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ITC e Choupal
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ITC conglomerate has interest in cigarettes andtobacco, packaging, specialty papers, hotel,
retailing, IT, and agri-exports
Agri-exports business is run underInternationalBusiness Division(IBD) of ITC
With a turnover of Rs. 7.5 bn it emerged as
Indias second largest exporter
But profit margin were very thin
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Problems
Less control over agricultural supply chain
Traders and Agents not aware about quality of
agri products needed by international buyers
Lack of infrastructure for handling, storage and
transportation
Middlemen often exploited their position and
blocked information at both ends
They also caused delay resulting in the
deterioration in the quality of agri-produce
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FARMER
Input CostSeed
Fertilizers
Chemicals
Farming
Practices
Met Dep.Insurance
Weather
Agri Input
Retailer
NGOs
AgriUniversities
Money
Lender
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Solution
e-Choupal initiative
Objective
It aimed to improve quality of agricultural
products by breaking the whole vicious cycle of
low investment, low productivity, weak market
orientation and low value addition in which theIndian farmer found himself trapped.
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A
RMER
PuccaAhratia
KacchaAhratia
Trader Broker P
R
O
C
E
S
S
O
R
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ITC-IBDs top executives had a major brainstormingsession. ITC was looking for a business model that iscustomer centric but uses existing infrastructure.Questions like the following were pondered upon:
Whats the best corporate business model for rural India?
Does it require a new breed of leaders?
What are the challenges that these leaders are facing?
Will they have to work within new organizationalstructures
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Initially ITC thought to remove the
intermediariesBut it was not possible as some performed the
important channel flow activity of collecting the
produce
Obstruction in information flow to farmers was
the main concern
Farmers didnt got the fair share of profits as
they were dependent on intermediaries
Intermediaries got good price from the Mandi
which they never communicated to farmers
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Hence the model
aimed at.
Leveraging the physical transmission
capability of the intermediaries
At the same time disintermediatethem from the flow of information
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The basic idea
Utilize IT tools to network the
villages.
Leverage the internet to provideinformation to the farmers.
In June 2000, the project Symphony was
launched in the villages of M.P. forSoyafarmers.
Later, it was re-christened as e-Chaupal .
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Farmers
Farmers
Farmers
Sanchalaks
PC
&
Internet
Uses the Net to
provide spot quotes
after examining
product sample
If the price is right,farmers take the
produce to the ITC
collection centre
+
ITCFactory
Samyojak
Co-ordinates a
group of villages
Performs
documentation
works
Supplies farm inputs
from ITC and
partner companies
to Sanchalaks
Builds relationship
with Sanchalaks and
farmers
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For Information
Sanchalak was to co-ordinate the activities at e-
Choupal
PC was installed and trained to run PC
ITC covered the fixed cost cost of equipment,
maintenance
Sanchalakspaid day-to-day operating cost of
electricity and the internet connection
Helped farmers in checking theprevailing pricesof commodities and farming practices
Sanchalaks werepaid 0.5% of the procurement
price for each tonne ofSoya procured by IBD
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Creation & Availability of Database at e-Choupal hub
All information required by the farmers like
the daily Mandi prices, weather reports, global
prices, best farming practices.Mandi Prices, weather reports and global
prices via internet
Best farming practices via CDsContent was written in simple words
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Commission Agents felt cheated
Commission agents were the vital link
between the the Mandi and the farmers
Samyojaks were created
Samyojak were responsible for the identification
of the Sanchalaks
Documentation ofinformation from Mandi
Collection of produce from the farmers to Hubs
Received 1% commission for his services
Compensated through increase in volumes
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Problems and Challenges cont..
The Agricultural Produce Marketing CommitteeAct(APMC Act) prohibited co.s from purchasing
certain specified commodities from any other
source than Govt. designated Mandis
Items included soyabean, wheat and coffee
all products that ITC dealt with
ITC persuaded state govts.explaining how
farmer gained
Some states did amendment and few other
gave some exemptions for ITC
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On an expansion spree
To increase its revenues ITC began to look toexpand its e-Choupal network into different crops
ITC observed .
Although characteristic of agriculture production is
similarall over the country
value chains differed from one crop to another
depending primarily on two factors
i) Commodity the farmer traded in
ii) Socio-economic strata they belonged to
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AfterSoya in Madhya Pradesh.
ITC aimed at coffeeplanters in Karnataka,
Andhra Pradesh and U.P.
Coffee is a plantation crop and growers aremore sophisticated and knowledgeable
Agents role was very crucial, particularly
because marketprice tended to be volatilePlanterspreferred to trade with dealers
they had got to know well
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Value chain for coffee was strong and
efficient,
thus there was less role of eliminating the
role of intermediaries
Different Strategy position website as
single source of knowledge
Information here was more sophisticated
related to coffee futures
ITC here relied on ABN Amro, theworlds largest futures player
Computers were placed in clubs and co-
operatives of various farmers
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Company launched Aquachoupal in Andhra
Pradesh in 2001
Operated 55 kiosks covering 10,000 shrimp
farmers in more than 300 villages
Aqua farming involves higher costs than
traditional farming
Highly perishable but returns are high
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Nov. 2001 - ITC started forwheat farmers of
U.P.
180 Kiosks were opened to reach more than
3,75,000 wheat farmers in over 1,500 villages
Many cigarette distributors became Samyojaks
ITC saved upto Rs. 55-65 per tonne of wheat
and upto 10% of the procurement cost throughthis programme
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Beyond Commodity Trading
ITC realized that it can further leverage its
existing infrastructure
It decided to use its kiosks forreverse trading
It brought companies like MONSANTO( a US
giant dealing in seeds), BASF India
Ltd.(agrochemicals),Nagarjuna Fertilizers &
Madhya Pradesh State Seeds Corporation.
Took orders, market their products, displayed
their products, trained farmers on product usage
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Goods were delivered through Sanchalaks
ITC was paid 10% of the transaction value. Half
of it was paid to Sanchalaks
In 2002, company started selling vegetable oilChoupal and gas lanterns mfg. by third parties
Also started selling Life Insurance of LIC and
other companies
Thus ITC leveraged the power of Meta Market
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ITC's Choupal Sagar at Sehore, about 38 km from Bhopal, put
up primarily for the shopping convenience of farmers
It is part of a huge complex, spread over eight acres, thatincludes the ITC's procurement centre for soyabean, wheat and
other grains.
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It is here that farmers in the Sehore belt and surrounding
areas bring theirproduce packed in huge trucks/trolleys
for sale sometimes pooling their produce in one
vehicle
Receives the payment in cash, pick up their requirement
of fertiliser, pesticide and even diesel packed in huge
drums.
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As the place where they wait for their money islocated tantalizingly in the middle of the mall, a lot of
impulsive shopping can take place
Every day it has about 1,100 to 1,200 footfalls, and inthe week before Diwali, this number went up to 1,600
to 1,800, with daily sales exceeding Rs 2 lakh.