“The rural income pyramid is morphing into a diamond”

Pradeep Kashyap, CEO of MART, is often called the father of rural marketing. For almost two decades he has been at the helm of helping companies penetrate the markets of the hinterland. Not only does his research and marketing organisation identify the needs of the rural consumer, but it helps companies innovate products for them and test the prototypes

In an interview with BrandLine, Kashyap outlines the rural opportunity for companies with the morphing of the rural income pyramid into a diamond by 2020.

The Committee of Secretaries' decision to clear the proposal for FDI in multi-brand retail has an investment prerequisite in back-end supply chain as one of the riders. In view of this clause, do you see an opportunity for investments by prospective retail players in the rural areas? Have companies started work in this direction, in anticipation of the retail FDI proposal getting a final nod soon?

Food is the biggest business worldwide. And all food is grown in rural areas. In India spoilage of fruit and vegetables is over 20 per cent due to inadequate and inefficient back-end supply chains … We need efficient, mechanised, modern supply chains which will reduce the number of intermediaries, thus bringing down the price of the produce to the consumer. We are the second largest producer of fruits and vegetables, so the opportunity for investment is huge.

Rural incomes are growing due to added income from NREGA and minimum support price. During your trips to rural India, what kind of perceptible changes have you found in rural buying habits in the last 10 years?

The income pyramid will morph into a diamond by 2020. The low-income segment will shrink dramatically, the middle-income segment will grow from 350 million people currently to 500 million and the rich will explode to 150 million from the current 50 million.

Rural India has transformed completely in the last 10 years. One in three people own a mobile phone, one in three households has a TV and 14 million homes have a DTH connection. I have seen 400 sq. ft. open shelves, glass front retail stores with cash machines at the reception in villages in Punjab! Tailors have disappeared from most villages because people are buying ready-stitched local branded garments. English medium private schools, Internet kiosks and beauty parlours are springing up in the bigger villages. I was recently in a village where I saw 10 children in the age group of 8-12 all dressed in branded jeans. Today many families use multiple brands of toothpaste, soap and shampoo. But in some rich households we have seen the same person using multiple brands, for example, soap for the body and face wash for the face. Similarly, premium brands such as Dove soap, Ezee fabric conditioner and Horlicks can be seen in these households

Apart from product innovation, you have been emphasising the need for companies interested in the rural market to focus on process innovation. What are the processes that need to be changed or tweaked for companies to succeed in this area?

Globally companies have focused on product innovation. R&D centres are given huge budgets for this. However, in emerging markets the roads, electricity, telephony and other infrastructure is poor and therefore reaching your product to remote villages, communicating with consumers living in media-dark areas and developing robust packaging to ensure delivery of product in good condition are critical challenges which many MNCs ignore because they are used to the good physical infrastructure in developed markets. Whilst the physical infrastructure is very weak in emerging markets, the social infrastructure is very strong because the government has a mandate to deliver a large number of social services – health, education, drinking water and much more to the rural population.

Companies can partner with the government to take advantage of the social infrastructure for their business models. To explain this point, when we worked with Unilever on Project Shakti to evolve a deep distribution model, the biggest innovation was appointing women dealers from self-help groups that are available in all parts of the country. This became a win-win model for all. Similarly we used the social animators that exist in every village as the communicator for Unilever brands among local households. Tweaking the process and using existing social infrastructure ensures better economic viability of the business model.

CSR is beginning to occupy a bigger space in corporate score sheets and annual reports. Are the rural areas really seeing any perceptible difference now in light of the corporate sector's increasing CSR focus?

The CSR movement in India started around a decade ago. With the passage of time more and more companies are realising that CSR has limited impact because of small budgets that companies can allocate and the agenda for CSR keeps changing over time. Further, the CSR responsibility is given to the low-performing executives as this activity does not add to the company's bottom line. More and more companies are moving to a business model approach to benefiting the poor. Project Shakti of Unilever or e-choupal of ITC are examples of this. The high performers are brought in because this is a challenging task and adequate budgets are allotted to ensure that the initiative generates good profits for the company… I have said at several forums CSR is dead, but doing good for society is good for business and bottom lines.

Several established multinational companies have been able to enter rural India with your help. Have you found any start-ups – Indian or from overseas – with innovative ideas who are also looking at the rural space?

MART works as an innovation partner with MNCs and Indian companies. Through community co-creation and bottom-up research we help companies understand the need gaps and pain points among rural consumers. This helps the company identify the business opportunity. We help develop the specs for the solution. The company then develops the product or solution. We conduct the prototype testing and give feedback to the company.

Several start-ups are working at providing solutions for the rural masses. Dhristee is using IT and Internet to make available a range of services – e-governance and transactional services such as railway ticket bookings- through their 800 kiosks. Selco is a social enterprise in Bangalore providing low-cost solar lighting solutions for the poor. Project Dharma is a start-up which is creating a rural distribution model for affordable products made by different companies. So, there are a number of start-ups that have entered the rural space.

You are in the ‘Trade and Industry' sub-committee of the Government's National Innovation Council headed by Sam Pitroda. What kind of a role do you think the Council and your committee can play?

India and China accounted for 52 per cent of the global GDP before the industrial revolution and a lot of innovation happened in these two countries. Neither country got the opportunity to benefit from the Industrial Revolution.

The centre of innovation shifted to the West for the affluent consumer. Big innovation no longer happened in India and we lost the culture of innovation. The larger objective of NIC is to create an enabling environment for innovation, set up appropriate financing and other appropriate institutions, support individual inventors for commercialisation of their innovations and foster an innovation culture in the country.

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