N a r s e e Mo n j e e C o l l e g e O f

C o mme r c e An d E c o n o mic s

Subject: Rural Marketing

Topic: Rural Marketing by ITC

Presented By:
Pratik Bubna 03
Bhushan Mehta 21
Dhiren Nagareya 28
Ninad Save 39
Sahil Shah 47

INDEX

1) Introduction to Rural Marketing

2) ITC Company Profile
3) ITC Products
 4) Product, Price, Promotion and Distribution
5) ITC E-Choupal
6) ITC Rural Hubs and Spokes
7) Conclusion

Introduction to Rural Marketing

Rural markets represent a distinct dynamic in how they come into being and make
unique demands on how the product is designed and how the brand is positioned and
promoted. Greater the strategic attention to these unique demands, assure greater the
chances of product's success in the rural market. Fringe acceptance of consumer
products or brands is no indication of market potential. It actually would only result in
higher incidence of brand and product mortality as more firms try to choke those
segments with competing brands.

The effort has to be directed towards reaching out to more and more of rural population
offering them the products which they find value for money and are converted to brand
loyalist in due course of time. But the hurdles faced are plenty. Distribution and
presence of counterfeits products being among the most important. So the emphasis
has to come in the form of innovative strategies in not only promoting the product and
the brand to the villagers but also making it available once the pull effect starts working
at its fullest. Also partnership with retailers at the rural level must be formulated to
tackle counterfeits, which dilute the hard-earned brand equity.

High distribution costs, high initial market development expenditure, lack of market
research, thinly populated and widely spread villages in the Indian mainland make it
difficult for the marketer to deliver the goods at reasonable costs. Mass Communication
and promotion programs which eventually lead to brand building are difficult to achieve
which ultimately results in low level of exposure to different product categories and
product brands in the presence of counterfeits and spurious products all around the
rural market and at times you have more than a dozen substitutes for a branded
product.

An essential element of rural marketing is wide distribution of products. In fact, the

successes of Chik shampoo, the second largest shampoo brand, and Ghadi detergent,
the third largest detergent brand, show that distribution, more than advertising, is the
key of building volumes. HLL with its best distribution network reaches just over 1 lakh
villages in total of 6.38 lakh villages.

These agencies would run as separate entities or companies with seed capital from the
participants. This newly formed agency would deliver products of partnering companies
in the most cost effective manner with maximum utilization of space available in cargo
trucks. An otherwise cost inefficient route would suddenly become very attractive for
12-15 companies combining their cargos. This is based on hypothesis that fully loaded
10 ton delivery truck is cheaper than 20 half filled 1 ton trucks, deployed by as many
different companies.

Distributing agency would drive its profits from the pre-fixed common distributor
margins, making agency totally impartial. Agency would maximize its profits by
allocating the best mix of products as well as correct service route and by carrying the
products timely, pulled by the demand by village Kirana Wala. Being profit driven,
Agencies would handle the most demanded products by Kirana Wala and can even add
or drop existing brands. So a heavily advertised product would ultimately capture
maximum space in the cargo truck as well as on shopkeeper's shelf.

Another major plague of rural marketing has been widespread availability of fakes.
Shopkeeper plays a very important role here, as consumer asks for things, not brands
like “Laal wala sabun dena, Lal Dant Manjan Dena”. To counter this nuisance agency
would certify specific village Kirana Wala as Genuine Products Store. Failure to comply
at surprise checks would result in immediate termination of contract.
In return, Agency would provide special incentives to these stores with better margins,
up gradation of store and longer credit period. In this way more and more stores can be
brought in the preference bracket, mitigating the danger of stores selling cheap fakes.
Store advertisement campaigns could be funded by the agency like reaching every
village household through free sample sachets using local school children. Special
incentives could be given to all genuine product stores on reaching sales target. Genuine
Product Stores could be collectively advertised at the end of every participating
company's advertisement, educating people about them.

