OVERVIEW OF RURAL MARKETS AND RURAL MARKETING

4MBA03M4 Rural And Agricultural Marketing Semester IV Vivek Rajapadmanabhan

Vivek Raja Padmanabhan

Agri-Business and Food Processing
28 Years RPG Enterprises, Ballarpur Industries, Reitzel

India (Swiss FDI) Two start-ups Director in 3 companies MSc (Agriculture), AMP-ISB Hyderabad, AIM - IIMA

THE FORCES THAT SHAPE RURAL INDIA

2/13/2012

India And World Agriculture The Opportunity And The Challenge

Largest producer of Milk, Pulses & Jute
2nd largest producer Rice, Wheat, F&V, SCane, Tea 2nd largest arable land (next to USA)

2nd largest irrigated area (next to China)

2nd largest no. of tractors (next to USA) 2nd largest population (next to China)

2/13/2012

Global Agri Markets are not perfectly competitive

Dominance of few MNCs / State Trading Enterprises 6 agro-chemical cos. control 75% of market (Bayer,

Syngenta, DuPont, BASF, Dow) 4 seed companies control 50% of proprietary seed market (Monsanto, DuPont, Syngenta & Bayer)

2/13/2012

Global Output Markets

ADM, Bunge, Cargill control 71% of soya bean crushing
Cargill, ADM, ConAgra control 60% of Flour Milling 5 companies control 50% of Food Retailing Market

2/13/2012

Global Agri Markets are thin markets

16 18% or wheat production is traded
6 7 % of rice 7 8 % of dairy products

2/13/2012

World Market Structure - Wheat

Major Producers MMT EU China India USA Russia Pakisthan Canada World 119.4 109.2 75.8 55.8 49.4 23.3 20.1 610.2 Major Exporters MMT USA 34.5 Canada 16.6 EU 12.2 Russia 12.2 Argentina 12.2 (Top 5 importers 29%) World 115.5 18.7 % of product traded

67%

74%

DRIVERS OF THE RURAL MARKET SPACE

2/13/2012

10

Framework for Studying the Market Environment of Agricultural Inputs

Output

Agronomic Potential

Demand Output Price Input Price Agro economic Potential Infrastrct Services Information Rights
Entreprunership

Scale Effective Demand Orgnsn

Agg. Suply Distribution Actual Consumption

2/13/2012

11

What is Agronomic Potential? Cultivated Area expansion, change Crops - New Crops Variety - New Varieties Research Increase in Cultivation Intensity Irrigation, Better Water Management New Pests Increase in Susceptibility Change in Natural Environment

2/13/2012

12

What is Agro-Economic Potential?

Is it Profitable? Input Prices Input Price Policy Output Prices/Demand Output Price Policy Markets Subsidies / Taxes Substitute Prices / Cost Time value

2/13/2012

13

From A-E Potential to Effective Demand

Entrepreneurship Information / Communication Extension Infrastructure Transportation Credit Literacy Training Management

2/13/2012

14

What Determines Aggregate Supply?

Investment Production Imports Government Policy Technology Patents Licensing

2/13/2012

15

Finally: Distribution

Need Reach Small Farmers Channels Stocking Outlets Agents / Dealers Margins / Incentives Costs Management

2/13/2012

16

What defines markets: rural markets?

The 7 Os Who constitutes the Market?:OCCUPANTS

What does the market buy? OBJECTS

Why does the market buy? OBJECTIVES Who participates in the buying?

ORGANIZATIONS How does the market buy? OPERATION When does the market buy? OCCASION Where does the market buy? OUTLETS

2/13/2012

17

Occupants 1
Farmers: Small/Large Farmers: With/ Without Irrigation

Agricultural Labourers: Poor

Agri Input Distributors / Dealers / Retailers Craftsmen

Petty Traders
Service-men

2/13/2012

18

Occupants 2
Physical Isolation Awareness/ Education Low

Small Resource Base/ Poor

Biological Production Process Traditions/ Beliefs

Interdependence
Leadership: Opinion Social Groups/ Castes

Religion/ Superstitions

2/13/2012

19

Objects
Seeds Fertilizers

Pesticides
Farm tools, machinery and equipment Animal Feeds and Medicines

Consumer non-durables
Consumer Durables Services

2/13/2012

20

Objectives Agricultural Production Agronomic Potential Agro-economic Potential Effective Demand Aggregate Supply Distribution Household needs - Necessities and more Building and repair needs Transport Information and entertainment

2/13/2012

21

Organizations - Involved
Farmers Households

Government
Cooperatives Informal Groups

Relatives - educated

2/13/2012

22

Operation: How?
Household Decision-making Men and Women

Opinion Leaders
Consultation Traditions/ Beliefs

Experience/ Utility
Risk-Aversion Credit Arrangements

Tied-Market Arrangements

2/13/2012

23

Outlets: Where?
Huge number of small farmers/ buyers Scattered over a huge area

Distribution extremely important

Village outlets Cooperatives, Govt., Private

Taluka Towns, District Towns

Stocking, Logistics - Seasonality Credit, Advise, Tie-up

Promotion/ Information

2/13/2012

24

Trends
Better Infrastructure Better Services

More Incomes
Better informed and educated - awareness High output prices - Demand

Good growth
Globalization More competition

2/13/2012

25

Rural Communication
Communication is about Education

Consumers buy benefits, so communicate benefits

Rural Marketing issues are to be addressed by (1)

Awareness (2) Availability (3) Affordability (4) Acceptance/ Adaptability / Appeal Most effective are (1) Demonstrations (2) One-on-one communication (3) Audio Visuals

2/13/2012

26

Rural Advertising A Hybrid System

Non-conventional media wall paintings, VOW, calendars Language, dialect

Puns, Metaphors, Sounds, Symbols

Oral (Katha, Epics) Devotional literature

Folk media (street theatre, puppets)

TV Serials Hindi songs

Bollywood films
Conventional & New Media (TV, Radio, Print, Internet)

2/13/2012

27

Trends
Better Infrastructure Better Services

More Incomes
Better informed and educated - awareness High output prices - Demand

Good growth
Globalization More competition

RURAL ECONOMY SIZE AND NATURE

4MBA03M4 Rural And Agricultural Marketing Semister IV Vivek Rajapadmanabhan

Rural Economy Some Important Indicators

Indian GDP ~ Rs 62 L Cr
Agri GDP ~ Rs 12 L Cr (19%) Indian Rural Retail Industry~$ 113 Billion (40% of ~$ 280

Billion) Rural Health Care ~$ 9 Billion (2015) Rural population ~ 700 Million (> 70%) No. of Villages ~ 6 Lakh

Startling Facts Rural India

200 million mobile users (more than Brazil)
14/20 million DTH connections 87 million Kisan Credit Cards (more than debit + credit

cards) Growth in durables 25%, urban 10% Growth in FMCG 18%, urban 12%

Nature Of Rural Economy

Large, diverse, scattered
Major income from agriculture Rising standard of living, disposable income

Traditional outlook
Rising literacy Diverse socio-economic background

Infrastructure facilities

Assignment 1
Explore the Size and Nature of the Rural Economy,

assess pros and cons and conclude whether it is a good sector to work in.
Submit by Monday, Feb 13th forenoon.