1. V-thought- A Knowledge Initiative by VertebrandTopicsVol5 The Business of AgricultureVol4 Education BrandingVol3 The world of Service BrandingVol2 B2B BrandingVol1 Branding Trends

2. The Business of AgricultureVolume 5V A VERTEBRAND KNOWLEDGE INITIATIVE 3. 03Vthought I Volume 5From the Editors desk 04Emerging trends in Indian Agri Business 06Branding Agriculture - Creating brands from commodities 09Around the world - Stories of successful Agri Branding 12Challenges in Branding Agri Businesses 14Down to Earth - Young India turns to Agri Business 16Expert Speak - Interview with Mr. Prabhakar Rao, Chairman, NSL Group 18C o n t e n t s 4. The very mention of Agri businessinvokes the memory of Farming; hardwork, some poignant memories andsome not so pleasant thoughts as well.Our thoughts have also been fashionedwith the belief that India is an agrarianeconomy and yet at the same timethe current state of affairs bears grimtestimony of the fact that there is anurgent need for rapid transformation.Agriculture contributes to about 14.2%of our GDP and yet provides livelihoodto close to 52% of the Indian workingpopulation. This possibly leads toagriculture being seen more as a socialphenomenon rather that just an industryor a business.Agriculture in India is largely dependanton 2Gs.The first is God or morespecifically monsoon God. With themonsoon playing truant this year, thebuzzword is certainly about how Indiawill cope. The cascading effect on othersectors cannot be discounted and henceevery business entity in India is worried.The 2nd G is Government. Agricultureis perhaps one sector where everyaspect is controlled and influenced bythe Government. There is a social angleto this sector requiring governmentintervention. However, while reforms inevery other sector have taken some shape, agriculturehas been lagging behind. Also the number of ministriesinvolved in the entire chain, compounded with manylegislations at both central and state level makes itdifficult for changes to be brought about. Industry-friendlyefforts of allowing private players to directly purchasefrom farmers is probably a right step in that direction.Yet, the APMC Act and the EC Act impose significantbarriers and states are yet to make changes to them.A billion mouths to feed with overflowing warehouses,sharp rise in food inflation and more than 50% of domesticspending on food products does not bode well for aneconomy wanting to grow and become a super power.Agri business is an indirect growth driver and if Indianeeds to propel itself to being an economic super power,several structural reforms are necessary in this sector.Government spend towards agriculture is 80% towardssubsidies and 20% towards investment. Unless thatsituation changes to more share for investment and lessfor subsidy, problems will continue to plague this sector.However there is a silver lining. While mega changeshave not taken place at expected levels, small innovationsare sweeping the sector. These are driving this sector tobecome more efficient, more customer-centric and in allboosting local economies.We, at Vertebrand, have partnered many of our clients whoare part of the agri business. Our experience in workingwith clients has been across the value chain. We areactively partnering a Seed company in their marketinginitiatives and in the past have created and managedsuccessful brands for clients in the agro processingFROMTHE EDITORSDESK04 Vthought I Volume 5 5. business. The Vertebrand team has also been involved inproviding expertise on the retail and logistics aspect of theagri value chain. Our collective experience of working withseveral clients in this sector has been the prime moverbehind this issue of Vthought.This issue of Vthought traces certain key trends sweepingthis sector. With Indian economy opening up, there havebeen marked changes in the consumption pattern,especially of urban India. This in turn has given rise to themarked changes in the way agri products are processedand consumed. This issue traces the emerging trends inagriculture and the challenges in branding of key sectors.There are some interesting stories of branding which havetaken place in the agri business sector across the world.We are specially indebted to Mr. Prabhakar Rao, Chairmanof NSL Group and Managing Director of NUZIVEEDUSeeds Ltd for his contribution to this issue. He talks aboutthe future of this sector and how to bring back the pastglory of agriculture.We do hope you enjoy what you read here. We look forwardto hearing from you. Please write back with your feedbackand comments to aparna@vertebrand.com.To read and download the online edition of this Vthought,visit www.vertebrand.comHappy reading!Aparna LakshmiChief Editor05Vthought I Volume 5 6. Aquick update on where India standsin the world agricultural production:Ranks number one in the production ofcommodities like - Mangoes, Papayas, Bananas, Spices,Millets like Bajra, Ragi etcSecond in the production of - SilkThird in the production of - Tobacco, Coconut, TomatoesSixth in the production of - CoffeeIndiahouses the worlds largestlivestock population and is numberone in the production of Cow milk andBuffalo milk.The Green revolution has been thestarting point for Indian agriculture inits quest for growth and automation.However, the biggest game changer forthe sector happened in the 90s whencropping patterns which hitherto weredetermined by agronomic conditions,moved to being determined by marketforces. This in turn, marked a shiftfrom subsistence farming to that ofcash cropping. This has led to severalemerging trends which characterized thelast decade of the 20th century and firstdecade of this century.The movement from being just foodcrops to cash crops and then croppingbased out of market and consumerdemand has brought interesting trendsin this sector.Movement from Agriculture to Agri businessAgriculture for a long time has been associated only withfarming. For a long time, a strange belief has existed,that farming is not a business and farmers can never bebusinessmen. However this mind set is changing. Withthe decline in cultivation and trade of traditional foodcrops and non food / horticulture gaining prominence,agriculture is no more about farming only. It has evolved toFarming, Processing and Preserving before it