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ITC

AGRI-BUSINESS DIVISION
Introduction
• ITC’s Agri Business Division, one of India’s largest
exporters of agricultural commodities.
• It has conceived e-Choupal as a more efficient supply
chain aimed at delivering value to its customers
around the world on a sustainable basis.
• This has been specifically designed to tackle the
challenges posed by the unique features of Indian
agriculture characterized by fragmented farms,
weak infrastructure & the involvement of
numerous intermediaries, among others.


ITC's Agri-Business
Øone of India's largest exporters of agricultural products.

ØITC is one of the country's biggest foreign exchange earners (US $

3.2 billion in the last decade.

ØThe Company's 'e-Choupal' initiative is enabling Indian agriculture

significantly enhance its competitiveness by empowering Indian

farmers through the power of the Internet.


ITC’s Agri Commodity Business

Ø Farm linkages in 14 states covering Soya, Wheat, Marine


products, Coffee etc. Focus on value added agri
commodities
Ø Unique CRM programme in commodity exports
Ø Leveraging IT for the transformational ‘e-Choupal’ initiative
• Rural India’s largest Internet-based intervention
• Over 40000 villages linked through around 6500 e-
Choupals servicing over 3.5 million farmers
Ø Distinctive sourcing capability for ITC’s Foods business

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The Value Chain - Farm to Factory Gate
Three Key Principles
• Empowerment
– Information and knowledge free of cost

• Choice
– Farmer choice to transact

• Business Model
– Fee to e-choupal Sanchalak for transactions
through him

Problem in Agri-Business
• For ITC For Farmer
a) Inconsistent supply of raw a) lack of information
• material.
b) Involvement of third party in b) less productivity
• supply chain.
•c) Delay in supply c) low price for their product
•d) Bed quality of material d) fails to supply on time
•e) Getting raw material at high cost
•f) Less production.
•g) Less profit
To enhance rural incomes,
there is a need for a system which can…

• …deliver an end-to-end solution



ü who should be able to take an informed decision !!
ü with farmer having the freedom of choice !

• …deliver effective service


ü at low cost !!!


ü
• And the opportunity lies in building capacity to induce
productivity led growth by providing last mile connectivity
ü
ü
ü
Execution isn’t Easy!
• No telecom reach
– They use Satellite
communications

• No Power; Erratic Voltage where it
exists
– They use Solar Power

• First Time Computer Users
– Lot of effort on Capacity Building

• Resistance from traditional middlemen
– Farmers dealt with them!
Production Channel Prior to e -
Choupal
Farmer Ghani
Village Trader

Regulated Markets Producer Crop


Wholesaler ( 15 - 75 %) ( 3 - 5 %)
(20-80%)

Commission Agent
Trader

Cooperative Mill
The e - Choupal Business Model

Farmer Ghani
Village
Trader
E-
Choupal
Regulated Markets Producer Crop
(Fair Market Price) (Negotiated
Price)

Cooperative
Commission Agent Mill
(hired by ITC)
ITC Commission

Private
Miller

ITC
Transaction Costs in Mandi Chain
Soybeans Example
Rs per MT

Trolley Freight to Mandi = 120


Labour = 50
Farmer Incurs Kacchha Adat = 150 370
Handling Loss = 50

Commission to Agent = 100


Processor Cost of Gunny Bags (net) = 75
Incurs Freight to Factory = 120 335
Handling at Mandi = 40

Total Chain 705


Transaction Costs in Choupal
Chain
Soybeans Example
Rs per MT

Trolley Freight to ITC Hub = 120


Labour = 50
Farmer Incurs Kacchha Adat = 150 370 120
Handling Loss = 50

50
Commission to Sanchalak = 100
Processor Cost of Gunny Bags (net) = 75
Incurs Freight to Factory = 120 335 215
Storage & Handling at Hub = 40

