Driving Food Security through Connectivity

ITC eChoupal

Changing Rural Trade Structures

 Context
¾ Food Security
• For whom ??
• With Increased urbanization
– Food Security will be a greater concern for urban poor and
middle class than Rural Poor
¾ Scope of Market Connectivity
• Reduce Value Chain Cost
• “ Vendor Engagement”
– Improve on Softer issues : Fairness , Respect and Motivation
• Improve Knowledge & Transaction Connectivity
– Information -- > converted to Knowledge to improve decision
making
– Ability to exercise knowledge through transaction
• New Opportunities Connectivity
– Entrepreneurship and Employment
 The Potential & The Constraints
of Indian Agriculture are well known
 Large arable land  Fragmented farm sizes

 Rich & Diverse Agro-  Heavy dependence on

climatic Zones Monsoon

 Strong institutional base  Poor extension work at

in R&D the farm level

 Large domestic  Numerous

consumption base intermediaries

 Attractive export  Weak infrastructure &

markets inconsistent quality
 Consequently…

¾ This created the classic “chicken first?” or “egg

first?” syndrome, as the solution eludes us until
we tackle all the issues at once and in concert
• Tackling any one, or even some, wastes a lot of
resources without enhancing the competitiveness of
the chain

¾ That’s why we have:

 Plenty of grain stocks, yet starvation
 Large quantity of raw material, yet unviable processing
units
 Many processing units, yet not much value-added
 Lots of consumers, yet under-developed food industry
Farmer is stuck in the Vicious Cycle…

Low Risk Taking Ability

Low Value Addition Low

Investment

Low Margin Low Productivity

Weak Market Orientation

 Manifestation at Transactions Level

Sell: sunk costs, inconvenience,

other losses Price Discovery
@ Sell Transaction
Video
Mandi

Transaction
Farmer Market
PRODUCT
&
Financing
Money SERVICE
Information Lender PROVIDERS
(Aggr)

Extension
VILLAGE Center
Knowledge
(Use) Middleman

TOWN
Buy: high prices, spurious goods, information not timely
 To enhance market connectivity,
there is a need for a system that can:

¾ deliver an end-to-end solution

9 with farmer having the freedom of choice
9 who should be able to take an informed decision

¾ deliver effective service

9 notwithstanding the fragmentation, dispersion,
heterogeneity and weak infrastructure
9 at low cost
 Insights …
. Let’s look at a few cross-industry success stories for
lessons:
 Wide and deep penetration of our traditional FMCG retail
channel
 Rapid scale-up of public telephone booths
 Low cost reach and effective customer servicing by cable
TV operators

. And the lessons are:

 Unleashing the power of small scale entrepreneur
 Effectively utilizing (and not eliminating) the channel
intermediaries
 Yet, their disintermediation from the market signals and
information flow
Reaching eChoupal to the Farmer

¾ ‘Sanchalak’, a lead farmer selected from within the

village and trained to interface between the
computer (placed in his house) and the other
farmers,
1. Overcome the literacy barrier
2. Keep the costs low
3. Effectively manage the relationships in the village
 Building Blocks of e-Choupal
¾ One-stop-shop that offers:
• Information (weather, prices, news)
• Knowledge (farm management, risk management)
• Inputs (screened for quality)
• Output (convenience, lower transaction costs)
¾ Interlocking network of partnerships to bring in
“best in class” in all offers
• (ITC+IMD+Universities+Input Cos etc.)
¾ Physical net access and community interface through a
lead farmer identified and appointed as Choupal
Sanchalak
• Sanchalak has a transaction based income stream
 The e-Choupal Infrastructure
¾ ICT Kiosk with Internet Access
• In the house of a trained farmer Sanchalak within
walking distance of target farmers
• Additional investments in Solar Power and VSATs to
overcome weak infrastructure
• All given free of cost to Sanchalak ( only on Public
Oath )
 The e-Choupal Infrastructure

¾ Warehousing Hub / Store

• Managed by the erstwhile middleman- the Sanyojak
• Within tractorable distance of target farmers
 The e-Choupal Infrastructure
¾ Collaborative Network of Companies
• Orchestrated by ITC
• With a Pan-Indian presence

Network : Connecting Indian industry with Rural

 Transactions through ITC eChoupal
Sell: Price discovery @ village, choice, efficiency

Knowledge
Information
(Customized) (e.g., Price
Discovery)
Video
Mandi

Farmer PRODUCT
Choupal Saagar
&
Transactions SERVICE
PROVIDERS

Samyojak
Sanchalak

PAN-INDIAN
VILLAGE TOWN
Information + Customized Knowledge @ village, high quality,
Buy:
competitive prices, superior service
Leading to Win-Win Value Proposition
Recover costs through the inherent value in transactions,
instead of charging the farmer

