10 October 2014
Consumer
Expert Speak
Rural consumption patterns changing
New categories to emerge; drivers in place
Growing incomes coupled with better media exposure are driving a shift in consumption habits
in rural geographies. We hosted a conference call with Mr Pradeep Kashyap, Founder of MART
to understand emerging trends in rural consumption and identify potential beneficiaries. Our
key takeaways:
Mr Pradeep Kashyap
Founder, MART
Mr Pradeep Kashyap is
Opportunity at the bottom of the pyramid:
Rural India provides immense scope for
known as the father of
penetration and consumption-led growth, especially for companies present in Personal
rural marketing in
India. He is recognized
Care (30% non-users of toothpaste in rural India) and Packaged Foods.
Growing middle income class driving consumption:
As manufacturing/services jobs are
replacing agricultural jobs, the proportion of mid-income consumers is going up, with
concomitant increase in per capita consumption. Consumption patterns too are shifting.
Roti, kapda, makaan (food, clothing, and shelter), which constituted 90% of household spend
in 1990, now constitute just 55% of household spend.
Rural consumer mirroring urban consumer behavior:
The wallet share of Healthcare, Durables,
and Transport is similar for rural and urban consumers. As incomes grow, spends on essentials
like Food reduce (currently 40% for rural and 34% for urban), while spends on Health and
Education rise.
Emergence of digital communication opening new vistas:
With better access to digital
platforms, companies have gradually started to engage rural consumers through new
mediums like mobile phones besides traditional means such as rural vans, melas (carnivals),
etc. Industry studies indicate that the mobile user base in rural India is set to double by 2017
(currently 300m users).
as a thought leader and
is a regular speaker at
CEO forums in India
and abroad. He has
authored the 'Rural
Marketing Book'. He
has been Marketing
Advisor to Ministry of
Rural Development and
has served on Prime
Minister Office and
Chief Minister
Committees on rural
development. He co-
created Project Shakti
with Hindustan
Unilever to appoint
46,000 poor women
from micro finance
groups as company
dealers.
- MART is one of
India's leading
management
consulting firms (for
over two decades)
focusing on the
Consumer Products &
Durables, Food and
Agribusiness, Health
and Banking sectors
in rural hinterland.
- Client List includes
names like
Hindustan Lever,
Asian Paints,
Colgate, Dabur, GSK,
Marico, Pidilite,
PepsiCo, Cadbury,
Coca Cola, Danone,
Heinz and many
more.
1
Drivers of rural household income
Manufacturing - small towns the new hubs:
Companies have been shifting their
manufacturing hubs from major cities to small towns (population less than 100k), creating
employment opportunities for people in the hinterland. In the last decade, 75% of the
manufacturing facilities were set up in small towns. Take for instance, Rudrapur, a town
in Uttaranchal, with a population of 75k. After Tata Motors and Procter & Gamble set up
manufacturing facilities, the town has 1,200 branded stores, 40 English schools, and a
five-star hotel.
Agriculture:
Though public investment in industry as compared to agriculture has
increased at 10x in the last ten years, farmers have witnessed 25% real increase in income,
supported by consistent rise in minimum support prices.
Services:
Contrary to popular belief, dependence on agricultural income has reduced,
with services now forming 40% of rural GDP. A study that MART Rural conducted for a
leading FMCG player brings out that poor monsoons have minimal impact, if any, on
consumer demand.
Gautam Duggad
(Gautam.Duggad@MotilalOswal.com); Tel: +9122 3982 5404
Manish Poddar
(Manish.Poddar@MotilalOswal.com); Tel: +9122 3027 8029
Investors are advised to refer through disclosures made at the end of the Research Report.