The Indian rural market is a complex mosaic of mind-sets, cultures, and lifestyles. While
education, employment, income, agricultural land ownership may still be the major
deciding factors accounting for social differentiation, they do not yield reciprocal cohort
behavioral patterns, with respect to consumption patterns, purchasing decisions and
priorities of product ownership. At 125.2 million (1999-00), India has more rural
households than all households in Western Hemisphere combined. Half of India’s GDP
comes from rural and semi-urban areas. The per capita annual income in rural India is
Rs: 9,481, against urban India’s Rs 19,407. But, lower education and housing expenses
makes the disposable income almost equable.

There is huge potential and definitely there is lot of money in rural India but the smart
thing would be to weigh in the roadblocks as carefully as possible. The companies
entering rural market must do so for strategic reasons and not for tactical gains as rural
consumer is still a closed book. It is only through unwavering commitment that the
companies can make a dent in the market.

ITC Company Profile

ITC is one of India's foremost private sector companies with a market capitalisation of
nearly US $ 18 billion and a turnover of over US $ 5.1 Billion. ITC is rated among the
World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies
by Forbes magazine, among India's Most Respected Companies by BusinessWorld and
among India's Most Valuable Companies by Business Today. ITC also ranks among
India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand Finance
and published by the Economic Times.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products.
While ITC is an outstanding market leader in its traditional businesses of Cigarettes,
Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even
in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal
Care and Stationery.

As one of India's most valuable and respected corporations, ITC is widely perceived to
be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration
"a commitment beyond the market". In his own words: "ITC believes that its aspiration
to create enduring value for the nation provides the motive force to sustain growing
shareholder value. ITC practices this philosophy by not only driving each of its
businesses towards international competitiveness but by also consciously contributing
to enhancing the competitiveness of the larger value chain of which it is a part."

ITC's diversified status originates from its corporate strategy aimed at creating multiple
drivers of growth anchored on its time-tested core competencies: unmatched
distribution reach, superior brand-building capabilities, effective supply chain
management and acknowledged service skills in hoteliering. Over time, the strategic
forays into new businesses are expected to garner a significant share of these emerging
high-growth markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one
of the country's biggest foreign exchange earners (US $ 3.2 billion in the last decade).
The Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance
its competitiveness by empowering Indian farmers through the power of the Internet.
This transformational strategy, which has already become the subject matter of a case
study at Harvard Business School, is expected to progressively create for ITC a huge rural
distribution infrastructure, significantly enhancing the Company's marketing reach.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Limited, is
aggressively pursuing emerging opportunities in providing end-to-end IT solutions,
including e-enabled services and business process outsourcing. ITC's production facilities
and hotels have won numerous national and international awards for quality,
productivity, safety and environment management systems. ITC was the first company
in India to voluntarily seek a corporate governance rating.

ITC employs over 24,000 people at more than 60 locations across India. The Company
continuously endeavors to enhance its wealth generating capabilities in a globalising
environment to consistently reward more than 3,81,000 shareholders, fulfill the
aspirations of its stakeholders and meet societal expectations. This over-arching vision
of the company is expressively captured in its corporate positioning statement:
"Enduring Value. For the nation. For the Shareholder."

ITC Products
Cigarettes:

ITC is the market leader in cigarettes in India. With its wide range of invaluable
brands, it has a leadership position in every segment of the market. Its brands
include Insignia, India Kings, Gold Flake, Navy Cut, Scissors, Capstan, Berkeley,
Bristol and Flake.

Foods:

ITC made its entry into the branded & packaged Foods business in August 2001
with the launch of the Kitchens of India brand with brand launches in the
Confectionery, Staples and Snack Foods segments. ITC's world famous restaurants
like the Bukhara and the Dum Pukht and other products like Aashirvaad, Sunfeast,
Mint-O.

Lifestyle Retailing:

ITC's Lifestyle Retailing Business Division has established a nationwide retailing

presence through its Wills Lifestyle chain of exclusive specialty stores. Beginning
with its initial offering of Wills Sport relaxed wear from the first store at South
Extension, it has expanded with Wills Classic work wear, Wills Clublife evening
wear.

Greeting, Gifting, and Stationary:

ITC's stationery brands Paper Kraft & Classmate are the most widely distributed
brands across India. Paperkraft is targeted at working executives and college goers.
The Classmate range consists of notebooks, long books, drawing, etc. ITC's Greeting
& Gifting products include Expressions greeting cards and gifting products.

