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By Vignesh k.

MBA

Incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company Company rechristened 'ITC Limited in 1974 One of the 8 Indian Companies to feature in Forbes A-list for 2004

Only Indian FMCG Company to feature in Forbes 2000 List


Among top in :

Sustained value creation (BT-Stern Stewart survey) Operating profits

Cash Profits

Ranks No. 4 among Indian listed Private Sector Companies by market cap. (@ April
09)

No. 1 in FMCG Sector

Rated as one of Indias Most Respected Companies (IMRB-Businessworld Survey

2006)
Diversified conglomerate with interests ranging from Tobacco to Hospitality

ITCs Agri Commodity Divison


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

Coffee etc. Focus on value added agri commodities


Unique CRM programme in commodity exports Leveraging IT for the transformational e-Choupal initiative

Rural Indias largest Internet-based intervention Over 40,000 villages linked through 6500 e-Choupals servicing over 4 million farmers

Distinctive sourcing capability for ITCs Foods business

The predicament of Indian Farmers


Low Risk Appetite

Low Margins

Caught in a vicious cycle of underdevelopment

Low Investment

Low Value Addition


Weak Market Orientation

Low Productivity

ITC e-Choupal
Started in the year 2000 Target Area so far 38,000 villages, 6500 kiosks, 9 states Wholly owned by ITC

Why it become a success ? Only initiative to attempt to combine Services and an Effective Business Model successfully

Designed to address the issues such as:


1. 2. 3. 4.

Fragmented farms Weak institutions Involvement of intermediaries Information Asymmetry

Pakka Adtiya (Registered Dealer)


Agri-Input Companies
Dealer/ Stockiest Retailer

Trader

Broker

ITC-IBD
Agril University, Met Dept, Insurance Co.
VLW (of Dept of Agriculture)

Kaccha Adtiya (Un-Registered Dealer)


Company Logo

Processor

Money Lender

Farmer

Why ITC thought of e-Choupal

The Tactical Imperative


ITCs distance from Farmer

The Strategic Imperative


Horizontal spread

The Social Imperative

Daily price inflation


Vertical presence Capture of Intraday Price shifts Seasonal price Inflation Risk management

Supply chain post re-engineering

Pricing

Inbound Logistics

Inspection Grading

Weighing and Payment

Hub Logistics

Technolog ical support

Pricing Previous days closing price used as benchmark price for next day Mandi prices communicated to sanchalak through e-Choupal portal Sanchalak inspects the sample, assesses quality and gives farmer a conditional quote and a note (name/village/quality tests/approx. quantity/conditional price), if farmer decides to sell to ITC

Inbound Logistics Farmer proceeds to the nearest ITC procurement hub with the note Some procurement hubs are ITC factories, others are purely warehouse operations ITCs aim is to have a processing centre within 30-40 km radius of its farmers Inspection and Grading At the ITC procurement hub, laboratory tests are conducted on a sample of farmers produce To change farmers attitude and appreciating produce quality, ITC is developing lab tests to reward farmers with reward points for better quality supply

Weighing and Payment Farmers produce is weighed on electronic weighbridge He is then given full cash payment Freight expenses are reimbursed Appropriate documentation at each stage and farmer is given a copy of that Samyojaks handle cash operations Hub Logistics Farmer transports his produce to the nearest processing centre or storage hub ITC incurs the transportation cost The farmer bears the risk of transportation until produce is delivered and the sale is completed
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Technological support Nodal platform catering to commodity blending, agricultural trading, e-choupal &rural distribution 24,000 personalized business function points 110,000+ pre-built business function points Integrated Business Systems for Direct Agriculture Procurement, Rural Distribution, e-Choupal Management, Exports, Insurance, Aqua Processing & Commodity blending Support for 8 local languages

A win-win Deal
Farmers gain Better information Content Better info timing Less transportation Cost Transaction duration Weighing accuracy Professionalism ITC gains Disintermediation savings Freight costs Quality control Risk management

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Transaction cost in Mandi Chain (after e-Choupal)

Source: Seminar on Bottom of the Pyramid and CSR, IIM-K, Sept. 24, 2008

Generation of Goodwill & positive public opinion Better supply chain for ITCs Food & Agri Businesses Costs, Quality, Traceability Access to the Underserved Rural Markets Through a Virtuous Cycle created by Larger Incomes, and founded on Trust that is built New ITES Business Opportunities Health, Education, Entertainment, eGovernance

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VPN providing SCM, ERP & CRM capability

Synergy Redefined :The Future


F A R M E R S
e-choupal rural two-way fulfillment capability

Cigarette Trade Marketing capability


Expanded FMCG distribution capability

M A R K E T S

Branded Foods

Lifestyle retailing

Education Stationery

Matches & Agarbattis

A basis for strategic partnerships with other FMCG brand owners

Efficiencies in e-Choupal network


Last mile low cost solution
Full Service approach Demand aggregation Third party seller Extensive use of technology Access to information about customers Pull based strategy

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