Coca Cola India's Thirst for the Rural Market

"The rural market is a significant part of our marketing strategy which enables us to help the consumer link with our product."
                                        - Sanjeev Gupta, Marketing Director – Cola-Cola India, in August 1995.

'Thanda' Goes Rural

In early 2002, Coca-Cola India (CCI)  launched a new advertisement campaign featuring leading bollywood actor – Aamir Khan.

The advertisement with the tag line – 'Thanda Matlab Coca-Cola⁴' was targeted at rural and semi-urban consumers. According to company sources, the idea was to position Coca-Cola as a generic brand for cold drinks. The campaign was launched to support CCI's rural marketing initiatives. CCI began focusing on the rural market in the early 2000s in order to increase volumes.

This decision was not surprising, given the huge size of the untapped rural market in India (Refer Exhibit II to learn about the rural market in India). With flat sales in the urban areas, it was clear that CCI would have to shift its focus to the rural market. Nantoo Banerjee, spokeswoman – CCI, said, "The real market in India is in the rural areas. If you can crack it, there is tremendous potential."

However, the poor rural infrastructure and consumption habits that are very different from those of urban people were two major obstacles to cracking the rural market for CCI. Because of the erratic power supply most grocers in rural areas did not stock cold drinks.

CCI's Rural Marketing Strategy

CCI's rural marketing strategy was based on three A's – Availability, Affordability and Acceptability. The first 'A' – Availability emphasized on the availability of the product to the customer; the second 'A' - Affordability focused on product pricing, and the third 'A'- Acceptability focused on convincing the customer to buy the product.

Availability

Once CCI entered the rural market,it focused on strengthening its distribution network there. It realized that the centralized distribution system used by the company in the urban areas would not be suitable for rural areas.

In the centralized distribution system, the product was transported directly from the bottling plants to retailers (Refer Figure I).

However, CCI realized that this distribution system would not work in rural markets, as taking stock directly from bottling plants to retail stores would be very costly due to the long distances to be covered.

The company instead opted for a hub and spoke distribution system (Refer Figure II). Under the hub and spoke distribution system, stock was transported from the bottling plants to hubs and then from hubs, the stock was transported to spokes which were situated in small towns. These spokes fed the retailers catering to the demand in rural areas. CCI not only changed its distribution model, it also changed the type of vehicles used for transportation. The company used large trucks for transporting stock from bottling plants to hubs and medium commercial vehicles transported the stock from the hubs to spokes. For transporting stock from spokes to village retailers the company utilized auto rickshaws and cycles.

Affordability

A survey conducted by CCI in 2001 revealed that 300 ml bottles were not popular with rural and semi-urban residents where two persons often shared a 300 ml bottle.

It was also found that the price of Rs10/- per bottle was considered too high by rural consumers. For these reasons, CCI decided to make some changes in the size of its bottles and pricing to win over consumers in the rural market.

In 2002, CCI launched 200 ml bottles (Chota Coke) priced at Rs 5.CCI announced that it would push the 200 ml bottles more in rural areas, as the rural market was very price-sensitive.

Acceptability

The initiatives of CCI in distribution and pricing were supported by extensive marketing in the mass media as well as through outdoor advertising. The company put up hoardings in villages and painted the name Coca Cola on the compounds of the residences in the villages. Further, CCI also participated in the weekly mandies by setting up temporary retail outlets, and also took part in the annual haats and fairs - major sources of business activity and entertainment in rural India. CCI also launched television commercials (TVCs) targeted at rural consumers. In order to reach more rural consumers, CCI increased its ad-spend on Doordarshan. The company ensured that all its rural marketing initiatives were well-supported by TVCs.

When CCI launched Chota Coke in 2002 priced at Rs. 5, it bought out a commercial featuring Bollywood actor Aamir Khan to communicate the message of the price cut and the launch of 200 ml bottles to the rural consumers. The commercial was shot in a rural setting. In the summer of 2003, CCI came up with a new commercial featuring Aamir Khan, to further strengthen the Coca-Cola brand image among rural c
onsumers.