Agarbattis:

ITC has launched Mangaldeep Agarbattis across a wide range of fragrances like
Rose, Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri..

Hotels:

The 484-room ITC Hotel Maurya Sheraton & Towers at New Delhi is not only
amongst the leading business hotel in the country and the 386-room ITC Hotel
Grand Maratha Sheraton & Towers. Fabulous Indian meal at the Bukhara.

Safety matches:

These matches are available in unique designs and with innovative value added
features. ITC's brands like iKno, Mangal Deep, VaxLit and Delite.
 Product
Product Levels:

(1) Core Benefit

It is the fundamental service or benefit that the customer is buying the product for.
With respect to ITC, if we take the product line of foods, the core benefit is to satisfy
hunger.

(2) Basic Product

It is conversion of core benefit into basic product which can be sold. With respect to
ITC’s food segment, the products are confectionary, snacks etc.

(3) Expected Product

It is a set of attributes a buyer wishes to see in a product. Here, consumers expect
healthy food and harmless ingredients.

(4) Augmented Product

They are products whose features exceed the expectation of consumers. For food
products like Bingo and Kitchens of India, their attractive packaging and some freebies
can be a good augmentation.

(5) Potential Product

It emphasizes the importance of customization like P & G, Barbie Dolls, etc. However
this level is absent in food segment of ITC.
 ITC’s Product Assortment
Cigarettes Foods Lifestyle Stationary Hotels Incense Agri I.T.
Retail sticks Paper Business

John Paperkraft Mangaldeep Paperboards

India Kings Kitchen Players Classmate Spriha Speciality Foodgrains
Classic of India Miss Regalia Papers Edible Nuts
Gold Flake Ashirwad Players Packaging Marine Products
Navy Cut Sunfeast Wills Processed Foods
Bristol Mint-O Lifestyle Coffee
Flake Candyman Spices
Bingo

1. Product:

Product Width:
It refers to the different product category a company has. For ITC, it is 9.

Product Length:
It refers to number of items in each category. If we take case of stationary it comes to 3.

Product depth:
It refers to number of sizes and variants offered in each product. If we take example of
their classmate books there are 8 various sizes available in it.

Consistency:
It refers to the degree of how much the products lines are related in terms of end use,
production requirements, distribution channels or some other way. We find that ITC’s
product lines can no way be called consistent in any of these terms.
 Product Life Cycle
Re

nu
ve

Inception Growth Maturity Decline

e

Sales

Time Profits

Maturity:
Sales increase as the product is accepted by most potential buyers. ITC’s agri
business can be classified as a mature business as it is at its peak and ITC's Agri-Business
is one of India's largest exporters of agricultural products. ITC is one of the country's
biggest foreign exchange earners (US $ 2.8 billion in the last decade).

Price
ITC believes that a significant portion of the rural population is paid in daily wages. Daily
wage earners tend to have little stock of money, and therefore tend to make purchases
only to meet their daily needs. The implication is that pack sizes and price points are
critical to sales, and importantly, that rural consumers view the purchase-tradeoff
dilemma across a much wider range of product categories. As a result, the nature of
competition is much greater; a beverage manufacturer is not only competing with other
manufacturers in its category, 10 but also other products that consumers may consider
one-off luxury purchases such as shampoo. So ITC examines method by which it can
make the product more affordable. In the case of consumer durable one way is to work
through rural bank and offer higher purchase terms to consumer.
In short, the Value for money is the most important concept that differentiates ITC from
the rest
 Promotion
Promotion through Advertising:

For ITC advertising is the main the tool for promoting its food products. When it signed
Shah Rukh khan, and Sania mirza it gave a tremendous boost to the confectionary
products like biscuits and all others products.

