Reverse migration to villages during Covid pandemic may help FMCG companies grow their presence in rural markets with migrants becoming their unofficial brand ambassadors, found a study by two India-born business school researchers from National University of Singapore and Stanford University in the US.
In developing economies like India, the majority of rural consumer spending goes to unbranded products that are affordable. However, once migrants gain exposure to brands in cities, they are likely to seek the same brands even after returning to villages, the researchers Vishal Narayan of NUS and Shreya Kankanhalli of Stanford said in their paper published in the Journal of Marketing recently.
The study titled “The Economic and Social Impacts of Migration on Brand Expenditure: Evidence from Rural India” probed how rural consumers in India shift their expenditures towards branded consumption once they are exposed to brands while living in urban areas.
When Covid-19 disrupted work patterns and increased investment in rural employment, most of over 45 crore migrants in India returned to their villages. Consumer goods companies viewed this as an opportunity to grow their presence in rural markets, with migrants serving as unofficial brand ambassadors to home communities.
Agreeing with the findings, Mayank Shah, Senior Category Head of Parle Products said, “With reverse migration during the two waves of the pandemic, people working in urban centres carried back the habits of consuming branded and packaged food products to rural regions. Not only did they continue those habits in their villages, they also introduced those habits to their families and relatives. We have seen strong traction from rural India for low-unit packs of certain varieties of biscuits which were earlier only being consumed in urban regions.”
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Just last month, Parle Products has ventured into the packaged flour segment with a key focus to tap into the rural demand. “Due to the pandemic, consumers, even in rural regions, want to limit their frequency of trips to the local miller. Once they get used to the packaged atta they continue with it due to convenience,” Shah added. FMCG companies have also been focusing on increasing direct distribution in rural regions in a big way.
Affect on brand expenditures
The researchers suggested that migration can affect brand expenditures through two major pathways. First, migrants who obtain better economic opportunities might send money or goods in-kind to the sending household. These “economic remittances” can increase the rural families’ ability to consume more expensive products that increase their social status in their village.
Secondly, as migrants become more settled in their new destinations, they can share information on urban lifestyles, aspirations, and behaviours with their families back home. This form of information diffusion, termed “social remittances,” can be powerful in overcoming rural households’ uncertainty and persuading them towards brands.
The researchers conducted a large-scale field survey of 434 rural families across 30 villages across the States which are known to have high rates of rural-urban migration and found quantitative evidence supporting both of these pathways.
Piyush Patnaik, MD of Cargill oil business in India, in an earlier conversation had told BusinessLine , that “the shift from loose oil to packaged oil has got further accelerated during the pandemic in practically all parts of the country including rural regions.” He added that growing availability and awareness of branded products as well as increase in rural incomes will further fuel the growth of packaged food industry.