Rural Marketing

-Rural marketing, Definition, Scenario, Rural

consumer behavior.
-Market segmentation, product and pricing,
Distribution, Rural marketing strategies,
Marketing of consumer durables.
-Marketing of agricultural inputs, traditional
marketing of farm products, defects in
agricultural marketing, Grading, storing and
processing, External trade in agricultural
products.
 Reference Books
Sanal Kumar Velayudhan (2007), Rural Marketing-Targeting the
Non-urban Consumer, Sage Publications, New Delhi.
1. Krishnamoorthy, R (2008), Introduction to Rural marketing,
Himalaya Publishing House, Mumbai.
2. Badi, R V and Badi N V (2007), Rural marketing, Himalaya
Publishing House, Mumbai.
3. Balram Dogra, Karminder Ghuman (2008), Rural marketing -
concepts and practices,. Tata McGraw-Hill Publishing Company
Ltd., New Delhi.
4. Krishnamacharyulu, C S G, Lalitha Ramakrishnan (2002), Rural
marketing Text and cases, Pearson Education (Singapore) Pvt. Ltd,
Delhi.
5. Pradeep Kashyap, Siddhartha Raut (2006), The rural marketing
Text and Practices, Himal Impressions, New Delhi.
6. Habeeb-ur-Rahman, K S (2004), Rural marketing in India,
Himalaya Publishing House,Mumbai.
 Journals

1. Indian Journal of Marketing

2. Journal of Rural Development
3. Brand Reporter
 Cases
1) Marketing Strategies of CavinKare Ltd.
2) Purchasing practices of food, clothing and
consumer durables among farm families of
Gadag District in Karnataka
3) TTK - Prestige Pressure cookers
4) NDDBs Kaira district co-operative milk
producers union Ltd
5) Agriculture Marketing Committee- A play
6) E-Choupals of ITC
7) HUL Sakthi
 Definition
As per NABARD, all locations upto a
population of 10,000 will be considered as
rural. Market existing in those areas is
rural marketing.
General definition- Any market that exists
in an area with less than 10,000
population, low density of population and
without significant infrastructure facilities is
rural marketing.
 Census of India (2001)
Urban
Minimum 5,000 population, 75% male
workforce in non-agricultural activities and
population density is over 400 persons per
sq km.
All municipalities/corporations, cantonment
board or notified town area.
 Others

RBI- less than 10,000 population

FMCGs- up to 20,000 population
Consumer Durables-
below 50,000 population
 Introduction

6.38 lakhs villages and over 70% of the people

(120 million families) live in these villages.
Traditional blacksmith, basket and rope making,
carpentry, iron works to prepare agricultural
implements, mason works for rural housing,
retail trading, pot making, leather works,
spinning and weaving, traditional handicrafts,
fishing, diary, poultry etc..
 Non-traditional

oil processing
tailoring,
comb making,
flour milling,
rice milling,
plumbing works,
repairs,
electrical works etc.
 Rural Occupation
Occupation Jan-June 2004 (National Sample Survey
Organisation) %

Self-employed in Non agriculture 14.40

Agriculture labour 27.40

Other labour 8.90

Self-employed in Agriculture 35.60

Others 13.50
 Rural Marketing Stages
Before 1960s-focus was on agricultural produce such as
paddy, wheat, cotton etc.
Rural to urban and rural to rural.
1960-70- Green revolution led to the increased use of
agricultural inputs.,
Rural to urban, rural to rural & urban to rural.
1980s-Demand for consumables and consumer durables
through the efforts of HLL,ITC, Colgate, Godrej, Phillips
etc.
Sachet revolution started during 1978-80 with Valvet
shampoo followed by Godrej, Dabur, Tiger biscuits,
close up, parachute etc.
 How rural consumers are
different from urban
Agricultural Manufacturing and
services
Near to nature Isolated from nature
Less density More density
Homogenous Heterogeneous
Fewer contacts with High contacts
outside world
Changing Attitude of the Rural Consumer
From
Pre-liberalization
Powerless/submissive
Settle for less
Reluctance, avoidance
Abstemiousness (not for us)
Destiny driven and resigned to
fate
Simple needs
To
Post-liberalization
Informative/outgoing
Stretch for more
Seeking experience
Affordable indulgence
Struggling and aspiring for a
better life
State need of hour
 Rural Segmentation

6,38,000 Villages
743 Million People
111 Million (Middle & High income group-
NCAER)
62% Villages (more than1000 Population)
3% above 5000 Population
Less than 500 Population do not have
shops
(National Council of Applied Economic
Research-NCAER)
 Profile of Villages

Distribution of Villages

Population No. of Villages Percentage of Total Villages

Less than 200 92.541 15.6 Hardly any shops in

these 220,000
200-500 127,054 21.4 villages
501-1000 144,817 24.4
1001-2000 129,661 21.9
17% of villages
2001-5000 80,318 13.5 Account for 50% of
5000-10,000 18,758 3.2 Rural population &
60% rural wealth
*Total no. of villages 593,154 100

*Inhabited villages; total number of villages is 6,38, 691

Source: Census 2001.
 Potential for RM
Indias 74 % population has 58% of countrys disposable
income due to increasing incomes, infrastructure like
roads, communications, literacy etc.
Rural consumers own only 54% of consumer durables
i.e. each house hold is having three consumables as
compared to urban population having seven consumer
durables by an average household (NCAER, 1998).
Rural markets help to reduce the risk during recession in
urban area.
HLL derive 50% of its revenues from rural areas
 General impression is that the rural
marketing is mainly for agricultural inputs
Had opportunities to market modern goods
and services such as consumer goods,
durables, financial services, education,
health care, telecommunication etc. in
addition to agricultural products marketing.
Worlds 12.4 % rural market lies in India
(120 million house holds).
BOP-8 billion population
 Potential of Rural Marketing

Most of the times except agro based companies

are not serious in rural marketing.

