Cracking the Rural Market

“There are two million retail outlets in rural India where we sell our products. There are consumers who want packaged beverage at an affordable price. We have been working with our suppliers to get affordable packaging and have got Maaza at the right price point.”

Coca-Cola India President & CEO Atul Singh

Coca-Cola has introduced 100 ml packs of Maaza for Rs. 6.  This new Stock keeping Unit of Maaza is currently under test marketing in Uttar Pradesh.  Maaza is a fruit-based beverage and is a new price point below the Rs. 8 that is charged for a cool drink bottle.  The non-returnable ready to drink category products have prices ranging from Rs. 8 to Rs. 12 at the entry level and goes as high as Rs. 60 for two litre plastic bottles.  The smallest size in quantity previously is 200 ml.  

The closest price points in the beverage segment for coke are Fanta Fun Taste Powder for Rs. 5, which needs to be mixed with water. Coke also has micronutrient powder sachets costing Rs. 2.50-3.  PepsiCo markets Tata Glucose (which is under a Joint Venture with Tatas) for Rs. 6 and sells fruit juice powders for Rs. 10.  Previously, cool drinks were available at Rs. 5, but in the last few years companies have increased the prices and the current cheapest beverages from Coke and PepsiCo are in the range of Rs. 8 – 12.  

In the view of Coca-Cola, the challenge in the rural market is one of affordability of the product and the product at Rs. 8 is not affordable to a large section of the market.   The new SKU of 100ml will only be possible if Coca-Cola is able to address the concerns in terms of packaging, distribution and cooling equipment.  The CEO of Coca-Cola India has also visualized a possibility of companies coming together to sell non-competing products, to address the distribution challenges in serving chilled products in rural markets. The collaboration may be with firms having products like ice creams or chocolates which had common infrastructure requirements for refrigerators and cold-chain trucks. 

Questions:

1. Is price the major challenge in Rural Marketing?
2. What are the infrastructural challenges for beverages to market themselves in the Rural markets
3. Do you think the rural market will accept fruit beverages like Maaza, when they have access to real fruits.

(This caselet is based on a news item in Business Standard April 17, 2013)