Strategies for chocolate companies to kill fake products in
Indian rural market


By

K.V. Kannan
M.B.A., M.F.T.
Assistant Professor
School of Management
SNS College of Technology
Coimbatore-35
 


Introduction to Indian Rural Market

The rural India has 75 percent of the population living in 5,72,000 villages speaking 33 languages, 1652 dialects and have diverse sub cultures and diverse requirements.  More than 80 percent of the rural consumers depend upon agriculture and allied activities for their livelihood.  The rural market has been growing steadily since the 1980s and, is now bigger than the urban market for both fast moving consumer goods (53 percent share of the total market) and consumer durables (59 percent).  An analysis of the National Samples Survey (NSS) data reveals that 75 percent of the expenditure on manufactured goods is accounted by rural India.  Technological developments take place in rural areas at rapid fast than the urban areas.  The disposable income in rural India has increased manifold in the last five years than the urban area.  All these paved way for rural marketing. 

Market Segmentation of Indian Rural Market

The Indian rural market can be segmented on the following basis:

  • Rural Rich Consumers

The rural rich consumers can be estimated on the basis of land owned by them.  They occupy major portion of the land (in acres) in their locality.  They engage in agriculture and allied activities.  They hold important positions in their places.  They may be a member of political party or may be having the support of political party.  They give employment opportunities in their field for other peoples in their locality.  They enjoy huge surplus of disposable income.  They mostly use the disposable income for purchasing jewels for their family members.  They also deposit consistent portion of their amount in the nationalised banks.  Some of the rural rich consumers also invest their money in small-scale businesses, land and buildings and act as moneylenders of their locality.  They have television, refrigerator, VCD/VCR/VCD, two-wheeler (prefer to have bike), tractor, and car.  Their children are sent to the nearby reputed educational institutions for their studies. They prefer to use all leading brands available in the market.

  • Rural Consumers above Poverty Line

They are identified as the middle class peoples residing in rural areas.  There are 50 million households that live above the poverty line in rural areas of India.  When comparing to the rural rich consumers they own few acres of land.  They mostly engage in agriculture and few other allied activities.  They have only less disposable income and deposit in local banks.  They also invest their disposable surpluses if any in jewels for their daughters' marriage. Most of them have two-wheelers like Bajaj M80 or TVS 50 and only few of them prefer to have bikes (bullets) and use these vehicle for multipurpose.  Only few of them have tractors and they send their children's to the nearby government educational institutions that charge less fees.  They prefer to have brands, which gives them value for money spent.

  • Rural Consumers below Poverty Line

There are 260 million Indians who live below poverty line and most of them are located in rural areas. They occupy minimum portion of land in their locality.  Some of them not even have any land in their locality.  They survive their family by working in the farm of rich persons in their locality.  They work for daily wages and sometimes they are compensated for their work with food grains.  They live in hut or in the farm of rich persons.  When they doesn't have work in their village they migrate to the nearby village for work.  They also involve in temporary seasonal business for their survival.  They mostly purchase local brands or fake brands for their usage because of its less pricing.

Barriers to Rural Marketing

A number of corporate houses have been trying to get a grip on rural markets in a variety of ways.  They face lot of challenges in stabilizing their market share.  The various challenges include language barriers, connectivity to other markets, small population in villages, and the most important availability of fake brands. The brand image of the successful FMCG majors has been imitated by some of the small regional companies.  These fake brands have been sold mostly in rural areas.

Introduction to Fake Products

Fake products are of two types one: counterfeit products and two: pass-off products.  Counterfeit products are fake products that bear identical name of product/ packaging/graphics/colour scheme and even same name and address as the genuine manufacturer. Someone produces these to look exactly like real products other than the legal owner of the real products, trademarks and product packaging.  Sometimes it is becoming more and more difficult to tell which is the real  "Ponds" talcum powder and "Clinic Plus" shampoo from the fake products.

Pass-off products use similar sounding or are similar in spelling (for example "Luk" for "Lux", "510" for "501", "Saveena" for "Sabeena", "Sun Max" or "Super Master". They use similar type of packaging or colour or designs.  They come out with the motive of misleading and cheating ordinary consumers who are uneducated or in a hurry in purchasing products.