reaches thefirst level of intermediaries. The evolution of organizedretail has not just spruced the supply chain but has madethe entire chain agile and nimble. The increasing affluencehas led to changes in the consumption pattern of people.This in turn adds enormous pressure on the sector tovalue-add their offering and adopt technology just likeany other industry. The trend is encouraging, yet there isa significant distance to be covered on the processing andlogistics front to truly become an efficient sector.Corporate involvement through Contract FarmingIndian Inc has been in the forefront in acquiring landsfor farming in African countries. The legal framework inIndia does not permit such direct participation. Howevercorporates have been investing in the sector activelythrough contract farming. The changes brought tothe APMC Act by several states have also providedan impetus for the adoption of contract farming.One of the pioneers in this area has been PepsiCo whenit initiated contract farming for sourcing tomatoes inPunjab. Contract farming has enabled farmers to accessbetter seeds, adopt better farming techniques, improveyield and also get an assured market and price. In turncompanies have benefited by getting consistent qualityof supplies. Contract farming today has grown leaps andbounds with many giants turning to contract farmingacross different crops ranging from potatoes, basmatirice, cotton, wheat, soyabean to name a few. The biggestchallenge in Agri business was the access to capitaland the absence of recourse to farmers when there wasEMERGINGTRENDS ININDIANAGRI BUSINESS06 Vthought I Volume 5 7. crop failure. Today the model has come of age. Financialinstitutions like ICICI have partnered with Unilever andother contractors in providing access to capital forcontract farmers. Weather based insurance products havealso come into play to prevent loss due to crop failure.There is a flip side to contract farming as farmersare dependent on contractors and produce only nonlocal crops. Hence there is a danger of a lopsided croppattern. However given the need for rapid improvementin productivity, contract farming is indeed a must forthe growth of the sector as well as for the rest of theeconomy.Information technology enabling a smart farmerInformation & communication technology has enabledthe farmers on two fronts - Risk reduction and Pricemaximization. Weather updates and forecasts haveenabled farmers to plan their sowing accordingly. Thecritical information on the correct market price enablesfarmers to get the right price and not be completelydependent on the intermediaries. Some solution providershave also been able to provide guidance on future pricingbased on global trends. This has taken the farmingcommunity one step further to critical decision makingon selling and thereby not falling victim to price fall.The pioneering and most prominent success story ofharnessing information technology to build a farmingcommunity network at a large scale can be attributed tothe ITC e-choupal initiative. Today, this initiative is spreadacross 15 states, touching the lives of over 4 millionfarmers. Much of the success of e-choupal can beattributed to the fact that it is not just a pure play ITsolution but was backed by strong physical infrastructure.It cannot be denied that this initiative opened up thefarming community to adopt information technology fora mutually benefiting relationship.Mobile telephony now touches the lives of more thantwo thirds of India. With the advent of smart phones, thenext generation of technology adoption has come of ageand is in turn leading to smart farming. An initiative ofThomson Reuter Group - Reuters Market Light (RML),was first piloted in Vidharba in 2007, as a professionalcontent service for farmers. For an annual subscriptionfee of ` 800, farmers receive daily weather updates aswell as personalized content. RML equips the farmerswith market intelligence and keeps them updated onprices of different markets to help them understandbroader current trends and future projections. From a fewthousand subscribers who received the service free ofcost during a test-run in 2007, RML today reaches 250,000farmers in 13 states, signalling a staggering growth drivenby greater rural consumer interest.With the growth of value-added services, mobile phonecompanies have also dived in to provide value addedservices to the farming sector. Bharti Airtel, in June thisyear added a new value added service geared towardrural India. Called Behtar Zindagi; the interactive voiceresponse service was rolled out first in Rajasthan.At INR 30 per month, the operators Behtar Zindagiservice is focused on farming and allied communities.It allows customers to receive various data on theirmobile phones, including weather updates, market rates,live stocks, agriculture, fisheries, health, education andfinance. The service is powered by Handygo, an India -based wireless services provider specializing in mobileentertainment. Handygo has worked with various privateand government bodies to collate relevant information anddisseminate the data to farmers.The service is available 24/7, supports several dialects andis available in Hindi and 17 other regional languages.07Vthought I Volume 5 8. Other corporate entities like TCS havepiloted mkrishi - a personalized andintegrated service in the local languageto farmers on their mobile phones.Farmers in remote areas will be able toconnect to their stakeholders, accessgood quality agricultural inputs, findadvice on farming practices, and getinformation on market prices, weather,and other essentials for improving yields.While providing information on weatherand market prices tops the chart, therehave been other initiatives which areutilitarian. There has been a glut inservices which allow farmers to usemobile phones to remotely monitor andswitch on irrigation pumps used forwatering crops in remote locations.Rise of Organic FarmingThe green revolution might havepropelled India to move towards selfsufficiency, but there have been severalunfavorable consequences which arebeing experienced now. The emphasison increasing productivity has resultedin deterioration of soil health. Themounting fertilizer subsidy itself is also acase in point that all is not well with thatformula for