Description
The objective of e choupal is to build a business model that does good to the society and helps in improving standard of living of stakeholders as well as adding value to shareholders wealth
Long Term Vision of ITC-IBD • To build a business model that does good to the society and helps in improving standard of living of stakeholders as well as adding value to shareholders wealth .
Objective • Rs 2000 Cr turnover in Agri Business by 2005. • Uninterrupted sourcing of Agri culture production. • To create a sustainable growth model .
• IBD set up in 1990 as an agri trading company
E-Choupal
• E choupal conceived by ITC’s International Business Division • Launched in June 2000 in Madhya Pradesh
•ITC kiosk with Internet access •Warehousing Hub •Relevant & real-time information •Customized knowledge •Supply chain for farm inputs •Direct Marketing channel for farm produce
Vertical Integration
Reducing number of Intermediaries and directly sourcing from farmers
Pilot (50-100 Choupals)
Information Technology
Better information flow in content as well as timing.
Critical Mass (300 choupals)
Roll out, fix it, scale up
Flexibility and learning from environment .
Saturation (more than 1500)
Bi- Directional Supply chain
Targeting farmers as supplier as well as consumer.
Inbound Logistics
Display & Inspection
Auction
Bagging & weighing
Payment & outbound logistics
•Improper Information Flow . •Difficulty in Price Discovery •Overnight Stay cost
•Due lack of storage area chance of crop getting damaged. •Unscientific sight inspection •No Incentive for better quality
•Farmer can’t refuse sale at auction price •Different socio economical background of agents from that of farmers
•Farmers to bear cost of bagging. •Malpractices of Mandy Labors •Under weighing
•Partial or Delayed payments •No Interest •Its difficult for ITC to distinguish between different grades of crop.
Agent control of market- Distortion of price & information Mixing of different quality of produce No communication with the supplier-The farmer
Pricing
Inbound Logistics
Inspection & Grading
Weighing & Payment
Hub Logistics
•Fair Average Quality Based Pricing. •Information Flow through Sanchalak
•No transportation cost to farmer
•Scientific and transparent method of quality testing. •Bonus points for producing high quality crops.
•Avoiding any malpractices while weighing . •On the spot full payment.
•Well Organized handled by samyojaks
•Re-engineering the channel to achieve virtual vertical integration •Access to Market intelligence leading to better fulfillment channel. •Pull based Marketing. •Sanchalak (one of the farmers) . •Demand Aggregation leading to scale economies. •Supply aggregation leading to customization.
Scope:
• • • • • Stakeholder involvement-Win win Bi-Directional flow Basis is the inefficiency of existing system Agri. based and IT empowered In sync with current portfolio of IBD
ITC ?Elimination of Middle men ,efficient supply chain. - Disintermediation saving. - Saving in transaction cost. ?Access to under served rural markets.
Farmers ? Feeling of empowerment . • Better Information content . • Better information timing. ? Improved profitability. • Saving of transaction cost and timing. • Spot payment. • Improved yield. • Avoid Malpractices.(weighing accuracy and granularity of weight ) ? Can take advantage of one stop solution • Consumer Agri products ,credit and other benefits. ? Professionalism and dignity
?Supply security and long term supplier
relationship. ?Creating shareholder value by serving society . ?Traceability of source and control over quality ?New ITES business opportunity. ?Rural Market research .
Sanchalak •Earns transaction based commission. •Trained to use internet, testing quality of produce •Sworn in front of the entire village there is pride attached. •He is motivated through public felicitation ceremonies also. • Shift in role from mere farmer to an Entrepreneur
Samyojak • Assured of revenues. 0.5% commission. •Responsibilities include cash disbursement, labor management, storage, transportation, mandi paperwork
Why CA joined with ITC •The company has assured that it will continue to procure through the mandis also. •Significant commission •They are fragmented •Long term gains in associating with ITC
Mandi Farmer Commission Handling and Transit losses Labor cost Bagging and weighing Transportation Total 0 50 50 70 100 270 Total ITC 100 10 70 75 250 505 775
E- Choupal Farmer 0 0 0 0 0 0 ITC 50 0 85 0 100 235 235
Mark Up Total Mark Up
3%
5%
8%
2.5%
2.5%
*All figures are per metric ton
2003: Success of E-choupal In state of MP for soybean
1695 e-choupals in MP. Pilot projects in Karnataka and AP, Rajasthan.
