ByVignesh 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 India’s Most Respected Companies (IMRB-

Businessworld Survey 2006)

Diversified conglomerate with interests ranging from Tobacco to

Hospitality

ITC’s 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 India’s largest Internet-based intervention

Over 40,000 villages linked through 6500 e-Choupals

servicing over 4 million farmers Distinctive sourcing capability for ITC’s Foods business

Low Risk Appetite

Weak Market Orientation

Low InvestmentLow Margins

Low ProductivityLow Value Addition

Caught in a vicious cycle of

underdevelopment

The predicament of Indian Farmers

ITC e-ChoupalStarted in the year 2000Target Area so far 38,000 villages, 6500 kiosks, 9

statesWholly owned by ITCWhy 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.Fragmented farms2.Weak institutions3.Involvement of intermediaries4.Information Asymmetry

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Farmer

Agri-Input Companies

Dealer/

StockiestRetailer

Agril University, Met Dept,

Insurance Co.

VLW (of Dept of Agriculture)

Money Lender

Pakka Adtiya(Registered Dealer)

Kaccha Adtiya(Un-Registered Dealer)

Trader

Broker

Pro

cess

or

ITC-IBD

Why ITC thought of e-Choupal

Supply chain post re-engineering

PricingPrevious day’s closing price used as benchmark

price for next dayMandi prices communicated to sanchalak through e-

Choupal portalSanchalak 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 LogisticsFarmer proceeds to the nearest ITC procurement

hub with the noteSome procurement hubs are ITC factories, others

are purely warehouse operationsITC’s aim is to have a processing centre within 30-

40 km radius of its farmersInspection and Grading

At the ITC procurement hub, laboratory tests are conducted on a sample of farmer’s produce

To change farmer’s attitude and appreciating produce quality, ITC is developing lab tests to reward farmers with reward points for better quality supply

Weighing and PaymentFarmer’s produce is weighed on electronic weighbridgeHe is then given full cash paymentFreight expenses are reimbursedAppropriate documentation at each stage and farmer is given a copy of thatSamyojaks handle cash operations

Hub LogisticsFarmer transports his produce to the nearest processing centre or storage hubITC incurs the transportation costThe farmer bears the risk of transportation until produce is delivered and the sale is

completed

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Technological supportNodal platform catering to commodity blending,

agricultural trading, e-choupal &rural distribution24,000 personalized business function points110,000+ pre-built business function pointsIntegrated 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

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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 ITC’s Food & Agri BusinessesCosts, Quality, Traceability

Access to the Underserved Rural MarketsThrough a Virtuous Cycle created by “Larger

Incomes”, and founded on “Trust” that is builtNew ITES Business Opportunities

Health, Education, Entertainment, eGovernance

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Synergy Redefined :The FutureFARMERS

MARKETS

Cigarette Trade Marketing capability

BrandedFoods

Expanded FMCG distribution capability

e-choupal rural two-way fulfillment capability

VPN providing SCM, ERP & CRM capability

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