Only when sales saturate in urban markets, they go

to rural.

However, rural market experts feel Rs.1,23,000

Crore rural market has the potential to double.
 1. Untapped potential for FMCGs

The total market for durables and non-durables in rural

areas is more than urban, though the average
consumption is less than urban.
The essential items including food products is large in
rural areas.
There is a huge potential for nail polish, lipsticks, face
cream, shampoo, mosquito repellents in rural areas.
 2. Durables

Purchase and use of items like sewing machine,

cassette recorder/radio/transistor, wristwatches, table
fan, black and white TVs, pressure cookers etc. are
more in rural areas.

The large population and the low consumption indicate

opportunities but geographical dispersion; income
variations suggest the challenge of serving rural people.
 3. Banks
Rural markets have potential for banking
as
Only 42 per cent rural households have
bank accounts
Only 21 per cent only have access to
credit from a formal source.
 4. Health
ORG-MARG survey indicates
pharmaceutical sales in rural areas is only
Rs.28.71 billion compared to Rs.155.34
billion total sales of the country.
NCAER survey, the rate of illness in rural
areas is more than urban and therefore
demand is more.
 5. Communication
A Gartner forecast revealed that Indian cellular services
revenue will grow at a compound annual growth rate
(CAGR) of 18.4 per cent to touch US$ 25.6 billion by
2011, with most of the growth coming from rural markets.
A joint Confederation of Indian Industries (CII) and Ernst
& Young report reveals that of the next 250 million Indian
wireless users, approximately 100 million (40 per cent)
are likely to be from rural areas, and
by 2012, rural users will account for over 60 per cent of
the total telecom subscriber base in India.
 Consumer Behavior

Getting market share is not possible within a

short period due to low literacy, low income,
seasonal demand and problems of
transportation, communication and distribution.
The number of middle and high income
consumers in rural markets is almost equal to
that in the urban markets
Hence, there is a need to understand the rural
consumer behavior, attitudes, beliefs and
aspirations of people.
 Conti..
Rural consumer has limited education, less exposed to
products and brands, choose price over quality and is
influenced by word-of-mouth communication.
However, it is changing with increased incomes,
situational factors, consumer needs and the market
reach out rural consumer.
Increased demand for batteries due to non-
electrification of many areas. TVs and radios that
withstands electricity voltage fluctuations are preferred
in rural areas.
Automatic washing machines cant be used due non
pipeline water supplies, washing powder cant be if it is
at streams and ponds. Bicycles and mechanical
watches, radios or transistors etc have more demand
due to use pattern.
 Categories of Spending

Gold
Education
Health care
Purchase of land
Conveyance (Durables)
Cell phones
Other Products
 Geographic
Region South, West, East and North
Density of Population >2,000
Climate Hot, Humid, cold and Rainy.
Every company is targeting to cover villages with
>20,000 each
South are willing to accept the high tech
products because of higher literacy.
Talcum powder in South.
Bullock carts of Western and Estern U.P differ in
the size of the tyres. Western UP speak of
Hindustani and Eastern U.P. Bhojpuri.
 Demographic segmentation
In rural areas head of the family make
purchase decision.
Now a days school going children are
influencing purchase decisions.
Gender (Male/ Female), Age and Family
Size influence.
Marketers are targeting the younger a lot.
 Occupation

Mobiles, cycles, TVs

Demand is Erratic
Farmers (35-40%) own one third stock of
durables.
Shop keepers, service occupants
consists of only 15-20% but 45-60%
durables are with them.
 Place of purchase

Only 5% of rural population bought

durables from rural outlets.
Shaving preparations, bulbs, balms, toilet
soaps and washing powders are also
purchased from nearby towns.
Social and behavioral influences
Word of month communication spreads.
Asian paints launched bright coloured paints in
a pouch form with the name of Utsav (festival).
It painted headmans house before the festival
and post office. (Brand was well accepted by
rural people).
Youth and children influence purchases as
children are sent to shop to buy the products
without naming the brand.
Opinion leaders influence.
Retailers influence with credit etc.
 Cultural

Toilet soaps and tooth paste are usually

private in urban but it is not for rural like
Srikakulam.
Non-durables are usually bought once in
a week from haat and durables like
clothes etc. from melas where women
are allowed.
Traditional population oppose
urbanization
 Packing, Price & Quality

Packing and price- Small packs.

