ITC E-CHOUPAL

ITC E-CHOUPAL FOOTPRINT

AGENDA

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ITC e-Choupal : An Introduction, Stake holder Analysis1

Supply Chain of ITC e-Choupal2

Critical Analysis, and Comparison with HKB3

Future Scope4

ITC e-Choupal : An Introduction

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ITC :AN OVERVIEW Incorporated on August 24, 1910 under the name of 'Imperial

Tobacco Company 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 program 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-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 successfullyDesigned to address the issues such as: 1.Fragmented farms2.Weak institutions3.Involvement of intermediaries4.Information Asymmetry

Analysis of Supply chain of e-Choupal Initiative

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Farmer

Agri-Input Companies

Dealer/Stockiest

Retailer

Agril University, Met Dept,

Insurance Co.

VLW (of Dept of Agriculture)

Money Lender

Pakka Adtiya(Registered Dealer)

Kaccha Adtiya(Un-Registered Dealer)

Trader

Broker

Proc

esso

r

ITC-IBD

WHY ITC THOUGHT OF E-CHOUPAL

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ITC’s Supply chain of Soya bean after e-Choupal Initiative

SUPPLY CHAIN POST RE-ENGINEERING

• Pricing• Previous day’s 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

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• Inbound Logistics• Farmer proceeds to the nearest ITC procurement hub with the

note• Some procurement hubs are ITC factories, others are purely

warehouse operations• ITC’s aim is to have a processing centre within 30-40 km radius

of its farmers

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• Inspection 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

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• Inspection 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

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• Weighing and Payment• Farmer’s 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

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• 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

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A WIN-WIN DEAL

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TRANSACTION COST IN MANDI CHAIN (BEFORE E-CHOUPAL)

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

TRANSACTION COST IN MANDI CHAIN (AFTER E-CHOUPAL)

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

Synergies for ITC

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Generation of Goodwill & positive public opinionBetter supply chain for ITC’s 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 builtNew ITES Business Opportunities

• Health, Education, Entertainment, e-Governance

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SYNERGY REDEFINED :THE FUTURE

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FARMERS

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

OTHER E-CHOUPAL INITIATIVE

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COMPANIES USING E-CHOUPAL NETWORK

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

Critical Analysis of ITC’s Supply Chain

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STAKE HOLDER ANALYSISPrimary Stakeholders

Interest

Farmer Community

Access to information– Empowered decisions– Improved agriculture

Economic benefits through lower transaction costs and process efficiencies

Served with dignity Knowledge bundled sale of goods and services Co-opted in product design Hope for a brighter future

ITC

Lower procurement costs Direct interaction with farmers - Control on quality

& supply security Low cost distribution channel Access to market intelligence

Commission Agents (Kachha & Pakka Adatiyas)

Gain access to global markets through ITC and commission to compensate some of the loss revenue

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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Comparison with Haryali Kisan Bazar

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E-chaupal Haryali Kisaan Bazaar

Main

objective

Procurement Rural Retail

Benefit to the

farmers

computer application to provide

market information

provide better method of cultivation by

trained agronomist

Synergies Synergies with products which

ITC is manufacturing

Synergies with what DSCL is

selling(inputs to agriculture plus other

services

Economies of

scale

25-30 km area coverage 20-25 km area coverage

Procurement

centre

near small town Strategically placed near petrol pump

mainly

Future of e-Choupal

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E-CHOUPAL 2.0

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VERSION 1.0 V/S VERSION 2.0Parameters Version 1.0( the start) Version 2.0( the scale-up)

Idea The concept gave a power of scale to

the small farmers by aggregating them as

sellers ( of produce) and as buyers

(of farm inputs)

By 2006, 40,000 villages covering 4 million

people.

Farmer’s gain The farmers get bargaining power and a

opportunity of have choice

Information on weather, price etc

Knowledge on farming methods,

soil testing etc

Purchase of seed, fertiliser to insurance

Farmers sell crops to the ITC centres

cattle care, water harvesting

ITC’s gain Access to inputs for its agri business;

offer the use of network to

other companies

ITC was able to procure

fresh commodities with

reasonable prices from the farmers

E-CHOUPAL 3.0.

The Deepening NEW BUSINESSES: 1) Rural jobs and employability 2) Personalised agri services.

MORE INTERACTION: Through Choupal Saagars and Haats and via mobile phones

NEW TECHNOLOGY: Use of especially enabled mobile phones, analytics, new partner

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