ITC E-CHOUPAL

ITC E-CHOUPAL FOOTPRINT

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 (IMRB-

Rated as one of Indias Most Respected Companies Businessworld Survey 2006) Diversified conglomerate with interests ranging from Tobacco to Hospitality

ITCS 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 Indias largest Internet-based intervention Over 40,000 villages linked through 6500 e-Choupals servicing over 4 million farmers

Distinctive sourcing capability for ITCs Foods business

The predicament of Indian Farmers

Low Risk Appetite

Caught in a vicious Low Investment cycle of underdevelopment Low Value Addition Low Productivity Weak Market Orientation

Low Margins

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 successfully

Designed to address the issues such as:

1.Fragmented farms 2.Weak institutions 3.Involvement of intermediaries 4.Information Asymmetry

Analysis of Supply chain of e-Choupal Initiative

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A ri -In u g pt C m a ie o pn s

D a r/ e le S c ie t to k s

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WHY ITC THOUGHT OF E-CHOUPAL

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ITCs Supply chain of Soya bean after e-Choupal Initiative

SUPPLY CHAIN POST RE-ENGINEERING

Pricing
Previous days 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 ITCs 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 farmers produce To change farmers 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

Farmers 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 ECHOUPAL)

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

TRANSACTION COST IN MANDI CHAIN (AFTER ECHOUPAL)

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 opinion Better supply chain for ITCs 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 built

New ITES Business Opportunities

Health, Education, Entertainment, e-Governance

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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 ITCs Supply Chain

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STAKE HOLDER ANALYSIS

Primary Stakeholders Farmer Community ITC 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 Lower procurement costs Direct interaction with farmers - Control on quality & supply security Low cost distribution channel Access to market intelligence Gain access to global markets through ITC and commission to compensate some of the loss revenue Interest

Commission Agents (Kachha & Pakka

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
Main objective Procurement

Haryali Kisaan Bazaar

Rural Retail

Benefit to thecomputer application to provide provide better method of cultivation by farmers Synergies market information Synergies with products which ITC is manufacturing trained agronomist Synergies with what DSCL is selling(inputs to agriculture plus other services

Economies scale

of25-30 km area coverage

20-25 km area coverage Strategically placed near petrol pump mainly

Procurement near small town centre

Future of e-Choupal

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VERSION 1.0 V/S VERSION 2.0

Parameters Idea Version 1.0( the start) The concept gave a power of scale to the small farmers by aggregating them as sellers ( of produce) and as buyers (of farm inputs) Version 2.0( the scale-up) By 2006, 40,000 villages covering 4 million people.

Farmers 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

ITCs 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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