Quality and price- Usha sewing
machines at premier price due to quality.
 Brand preference

Brand (Local / Regional Specific)

(Eg: Tractors, Fertilizers, Chit fund Companies)
National brands of
Nirma, Lifeboy, Chavanprash, skin creams
are preferred in rural areas also.
But within a household multiple brands
consumed like soaps.
Splendor is popular because of its quality.
 Media

The appropriate media for rural markets is

not the same as used for urban markets.
The print media or magazines not
preferred in rural areas particularly
women.
Wall paints, Posters, TV in the most
preferred mass media (36%), followed by
print media (23%), radio (20%) and
cinema (9%).
Neighbours, friends are major source of
information
 Case: Purchasing Practices
Purchasing practices of food, clothing and
consumer durables among farm families of
Gadag District in Karnataka.
By Dr. P R Sumangala
Mr. Yallawwa Uppar
University of Agricultural Sciences,
Dharwad.
(Indian Journal of Marketing,
December,2009)
 Methodology

-Survey conducted in 3 Taluks in Gadag District.

-5 % of the villages in each Taluk (10 villages
i.e.3 from Gadag, 5 from Ron and 2 from
Nargund)
-Purposive sampling technique of different land
holding families selected such as landless,
small, medium and big farmers.
-20 households from each village comprising of
5 samples from each category.
 -Total 200 households with 50 households
from each category.
-Self structured questionnaire was formed
and required data was collected by
personal interview method.
-Data was coded, tabulated, analyzed and
interpreted by using suitable statistical
parameters.
 Maximum households purchased
1.The groceries, perishables, ready to eat
mixes and bakery on weekly basis from
nearby towns.
2. Daily wear of women, men and children
purchased once in six months where as
occasional wear were purchased during
festivals from the shops located in the
nearby town.
 3. Majority of the respondents from all the
land holdings adopted cash payment
system in purchasing of food, clothing and
consumer durables.
4. More number of families from Medium
and Big farmers owned greater number of
consumer durables and they adopted
credit and installment system in
purchasing of tractors and motorcycles.
5. Neighbours and friends were the
common source of information for
purchasing of food, clothing and consumer
durables from families of different
 Marketing Strategy
Marketing strategy basically involves effective
use of the marketing mix to explore the rural
markets.
Marketing mix indicates appropriate combination
of four Ps for achieving marketing objectives.
Four Ps for product, Price, place and Promotion.
These are interdependent and any change in
one variable will have an impact on the other.
 Continue.
The challenges of four As such s acceptability,
affordability, availability and awareness comes
into picture.
Product and pricing are important aspects.
Out of the following listed strategies, one has to
select options that are appropriate according to
market segment and the product category in
order to have a success in rural market.
 4 Ps -4 As

Product - Acceptability
Price - affordability
Place - availability
Promotion - Awareness
 I. Product and Acceptability
Post liberalization has changed from
simple needs to better life style with more
information, stretching for more.
Changing with increased incomes,
situational factors, consumer needs and
the market reach out rural consumer.
 Product
It is the most tangible and important single
component of the marketing.
It is the engine that pulls the rest of the
marketing mix.
Product is anything that satisfies human
wants and includes product quantity,
benefits, design, style, colours, brand,
services and warranties.
 II. Pricing and Affordability
It is important to both seller and buyer.
In the competitive economy, price is determined by free play of demand and
supply. Price will go up and down with changing supply and demand
situation.
Pricing decisions influence sales volumes, profit margins, trade terms and
conditions, advertising, sales promotion and product image.
Price refers to exchange value of the product and includes
(i) Maximum retail price
(ii) Discounts
(iii) Credit
(iv) Terms of delivery and
(v) Maintenance charges
 Low price
A rural consumer is price sensitive due to low levels of
income. But once he is satisfied with quality, he will
continue to patronize the same.
For many FMCG, Rs 5 is an appropriate price to attract
new customers. It has been observed that pens, razors,
biscuit packs, toothpaste, washing soaps, soft drinks
costing around Rs.5 have slowly started selling in
villages.
Eg: Lifebuoy soap 60 grams @ Rs 4.50 sales are 40:60
IN urban: Rural
5kg cylinder of BP instead of 14kg
 Discounts to dealers,
consumers
(i) Trade discount for wholesaler or retailer usually
wholesellers get 3-5% and retailers 7.5 10% discounts
for consumer products like soap, tooth paste, biscuits,
hair care products.
(ii) Cash discount
(iii) Quantity discount for total volume of purchase
during a certain period or at a time.
(iv) Off season
(v) Promotion allowances for advertising, delivery
van operation, display products
(vi) Promotional schemes during crop harvesting
period like exchange offers, festival offer, special
discounts, product introduction etc.,
 Value engineering
Low margin & High volume
Ex: Nirma Affordable price, medium quality,
availability at village shops and focus on rural
mass media.
Rupees 5 price point
Ex: Coke & other soft drinks consumers
increased from 16 crore (2002) to 24 crores
(2004)
Ponds talc, Cold cream, Rin, Fair & Lovely etc
 III. Place and Availability
Distribution channels in rural marketing
and penetrate into rural markets are
crucial.
HLL, ITC, Ever-ready, Dabur, Nirma are
some of the organizations who have good
networking.
 Distribution
The distribution from producer to consumer
requires a large number of intermediaries and
this increases overhead costs. There are about
52 lakh retail outlets in India out of them, 17 lakh
outlets are in urban and 35 lakh outlets are
scattered in about 6.30 lakh villages servicing to
rural outlets is a challenge. Distribution system
has two sub divisions i.e.,
(1) Channels of distribution and (2) Physical
distribution
 Channels of Distribution