increasing productivity.Organic farming has been an answer togetting back to a process of cultivationof agriculture naturally. It helps inthe reduction of synthetic fertilizers,avoids building up of those substancesin the soil and in turn creates abalanced ecological chain that ensuressustainable, eco friendly and pollutionfree environment. Awareness has been increasingabout the ill effects of synthetic fertilizers and the bioamplification of it, which in turn has translated intoincreasing demand for the organic products.However, there are two essential derailers to the rapidadoption of organic products. Given that farmers in Indiahave very small land holdings, their ability to adopt theusage of bio fertilizers and judicially use it to reap goodresults has so far been low. On the consumer front, urbanconsumers have high awareness of organic method ofcultivation and do aspire to buy organic products. But arethey willing to pay for that? Sadly, No. The demand sideis still weak. Consumers like to have organic food but arenot willing to pay a premium for it.It is hoped that in the near future there will be muchmore rapid adoption of organic farming. As agri retailingbecomes more entrenched with organized players comingin, there is ample scope for improvement in the demandfor organic products. This in turn will facilitate technologytransfer and will boost adoption of organic farming at amuch larger scale than what it is now.The road aheadAs they say We live in interesting times. Indian agribusiness culture has been seeped in the middle ages, withlack of information and market being a key impedimentto its development. There have been small steps taken tomove to a transparent market mechanism. It is hoped thatthis effort will only go up in the days to come. Howeverwith monsoon vagaries continuing to haunt the Indianfarmer, there is a paramount need to manage water.The next wave of innovation needs to address the issue ofwater management. Another area of interest will be thatof adopting bio technology. Barring Bt. Cotton, India hasnot moved forward. While there are pros and cons to thatdebate, it will be interesting to see some concrete actionon that front.08 Vthought I Volume 5 9. BRANDINGAGRI BUSINESSCreating brandsfrom commoditiesArecent study has revealed that, there is a shift in theconsumption pattern from cereals to value-addedcommodities owing to the change in dietary habits, socioeconomic and socio demographic factors. As consumersincome rises, demand becomes more discriminating,i.e. wider variety and higher quality are sought. It isbelieved that the share of value-added products in foodconsumption would reach 50% by 2015.However, the majority of agri products in India are soldto the market as commodities with very little valueaddition. In the current situation, it is no longer sufficientfor agri business to continue focussing on productivityimprovement. It is important that agri businesses adoptstrategic planning models that address the developmentof strong brands, a unique selling proposition, theformation of close relationships throughout the supplychain and the development of market orientation.Commodity Vs BrandKotler and Keller (2006) define a commodity as a productthat is presumably so basic that it cannot be physicallydifferentiated in the minds of the consumer. HoweverTheodore Levitt (1980) in his classic article titled,Marketing Success Through Differentiation - of Anything,states There is no such thing as a commodity. All goodsand services are differentiable.At Vertebrand, we believe that A brand is defined as abundle of functional benefits and added emotional valuesthat some people value enough to buy into repeatedly.A brand gives an identity to a commodity and desirabilityto purchase. Not only does it help in quality assurance,but also product repurchases have been allied with goodquality branded products thereby increasing loyalty amongthe customers. In essence, a brand is the tool to create asustainable competitive advantage.Why branding is importantProper branding of products ensures that the farmers/producers receive prices of their products according totheir quality. Branding is an incentive to improve quality.It also safeguards consumers against adulteration.Branding narrows the gap between the producer priceand the consumer price. Branding creates a favourableposition in the consumers mind and hence thewillingness to pay a premium. Empirical studies indicateconsumers willingness to pay at least a 10% premium onbranded agri products over commodities. Branding is ameans to create a loyal consumer following who is readyto buy your product repeatedly, thereby giving an edge overcompetition.Branding Agri businessA brand is a mix of both functional and emotionalattributes and hence it is necessary to look at thebusiness not just from a pure product basis. Agri businessis no different from other industries in the efforts requiredto build a brand. Brand creation needs to necessarilygo through the ritual of Mapping consumer needs,Market segmentation, Product differentiation and Brandcommunication. However, there is a significant challengein this business. The nature and size of farm holdingswhich are small and heterogeneous means that scale isnot possible and hence individual farm owners will nothave the wherewithal to create brands. Also product-led innovation is difficult and again, will not achieveeconomies of scale easily. Creating an agri business isfraught with challenges, but there is a method to themadness.09Vthought I Volume 5 10. Core product packaged wellIn many agri products, the opportunityfor real product differentiation is verylow. However, consumers have a verystrong need for safety given the threatof adulteration and poor consistency inthe quality of produce. Brands typicallystart off with offering a packaged productwhich safe-guards consumers fromadulteration and also meeting a certainbasic product quality. Typically, stapleslike rice and pulses start off with thisroute, promising customers a certainminimum assured quality. However, theopportunity to charge price premium isminimal over unbranded commodities.In most situations, the brand ownerisnt the agri product producer but anintermediary.Augmented product offeringEvolution of food processing technologiesalong