2005 : Profitable venture with scalability .
Majority (80:20) of procurement from e-choupals. Developed a model which can be scalable to national level
Strategies
Expansion to Other States Partnering with other allied industries.
*All figures are per metric ton
Selection of state
Factors Agri Production Level Level of Customisation Required Literacy level of population Connectivity Road Infrastructure Weighted Avg. Score Weights 0.35 0.35 0.1 0.1 0.1
Maharash Rajastha tra n
4 4 4 2 2 3.60 3 4 3 2 2 3.15
Uttar Pardesh
4 3 2 2 4 3.25
Karnataka
3 2 3 3 3 2.65
Andhra Pardesh
2.5 2 2 3 3 2.375
• 65 % of IBD export business is of Soya export, Second largest soya exported with market share of 8% . • Wheat being the next highest contributor to revenue after soya . • Where Shimp and Coffee there are vagaries in market prices and ROI takes much longer
Number of e-choupals Uttar Pardesh 4.4 90.8 1500
MP Aerable land soya(Lakh Hectere) Aerable land wheat(Lakh Hectere) e choupal 42 34.3 1700
Maharashtra 19.3 7.8 1100
Rajasthan 1.3 22.9 50
Saturation
Critical States Karnataka
Pilot
Saturation
Number of Echoupal 300 300
Critical
Andhra Pardesh
Cost Components
Revenue Components
• Capital Expenditure of Setting up of E-choupals, ITC hubs, Designing portals • Revenue Expenditure Labour cost, Commisison to Sanchalaks and samyojaks, Maintenance and Replacement of IT systems
• Sale of Agri Products • Saving on transaction cost • Commission from the sale of Consumer products at ITC hubs to farmers
No Of Ecoupals Cost of each E-choupal ( Rs 3 lakhs) Total outflow Number of Farmers covered Total Expected Saving for ITC Net
2003 1695 300000 Rs 50.85 Cr 847500 Rs 34.3 Cr (Rs 16.5 Cr)
2005(E) 5000 300000 Rs 150 Cr 2500000 Rs243Cr Rs 93 Cr
Assumptions • • • • • . Each e-choupal covered almost 500-600 farmers. 50% of total covered farmers actually visit e-choupals for selling their crops Each transaction size around 2 MT ,Avg. number of transaction per farmer 1.5 between 2000 to 2003 ,and 3 from 2000 to 2005. Average transaction cost saving for ITC Rs 270 per MT. Earnings from allied services not included in Expected savings that will further increase profits.
Involving the Customer • Customise content of the web site based on feedback.
Adding Value • Research to analyze farmer preferences , spending pattern and financial position . • Complete one stop solution at ITC hub agri related for farmers visiting there. • Entering in Allied services like rural healthcare , education ,credit and insurance
Adding Value to Sanchalak • Public felicitation of sanchalak in public gathering.
• Include content like . Cricket, Daily news ,Movie trivia/ music downloads, Using internet to check results, Setting up forums for the Sanchalaks to communicate with each other
• Higher incentives of faster target achievement .
• Commission to the sanchalak on allied services .
• Converting ITC • Hub to a one stop solution for Rural • Consumers •
Make it a low cost distribution system for rural consumers. Provides services like Agri based seeds ,fertilizers , FMCG ,consumer durable ,Automobile as per needs of rural consumers. Promotion through local Media ( Painting walls ,local cable TV, Video on wheels) Special promotions in Diwali ,New Year ,festival and marriage seasons.