The channel members are wholesalers

and retailers who are middlemen in
distribution and they perform all marketing
functions. Channel members are useful to
producers well as consumers. These
channels may be of different types
 1. Manufacturer consumer
Ex: Rhythu bazaars, Village artisans
2. Manufacturer Retailer consumer
Ex: Mahindra & Mahindra tractors
3. Manufacturer distributor Retailer consumer
Ex: Agri chemicals
4. Manufacturer C & F (Carrying and Forwarding)
Agents Distributor Retailer consumer
Ex: Colgate, HUL, Parle
 Physical Distribution

Physical distribution activities include order processing, handling &

goods, packing, warehousing, transportation, inventory control,
banking and customer service.
1. Company owned delivery vans
Ex: Bharat petroleum has introduced rural marketing vehicle
(RMV) in Punjab in 1999, it moves from village to village and fills
LPG cylinders.
2. Hired vans
Ex: HUL use hired vehicles to reach to rural retailers
3. Bullock carts or camels for remote villages.
4. Mobile traders
Ex: People move from house to house by bicycles or on foot.
 5. Syndicate distribution
Ex: A firm manufacturing edible oils and one
dealing in biscuits, tea and coffee could jointly
service rural retailers.
Cavin kare used the distribution network of
Amrutanjan company for chick shampoo
6. Satellite Distribution
Ex: HUL, Nestle, Marico have appreciated
stockiest to service the village merchants and
the merchants get stocks from stockiest.
 7. Haats: Traditionally on certain days of a week both sellers and
buyers meet in village to buy and sell goods and services.
Participation of companies would not only promote products
but also understand the shared values, beliefs and perceptions of
rural consumer. Haats are generally held where the population is
>2000. Each haat covers surrounding 15 20 villages.
Ex: parachute oil, tiger brand biscuits are promoted through haats.
8. Melas: these are different types i.e., commodity fairs, cattle fairs
and religions fairs and may be held only for a day or may extend
over a week.
Ex: kisan mela in Ludhiana is an annual Mela. Maruthi have
been able to book cars.
- HUL, Colgate, Britannia
 New channels
HLL, ITC, Ever-ready, Dabur, Nirma are
some of the organizations who have good
networking.
E-Choupals (ITC)
SHG (Prestige, HUL)
Unemployed youth, Integrated outlets
(Coromandal) etc.
 IV. Promotion & Awareness
To communicate effectively, it is important to understand
the aspirations, fears and hopes of rural customers.
Even if one company had a national strategy it has to act
locally.
Ex: Shampoo in Rajastan
- Education instead of promotion for interaction
- Customization, Regionalization.
- Mass media TV in the most preferred mass media
(36%), followed by print media (23%), radio (20%) and
cinema (9%)
Outdoor media: Wall painting, video vans etc.,
 Nagarguna Urea
Add

Colgate Add
Cocacola Add

Thumsup add

Pepsi Add

Santoor soap Add Rin & Surf Add

 Unconventional platforms: Mandis, Haats/
Melas (faires) mainly religious like kumbh mela
at Haridwar, Allahabad. FMCG giants like HLL,
P& G set up branded kiosks.
Marketing & Research Team (MART)
conducted survey & found these places are
effective.
- Pilgrimage sites
- Rural games
- Primary health centre
- Schools
 Alternative Media for rural marketing:
To reach illiterate and less privileged
Nautanki, Puppet shows, Burrakata, Folk
theatre for social protest against injustice
like Naxalism.
Internet: e-choupal
Innovative & Special promotion
Ex: Scare crow, Midwife, uniform to rural
postman, One on One contact,
demonstration like motor-cycles.
 Rural Marketing Strategies
Key Elements to be considered
Cultural diversity,
Lifestyle,
Standard of living,
Disposable income,
Consumption pattern and
Communication facilities available
 1. Competitive strategy

Examine the conceptual framework of

Michael Porters five force model strategy.
a) Supplier: The Company has to make
high quality products but also sell at
cheaper price. This is possible only when
company has suppliers who can supply
quality raw materials at cheaper price.
 b) Customer power: The word of mouth is very crucial in
rural markets. The retailer has a high bargaining power
but it can be neutralized through promotional and brand
building efforts that create consumer pull, which forces
the retailer to stock a particular brand.
c) Potential Entrants: Local and regional players offer
terms more attractive than the existing players. The
servicing of existing company is up to expectations of
retailer like non supply of products in time etc., would
allow new entrants. Then, it is difficult to regain the
position it lost.
 d) Substitute products: Counterfeiting is
prevalent in rural markets due to illiteracy,
low awareness and dependency on
retailers. Ex: Cool drinks. Hence,
companies should focus on packing and
brand identity to counter the substitute
products.
e) Competitors: Retailer may be keeping
different brands but only selected brands
are sold more as per advantage of retailer.
 2. Product Strategy
Product mix modification to suit the rural
conditions as Splendor for rugged terrain.
a) Understanding of valued product- Rural
consumers are extremely aware of
equation of price, quantity and image.
One should concentrate on these aspects
rather than frills.
 b) Packing: Size of pack to affordability,
storability, display ability matters. Packing is one
of the most important components in the
marketing mix.
c) Branding strategy Product has to be at
reasonable price, packing, communication and
target audience in their understanding
languages.
d) Logos and Symbols: These are important as
most of the rural markets should be done in a
manner to maintain low cost, refill packs etc.
 Corporates Presence in Rural India
ITC Nirma

