Nestlé’s Expansion into Rural India
| Case Code: MKTG442 Case Length: 10 Pages Period: 2021 Pub Date: 2022 Teaching Note: Available |
Price: Rs.300 Organization : Nestlé India Limited Industry :Food & Beverage Countries : India Themes: Marketing Strategy, Rural Markets, Distribution |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Time for Change
Nestlé had always been associated with the urban market. Its product portfolio found takers mostly among urban Indians. However, Nestlé had always had a presence in rural India though on a very small scale. In 2015, after the Maggi fiasco where the product was banned in several states due to its lead content before being reintroduced later, Nestlé wanted to reduce its dependence on a few products and also widen its reach..
The New Channels
Nestlé reached out to rural India through multiple channels. The company used a combination of direct distribution and wholesale trade channels for the rural market. Narayanan said, “The route to market has to be different. It cannot be the same.” The company even participated in local haats to advertise and sell its products. Many of Nestlé’s advertisements were created in the local languages to woo the new markets. With the rural push, Nestlé had covered 89,000 villages by 2019..
The Results
During the pandemic, growth in the urban areas tanked, but the rural markets showed accelerated growth. In the quarter ending December 2020, while Nestlé’s overall sales grew by 10%, urban sales grew by just 6%. Narayanan was of the view that the main reason for the falling demand from the urban markets was the reverse migration that took place in the wake of the lockdown imposed to prevent the virus spread. At the same time, semi-urban and rural India were experiencing growth. For example, Maggi had found several takers in rural markets, pushed by advertisements in the local languages and smaller packs priced at Rs.5..
The Competitive Landscape
A study conducted in 2019 by the World Economic Forum and Bain & Company stated that there was a shift in the consumption pattern of Indians. According to the report, the information divide between rural and urban consumers was getting narrower due to the extensive reach of the internet..
Challenges for Nestlé
Nestlé was a late entrant into the rural market. Other FMCG companies had already established their footprint in rural India. Hindustan Unilever (HUL), ITC, Dabur, Britannia, Coca-Cola, and PepsiCo had been expanding their rural distribution since the early 2000s. ITC catered to close to 100,000 villages by 2021..
Exhibits
Exhibit I: Nestlé India Portfolio of Brands
Exhibit II: The Maggi Crisis
Exhibit III: Rural Marketing Initiatives of Indian FMCG Companies
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