Factors Alignment with agriculture Existing penetration Potential Demand Competition in same segment Score
Weights Fertilizers Agrichemical Seed Insurance Credit 0.35 0.25 0.2 0.2 4 4 5 2
3.8
4 3 4 2
3.35
4 3 4 2
3.35
2 5 3 5
3.55
2 5 3 5
3.55
Consumer FMCG durables 2 2 3 2 3 4 2
2.45
2
2.4
Distribution of goods related to agriculture will be much easier as it adds direct value to farmer and also e-choupal’s association with agriculture. Penetration of insurance and credit of existing players is low in rural areas , ITC has a profile of rural consumers and hence can be profitable in these products. Because of existing dominant players in FMCG and consumer durables, potential of being profitable in these segments is low.
• Illiteracy about computers in rural areas and also low trust of rural people on electronic systems. • Cartelization by the Sanchalaks. They might demand more commissions. • Poaching of Samyojaks by competition • Selection of reliable and educated person as sanchalak. • Management capability of ITC frontline. Expertise in lab testing of soil, in retail format. • Lapses in Power and slow internet connectivity . • The mandi labourers, the bazaar near the mandis, competing processors have lost out due to ITC e choupal ands may join forces against ITC. • Lack of rules and regulation of electronic choupal.
E- Choupal : 6500 States : 10 •
New Partnerships Partnering with Nokia : Educating farmers through cell phones as telecom services reached rural India . Partnering With Monster.com : Setting up of “Rozgar Dunia “ Bi-lingual jobsite. Partnering with BPCL
New Intiatives
Vilalges : 40000 Farmers: 4mn Crops : Weat ,Rice Pulses ,Soya ,maize ,spices ,coffee and aqua Products. Reverse Flow; FMCG , Durables, Automotive, banking Services , Fertilizers ,Pesticides • •
•
• •
Setting up of choupal fresh outlets in urban areas. Working in Non Renewable Source of Energy . Focus on horticulture
Choupal Sagar
One Stop Solution for farmers , Target 100 by 2011
doc_605523101.pptx
The objective of e choupal is to build a business model that does good to the society and helps in improving standard of living of stakeholders as well as adding value to shareholders wealth
Long Term Vision of ITC-IBD • To build a business model that does good to the society and helps in improving standard of living of stakeholders as well as adding value to shareholders wealth .
Objective • Rs 2000 Cr turnover in Agri Business by 2005. • Uninterrupted sourcing of Agri culture production. • To create a sustainable growth model .
• IBD set up in 1990 as an agri trading company
E-Choupal
• E choupal conceived by ITC’s International Business Division • Launched in June 2000 in Madhya Pradesh
•ITC kiosk with Internet access •Warehousing Hub •Relevant & real-time information •Customized knowledge •Supply chain for farm inputs •Direct Marketing channel for farm produce
Vertical Integration
Reducing number of Intermediaries and directly sourcing from farmers
Pilot (50-100 Choupals)
Information Technology
Better information flow in content as well as timing.
Critical Mass (300 choupals)
Roll out, fix it, scale up
Flexibility and learning from environment .
Saturation (more than 1500)
Bi- Directional Supply chain
Targeting farmers as supplier as well as consumer.
Inbound Logistics
Display & Inspection
Auction
Bagging & weighing
Payment & outbound logistics
•Improper Information Flow . •Difficulty in Price Discovery •Overnight Stay cost
•Due lack of storage area chance of crop getting damaged. •Unscientific sight inspection •No Incentive for better quality
•Farmer can’t refuse sale at auction price •Different socio economical background of agents from that of farmers
•Farmers to bear cost of bagging. •Malpractices of Mandy Labors •Under weighing
•Partial or Delayed payments •No Interest •Its difficult for ITC to distinguish between different grades of crop.
Agent control of market- Distortion of price & information Mixing of different quality of produce No communication with the supplier-The farmer
Pricing
Inbound Logistics
Inspection & Grading
Weighing & Payment
Hub Logistics
•Fair Average Quality Based Pricing. •Information Flow through Sanchalak
•No transportation cost to farmer
•Scientific and transparent method of quality testing. •Bonus points for producing high quality crops.