with Farm to Fork concept has nowgiven the opportunity to provide addedvalue to the core product, which canbe used as a significant differentiator.A brand needs to give assurance ofcertain quality and consistent productinnovations which new technologies infood processing enable. For example,long grain rice or unpolished dal withlong shelf life are examples of offeringswhich have found significant consumeracceptance.Value added products for discerning consumer needOrganic farming and Specialty agri produce are someof the ways to create a differentiated product offeringand in turn create brands which command much higherpremium pricing. Typically, there is a partnershipbetween the farmer and brand owner to create suchdifferentiated products which are high up on the valuechain. In such cases, the first mover has the biggestadvantage as they create a need for a certain categoryof products in the consumers mind. Along with productinnovation, investment on brand building is essential tosustain the branding effort. Otherwise, the advantage ofa differentiated product is lost with competition crowdingin. For example, special rice for diabetics, fortified milk,oil etc. fall into this category. Over time, every agri brandneeds to find a real differentiator to stay in this space, orelse the advantage of pricing will be lost.Retail BrandsOrganized retail has been at the fore front in addingvalue to agri products. While branding the source (farm)is not easy, branding at the point of sale has been away of creating brands. While store brands in manymanufacturing categories are considered inferior toproducer brands, in agri business store brands are seenas that of superior quality. Almost 60% of organized retailchain businesses are from food and related items. Withchanges in the APMC Act & FDI in retail, the future willsee a more direct relationship between farm and store.Retail branding is then expected to pick up.GI as a brand building toolGeographical Indicator is an indication; it originates froma definite geographical territory, and it is used to identifyagricultural, natural or manufactured goods. GI is similar10 Vthought I Volume 5 11. to trademarks except that they point to the place of originand not to the owner of the goods. World over, GI has beeneffectively used for agri products especially with relevanceto export markets.GI is applicable for Agricultural/Horticulture products thathave qualities derived from their place of production andare influenced by specific local factors, such as climate,type of soil, altitude, etc. Some criteria which are essentialto meet GI registration areProduce are distinct eco-types with many appreciablefeatures.Produce have been under cultivation for a long time.Produce with strong local reorganization andcommercial impact in the zone of their cultivation.No individual or organization has claimed ownership ofthese crops.The local communities have recognized such crops asheritage crops.While much of the evidence surrounding the dollarbenefits derived from GI branding is anecdotal, someempirical research has shown that geographic originplays a key role in consumer decisions, includingwillingness to pay a higher price for regionally brandedfood products. For example, researchers have found thatgeographic location is an important component of winepricing as well as food products, such as beef and freshproduce.While GI can be an effective tool for differentiation,an effective marketing program is a must to take themessage across to the consumer. This is challenging,especially for developing countries which have an inherentimagery disadvantage. The producer boards which till nowSome of the GI registeredagri products Basmati Rice Darjeeling Tea Assam Tea Nilgiri Tea Goa Feni Malabar Pepper Kerala Cardamom11Vthought I Volume 5have focused on productivity and product improvement,need to reorient themselves towards building the brand.Historically, the focus of agri business has been to remainprofitable by minimizing costs (improving productivity).Today, an increasing number of agricultural producersare examining how to increase profit through productdifferentiation. GI branding, in conjunction with aneffective marketing program, can help agriculturalproducers and processors develop more profitableoperations. 12. AROUNDTHE WORLD-SuccessfulAgri businessbranding storiesAbrand gives an identity to acommodity and desirability topurchase. Not only does it help in qualityassurance, but also repurchases haveoften been allied with good qualitybranded products, thereby increasingloyalty among the customers. Majorityof agri products in India are sold tothe market as commodities. Howeverincreasingly it is observed that thereis greater opportunity to make profitsby selling branded produce. Brandingefforts in agri business in India owe theirgenesis to Basmati rice and since thenhas been extended to Darjeeling tea andother products.These efforts though, are minusculecompared to the opportunity available.While the domestic market is fraughtwith its own unique challenges,branding is the need of the hour in theexport market. Branding is the way fordeveloping countries to be a force ofreckoning in the global food economy.Typically, agri produce branding hasbeen linked to the geographical regionswhere they are grown. Think of cheeseand wine from France which carriesthe appellation dorigine contrlecertificate and the prestige that itenjoys. However, developing countrieslike India are at a disadvantage. Productsfrom developing countries are alwaysviewed with suspicion and a higherdiscount is expected by consumers inthe developed world. However globally,there has been success demonstrated bydeveloping countries in creating strongagri brandsBrazil- Viva TangoBrazil has one of the top rated agri branding programs.Not only has Brazilian coffee been promoted extensively,but also branding programs have been in existence- Brazilian fruit, Brazilian chicken and even BrazilianLobster tail! Brazil holds seven percent of the worldsagricultural commodity market and is the worlds third-biggest exporter of agricultural products. Agricultureis the most globalized sector of the Brazilian economy,accounting for 25 percent of GDP and 36 percent ofexports. Brazil is the worlds leading exporter of: red meat(24 percent of