Surrogate advertising:

Here well known celebrities are promoting the products. In April 2005, Sunfeast
launched its major campaign fro promoting the product. It signed on Hindi film actor,
Shah Rukh Khan as its brand ambassador. In the same year, as the official sponsor of the
WTA tennis championship -- titled the Sun feast Open -- the company had teenage
sensations Sania Mirza and Mahesh Bhupathi campaigning for it. But that's not all. For
promotions in southern states, Sun feast has signed Tamil super star Surya as a brand
ambassador.
No product advertisement relating to tobacco is published by the business. The business
also maintains a website, 'itc-iltd.com', which provides the details of Tobaccos grown in
different regions of India.

Sales promotions

ITC indulged in sales promotion basically only for its small products. ITC Ltd’s agarbathi
business division concentrates to promote its ‘Spriha’, ‘Ashageet’ and ‘Nivedan’ brands
as national brands. Sales promotions is basically providing discounts, samples etc. ITC
promotes its agarbathi by giving free small samples of agarbathi packets. ITC uses sales
promotion because it is facing tough competition from others competitors like cycle
brands agarbathi. Also in case of brand apparel like john players there are various cash
discounts. Also, the company tied up with Bey Blades, the popular television series that
was a rage among children, to promote its confectionary products.

Public Relations - Public welfare activities

ITC is involved in social welfare activities. ITC Limited plans to provide infrastructure
facilities at select rural Government schools in the Coimbatore district under its “Project
Classmate.” ITC has undertaken this project as part of its corporate social responsibility.
A survey of nearly 50 schools conducted by ITC in Coimbatore revealed that most of
them were in need of facilities such as girl’s toilets, benches and desks, black board and
blocks. The project had already started in about five schools. The company had tied play
materials. Fifty-two schools had been identified in Mettupalayam and Karamadai up
with a Chennai based non-governmental organization (NGO), V-Excel, to carry out its
activities in the district. Also through the confectionary products like Sunfeast it is
contributing to the rural education like if you buy a Sunfeast pack your one rupee will go
in rural education development. This advertisement of contributing one rupee is done
by the brand ambassador Shah Rukh Khan.

Distribution
For most companies wanting to enter the rural markets, distribution poses a serious
problem. Distribution costs and non availability of retail outlets are major problems
faced by the marketers.

a.) Rural Marketing Vehicle (RMV) Marketers need to make more on- ground contact
with their target audience as well as make demonstration of products as consumers in
rural markets rely on the 'touch and feel' experience. One of the ways could be using
company delivery vans which can serve both the purposes.

b.) Melas and Haats:- According to the Indian Market Research Bureau, around 8000
melas are held in rural India every year and annual sales at melas amount to Rs.3,500
crore. Besides these melas, rural markets have the practice of fixing specific days in a
week as Market Days when exchange of goods and services are carried out. Also, every
region consisting of several villages is generally served by one satellite town where
people prefer to go to buy their durable commodities. Marketing managers can use
these feeder towns they will easily be able to cover a large section of the rural
population.
 Case Study - Agarbattis in Rural Market

As part of ITC's business strategy of creating multiple drivers of growth in the FMCG
sector, the Company has commenced marketing agarbattis (incense sticks) sourced from
small-scale and cottage units. This business leverages the core strengths of ITC in nation-
wide distribution and marketing, brand building, supply chain management,
manufacture of high quality paperboards and the creation of innovative packaging
solutions to offer Indian consumers high quality agarbattis.

ITC has launched Mangaldeep Agarbattis across a wide range of fragrances like Rose,
Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri and Mogra. To
offer better value proposition to the consumer, Mangaldeep is also available in 3in1 and
5in1 varieties giving the consumer three and five fragrances in one pack respectively.
Attractively packaged, these brands have been appropriately priced to appeal to a cross-
section of consumers at various price segments. These agarbattis are available in
innovative 'Fragrance-Locked' packaging.

ITC has also entered into an MOU with the Khadi & Village Industries Commission (KVIC)
to source agarbattis from KVIC approved units, and to distribute agarbattis through the
Khadi Bhavan / Khadi Bhandar outlets across the country. This collaborative venture is
expected to result in employment generation, particularly in the semi-urban and rural
areas.