•Avoiding any malpractices while weighing . •On the spot full payment.
•Well Organized handled by samyojaks
•Re-engineering the channel to achieve virtual vertical integration •Access to Market intelligence leading to better fulfillment channel. •Pull based Marketing. •Sanchalak (one of the farmers) . •Demand Aggregation leading to scale economies. •Supply aggregation leading to customization.
Scope:
• • • • • Stakeholder involvement-Win win Bi-Directional flow Basis is the inefficiency of existing system Agri. based and IT empowered In sync with current portfolio of IBD
ITC ?Elimination of Middle men ,efficient supply chain. - Disintermediation saving. - Saving in transaction cost. ?Access to under served rural markets.
Farmers ? Feeling of empowerment . • Better Information content . • Better information timing. ? Improved profitability. • Saving of transaction cost and timing. • Spot payment. • Improved yield. • Avoid Malpractices.(weighing accuracy and granularity of weight ) ? Can take advantage of one stop solution • Consumer Agri products ,credit and other benefits. ? Professionalism and dignity
?Supply security and long term supplier
relationship. ?Creating shareholder value by serving society . ?Traceability of source and control over quality ?New ITES business opportunity. ?Rural Market research .
Sanchalak •Earns transaction based commission. •Trained to use internet, testing quality of produce •Sworn in front of the entire village there is pride attached. •He is motivated through public felicitation ceremonies also. • Shift in role from mere farmer to an Entrepreneur
Samyojak • Assured of revenues. 0.5% commission. •Responsibilities include cash disbursement, labor management, storage, transportation, mandi paperwork
Why CA joined with ITC •The company has assured that it will continue to procure through the mandis also. •Significant commission •They are fragmented •Long term gains in associating with ITC
Mandi Farmer Commission Handling and Transit losses Labor cost Bagging and weighing Transportation Total 0 50 50 70 100 270 Total ITC 100 10 70 75 250 505 775
E- Choupal Farmer 0 0 0 0 0 0 ITC 50 0 85 0 100 235 235
Mark Up Total Mark Up
3%
5%
8%
2.5%
2.5%
*All figures are per metric ton
2003: Success of E-choupal In state of MP for soybean
1695 e-choupals in MP. Pilot projects in Karnataka and AP, Rajasthan.
2005 : Profitable venture with scalability .
Majority (80:20) of procurement from e-choupals. Developed a model which can be scalable to national level
Strategies
Expansion to Other States Partnering with other allied industries.
*All figures are per metric ton
Selection of state
Factors Agri Production Level Level of Customisation Required Literacy level of population Connectivity Road Infrastructure Weighted Avg. Score Weights 0.35 0.35 0.1 0.1 0.1
Maharash Rajastha tra n
4 4 4 2 2 3.60 3 4 3 2 2 3.15
Uttar Pardesh
4 3 2 2 4 3.25
Karnataka
3 2 3 3 3 2.65
Andhra Pardesh
2.5 2 2 3 3 2.375
• 65 % of IBD export business is of Soya export, Second largest soya exported with market share of 8% . • Wheat being the next highest contributor to revenue after soya . • Where Shimp and Coffee there are vagaries in market prices and ROI takes much longer
Number of e-choupals Uttar Pardesh 4.4 90.8 1500
MP Aerable land soya(Lakh Hectere) Aerable land wheat(Lakh Hectere) e choupal 42 34.3 1700
Maharashtra 19.3 7.8 1100
Rajasthan 1.3 22.9 50
Saturation
Critical States Karnataka
Pilot
Saturation
Number of Echoupal 300 300
Critical
Andhra Pardesh
Cost Components
Revenue Components
• Capital Expenditure of Setting up of E-choupals, ITC hubs, Designing portals • Revenue Expenditure Labour cost, Commisison to Sanchalaks and samyojaks, Maintenance and Replacement of IT systems
• Sale of Agri Products • Saving on transaction cost • Commission from the sale of Consumer products at ITC hubs to farmers
No Of Ecoupals Cost of each E-choupal ( Rs 3 lakhs) Total outflow Number of Farmers covered Total Expected Saving for ITC Net
2003 1695 300000 Rs 50.85 Cr 847500 Rs 34.3 Cr (Rs 16.5 Cr)
2005(E) 5000 300000 Rs 150 Cr 2500000 Rs243Cr Rs 93 Cr
Assumptions • • • • • . Each e-choupal covered almost 500-600 farmers. 50% of total covered farmers actually visit e-choupals for selling their crops Each transaction size around 2 MT ,Avg. number of transaction per farmer 1.5 between 2000 to 2003 ,and 3 from 2000 to 2005. Average transaction cost saving for ITC Rs 270 per MT. Earnings from allied services not included in Expected savings that will further increase profits.
