RURAL MARKETING

PRESENTATION

“e- CHOUPAL”

SECTIONS1) Introduction To ITC & e-Choupal

2) The e-Choupal System

3) Apprehensions To e-Choupal

4) Operating Environment Constraints Faced By ITC

5) Benefits For The Farmers

6) Social Impact Of e-Choupal

7) Gains For ITC

INTRODUCTION

Vision & Mission statements

• Vision: Sustain ITC’s position as one of India’s most valuable corporations through world class performance, creating growing value for the Indian economy and the Company’s stakeholders.

• Mission: To enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder value.

Business Mix of ITC Ltd.

FMCG• Cigarettes• Foods• Lifestyle Retailing• Greeting, Gifting & Stationery• Safety Matches• Agarbattis

Paperboards & Packaging• Paperboards & Specialty Papers• Packaging

Business Mix (Cont’d)

Agri – Business• Agri-Exports• e-Choupal• Leaf Tobacco

Hotels

Group Companies • ITC Infotech; etc.

CAGR during FY 2005-2008

Category CAGR Growth parameters

Cigarettes 10.9 % Pricing power

Hotels 22.7% Inward traffic, occupancy

Paper 17.2 % Capacity utilization, value added products

Agri business

34.3 % e-choupal, choupal sagar,

FMCG-Others

60.2 % Fast track, decent share.

Market share of ITC Ltd.

Outstanding market leader • Cigarettes, Hotels, Paperboards,

Packaging and Agri-Exports.

Gaining market share • Nascent businesses of Packaged

Foods & Confectionery, Branded Apparel and Greeting Cards.

THE E –CHOUPAL SYSTEM

Indian Agriculture Has Excellent Resources

• Plenty of Arable land

– Rich & diverse Agro-climatic zones– Strong Agricultural Research– Large & growing markets

• Indian Farmer’s resourcefulness is also legendry

– Works very hard ( whole family is on the farm)– Takes risk ( on weather ,yields , price)– Is innovative ( technology adoption, risk management)

The Devil

• The Middleman– Lends Money , source of inputs , buys output

• But blocks information flow & market signals and extracts larger profit for himself– Also spins an exploitative cycle of dependency– Therefore evil

…And the Implications

Low Risk Taking Ability

Low Investment

Low ProductivityLow Value Addition

Low Margin

Weak market Orientation

The e-Choupal Infrastructure

• ITC Kiosk with Internet Access

– In the house of one trained farmer, Sanchalak

– Within walking distance of target farmers

• Warehousing Hub

– Managed by the erstwhile middleman, Samyojak

– Within tractor able distance of target farmers

Structure of e-Choupal

• Checks details• Does quality checks• Provides slips

Sanchalak

APPREHENSIONS TO e-CHOUPAL

RISKS:

• Radical shifts in computing access .• Threat of unionization of sanchalaks and

rent extractions.• The diversity of activities and speed of

expansion create threats to efficient management.

Managing Bureaucracy:

• The agricultural produce marketing act prohibits procurements outside the mandi.

• The government offered to waive the mandi tax on the produce procured through the e-Choupal.

• But tax was not making ITC uncompetitive therefore ITC continuing paying taxes.

OPERATING ENVIRONMENT CONSTRAINTS

FACED BY ITC

TECHNOLOGY

• Overcoming power constraints

Unreliable

Quality• Transportation• Telecom infrastructure

CHALLENGES

• Radical shifts in computing access could fundamentally alter community-based business models.

• Threats from sanchalaks• relationship with the samyojaks • Scope of the e-Choupal operation

BENEFITS FOR THE FARMER

1) Relevant & Real-time Information

2) Better Decision Making, Hence Better Value For Crop

3) Farmer No Longer Bears Transportation Cost

4) Electronic Weighing Facilities – Avoids Intentional Spillage

5) Treatment As That Of A Respected Customer

6) Increment Of 2.5% Over The Mandi System

7) Information Also Provided To Improve Yield

Additional Services

Managing Credit Risk Through Sanchalak Network

Non-cash Loans For Farm Inputs

Loans To Sanchalak

Direct Loans To Farmers Based On Sanchalak

Recommendations

Insurance & Risk Management

SOCIAL IMPACT OF e-CHOUPAL

Information That Is Available On e-CHOUPAL

• Weather

• Agricultural best Practices

• Customized Quality solutions

• Intelligent Product Deployment

GAINS FOR ITC

Wheat

Soybean

Soybean& Wheat

Coffee

Aqua

Wheat

Soybean

Soybean& Wheat

Coffee

Aqua

Scale Today and Vision Tomorrow

6 StatesKiosks: 6400

Villages: 40,000

Farmers: 4.1 million

Year 2007:

15 StatesKiosks: 20,000

Villages: 100,000

Farmers: 10 million

Year 2012:

• Supply Security

• Lowering ITC Logistic Cost

• Better Plan Future Operations

• True Cost Of Intermediation

• Reimbursement Of Transport Costs

Transaction Costs in Mandi ChainSoybeans Example

Farmer Incurs

Trolley Freight to Mandi = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Agent = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Handling at Mandi = 40

335

Total Chain 705

Transaction Costs in Choupal ChainSoybeans Example

Farmer Incurs

Trolley Freight to ITC Hub = 120Labour = 50Kacchha Adat = 150Handling Loss = 50

Rs per MT

370

ProcessorIncurs

Commission to Sanchalak = 100Cost of Gunny Bags (net) = 75Freight to Factory = 120Storage & Handling at Hub = 40

335

Total Chain 705

120

50

Cash Disbursement Costs = 50

215

335

Conclusion

1) PANKAJ JAIN - 102

2) ROBIN KAPOOR -

3) VIKAS SHARMA -

4) POOJA GUPTA - 103

5) TUSHAR GARG -

6) ANSHUL YADAV - 92

7) DEEPAK KUMAR -

8) INDRAJEET SINGH - 96

THANK YOU