Cash Disbursement Costs = 50

Total Chain 705 335


eChoupal benefits the farmer, by

• Enhancing farm productivity


üThrough bundling customised knowledge with
input deliveries
ü
ü
• Increasing farm gate price realisation
üThrough bundling information with cropping &
output marketing decisions
üThrough unbundling produce delivery, cash
flow and pricing
ü

eChoupal benefits ITC, by

• Cutting down net cost of procurement,


despite offering better prices to the
farmers
üBy eliminating non-value adding costs in the
value chain
ü
ü
• Creating new business opportunities
üe.g. marketing several goods & services to
the rural consumers
ülinking non-farm skill based services of rural
origin with the global markets
e-choupal: Strategic Thrust
Ø Procurement: cost & quality optimisation
• strategic sourcing support to the Foods business (support creation of
verticals in wheat, soya, corn, potato etc.)
• cost-effective sourcing for exports/domestic external business
Ø Rural Distribution
• ‘last mile connectivity’: 100 partnering companies
• diverse range of goods/services: FMCG, consumer durables, agri-
inputs, paid extension services etc.
Ø Financial Services
• insurance (focus: weather)
• credit (focus: Kisan Credit Card scheme)
Ø Rural retail
• 24 Choupal Saagars operational

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Promotional Strategies
• A particular budget is allocated for the promotion
of the products.
• The local promotion scheme is decided by the
Area Sales Managers.
• It gives its suggestion to the District office &
forwarded to the HQ in Kolkata.
• In promotional scheme for Biscuits a particular
no. of cases is given freely to the distributors
according to the amount of sale they make.

Pricing Strategy
• The pricing of the ITC food division depends upon
the
• Customers’ demand schedule,
• Cost function and
• Competitors’ price.

• The pricing of the company is such that it caters to


the need of all income groups of people but special
provision has been kept for Low & middle income
group.

• Their pricing are competitive with respect to
other players like Britannia, Parle and
Briskfarm.
• The company follows the Going rate pricing that
is the price of the product depends upon the
competitors price.
• The firm chooses pricing more or less the same
as Market leader.

PESTLE Analysis

Political ( incl . Economic Social Technological


Legal )

Environmental regulations Economic growth Income distribution Government research


and protection spending

Tax policies Interest rates & monetary Demographics, Population Industry focus on
policies growth rates, Age technological effort
distribution

International trade Government spending Labor / social mobility New inventions and
regulations and development
restrictions
Contract enforcement Unemployment policy Lifestyle changes Rate of technology transfer
law
Consumer protection
Contd.

Political (incl. Legal) Economic Social Technological

Employment laws Taxation Work/career and leisure Life cycle and speed of
attitudes technological obsolescence
Entrepreneurial spirit

Government organization / Exchange rates Education Energy use and costs


attitude

Competition regulation Inflation rates Fashion, hypes (Changes in) Information


Technology

Political Stability Stage of the business cycle Health consciousness & (Changes in) Internet
welfare, feelings on safety

Safety regulations Consumer confidence Living conditions (Changes in) Mobile


Technology
Five Competitive Forces
Threat of
New
Entrants
Bargaining Power
of Suppliers
Rivalry Among
Existing
Competitors

Threat of
Substitutes Bargaining Power
of Customers
SWOT Analysis
• Strengths:
•-Supply demand gap

•-Financial strength

•-Brand image

•-Wide range of products

•-Efficient and young workforce

• Weakness:
•-Less shelf life of the product

•-Very high investment in the initial period

•-Lack of awareness among farmers about the

benefits of using organic inputs


•-Less exposure
• Opportunity:
•-Growing demand for organic inputs

•-Increasing awareness among farmers about organic

farming
•-Export to foreign countries

•-Good distribution through by E-choupal

• Threats:
•-Intense competition

•-Unorganized sector

•-Inconsistency of demand

•-Improper quality product with low price in the

market
•-Subsidy by the government up to 75%


THANKS FOR BEING
ALL EARS