Mahindra War Room 2014 AFS Agri Business Caselet

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MAHINDRA AUTOMOTIVE & FARM SECTORS
AGRI-BUSINESS CASELET

Mahindras Automotive & Farm Sectors have independent caselets for the Automotive
Business, Tractor Business and Agri-business - this caselet pertains to Agri-business.

BUSINESS BACKGROUND

Mahindra entered the farm sector in the 1960s with the manufacture of tractors, and
have successfully maintained leadership position in tractors for the last 30 years, selling
over 2.1 million tractors across 40 countries to date, the worlds #1 by volume. Mahindra
subsequently added a range of farm mechanization equipment, such as harvesters,
transplanters, tillers etc. under the Applitrac range. In the recent years, Mahindras
Farm Sector expanded the vision beyond just selling of tractors and farm equipment, to
delivering farm tech prosperity. The business was accordingly reinvented in 2010 and
organized as: (a) Tractor & Farm Mechanization Business, and (b) Agri-business
comprising Fresh Produce (Shubhlabh), Crop Care, Seeds, Micro Irrigation & Agronomy
Services (Samriddhi) and New Business Development & Innovation.

In the initial stage, Mahindras strategy was largely Agri-input driven. But after
evaluating the entire agricultural value-chain from Farm to Fork, and leveraging the
strengths of the Farm business, Mahindra has decided to focus on key input businesses
on the farm side - such as seeds, micro irrigation solutions and crop-care. Mahindra
Agri business division is engaged in seed supply, crop care and fresh produce
distribution, provides a single source channel to access all products, services and
knowledge needed by farmers to run a productive farm. Mahindra acquired a majority
stake in EPC Industries Ltd - a pioneer of micro-irrigation in India started in 1986 with
French technological support - thereby adding the capability to design and develop
irrigation products of international standard. The Samriddhi Centre network offers soil
testing, agronomy and other services, aspiring to be a one-stop solution for all farmer
needs. The Agri-business division realized the importance of assisting farmers by
providing them market linkages for their produce, which in turn would help them
increase their returns. With this objective, along with an evaluation of the Agri Value
chain on specific business selection criteria, the division has decided to enter key crops
like Fresh Fruits, Dairy, Pulses, Edible Oils (Oil seeds), Processed Foods and Basmati
Rice. Mahindra Samriddhi Services Ltd. is engaged in the fresh fruits business and is a
100% subsidiary of Mahindra & Mahindra Ltd. The Dairy business foray is already
underway - a decision partly inspired by the National Champions of Mahindra War
Room 2012. This years business challenge pertains to the Edible Oil Business.

LIVE CHALLENGE: EDIBLE OILS BUSINESS STRATEGY

With the shift of focus from Generation X to Generation Y, fitness is becoming
increasingly important to the consumer. The cooking medium - Edible Oils - has
become an area of intense scrutiny by home-makers, for its obvious impact on the
health of the family at large. Edible Oils is a critical item on the household monthly
purchase basket and a high-involvement purchase for a growing health conscious

Mahindra War Room 2014 AFS Agri Business Caselet
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consumer segment. Moreover, Refined oil is among the top three largest FMCG
categories in India by value, demonstrating significant growth over time.

The Indian Edible Oil Industry is estimated to be INR 100,000 Crs, with players like ITC,
Saffola, Ruchi & Fortune controlling ~75% of the total market share, followed by 5-6
players with 3-4% of the market each. The industry is slated for phenomenal growth per
capita, with all the good fundamentals, and offers the opportunity to create an INR.
10,000 Crs company in less than a decade. However, the industry is also very dynamic
and competitive, with not enough differentiation among the offerings. Almost all
competing brands procure seeds from similar farms and locations, process them using
similar technology, and offer similar products with limited possibility of unique value
creation. Brand awareness, propelled by high decibel advertising, has been the main
differentiator, though there are exceptions. In the recent past, there has been a
considerable thrust by current manufacturers and brands on developing healthier
variants of oil and creating a new sub-category of blended oils. Net Margins are low at
3-4%, de-motivating large companies to enter this business.

Though these risk factors mitigate the attractiveness of this business, when viewed from
the vision of Delivering Farmtech Prosperity, this business gains importance especially
keeping in mind the strong connect that the business has with the farmers. Mahindra
envisions a large number of farmers engaged in this production and by adding value to
them by improving productivity and quality, technology and distribution, aims to connect
with the farmers better.

Considering the Strengths, Weaknesses, Opportunities and Threats outlined
above, evolve the entry strategy for Mahindra to foray into the Edible Oils
business, covering:

a. Product Strategy
b. Marketing & Branding Strategy
c. Sales & Distribution Strategy
d. Sourcing Strategy
e. Supply Chain Strategy
f. Financials

Please note that with M&M deciding to get into this industry, the business cannot just be
another me too player. The strategy proposed must thus be on some kind of an
innovative, disruptive business model that will help the group gain a long term
sustainable competitive advantage. The Strategy evolved should help the company
differentiate, clearly articulate the companys right to win in the market place and
create a sustainable long-term advantage.