Coromondal Super
Stores

HLL Micro credit / ICICI

Life style Products

HCL

Mahindra & Mahindra

 Product strategies used by
companies in rural markets are
a) Sturdy products: Rural consumers believe that heavier the item,
higher the power and durability-Eg-Bullet, Rajdoot, Ambassador
b) Designing products: Development of new products to suit field
conditions.
Ex: PVC shoes, Chappals, Sampoorna TV which can withstand
Power fluctuations (LG Electronics ) Large wheel base motor cycle,
chota coke.
c) Small unit packing: Ex: Tiger Brand biscuits, Ponds 20 gram
talcum powder, Cavin kares 4ml 50 paise chick shampoo, Rasna
d) Utility products: Rural people are more concerned with utility than
the appearance/ show.
e) Branding Brand name also conveys quality of the product.
Ex: Lal saboon (Lifebuoy)
Coconut tree (parachute)
Amul (NDDB milk)
 No frills product

Product cost can be brought down by

reducing the sophistication
Ex: Maharaja appliances washing
machine.
Refill/ Reasonable packing
Ex:Coffee
 Hiring Strategy

Hire rural background graduated on

regular pay and also use the services of
unemployed rural youth at village level
promotions.
 Social Strategies
Not only selling a particular products but
look at and relate into the holistic
development of the society.
Ex: Encourage primary Education,
Partnership with NGOs, Employment of
rural youth.
 Marketing of FMCG

Fast moving consumer goods are very frequently used, sometimes

daily and relatively faster at the retailer end. Such as toilet soap,
washing cake, bars, soaps, edible oils, tea, washing powder, liquid,
salt, biscuits etc.,
The biggest player in rural market is HLL followed by Colgate, ITC,
Jyothi labs, Eveready and LG Electronics.
- HLL derive 50% of its revenues from rural areas
- ITC Choupals
- HLL introduced Surf in 1959. Karsan Bhai Patel (Nirma chemicals)
started Nirma in 1969 and revolutionalised and it is the largest seller
today.
- Coca Cola India ltd.
 Indian FMCG Journey So far..
LACKLUSTER STAGE 1950s to 1970s
RURAL SENSITIZATION STAGE 1970s to
1990s
LIBERLIZATION BOOM and STABLIZATION
STAGE - Post Liberalization (1991 - 2000)
DROP STAGE (2000 2005)
BOOM REVISTED STAGE: 2005 onwards
 Product use and Customers
Product /Customer Men/Farmers Women Youth Children

Chocolates
- Mango
- Mahalacto
- Asha

Beverages
-Thumpsup

-Coke

Biscuits
- Parley-g
- Tiger
- Crack jack
- Good day
 Economic Value Creation

Nirma HLL (Wheel) HLL (Surf)

Sales ($ Million) 150 100 180

Gross margin (%) 18 18 25
Return on capital employed (%) 121 93 22

Source: John Ripley, Senior Vice President, Unilever PLC.

 Consumer Durables

Durable goods are the one that usually last over

an extended number of uses.
The consumers purchasing these items are
spending the savings of few months or years on
these articles and want to be double sure on the
long time performance.
Only about 26% households have TV sets, <4%
refrigerators, <1% washing machines, radios are
>67% households.
 Product use and Customers
Product Men/Farme Women Youth Children
/demographic rs
Motor cycles
Televisions
Tooth paste
- Colgate
- Close up
Soap
- Santoor
- Lux

- Lifebouy
Detergent
- Rin
- Surf
- ETA

Shampoo
- Chik
- Clinicplus

- Head&Shoulder
 Untapped potential for FMCGs and durables:

The large population and the low consumption indicate

opportunities but geographical dispersion; income
variations suggest the challenge of serving rural people.
The essential items including food products is large in
rural areas.
Purchase and use of items like sewing machine,
cassette recorder/radio/transistor, wristwatches, table
fan, black and white TVs, pressure cookers etc.
There is a huge potential for nail polish, lipsticks, face
cream, shampoo, mosquito repellents in rural areas.
 Case:TTK-Prestige Pressure cookers

When its sales have saturation during 1999, it has

started exploring the rural market. It has launched pilot
project in Mahaboobnagar district on 2002 with the help
of marketing & research team (MART) utilizing the SHG
movement. There were over 4 lakh SHG in A.P during
2002. Dealers have started demonstrating and
educating SHG members
The project involved
- Appointing women as the dealers of the prestige.
- Setting up an assembly plant in A.P
- Using rural women as employees.
 Agriculture scenario
Agricultural contribution to GDP has come down
to 20-22% (2003-04) from 56% (1951-52) but
the volume of population depending on the farm
sector has not reduced proportionately
The productivity levels of 0.95 tones per hectare
during 1961-63 enhanced to 2.00 tones per
hectare by 1990.
India is the third largest producer of food with an
annual output of 600 million tones
 India