the total), chicken (39 percent of the total),sugar, alcohol, orange juice, coffee and tobacco.Part of BRAZILIANS success can also be attributed totheir acumen in market selection. Brazils focus for exportis not the US or EU where they face trade road blocks, butthe other developing countries. They understood that thegreatest potential for growth in food and agricultural tradeis among developing countries due to the large populationand the rising income growth. Now Russia is the mainbuyer of Brazilian pork while Egypt is the main importer ofBrazilian fresh beef and China is the biggest importer ofBrazilian soy beans.Brazil has followed a strategy of diversification,globalization and brand differentiation, thereby reinventingBrazilian agricultural produce. The country today is seenas a producer of many high-quality products.Colombia- Rebranding a nationA well thought-out branding program for agri producewill do a great deal in even building the country brand.Perhaps the best example would be Colombia coffee.Colombia for a long time was synonymous with crime andnarco terrorism until the Colombia coffee program camealong.Similar to BRAZILS branding efforts, Colombias coffeegrowers federation took the initiative and started buildinga brand for their product back in 1959. They created thestrategy that built recognition and distinction for 100percent Colombia coffee. The aim was to emphasize12 Vthought I Volume 5 13. coffees origins, on the same lines as Bordeaux for wine.It was successful too. Although it only grows about aquarter of Brazils coffee harvest, it is Colombias coffeethat has the reputation for quality.Perhaps that has been the only positive thing about thecountry and it has changed the overall impression of thenation itself!Experience, across the world, indicates that aggregationand quality is a precursor to branding agri business.BRASMAR -Lobster tail turns goldThe story of Brazilian Lobster tail is a case inpoint. Interbras is an export promotions board setup by the Brazilian government in 1976. One of itsmost successful ventures has been to organize thecollective marketing and branding of lobster tails.Interbras recognized the opportunity to increaseBrazils penetration of the large US market for lobstertails. They set about organizing the fishermen in sucha way, as to ensure reliable supplies and to developa strong brand identity. Interbras was initially able toconvince about 50 percent of the fishermen to givethem exclusive rights to export their lobster tailsto the US. In return, Interbras gave them a bettermargin than the fishermen had been getting throughthe importers. Interbras offered a firm price to boththe fishermen and to the brokers and in each casethat price was guaranteed for a three month period.Moreover, whenever Interbras exceeded its targetmargin, surplus profits were channeled back to thefishermen.Subsequently, Brazilian Seafood Marketing Associates(Brasmar) was formed. Brazilian lobsters werepacked in good quality cartons bearing the Brasmarlabel giving the product a single brand identity. Theproduct was promoted on its quality attributes andso, was positioned as a direct competitor to SouthAfrican lobsters. A rigorous quality control systemwas instituted to ensure that the brand image wassustained. Suppliers who consistently failed to meetthe quality standards set by Interbras were ultimatelyexcluded from the scheme.As for the South African product, restaurateurs arethe principal buyers of Brazilian lobsters. Brasmarrecognized that in addition to reliability of quality, therestaurants were concerned about portion controland were therefore interested in buying a product ofuniform size. Interbras developed a grading systemwith 14 size categories instead of the 6 categorysystem used by others. This augmentation of theirproduct was well-received by buyers who couldthen purchase a carton of lobsters, knowing that itcontained lobsters of uniform size.The success of Brasmar can be measured in anumber of ways. Perhaps the most important of theseis that 8590 percent of Brazils lobster fishermennow collectively market through Brasmar and theorganization is able to claim that their marketingsystem brought US$6 million more into the countrythan did the system it largely displaced.Source: FAO corporate documentation repository13Vthought I Volume 5Geographical indicator is a great tool for branding agriproduce. Till recently, about 31 agriculture productsincluding Darjeeling tea and Alphonso mango have gotGI registration. Currently, the action related to GI appearsconcentrated on the registration of GI goods and has notmade any headway in adoption of strategies for brandingand promotion of GI products as well as their marketingand distribution in both domestic and export markets. Itneeds to be noted that GI coupled with effective marketingcan mean greater profits to the local producers. 14. CHALLENGES INBRANDINGAGRI BUSINESSESWhy is it in a country like Indiawhich produces huge quantitiesof agricultural products, there exists avoluminous gap between proportion ofbranded and unbranded products? Ina market where commodities like rice,pulses, fruits and vegetables are boughtby visually and physically assessing thequality, establishing a brand is a colossalchallenge.The fact of the matter is that exportopportunities have contributedsignificantly to the field of agri-branding.For example, the overseas market forbasmati rice gave an impetus to the riceproducers and marketers in India to sellbranded basmati rice. On the domesticfront, the basmati and non basmati ricevarieties are made available in variousbranded package variants suitable toconsumer preferences. Similar is thecase with pulses which is in nascentstages.Although commodities like Basmati Riceand Darjeeling Tea are well known andhave a huge market overseas, the needof the hour is to look beyond to brandingof such commodities with significantexport value and look at developingbrands in the domestic frontSo what prevents the wide prevalence ofbranding? Currently the branding effortsin India for agri products are driven bythe food processing and organized retail industry only.While organized retail has been growing, its contributionis still in single digits. Hence, vast majority of Indiacontinues to buy only unbranded agri