Involving the Customer • Customise content of the web site based on feedback.
Adding Value • Research to analyze farmer preferences , spending pattern and financial position . • Complete one stop solution at ITC hub agri related for farmers visiting there. • Entering in Allied services like rural healthcare , education ,credit and insurance
Adding Value to Sanchalak • Public felicitation of sanchalak in public gathering.
• Include content like . Cricket, Daily news ,Movie trivia/ music downloads, Using internet to check results, Setting up forums for the Sanchalaks to communicate with each other
• Higher incentives of faster target achievement .
• Commission to the sanchalak on allied services .
• Converting ITC • Hub to a one stop solution for Rural • Consumers •
Make it a low cost distribution system for rural consumers. Provides services like Agri based seeds ,fertilizers , FMCG ,consumer durable ,Automobile as per needs of rural consumers. Promotion through local Media ( Painting walls ,local cable TV, Video on wheels) Special promotions in Diwali ,New Year ,festival and marriage seasons.
Factors Alignment with agriculture Existing penetration Potential Demand Competition in same segment Score
Weights Fertilizers Agrichemical Seed Insurance Credit 0.35 0.25 0.2 0.2 4 4 5 2
3.8
4 3 4 2
3.35
4 3 4 2
3.35
2 5 3 5
3.55
2 5 3 5
3.55
Consumer FMCG durables 2 2 3 2 3 4 2
2.45
2
2.4
Distribution of goods related to agriculture will be much easier as it adds direct value to farmer and also e-choupal’s association with agriculture. Penetration of insurance and credit of existing players is low in rural areas , ITC has a profile of rural consumers and hence can be profitable in these products. Because of existing dominant players in FMCG and consumer durables, potential of being profitable in these segments is low.
• Illiteracy about computers in rural areas and also low trust of rural people on electronic systems. • Cartelization by the Sanchalaks. They might demand more commissions. • Poaching of Samyojaks by competition • Selection of reliable and educated person as sanchalak. • Management capability of ITC frontline. Expertise in lab testing of soil, in retail format. • Lapses in Power and slow internet connectivity . • The mandi labourers, the bazaar near the mandis, competing processors have lost out due to ITC e choupal ands may join forces against ITC. • Lack of rules and regulation of electronic choupal.
E- Choupal : 6500 States : 10 •
New Partnerships Partnering with Nokia : Educating farmers through cell phones as telecom services reached rural India . Partnering With Monster.com : Setting up of “Rozgar Dunia “ Bi-lingual jobsite. Partnering with BPCL
New Intiatives
Vilalges : 40000 Farmers: 4mn Crops : Weat ,Rice Pulses ,Soya ,maize ,spices ,coffee and aqua Products. Reverse Flow; FMCG , Durables, Automotive, banking Services , Fertilizers ,Pesticides • •
•
• •
Setting up of choupal fresh outlets in urban areas. Working in Non Renewable Source of Energy . Focus on horticulture
Choupal Sagar
One Stop Solution for farmers , Target 100 by 2011
doc_605523101.pptx