Total area 329 Mill hectares

Total cropped area 190 Mill hectares
Net area 142 Mill hectares
Net irrigated area 54.6 Mill hectares
Population 1027 Millions
Rural 742 Millions
No. Of villages 6.5 lakh
No. Of rural markets 36,000
Official languages 18
 Production
We are worlds largest producer of milk 100 million
tones,
2nd largest producer of rice 88
2nd largest producer of wheat 72
2nd largest producer of sugar 25
1st in pulses 15
1st in fruits and vegetables 185
4th in poultry 46.20 billion
eggs
Meat 4.45 million
tones
Fishery 6.50
3rd largest in cotton 27 million
bales.
 Inputs Marketing
Consumables seeds, fertilizers,
manures, pesticides, animal feeds,
veterinary products, energy (Electricity,
petrol, diesel oil, baskets etc).
Durables farm machinery, irrigation
equipments, construction materials
(cement, bricks) transport equipments
(tractors, trailers, tempos, carts etc)
sprayers etc.,
 I- Seeds
Green revolution of 1965 70 was mainly with high
yielding dwarf varieties and seed played major role.
Government has also initiated following steps:
- Seed Act of 1966 regulating quality of seeds sold
labeling, certification
- Amendment of Industrial licensing policy in 1987 which
removed restrictions on investment of foreign
companies.
- Seed policy of 1988 for free important vegetable and
flower seeds.
- Commercial cultivation of BT cotton.(2002)
Indian seed market was about Rs. 3,000 crores (2004-
2005) excluding to farmer exchange among themselves
 Seed companies
Public sector: State farms, NSC, State
seeds corporations.
Private sector - MAHYCHO (Mahindra
Hybrid seeds co. Ltd) Indo America
Hybrid seeds Ltd., Bangalore.
Nuziveed seeds, Hyderabad, Nath seeds,
Aurangabad, Raasi seeds, salem etc.,
Seed production and Distribution

Seeds are living organism and has limited

shelf life and highly seasoned. The
package contains germination, Physical
purity, Inert materials, moisture, genetic
purity, shelf life, MRP etc.,
 Opportunities
Distribution is through distributors who get
5 7.5%, retailers (10-15% margin)
Our country is one of the leading seed
producing centers due to favorable
climatic conditions. Total cropped area is
190 million hectares i.e., one of the
highest in the world. Irrigated area is 55
million hectares.
Pest resistance verities are a challenge.
 Fertilizers
The fertilizer consumption has increased
dramatically from 2.66 million tonnes (NPK) in
1971 72 to 18.07 million tonnes in 1999
2000.
This is one of the important factors for increased
food grain production of 105 million tonnes in
1971 to 212 million tonnes in 2003 04.
The consumption for rabi is 53.40% and kharif
season is 46.60%. U.P is the highest consumer
of fertilizers (Sugarcane, paddy) followed by A.P,
Maharastra, Punjab and West Bengal.
 Fertilisers
Fertilizers marketing is about Rs. 30,000
crores.
India is 3rd largest producer and
consumer of NPK fertilizers. Some of the
important companies are IFFCO,
KRIBHCO, Nagarjuna, Godavari, Zuari,
SPIC, FACT etc
 Plants require 16 elements
Those are carbon, hydrogen, oxygen,
nitrogen, Calcium, Ferrous, Managanese,
Zinc, etc., Carbon from carbon dioxide of
air, oxygen from air and water and
hydrogen from water. Balances of all
elements from soil.
 Manures
They are relatively bulky materials to
physical conditioning of the soils
FYM
Green manure
Compost
 Pricing
Fertilizers prices are subsidized by government to encourage its
usage and to maintain uniformity. Different geographical zones are
allotted different quantities. Fertilizer industry co ordination
committee (FICC) fix retention price. Govt. Subsidies increased from
Rs . 505 crores in 80 81 to Rs, 16,000 crores in 2004 05. to
reduce the cost of all fertilizers except urea.
Pricing: fertilizer prices are segmented by government to encourage
its usage and to maintain uniformity. Different geographical zones
are allotted different quantities. Fertilizer industry co ordination
committee (FICC) fix retention price.
General prices during 2003 04
Urea Rs 483/quintal
DAP Rs 935/ quintal
MOP Rs 445/ quintal
Complexes Rs 698/ quintal
 Pesticides
Crops are subjected to the attack of pests like
insects, fungi, bacteria and viruses and the loss
is estimated about Rs. 20,000 crores.
There are different methods of control such as
physical, biological, cultural and chemical
methods.
The chemical control is common and they are
insecticides, fungicides, weedicides and
rodenticides
 Market
The consumption of pesticides varies
depending on crop, agricultural conditions,
pest incidence. Cotton and paddy account
for about 50% of pesticides consumption
in our country. The peak consumption is
during July October.
The share of insecticides in value terms is
65%, fungicides 15%, weedicides 17%
and others 3%
 Companies
Multinational - BASF, Buyer,
Cheminova, Dow, Dupoint, Syngenta
Indian companies Excel Industries,
Indofil, Nagrjuna pesticides ltd.,
Public sector Hindustan Insecticides
Ltd., State agricultural industries.
Products are formulated in different forms
such as liquids, dusts, granules and WP
and in different concentrations.
 Others
1. Bio-fuel/ethanol Industry
2. Organic products
3. Medicinal and aromatic plants
4.Floriculture
5. Mushrooms
6. Biotechnological inputs-Biotic and
abiotic tolerant varieties, high nutritive
value varieties production.
 Tractors