produce.Key Challenges which impede brandingValue-Seeking Indian ConsumerThe value conscious Indian consumer is always on thelookout for the lowest price. The perception that brandedproducts are costly is deeply rooted in the Indian psyche.To many consumers, a branded product still means aproduct with an attractive label rather than an assuranceof quality.The great Indian retailerIndia has been a land of Shopkeepers. Indian retailersenjoy high trust quotient by virtue of their superior serviceand relationship with their customers. This in turn meansconsumers trust the retailers choice implicitly and hencedo not feel the need for branded products. However, thistrend has been changing with increasing awareness aboutvarious products. Retail consolidation has also been aprime mover in the picking up of branding efforts in agriproduce.Scalability ChallengeA brand needs to stand for something to someone. Theheterogeneity of the Indian population in turn meansextensive localization and hence becomes unviable formaking investment towards building a brand across alarge geography. Only players with deep pockets have thecapabilities to invest and build a brand. Since the verynature of agri business is oriented towards supplyingto the local community at large, branding efforts aresporadic.14 Vthought I Volume 5 15. Market StructureThe system of aggregation for farm produce (Mandi)by itself is against branding. This method strives toconsolidate without any allusion to the source and hencewipes out any opportunity for differentiation at the firstpoint of sale. It does not incentivize farmers to provide amuch superior produce and charge premium accordingly.This in turn goes against the grain of branding.Poor Farmer AwarenessThe average holding in India is way too small for anyfarmer to make efforts towards branding. Although dairyhas seen the co-operative movement being successfulin creating great brands like AMUL, there have been noconcrete efforts in other spheres of agri products. Thefarming community in India is still caught up on efforts tosell and does not have the awareness of the relative meritof branding.The Way AheadIt is only a matter of time before the challenges areovercome. What are the ways to overcome this brandingconundrum?Quality FirstCheap & best possibly exists only in the Indian lexicon.However, increasingly people are realising that bothcannot always exist together. Continuous effort needsto be put on highlighting the superior quality of brandedproduce.oVisual differentiation is a key method of highlightingquality. For example, when branded sugar came intovogue, very clear communication about how the sugaris whiter and uniform in crystal size was highlighted.Dont undermine value - seekingIndian consumers cannot be divorced from seekingvalue. Use any scope of differentiation to highlightsuperior value to customers.oFor example, long or rounded grains can behighlighted to prove that less quantity is required forcooking.Dont scare consumersOne of the strategies adopted many times by brands isto scare consumers about adulteration in unbrandedcommodities. That is not a good way to build a good agribrand. It might give temporary results. However, it doesnot add any value to the brand in question.15Vthought I Volume 5 16. DOWN TOEARTH -Young Indiaforays intoagri businessAgri business today employs about52% of the Indian population.However, there has been large scale ruralto urban migration. People take up agribusiness not by volition but more becauseit has been their family tradition orbecause that is the only profession theycan take up.Recently, the wind of change has beenblowing in this direction with a chunkof educated professionals taking upagri business with gusto. Thanks tothe economic slowdown and fall-out ofcountries, educated youth are realizingthe importance and prospects of agribusiness and are exploring new avenuesin this field. Agri business is one sectorthat will stay for long - till the survivalof mankind. Young entrepreneursare realizing this fact. Even when theeconomy is shattered, people need foodto eat.Any business, if it has to attract newpeople, needs to provide intellectualstimulation and financial rewards.Its the same in agri business as well.Floriculture and Horticulture have beenat the forefront of attracting new-ageentrepreneurs.Down to earth - What do youngstersbring to the table?The risk appetite of these new-ageentrepreneurs is definitely more - hencethe ability to experiment with crops which have a highexport potential has been a trend. We have witnessed theefforts made by a 28 year old entrepreneur Mr. Rahul Galawho has successfully cultivated the Iraqi Bari Dates inGujarat, which have a very lucrative market abroad.Todays youth are also willing to adopt technology.A complete wave of computerization has taken place insome farms, and technology is used to such an extent thata click on the computer will irrigate and fertilise the entireland as per requirements!Emergence of a new service engagement with theyoung entrepreneurs, has given rise to a completely newservice industry of supporting the farming initiative withKnow how. A successful revenue model which works onproviding a one-stop solution on key farming informationhas created a new service business stream.Getting the youth to the earth - the need of the hourIndia has 60% of its population below the age of 30.A robust economic growth is achieved only if this youthpopulation is gainfully employed and agri business doesprovide the impetus. Initiatives have already been rolledout by various governments. For example in Kashmir,floriculture by youth is actively promoted as a means tocombat even terrorism. A sustained effort of this natureneeds to be done across the country.Educating the youth-The agri education system needs abigger impetus to reach out to more youth and educatethem on practices leading to better revenue generation.This is absolutely critical to gainfully engage the youth andbring them back to working on the ground.16 Vthought I Volume 5 17. Expanding scope of service sectors - Services like sale offarm machinery, processing of farm produce, extensionof agricultural knowledge have very good scope in ruralareas and will also help generate income in rural areasand engage the youth in the entire agri value