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INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE
Executive Post Graduate Certificate in Marketing Management (EPGCMM-06)

CASE ANALYSIS NOTE
CANDY AND CHOCOLATES INDIA: LAST MILE DISTRIBUTION CHANNEL

Submitted by: Student Name | Roll No. | Girish Sonawane | EPGCMM-06-020 |

Why CCI should invest in rural? What are the opportunities in rural markets for CCI?

CCI changed it’s RTM strategy in 2007with objective to increase the availability of its brands and increase customer service. CCI was basically marketing its products in India which was seventh largest country in the world with 28 states and seven union territories. Till 2013, there were 6649 districts and sub-districts. | Villages/towns | Population % | Rural | 638,588 | 68.8 | Urban | 16,297 | 31.2 |
From census 2011 reports, huge population is residing in rural areas which hold lots of potential for CCI to target. From 2001 to 2011tremendous growth of male as well as female population in rural areas were observed (CENSUS 2011). | Male (%) | Female (%) | Rural | 12.12 | 12.25 | Urban | 30.06 | 33.73 |
Rural market from 2001 to 2010 shows approximately 50% of India’s Gross Domestic Products. | Per Capita Income (INR) | Rural | 9481 | Urban | 19407 |
The rural consumption shows tremendous growth as per past records and would accelerate at 5.1% CAGR during 2005-2015 and 2015-2025. It is estimated that rural households with Rs.90,000 to Rs.2,00,00 income bracket would contribute to 70% of total rural consumption by 2025. It is expected to reduce rural deprived population of 96% in 1985 to 29% by 2015. Net consumption in INR for rural segment from 2005 to 2025 is tabled below | Consumption (INR) | 2005 | 9688 | 2015 | 16701 | 2025 | 26363 |
Though overall rural market is growing, confectionary market too shows growth in rural segment. Growth of rural segment is recorded at 30% compared to 18% growth of urban segment. Chocolates are showing upwards escalation in rural segment than urban.
What are the barriers for CCI to distribution in rural markets?
Though rural market shows lots of potential and growth; it is burdened with lots of barriers for business. It is well known that rural and urban markets are altogether different. Major issues faced by marketers in rural areas are; * Infrastructure * Lack of information (communication-case specific) * Inadequate knowledge and skills * Literacy * Unorganized confectionary market
By 2010 infrastructure and communication statistics of rural segment are detailed below; Infrastructure | Communication | | Landline | Mobile | 33% villages were connected by road1.2% villages were connected by rail | Coverage was 18.5% | 2006-2007: 4%2011-2012:45% |
Rural segment were far more left behind as far as knowledge and literacy levels are considered. Literacy levels of rural and urban markets for the year 2011 are given below Literacy | Rural (%) | Urban (%) | Overall | 69 | 85 | Men | 78.57 | 89.67 | Women | 58.75 | 79.92 |
Investment payoff in rural segment is one of the major concerns. Investment may pay off after a long gestation period or after a period of product customization and on-the-ground communication.
Unorganized segment in confectionary markets holds 35% of overall share and they mostly concentrate in rural segment. Due to locally sourcing raw material, low or No advertising or promotional expenses these players are playing on price by keeping it less by 30% than organized players.
Describe confectionary market in India. How is the market different in urban and rural India?
With revenue more than Rs.6.5 Billion in 2010, Indian confectionary market (organized) is growing with CAGR of 12% and projected to reach at Rs.11Billion by 2014. In terms of volume, it had reached 193 Million Kg in 2010 and expected to grow to 264.4 million Kg by 2016. Unorganized confectionary market holds 35% of share in confectionary segment in India. Details of confectionary market, per-capita Global consumption, internal consumption and population wise consumption details are given below | Chocolates | Sugar Candies | Gums | Products | Chocolates | Mints, sugar, hard boiled sweets, cough lozenges | Chewing gum, bubble gum | Market share | 46% | 34% | 20% | Growth | 20% | 5% | 9% | Prices (mono packs) | Rs.2.00 to 10.00 | Rs.0.50-1.00 | Rs.1.00-5.00 | Availability/Reach | 1.7 million outlets | More than 5million outlets | Rural penetration | 2% | 15% | NA | Overall penetration | Rural: 10Urban: 75% | Distribution | Kirana Stores: 76 %Convenience Stores: 13.5%Paan/ Beedi Shop & other: 10% |

Per capita consumption-Global | India | Global | US | Europe | Per capita consumption (gm) | 20 | 3000 | 6500 | 9000 |
Internal consumption | East | West | South | North | consumption -India | 17% | 32% | 23% | 28% |
Consumption-population age AGE (years) | 2-8 | 8-25 | 25-64 | 64 & above | consumption -India | 15% | 25% | 55% | 5% |
Purchasing of confectionary products have shown different purchasing trends. Sugar candies were mostly impulse purchase while chocolates were predominantly planned purchase. Within children, urban population was mostly driven by quality while rural population concerned more of price. Over a period of time, gifting patterns of Indian population have shifted from mithai to chocolates.
Does the case have any hero (case protagonist), a dilemma, or potential solutions?
Case discusses issues among following CCI executives Name | Designation | Akhilesh Gupta | Director-Sales & Marketing | Naren Shah | Associate Director-Sales & Marketing | Sandhya Jain | Group Project Manager | Anjan Mehta | Chief Operating Officer | Mamtha Kumar | Director of finance |

CCI executives discussed over various options available before CCI to enter into rural segment. Following are advantages and issues with each alternative available with the team. Alternatives | Dilemma | Advantage | Superstokist model | --Cap on expansion as it would require more resources and would generate less revenue per stockiest after limit--Viability is major concern-- low profits to stokists | --Established model in villages with 10000 population--Scalable and operationally flexible | Haats | --ownership of haat option (distributors, superstokist, stokist) | --cost effective and -- reach is easy--in south 20-30% customers patronized CCI products in haats | Van sales | --viability with value packs--van operations after activation perio--higher operational cost | --mobile and can reach to remote areas | SHG | --SHG movement is not evenly spread and successful in selected states only --majority of SG are in south and east region--training to SHG members --scaling would be big concern | --7million SHG in india--Readymade infrastructure to tap rural market | Mobile traders | --operational and financial concerns--number of mobile traders and governing--spreading product awareness among villagers--Viability in markets with dominant players | --good source of income to micro-entrepreneurs-- | India post | --vulnerability to a partners with high bargaining power--not affordable for limited resources--nature of its product | --Huge network--scalability, 90% of branches are in rural area |

Out of the options available with CCI executives, Haats and mobile traders could be best options for CCI to leverage rural segment in view of scalability, viability, and operational effectiveness. * Mobile traders could reach and serve diversely spread villagers productively apart from the earnings they would be getting from sale. * Hats would be best option for market penetration considering strong competitors * Local traders coupled with high reach haats would increase market penetration
Identify the criteria on the basis of which evaluation and comparison of alternatives (or potential solutions) for distribution should be made?

Criterion | Description | Viability | Among the available alternatives, CCI can determine which options are viable and may be successful if implemented for their available product range. | Scalability | CCI can decide which option would remain persistent with sales growth and can give the consistent stream of profit for their marketing efforts. CCI can also look for the alternatives which favors its marketing efforts while launching new products with the same channel. | Operational flexibility | The alternatives should also be flexible enough to fluctuating demands in the sales cycle. | Cost effective | The alternative sould be cost effective to CCI in terms of overall expenses per product as well as to the individual/agency involved into it. The alternative need to generate profit for both parties as a whole. | Reach | It should be covering maximum villagers even remotely located. | Population | The alternative should be covering maximum population of the area. |

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