Tractors are mainly used for farming operations,

transportation and as a power source. Tractor
sales are about 2.5 lakh per annum and it is 4th
in the world ranking
The tractor density in India is 10 for 1000
hectares and it is lower to world average of 50
60 tractors per thousand hectares. The tractor
sales are fluctuating 2.7 lakh in 1999 2000, 1.7
lakhs in 2002 2003, 2.47 lakhs in 2004 05.
Hence, Indian tractor industry is looking towards
exports.
 Details India World % Rank
Total area 329 mill ha 13,387 2.5 7
Land area 297 mill ha 13, 048 2.3 7
Arable land 162 mill ha 1,387 11.7 2
Irrigated 57 268 21.3 1
Crop 212 2,100 10.1 3
Production
Tractors 2.4 mill 32.0 7.5 4
 Classification of tractors
Less than 30 HP Small
31 40 HP Medium
> 40 HP Large
The mid segment of 31 40 HP is the core of the
tractor industry in India.
Company wise market share
Company Market share (2004 05)
Escorts 12.8
International Tractors Ltd., 11.3
M&M 26.5
TAFE 22.3
 Tractors Accessories
The implements are Disk harrow, Disk
Plough, leveler, mounted mould board
plough, trailers etc.,
Potential: custom hiring, contact farming,
corporate farming, Organized retailing will
boost the demand for tractors in addition
to transport segments.
Market for outputs/agriproducts
Unorganized market is subject to
malpractice of middlemen. Only 40 60%
of the price paid by consumers goes to
farmers.
These are primarily three types of players
involved in marketing of agricultural
produce such as Govt; Private and Co
operative.
 Post Harvest Losses
Post harvest losses Rs.58,000 crores per annum that is about 30%
of total food production.
The food grain losses worth of Rs.10,000 crores are equal to what
Australia produces in a year (20 MTs).
Fruits and vegetables worth of Rs.30,000 crores is more than what
UK consumes in a year.
The losses are in the process of transport, high moisture at the time
of storage, birds pickings, threshing loses, rodents in the field and
storage and insects in the storage. The losses at different levels:
Farmers 15%
Traders 4%
Agents 2%
Wholesalers 1%
Retailers 8%
 Processing Industry
Indias processed food industry accounts for 14 per cent
of the total industrial output and 6.5 per cent of GDP.
It employs over 15 lakh people or nearly 20 per cent of
industrial force but hardly 2% of the produce is
processed as against 80% in Malaysia, 78% in
Philippines, 70% in Brazil and 30% in Thailand.
Level of processing in India:
Fruits & Vegetables 2%,
Poultry 6%,
Milk 35%
Marine products 8%
 Government
Government play an important role. These steps include
establishing regulated markets, constructing warehouses, grading
and standardizing produce, standardizing weights and measures,
providing maximum support price and providing market prices
through AIR etc.,
- Directorate of Marketing and Inspection under the Ministry
of Agriculture is responsible for administering federal statistics and
conducting market research concerned with the marketing of
agricultural produce.
- Commission for agricultural costs and prices decides
minimum support price (MSP) for selected crops.
- Food corporation of India was established in1965 to
procure and distribute through public distribution system. PDS is a
network of 3.5 lakh fair price shops that are monitored my state
governments.
Central & State warehousing corporations are operating from
1980s to store agricultural produce.
 Regulated Market Yards
There are about 6,640 (1991) regulated markets under
state governments ( Marketing departments) to which
central Govt. provides assistance in the establishment of
infrastructure and in setting up rural warehouses. Under
these market yards, agricultural produce is sold through
open auction by commission agents or the brokers or
some other auctioneer in the presence of the seller or his
agent and the competing traders. The offer of the highest
bidder is accepted with the consent of the seller. The
seller has the discretion to refuse if he feels bid is too
low. They also provide storage facilities and advances to
products.
 Private Sector
Farmers sell most of their produce in the
private sector to traders who are also
moneylenders. Other ways of selling are
1) Weekly village market (Haat)
2) Traders who come to village
3) Directly to rice mills or some other
processing or corporate sector.
 Co operative Sector
NAFED (National agricultural Co-operation Marketing
Federation) of central Government established in 1958
as an apex body of state marketing federations to handle
domestic and export marketing.
Large co-operative enterprises such as milk, sugar,
spinning mills, edible oils handle marketing operations.
Sugar production of about 50% is coming from co-
operative sugar factories.
Organised retailing: They will be beneficial to both
farmers and consumers because better supply chain
management and due to elimination of middlemen.
 Case study: NDDB
(NDDB) Kaira district co-operative milk
producers union Ltd established on 14th Dec
1946.
They started supplying to Bombay Milk scheme
and it led to sound foundation for future growth
under the leadership of Mr.Verghese Kurien.
During1940s milk collection of 250 liters/ day in
Anand expanded to >1000 villages collecting 60
lakh litres and distributing them across the
country (2004).
Amul is the product of Anand milk union Ltd.
 Defects in Agricultural marketing
1) Lack of organization among producers because of small and
marginal farmers.
2) Forced sale due to indebtedness that is influenced by number of
factors.
- Farmers borrow money from money lenders for cultivation
expenses
- Uneconomical land holdings.
- Lavish spending during festivals and marriages
- Indebtness passed from generation to generation
- Lack of market information
- Inadequate transportation facilities.
3) Superfluous middlemen
Too many intermediaries between farmer to consumer
 4) Multiplicity of market charges upto 20% goes to meet various expenses
- Commission
- Brokerage
- Handling charges
- Weighment charges
- Samples (shared by buyer & commission agent)
- Rent for storage
5) Mal Practices in unregulated markets
- Weighment, Sample, differential price for same grade etc.,
6) Lack of grading specifications
7) Inadequate storage facilities usually for storage in earthen cylinders, pits lined
with strong mud/ Concrete. Storage losses range from 1.5 2.5%
8) Poor transportation system
9) High cost of borrowing
10) Lack of standard weights and measures
11) Adulteration
Ex: Damping of cotton by middlemen
- Small chippings stones in rice.
- Salt with chalk
12) Lack of marketing information
 Regulated Markets
Market committee consists of nominees of state
Govt, local bodies, traders and farmers pre
committee formulates rules and regulations and
market fee various 0.5 2%. Disputes from
buyer & seller are settled by committee
Objectives:
- Ensure a fair price to producers
- Provide congenial environment for business
transaction
- To stabilize the prices
- To provide common place for buyer & seller
 Problems