chain.Overcoming the social stigma - The perception aboutfarming is at the nadir compared to any other industry.This in turn means building up of family pressure tomove out of this business. While there is certain truth inBhushan Agro - Young & Educated makinga differenceWith a strong intent to change the grim situationof farmers, Chandra Dubey (IIT-Kgp and IIM-L), set out on a mission to improve the situationby using scientific methods of farming on farmlands leased out from poor farmers in MadhyaPradesh. Working on 56 acres of farm land in avillage near Sagar, Madhya Pradesh, BhushanAgro is focused on contributing towards ruraltransformation. The business model is to leaseagricultural land from farmers at ` 8000-10,000per acre per year and carry out farming usingmodern scientific methods, equipment, systematiccrop rotation, and water harvesting techniques. Therevenue from agricultural activities per acre per yearis approximately ` 100,000 150,000. Also, becauseof the increasing number of farmers under debt andthe consequent suicides, Bhushan Agro is looking toreplace financial institutions and also provide themwith crop insurance on reaching scale.17Vthought I Volume 5some of the perceptions, it is still misplaced and a socialrebranding of the sector needs to be taken up to instillthe sense of purpose in being employed in and by thisbusiness.We are not going to witness a reverse migration fromurban to rural and IT to agri in the near future. But smallsteps have been taken and there is a need to overcomethe inhibitors and draw youth back to the ground. 18. EXPERT SPEAK-Mr. Prabhakar Rao, ManagingDirector, Nuziveedu Seeds Ltd.,speaks on the challengesand future of AgribusinessMr. M. Prabhakar Rao is theVisionary Chairman of the NSLGroup and the Managing Directorof Nuziveedu Seeds Limited.Hailing from an agricultural family,Mr. M. Prabhakar Rao is a postgraduate in agriculture and hasnurtured Nuziveedu Seeds tobecome the countrys largest seedmanufacturer and the dominantplayer of Bt. Cotton seeds. Today,Nuziveedu seeds is recognized as aleading Bio-Agri company of India.Apart from seeds, the group hasalso diversified into several sectorslike Renewable Power, Textiles,Integrated Sugar Factories and ITInfrastructure.In this exclusive interview, he talksto Vertebrand about the boon andbane of the agri sector.The contribution of agriculture to GDPhas been steadily declining. The generalimpression seems to be that the futuregrowth prospects for this sector areweak. On the other side there are abillion mouths to be fed. What is youropinion on the future growth prospectsof this sector?The Contribution of Agriculture to GDPis certainly declining. This is naturalwhen other areas like manufacturing& services start to grow and hencecontribute more to the GDP. However,The role of government in this industry is very important.Yet the general feeling is that reforms are significantlypending in the sector. What are the significant reformsyou think need immediate priority and attention?Iagree that Government intervention and role is very highin this sector and there is an urgent call for reforms.On the policy front, we urgently need a well thought-outpolicy on genetically modified crops. There needs to beadequate safe-guards, but in the larger interest of thepeople, we need to adopt GM crops soon.We need significant changes on the policy for subsidiesfor agri inputs. It is paramount that the benefit needsto reach the farmers directly. Currently, this is beingpartly implemented and we need a whole-heartedimplementation going forward.Beyond framing policies, there is a larger government rolein building rural infrastructure. With Indian agriculturebeing dependent on monsoon, we need better irrigationfacilities. Point to note is that we already have a lowcropping intensity (i.e. area under cultivation as againstavailable area). Hence, it is important that priority is givento improve the availability of water supply.absolute growth in this sector cannot be compromised.In a country where about 60% of the population is engagedin agriculture and related occupation, it is importantthat society inequalities do not crop up and growth ismaintained in this sector.I strongly believe that 4% growth is possible if we ensurethat productivity is enhanced from the current levelsand that is possible by virtue of bringing in technologicalinnovations, extensive education to the farmers anddeveloping a strong linkage between farmers and marketsYes, Agriculture can continue to make a healthycontribution to GDP and can grow at modest levels,provided right measures are taken.18 Vthought I Volume 5 19. Information technology has been a game changer inmany sectors. What do you think will be the role of IT intransforming agri business?IT is now an essential part of any business. A key area willbe the availability of real-time information. Informationabout market prices and trends to farmers will certainlyenhance their decision making capabilities. At a largerlevel, information on global commodity trends andinnovations across the world will positively transform theindustry. There is no doubt that information will play a keyrole in connecting the farmers to the world.Apart from BT cotton there seems to be no further rollout of GM seeds. Do you see any future for GM seedsgetting into India?I believe that adopting GM traits in all crops will improveproductivity, reduce losses and also improve the qualityof output, thereby making agriculture profitable.However this is an area which needs the consensus of allstakeholders. As told in an earlier question there is a needfor a well thought-out policy.To start with, we need robust and transparent regulatorymechanisms to roll out GM crops. This must be followedby extensive education programs to general public on thesafety of GM foods. There is no doubt that India needs GMcrops.In your line of business i.e. Seed industry, what do yousee as the significant challenge in the coming years?Currently, the agri sector is plagued with issues of lowproductivity due to poor agronomic practices in thecontext of constant arable land and increasing demand forgrain and fibre. Hence, it has become imperative for theindustry and government to enhance yield per unit of land.To accomplish that, there needs to be