ITC is also supporting an 'Agarbatti Community Participation Programme' run by the

Vyakti Vikas Kendra, a non-profit organisation founded by the renowned spiritual guru
Sri Sri Ravishankar and located near Bangalore. Over 100 village women are gaining
from the training that this organisation imparts in rolling agarbattis. ITC is also beginning
to extend similar support to other NGOs in other states like Bihar, Tripura and Andhra
Pradesh, who are also setting up agarbatti units, training village women in rolling
agarbattis and employing these women in these units.
 Marketing Mix

Product:

1) ITC Limited has launched agarbattis in Indian Rural Market.

2) ITC has sold these Agarbattis in the name of ‘Spriha’ and ‘Mangaldeep’.
3) These agarbattis have got different fragrances like rose, jasmine, bouquet,
sandalwood, madhur, sambrani and nagchampa.
4) These agarbattis are available in ‘fragrance-locked’ packets.

Pricing:

1) ITC is selling these agarbattis at very low cost seeing the economy of the people
staying in rural areas at Rs five for 10 sticks for every pack.
2) ITC has also kept cost for each stick that is 75 paisa.

Place:

1) ITC has promoted this product through the melas and Haats.
2) Some agarbattis had been given to co-operative societies to help in distributing
the agarbattis to different consumers.

Promotion:

1) ITC had chosen to promote their agarbattis in rural markets hrough wall
paintings in different languages so that it should be understood by everyone.
2) ITC had also chosen formal media to promote their product by TV and Radio.
 ITC E-Choupal
The Big Picture:

ITC’s International Business Division, one of India’s largest exporters of agricultural

commodities, has conceived e-Choupal as a more efficient supply chain aimed at
delivering value to its customers around the world on a sustainable basis.

The e-Choupal model has been specifically designed to tackle the challenges posed by
the unique features of Indian agriculture, characterized by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, among others.

The Value Chain - Farm to Factory Gate:

 
‘e-Choupal’ also unshackles the potential of Indian farmer who has been trapped in a
vicious cycle of low risk taking ability > low investment > low productivity > weak market
orientation > low value addition > low margin > low risk taking ability. This made him
and Indian agribusiness sector globally uncompetitive, despite rich & abundant natural
resources.

Such a market-led business model can enhance the competitiveness of Indian

agriculture and trigger a virtuous cycle of higher productivity, higher incomes, and
enlarged capacity for farmer risk management, larger investments and higher quality
and productivity.

Further, a growth in rural incomes will also unleash the latent demand for industrial
goods so necessary for the continued growth of the Indian economy. This will create
another virtuous cycle propelling the economy into a higher growth trajectory.

The Model in Action:

Appreciating the imperative of intermediaries in the Indian context, ‘e-Choupal’

leverages Information Technology to virtually cluster all the value chain participants,
delivering the same benefits as vertical integration does in mature agricultural
economies like the USA.

‘e-Choupal’ makes use of the physical transmission capabilities of current intermediaries

– aggregation, logistics, counter-party risk and bridge financing –while disintermediating
them from the chain of information flow and market signals.

With a judicious blend of click & mortar capabilities, village internet kiosks managed by
farmers – called sanchalaks – themselves, enable the agricultural community access
ready information in their local language on the weather & market prices, disseminate
knowledge on scientific farm practices & risk management, facilitate the sale of farm
inputs (now with embedded knowledge) and purchase farm produce from the farmers’
doorsteps (decision making is now information-based).
Real-time information and customized knowledge provided by ‘e-Choupal’ enhance the
ability of farmers to take decisions and align their farm output with market demand and
secure quality & productivity. The aggregation of the demand for farm inputs from
individual farmers gives them access to high quality inputs from established and reputed
manufacturers at fair prices. As a direct marketing channel, virtually linked to the
‘mandi’ system for price discovery, ‘e-Choupal’ eliminates wasteful intermediation and
multiple handling. Thereby it significantly reduces transaction costs.

‘e-Choupal’ ensures world-class quality in delivering all these goods & services through
several product / service specific partnerships with the leaders in the respective fields,
in addition to ITC’s own expertise.

While the farmers benefit through enhanced farm productivity and higher farm gate
prices, ITC benefits from the lower net cost of procurement (despite offering better
prices to the farmer) having eliminated costs in the supply chain that do not add value.