- Location not in proximity

- Payment delays
- Presence of middlemen
- Working hours
- Lack of information on incentives
- Malpractices by corrupt officers and employers
- Management not on democratic lines
Many state governments have established
terminal markets by amending agricultural
product marketing committee act. Ex: Rhythu
bazaars in A.P & T.N
 Organized Retailing
Retailing is the largest industry in the world
India ranked second most attractive retail market
after Russia as per Global Retail Development
Index 2004 brought out by AT Kearney.
Estimated $ 350 billion retail marketing in India.
Most of the retailing is under unorganized
sector and only 3% is in the organized sector.
About 70% of retail trade is concentrated in food
and grocery products (milk, grain, vegetables,
fruits) and fast moving goods (soaps, detergents
etc.).
 Grading
It involves division of products into classes
made up of units of similar characteristics.
Ex: - Tea graded as BOP (Broken Orange
Pekol), OP and Dust
- Staple length in cotton
- Moisture, inert materials in grains.
- Germination % in seeds.
 Types of Grading
a) Mandatory GOI fixed standards and grades
for Agriculture commodities meant for exports.
b) Centralized Subject to inspection and audit,
co-operation, private agencies, farmers
associates. Items covered are ghee, curd, milk,
edible oils, jam, juices etc.
c) Variable Farmers fix their own method of
standards.
 Advantage and problems of
Grading
Advantages:
Grading helps in fixing of price.
- Quality assurance
- Facilitates selling
Problems:
- Many products have no standards
- Poor testing facilities
- Even the graded produce may perish by the time it
reaches to consumer
- Each and every product grading is a different task
 AGMARK
The directorate of marketing and inspection (DMI) headed by
agricultural marketing advisor (AMA) to the GOI implements
marketing programmes of the central government under DMI and
maintains a close liaison between central and state governments
through its regional offices. The directorate has specified grade
standards for various agricultural products under the agricultural
products grading and marketing Act 1937.
AGMARK label indicates the quality and purity of the product based
on the prescribed standards.
There are about 15,000 licenses who are marketing their produce
under AGMARK certification. There are 718 approved grading/
testing laboratories consisting of 111 state owned, 549 licensed
private packers, 9 co operative and 49 private/ commercial labs.
DMI has 22 regional Agmark labs with its central Agmark lab at
Nagpur.
 Bureau of Indian Standards (BIS)
Previously known as Indian standard Institution (ISI). The ISI Act
was passed in 1952. It is managed by board members consisting of
central and state governments; research institutes, labs and
development boards. Its activities are two fold formation of Indian
standards and their implementation by promotion and through
voluntary and third party certification system. ISI label is an indicator
of the quality of the product.

It has central lab at Delhi, regional labs in Chennai, Mumbai and

Kolkata. It has prepared standards for 14,000 products covering
agriculture, chemicals, Civil, Mechanical, Electrical, Electronic,
Textile etc. ISI has 2,000 standards covering agriculture inputs such
as fertilizer, seeds, pesticides agricultural machinery. ISI is
compulsory for exports and for government rate contract.
 eChoupal
Another example of the bottom of the pyramid targeting
at work is eChoupal in rural India. ITC manages an
agricultural trading company. To eliminate the
inefficiencies in its supply chain caused by corrupt
middle men at local rural markets, it created a network of
e-Choupals (choupal = village square) in rural
communities. Through these e-Choupals, individual
farmers have been able to check the market trading
price of their produce and sell it directly to ITC. Both the
individual farmers and ITC have increased their
revenues, because the layers of ineffiency no longer
have a role in the transaction between seller and buyer.
 Rojamma
Rojamma is a single parent living in a
small village in Mahabubnagar district in
Andhra Pradesh. When her husband left
her, she earned a few rupees working in
her mother's field but found it difficult to
support her two daughters. Then she
joined a women's self-help group and
found out about Project Shakti.
 Rojamma has opened an outlet in their village and
started selling Unilever products. She has started
making profit of Rs.2,000 per month. By the end of 2004,
over 13,000 women entrepreneurs were selling to 70
million consumers in 12 states (a 30% increase in rural
population reached by Hindustan Lever). By the end of
2006, 30,000 Shakti entrepreneurs reached 1,00 000
villages in 15 states. Shakti has brought them self-
esteem, a sense of empowerment and a place in society.
As Rojamma says: "When my husband left me I had
nothing except my daughters. Today everyone knows
me. I am someone now". It has meant she has been able
to send her daughters to school, giving them the chance
in life she didn't have