A study conducted by AC Nielson, a research agency reveals that FMCG industry loses around 2500 crores annually to counterfeits and pass-off products.  According to Ashok Chhabra, Executive Director, P&G the fake products are affecting the sales of leading brands to the extent of 20 to 30 percent.  Another recent survey conducted by AC Nielson reveals that top brands in India are estimated to lose up to 30 percent of their business to fake products.  Besides the loss of revenue, the leading companies also face the loss in the damage to brand image and brand loyalty of consumers.

Laws Governing

Following are the laws under which legal action can be taken against manufacturers and sellers of fake products:

i. Indian Penal Code 1860
ii. Drugs and Cosmetics Act, 1940
iii. Prevention of Food Adulteration Act, 1954
iv. Consumer Protection Act, 1986
v. Bureau of Indian Standards Act, 1986 and
vi. Trademarks Act, 1999

The rural consumers by looking into the ads of leading chocolate companies unknowingly purchase the fake chocolate brands because of their impulses. 

"A rural consumer is brand loyal and this also make it easy to sell look-alike"
                                                                                   - Mr. R.V. Rajan, CMD, Anuragh Madison Advertising

Hence, the researcher has conducted a survey in the petty shops in rural areas to find out the fake chocolates available.

List of Fake Chocolates/Toffees available in rural areas

S. No.

Original Product

Fake Product

1.
2.
3.
4.
5.
6.
7.

Dairy Milk
Kit Kat
Coffee Bite
Mango Bite
Aasai
Polo
Vicks

Daily Milk
Kir Kat
Coffee Toffee
Mango ripe and mango bits
Aasha
Rolo
Vibex


It has been found out that fake chocolates and toffees are available in more number of petty shops for the leading brands.

Strategies for Chocolate/Toffee Companies in Rural Marketing (to kill fake brands):

Product: Without compromising on quality, the leading chocolate companies can reduce their size to match the rural demand.

Pricing: As the rural consumers are bothered about economy pricing the leading chocolate companies can follow the strategy of "penetration pricing"

Promotion: The traditional method of promotions has to be changed by the MNCs and National Companies in attacking the fake products.  A portion of the ad budget can be allocated for retailers' margin. Through ad campaigns, the companies can also create awareness among consumers regarding the evils of fake products.

Physical Distribution: Sales professionals of the local region who have familiarity in the local (regional) language can be appointed to look after the sales of rural areas, so that they can easily converse with the retailers and can build goodwill.

Conclusion

Fake products create damage to leading companies' sales and brand image.  Fake products also create problems to consumers on their health.  Hence, the MNCs and other leading companies that are worse affected by fake brands has to prevent their footage by adopting various strategies as discussed.  The 4 P's of the marketing mix have to be redesigned by the marketers in attracting and attacking the rural markets of India.  When consumers come across such fake brands they also have to take the issue to the companies and/or legal authorities.

Bibliography

1. Gopalaswamy T.P, Rural Marketing, Wheeler Publishing

2. Della Bitta, Loudon, "Consumer Behaviour: Concept and Application" McGraw Hill Book Company

3. Philip Kotler, "Marketing Management: Analysis, Planning, Implementation and Control", Prentice Hall of India

4. Boyd, H.W. Ralph Westfall, Stanley, F. Stasch, "Marketing Research: Text and Cases", Richard D. Irwin Inc.

5. Dr. Francis Cherunilam, "Corporate Scene The Menace of Fake Products" Organisational Management

6. Shanthi Nachiappan, "Challenges in Teaching Business Ethics: Spurious Products in Rural Markets", Indian Journal of Marketing, Volume:XXXIII, Number:9, September, 2003

7. Ruchi Trehan and Harmandeep Singh, "A Comparative Study on Urban and Rural Consumer Behaviour", Indian Journal of Marketing, Volume:XXXIII, Number:7, July, 2003

8. "Indian Rural Market", Indian Journal of Marketing, Volume:XXXII, Number:10, October, 2002

9. "Drying up of rural markets", Business Today dt.22 May, 2000
 


K.V. Kannan
M.B.A., M.F.T.
Assistant Professor
School of Management
SNS College of Technology
Coimbatore-35
 

Source: E-mail September 5, 2006

     

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