Major cities were still in some form of lockdown. Construction activities were down to the bare minimum. From my office I could see the huge residential project coming up next door had stopped adding floors at the alarming speed they were working at till March 2020.
If big projects in cities like Mumbai and Delhi had ground to a halt, who was buying all this cement? My friend explained that rural and semi-urban demand for cement had jumped and his explanation was that the huge reverse migration into rural India had given construction a big fillip.
I was not fully convinced but I did admit that numbers don’t lie.
It was, therefore, interesting to read an article from Journal of Marketing [JM.18.0592.R4] by Vishal Narayan of National University of Singapore and Shreya Kankanhalli of Stanford (“The Economic and Social Impacts of Migration on Brand Expenditure: Evidence from Rural India”).
In the article the authors studied the effect of the massive reverse migration of labour from urban centres to rural India on adoption of brands or what is called “brandification”. While they did not study the consumption of cement, they did study the impact on consumption of packaged branded consumer products. In addition to studying the adoption process of rural households, they also studied the impact of other influences like size of village, availability of mobile phones and television. Their findings showed some interesting trends.
First, let us dig into what we mean by “brandification”. India is reported to be one of the least “brandified” markets in the world. Almost 60 per cent of all that a household consumes is unbranded or could be called commodities. This could include daily use products like milk and atta as well as other regular consumption products like biscuits and washing soaps. What drives brandification? It is normally understood that brandification is directly related to consumer education, availability of branded goods, affordability and, most importantly, monthly household income. As GDP and per capita GDP improves, it is normally understood that brands will benefit.
The authors in their article point towards two key influences migration has on consumption of branded products. The first is what they call the “Economic Remittance”; this is easy to explain. The migrant labour transfer economic prosperity to their homes in the village. The second transfer is what they call “Social Remittance”. The migrant labour, when they move back to the village, take with them the social knowledge of brands and how they save time and effort.
For instance, a migrant labour working in Mumbai may tell his family in rural Uttar Pradesh how packaged branded atta used to save him a lot of time and effort as he had to cook his daily rotis. He may also explain that rotis made from packaged atta are tasty and are safe from bacteria or viruses. You may say that this is nothing new and may have been happening for decades. It is also true that most migrant labour tend to go back to their village every year for the big festival; Diwali in the north, Pongal in Tamil Nadu and so forth. But during the year 2020, it is reported that almost 120 million daily wage earners went back to their villages. This is an amazing number of potential social remittances.
The research said that the return of migrant labour, possibly in such large numbers, led to a sudden demand spurt for packaged branded goods in rural India. The researchers say that the effect was muted in households living in larger villages (which may have had a robust word-of-mouth and retail system), that had television and were used to mobile telephony. Understandably, households with long-standing migration tradition did not see a rapid adoption of new brands last year.
If you relate back these findings with the financial results declared by many of the branded packaged goods marketers for Q2/Q3 of FY 2020-21, you will realise that they did benefit from the demand upsurge from rural India.
The question remains whether rural households that experimented with a packaged branded atta or packaged branded detergent will continue to use the same. That may depend on the economic situation and availability. Even educated urban Indian consumers tend to switch from branded to unbranded goods with great fluency. In the past cooking oil brands used to see their sales rise or fall depending on the price of unbranded (commodity) oil.
This brings us back to our cement question. I feel in addition to Economic Remittance and Social Remittance, labour going back to villages are also doing a “Skill Remittance”. A construction worker going back to his village not only takes some money with him and the knowledge of brands but also the valuable skill on how to build a wall or a room. Returning migrant workers from the Gulf who had worked in the construction sector have traditionally carried their skills back to Kerala and leveraged it wherever possible. This triple benefit transfer, in such large numbers, may have indeed helped the cement players last year. My friend was probably right in more ways than one.
The writer is an independent brand coach and a best-selling author. His latest book is Spring — Bouncing Back From Rejection. He can be reached at ambimgp@brand-building.com
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