1. Logistics savings between the farm and factory leg by

eliminating certain non-value-adding activities in Soya
2. Margins from cost-quality optimisation by segregating at
source (farmer level) and matching with the needs of
different customer segments in Wheat
3. Price premiums from sophisticated global consumers (who
are highly concerned about food safety, etc.) through export
of products traceable to farms / practices in Aqua
4. Service income from value added for the market
participants through superior price discovery using
electronic trading platform in Coffee
 Transaction Costs
The Mandi Chain
Rs per MT

Trolley Freight to Mandi = 100

Filling & Weighing Labour = 70
Farmer Incurs 270
Labour Khadi Karai = 50
Handling Loss = 50

Commission to Agent = 100

Cost of Gunny Bags (net) = 75
Processor
Labour (Stitching, Loading)= 35 505
Incurs
Labour at Factory (Unload) = 35
Freight to Factory = 250
Transit Losses = 10
Total Chain 775
 Transaction Costs
The eChoupal Chain
Rs per MT

Trolley Freight to Mandi = 100

Filling & Weighing Labour = 70
Farmer Incurs 270
Labour Khadi Karai = 50
Handling Loss = 50
Sanchalak 50
Commission to Agent = 100
Processor Cost of Gunny Bags (net) = 75
505
Incurs Labour (Stitching, Loading)= 35
185
Labour at Factory (Unload) = 35
Freight to Factory 100 = 250
Transit Losses = 10
Total Chain 775 185
 Co-creation Process
¾ Sanchalaks,
• “as lead consumers”, sell their experience to other
consumers
• because of “aligned self-interest”, assist the
ecosystem in the value creation process
• “as extended organisation”, personalise
transactions at the touch point through interaction

¾ Making it possible to continuously

recontextualise products / services /
experiences, as the customers evolve
 Transformed eChoupal
¾ From being the name of a supply chain
initiative…
¾ … to a brand that offers a platform / an
experience environment that facilitates
• Dignity of choice
• Informed transactions
• Interaction within the community
• Interaction with the rest of the world
• Self-expression

¾ In short,
• A tool of empowerment
• With a mission to improve quality of life in rural India
And the Customers themselves…
¾ Took it beyond agriculture, into
• Consumer goods
• Financial products
• Resource capability building
• Health
• Education
• Employability
• …and more

¾ Making it a Universal Platform

 eChoupal Evolution

eChoupal 3.0 : Scale & Sustainability

Rural Marketing , Employability , Commodity &
Agri Services
Financial + Social Inclusion

eChoupal 2.0 : Seasonal to All year Connect

FMCG , Financial Services and Agri Input

eChoupal 1.0 : Sourcing Supply Chain

Traceability , Identity Preservation and Cost Management

1999 2003 2008

 eChoupal 3.0

¾ Objective :
• Improve quality of life in Rural India

Expand the wallet size by improving economic activity at village level and
leverage it to benefit stakeholders

Farm Sector : Non Farm sector

• Increased Output
realization through choice
and reduction in sunk cost
• Productivity through
• Agri Input @ door Steps
• Higher Choice for consumption and
employment
• Active Distribution of FMCG and
Engagement through Choupal Haats
• Employability
• Health Initiatives
 Bottom line for ITC
¾ Reliable supply chain for ITC’s food &
agribusinesses
• Costs, Quality, Traceability
¾ Access to the underserved rural markets
• Through a virtuous cycle created by “larger incomes”
and “trust” that is built
¾ Shareholder value through serving society
• Reliable delivery mechanism for development
initiatives
Improving Quality of Life in Rural India

Thank You
 e Choupal Æ Recognition
¾ International Awards
• United Nations Industrial Development Organisation (UNIDO) Award –
2008
• The Stockholm Challenge 2006
• The Development Gateway Award 2005 (previously known as the
Petersberg Prize)
• The inaugural 'World Business Award', instituted jointly by the International
Chamber of Commerce (ICC), the HRH Prince of Wales International
Business Leaders Forum (IBLF) and the United Nations Development
Programme (UNDP).
• The ‘Enterprise Business Transformation Award’ for Asia Pacific (Apac),
instituted by Infosys Technologies and Wharton School of the University
of Pennsylvania.
• The Golden Peacock Innovation Award 2004.

¾ Case studies & Books

• Harvard Business School , Michigan Business School
• C K Prahalad’s Fortune at the Bottom of Pyramid
Sunehra Kal : Strengthening
Connections beyond Farmers