Expert Speak
Story in charts
Exhibit 1: Urban-rural split for select coverage names (%)
Exhibit 2: Rural markets have outperformed urban markets…
Source: Industry, Company, MOSL
Exhibit 3 & 4: ...aided by increase in government spends
Rural Plan Outlay (INR b)
Source: Industry, Company, MOSL
Exhibit 5: Increase in minimum selling prices (MSP) provided good boost to rural incomes
Commodity
(INR/Qtl)
Kharif Crops
Paddy
Jowar
Bajra
Maize
Arhar(Tur)
Moong
Urad
Cotton
Groundnut In Shell
Sunflower Seed
Soyabean
Rabi Crops
Wheat
Masur (Lentil)
Rapeseed/Mustard
Safflower
Sugarcane
FY05
560
515
515
525
1,390
1,410
1,410
1,760
1,500
1,340
900
640
1,525
1,700
1,550
75
FY06
570
525
525
540
1,400
1,520
1,520
1,760
1,520
1,500
900
650
1,535
1,715
1,565
80
FY07
580
540
540
540
1,410
1,520
1,520
1,770
1,520
1,500
900
750
1,545
1,715
1,565
80
FY08
850
600
600
620
1,550
1,700
1,700
1,800
1,550
1,510
910
1,000
1,700
1,800
1,650
81
FY09
850
840
840
840
2,000
2,520
2,520
2,500
2,100
2,215
1,350
1,080
1,870
1,830
1,650
81
FY10
950
840
840
840
2,300
2,760
2,520
2,500
2,100
2,215
1,350
1,100
1,870
1,830
1,680
130
FY11
1,000
880
880
880
3,000
3,170
2,900
2,500
2,300
2,350
1,400
1,120
2,250
1,850
1,800
139
FY12
1,080
980
980
980
3,200
3,500
3,300
2,800
2,700
2,800
1,650
1,285
2,800
2,500
2,500
145
FY13
1,250
1,500
1,175
1,175
3,850
4,400
4,300
3,600
3,700
3,700
2,200
1,350
2,900
3,000
2,800
170
CAGR (%)
FY14 FY11-14 FY09-14 FY05-14
1,310
1,500
1,250
1,310
4,300
4,500
4,300
3,700
4,000
3,700
2,500
1,400
2,950
3,050
3,000
210
9.4
19.5
12.4
14.2
12.7
12.4
14.0
14.0
20.3
16.3
21.3
7.7
9.4
18.1
18.6
14.7
9.0
12.3
8.3
9.3
16.5
12.3
11.3
8.2
13.8
10.8
13.1
9.9
12.6
10.4
10.7
13.4
13.8
13.2
8.6
11.5
11.9
12.0
5.3
9.1
9.5
7.6
10.8
6.7
12.7
7.6
20.9
12.2
Source: GoI
2
10 October 2014

Expert Speak
NOTES
10 October 2014
3

Disclosures
This research report has been prepared by MOSt to provide information about the company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its affiliated company(ies). This report is for personal information
of the select recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal
Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your general information and should not be reproduced or
redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on
any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this
material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original
capital may occur.
MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a significant
percentage of the companies covered by our Research Department Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that MOSt and/
or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may
participate in the solicitation of such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering,
applying and interpreting market information. Our research professionals are paid in part based on the profitability of MOSt which include earnings from investment banking and other business. MOSt generally prohibits its analysts,
persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt generally prohibits its analysts and
persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market
commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with
the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest . MOSt and its affiliated company(ies),
their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and
earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict
of interests with respect to any recommendation and other related information and opinions.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from,
any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free
and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources
believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt's interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service,
and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the document. While we would
endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or
its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this
report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability,
fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents.
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this
document. This should, however, not be treated as endorsement of the views expressed in the report.
Disclosure of Interest Statement
Analyst ownership of the stock
Companies where there is interest
No
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly
related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive
compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which
would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For U.K.
This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005
(referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to which this document relates is only available
to investment professionals and will be engaged in only with such persons.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not
a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the
absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document
must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities
and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International
Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore,
may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the
Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Anosh Koppikar
Kadambari Balachandran
Email:anosh.Koppikar@motilaloswal.com
Email : kadambari.balachandran@motilaloswal.com
Contact(+65)68189232
Contact: (+65) 68189233 / 65249115
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
Motilal Oswal Securities Ltd
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com