The Status of Execution:

Launched in June 2000, 'e-Choupal', has already become the largest initiative among all
Internet-based interventions in rural India.'e-Choupal' services today reach out to more
than 3.5 million farmers growing a range of crops - soyabean, coffee, wheat, rice, pulses,
shrimp - in over 36,000 villages through nearly 6000 kiosks across nine states (Madhya
Pradesh, Haryana, Uttaranchal, Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra,
Rajasthan and Kerela).

The problems encountered while setting up and managing these ‘e-Choupals’ are
primarily of infrastructural inadequacies, including power supply, telecom connectivity
and bandwidth, apart from the challenge of imparting skills to the first time internet
users in remote and inaccessible areas of rural India.
  

Several alternative and innovative solutions – some of them expensive – are being
deployed to overcome these challenges e.g. Power back-up through batteries charged
by Solar panels, upgrading BSNL exchanges with RNS kits, installation of VSAT
equipment, Mobile Choupals, local caching of static content on website to stream in the
dynamic content more efficiently, 24x7 helpdesk etc.

 Going forward, the roadmap includes plans to integrate bulk storage, handling &
transportation facilities to improve logistics efficiencies.

As India’s ‘kissan’ Company, ITC has taken care to involve farmers in the designing and
management of the entire ‘e-Choupal’ initiative. The active participation of farmers in
this rural initiative has created a sense of ownership in the project among the farmers. .
They see the ‘e-Choupal’ as the new age cooperative for all practical purposes.

This enthusiastic response from farmers has encouraged ITC to plan for the extension of
the ‘e-Choupal’ initiative to altogether 15 states across India over the next few years. On
the anvil are plans to channelise other services related to micro-credit, health and
education through the same 'e-Choupal' infrastructure.
 e-Choupal among the '10 biz ideas that changed
India’
The August 31 2008 issue of The Week magazine features e-Choupal among the '10 biz
ideas that changed India'.

The Article says:

Successfully building a farmer-centric ecosystem that is not government-owned and

run and creating virtual markets in rural India

Entrepreneur: S. Sivakumar

Its aim is to ultimately become a universal platform for any kind of information-farming,
social services, finance-that villagers would want access to. But like all transforming
ideas, it was initially dismissed as 'unrealistic and impractical'. But S. Sivakumar, head,
international business and agricultural division, ITC, was unfazed. He was convinced that
as long as the process was simple and visibly useful and beneficial, the Indian farmer
would learn to use IT to his advantage.

Sivakamar was proved right. Within a short while of being rolled out, the concept caught
on.

Operating out of village internet kiosks managed by the farmers, called sanchalaks, the
e-Choupal gave to the agricultural community convenient access in their local language
to information on weather, market scenarios, scientific farm practices and risk
management and facilitating the sale and purchase of farm inputs (with embedded
knowledge on how to use optimally).

Appreciating the imperative of the much-abused middlemen in the Indian rural context,
it makes use of their physical transmission capabilities like aggregation, logistics and
bridge financing, while eliminating them from the chain of information flow and market
signals.

But how did the idea germinate? It all started when Sivakumar emphasised to group
chairman Y. C. Deveshwar that if the company wanted to grow in the agri business, it
needed to pump in more money along the value chain. Deveshwar had initially
suggested using models similar to that of Ebay and Amazon. But he finally fell in with
Sivakumar's concept and the first e-Choupal became operational in June 2000.

Sivakumar admitted though that initially even he was not sure whether the project
would be able to establish trust with the farmers.

But the problem was just in the mind. Having set aside two days for training six
sanchalaks to begin with, they were taken by surprise when they completed the first
phase of training in only three hours.

Said Sivakumar: "Unlike the typical urban methodology of starting with the basics, we
started with the benefits of e-Choupal and how farmers could derive them." With input
from the farmers, the choupal web portal became operational.

Since it was aimed at making markets more transparent and enhancing the bargaining
power of farmers, it saw some resistance from traders. But by 2004, e-Choupal became
firmly established through nearly 6,500 kiosks across nine states (MP, Haryana,
Uttaranchal, Karnataka, Andhra Pradesh, UP, Maharashtra, Rajasthan and Kerala).