significantinvestments in R&D and technology. We also have toomany regulatory challenges. A number of legislationsare involved right from Seed Act; PPV & FR Act; EPA;Essential Commodities Act; State Cotton Control Acts;Biodiversity Act etc. to name a few. There needs to beconcrete effort by the government to rationalize thecontrols. Unless it is done, R&D and its adoption will bestifled. The uncertainty in GM food crops is a dampener.19Vthought I Volume 5Warehousing facilities and Connectivity to Market need tobe significantly improved. Government should championPPP model in this area.Government needs to incentivize R&D to bring outinnovative products.With rising affluence of consumers, a significant changein the dietary pattern is experienced. What is yourprediction of the consumption which is expected? In fact,price rise of dals has been attributed to the increasingconsumption of protein rich food by Indians. Do you seeany such future trends in food consumption in India?It is true that the rising income of the population has ledto changes in the dietary pattern of people. The increasein demand for fine rice, vegetable/fruits, eggs and meatclearly indicates this trend. In fact, fruits & vegetableshave registered significant growth not just in India butin all developing countries with the demand growthoutpacing the production growth.Along with the increasing consumption of eggs andchicken, the demand for maize grain has also increased.Thereby, an increase in demand for maize hybrid seedis seen. As a seed manufacturer, we need to takeconsonance of such trends. 20. There is a lot of buzz about Organicfarming. Do you think it will be asustainable movement and what will beits future in India?I dont think we are ready for organicfarming on a large scale. Our task is cutout - We have one of the lowest levels ofagricultural productivity and that shouldbe improved to match at least the globalaverage. Once we attain that standard, wemay look at high-value agriculture. Fornow, it is not a priority area.If multi brand retail FDI becomes areality, how will the face of Indian agribusiness change?Allowing Foreign Direct Investmentin multi brand retail will benefit thefarmers. In fact, both the farmers andretailers may benefit by avoiding themiddle men. Lets wait & watch.Indian corporate sector has made significant acquisitionof farms in African countries. Do you see thiscorporatization of farming ever happening in India?Many corporates have initiated farming related activities inAfrica. One has to wait for some more time to understandtheir success. I have no doubt that Africa is going to be thefood bowl for the world in the future. The basic differencebetween Africa and India is the availability of large tractsof land in Africa, which is not so in India. Within thenatural limits of our agriculture (like dependence onrain), we can grow only to a limited extent and hence amdoubtful about this.There seems to be a trend of many youngsters returningto farming. What will be your advice to the buddingentrepreneurs in the agri business space?Till recently, the rural young have been shying awayfrom agriculture. I am not aware if there is a large trendof youngsters turning back to agriculture rather thanturning their back on agriculture. However If it is true thatyoungsters are returning to this sector, it is the best thingthat can happen to Indian Agriculture and I wish them thevery best!20 Vthought I Volume 5 21. THE EDITORIAL TEAMAparna Lakshmi (Chief Editor)Aparna Lakshmi is the Head of CorporateCommunication and Knowledge Management atVertebrand. Her sectoral interests includes foods andconsumer goods.Syed HaqueSyed Haque is an Associate Vice President atVertebrand and leads the Research and StrategyDevelopment domain. In addition to businessstrategy and consumer research, Syed is also aspecialist in supply chain management.Richa ChhabraRicha Chhabra is an associate and part of thebusiness development team at Vertebrand. Herinterests lie in tracking consumer patterns andbehavioral trends.Karthik SunkaraKarthik Sunkara is an associate and part of the mainbusiness development team at Vertebrand. His areaof interest is digital marketing.21Vthought I Volume 5 22. ABOUT VERTEBRANDVertebrand is Indias premier Brand Equity Management partnership. We taketurnkey accountability for managing brand equity of products and services on anoutsourced basis and help entrepreneurs take ideas from mind-to-market.Occupying the hitherto-vacant space between Management Consultancies on theone hand and typical Communication and Design firms on the other, Vertebrandadopts a 360 perspective towards enhancing the business-stakeholder connect,across all touch-points.Vertebrand offers a comprehensive array of services spanning the science ofbuilding & managing Brand equity. We have handled dozens of prestigiousassignments across sectors, assisting clients in New Product launches,Channel Structuring & building, Internal Brand Alignment of employees,Brand Architecture & Positioning, Corporate Identity Creation as well as BrandValuations.Our expertise spans several industry verticals from Foods to Fertilizers, ConsumerGoods to Chemicals, Automobiles to Apparel, et al.Our scientific & proprietary consulting tools are deployed by a team of over 35consultants with deep-domain Sales & Marketing experience across variousindustry sectors.Vertebrand is todays Indias largest single-window brand-building partnership.Headquartered in Bangalore, the company has full-service offices across Delhi,Mumbai, Chennai & Kolkata.Most recently, Vertebrand was chosen as the global alliance partner and theexclusive Asia-Pacific licensee of Equancy International (www.equancy.com ),a premier Digital & Strategic Marketing global consultancy with a networkspanning Paris, New York & Shanghai. Vertebrand & Equancy collaborate activelyin knowledge-sharing & cross-border assignment-handling.For more details, do visit us at www.vertebrand.comFor business enquiries, contact us at: brand.engineers@vertebrand.com22 Vthought I Volume 5 23. Vertebrand Management Consulting Pvt Ltd, No. 119, 1st Cross, 2nd Main, HAL 3rd Stage,Indiranagar, Bengaluru - 560 075, India.T+ 91 80 2521 0277-79 F +91 80 2521 0280 www.vertebrand.comBengaluru Chennai Delhi Kolkata Mumbai Paris New York Shanghai