ITC aims to reach 15 states by 2010, covering 1,00,000 villages with 20,000 choupals. It
also plans to expand its horizon of services: including fruits and vegetables in its
portfolio of agricommodities, besides adding information on health services, vocational
education and micro-financing.
 ITC'S RURAL HUBS AND SPOKES:
ITC is one of the most active companies in rural India. They have set up over 2,500 e-
choupals in the villages and expect income from e-choupals to be more than their
tobacco business by 2010. "In the next 5-7 years, ITC will have 20,000 choupals. Since
each choupal covers around five villages, the company will have access to 100,000
villages. Each choupal currently serves 500-600 farmers." To complete the picture, India
has about 600,000 villages with about 700 million people in all. "[ITC chairman Yogi]
Deveshwar explained that the revenue estimated from choupals in the coming years
was not unfounded, given the importance of the rural economy. He said at present the
propensity to spend was low among villagers because surplus income was low.
However, the choupal network would boost farmers' income and increase their
propensity to spend, he said, adding that this would have a multiplier effect on the
economy."

The e-choupals are spokes, and where there are spokes, there is a need for a hub. The
Economic Times writes about their plan to set up rural malls: ITC is setting up 45
shopping malls in the countryside, each the size of Delhi’s Khan Market, to retail
everything from John Players clothes and ICICI life insurance to Eicher motorbikes. The
first five malls, costing more than Rs 20 crore, will be ready for shoppers in 16 weeks.

What ITC gets in return is a dedicated customer base, savings through procurement of
cheaper farm produce, and a cut ranging from 3%-40% of sales value from the brands
which use its shelf space. The focus at present is Madhya Pradesh, where ITC has
already managed to set up an exhaustive network of e-chaupals for procurement of
soyabeans and sale of agri-inputs.

Built on 5 acres, each mall would cost ITC anything between Rs 3-5 cr [USD 650K - 1.1
million], depending on the price of real estate. To put that area in perspective, most
malls in the large metros are built on just 2-3 acres of land. Each mall will be a self-
contained unit, with facilities for storage of goods, warehousing of agricultural produce
procured by ITC, shelf display, and parking. Each store will be manned by at least five
full-time ITC sales staff, and the number could go up in busy seasons of the year.

This interests us is the context of our RISC ideas. We are working to set up a pilot by
mid-2004. RISC's goals are broader: "Fundamentally, the specific market failure that
RISC addresses is that of coordination failure. RISC is designed to coordinate the
activities of a host of entities?commercial, governmental, NGOs. It synchronizes
investment decisions so as to reduce risk. It essentially acts as a catalyst that starts off a
virtuous cycle of introducing efficient modern technology to improve productivity that
increases incomes and thus the ability of users to pay for the services, and so on. It
creates a mechanism that reduces transaction costs and therefore improves the
functions of markets."

Future Positioning of ITC

a leading FMCG player in India

VPN providing SCM, ERP & CRM capability

F
A e-choupal rural two-way fulfillment
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A
R
R
S
K
E
T
S
Expanded FMCG distribution capability

Matches
Greetin
Brande &
Lifestyle g
d Agarbatti
retailing cards/st
Foods s
ationery

A basis for strategic partnerships with other FMCG brand owners

Conclusion

Thus looking at the challenges and the opportunities which rural markets offer to the
marketers it can be said that the future is very promising for those who can understand
the dynamics of rural markets and exploit them to their best advantage. A radical
change in attitudes of marketers towards the vibrant and burgeoning rural markets is
called for, so they can successfully impress on the 230 million rural consumers spread
over approximately six hundred thousand villages in rural India.
 Acknowledgement

We would like to take this opportunity to thanks Prof. Natu for his valuable
advice, suggestions and the help given to us in completion of this project. It’s been
a pleasure working on this project. It’s been an adventurous and learning
experience. On the successful completion of this project, we feel worthwhile to
convey our acknowledgement to all those associated with it. We also take this
opportunity to express our gratitude to all those who directly or indirectly helped
us to successfully complete this project.