INTERNATION MARKETING PROJECT REPORT ON AGARBATTI INDUSTRY

WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT & RESEARCH

INTERNATION MARKETING

PROJECT REPORT

ON

AGARBATTI INDUSTRY

BY

Abul Hasan Rajani 1

Sanket Kabra 16

Juhi Parekh 23

Saloni Shah 34

Sidharth V.D. 39

Vivek Rajan 41

International Marketing project report 2

Table of Contents

Section – A

a.I. Executive Summary .................................................................................................... 5

a.II. About Acharya Exports............................................................................................... 6

a.III. Industry Overview ...................................................................................................... 7

a.IV.SWOT Analysis .......................................................................................................... 9

a.V. HS Code for Agarbattis ............................................................................................. 10

a.VII. Industry Structure ................................................................................................... 11

Section-B

BUSINESS PLAN

b.I. Introduction about our company ............................................................................... 13

b.II. Business model ......................................................................................................... 13

b.III.Tie ups ....................................................................................................................... 14

X. ......................................................................................................................................

XI.


Section-A

Industry Analysis


Acknowledgement

We would sincerely like to thank Professor R. Venkatesh sir for giving us

this opportunity to do this project. This project has helped us on

understanding International marketing much better.


Executive Summary

The projects aims to understand the nuances of export in relation to the agarbathi (aka

Incense) industry. The data has been collected from Mr. Dinesh, Exports Manager at

Acharya exports, Matunga. Since the company exports most of its goods to USA. We

have taken USA as a target market for our in-depth analysis. Finally we have made a

business plan to start our own company


About Acharya Exports

Acharya exports is a the leading incense trading house established over 50 years ago in

the name of Acharya Products based in Mumbai.

Acharya Exports is a specialized export marketing and trading company. It is the sole

exporter and distribution agency for many leading incense/agarbatti manufacturers in

India.

Acharya exports is a largest incense trading group, with over half a century of experience.

Its expertise lies in accessing and assisting esteemed customer's requirements in regard to

quality of incense, fragrance, packaging etc.

Acharya exports offers competitive prices and has earned a reputation for maintaining

strict delivery schedules. At any given time, the company is adequately stocked with

most of India's leading brands of incense. Since Acharya exporters are located in the port

city of Mumbai, it becomes more convenient for shipping small or larger quantities of

incense as per client‟s requirement.

Acharya Exports has a satisfied clientele in over 58 countries worldwide, to whom they

export to on a regular basis.


Industry Overview

India is a vast country and the Indians follow various religions, speak different languages

and follow different customs and traditions. Inspite of this diversity, all people use

Agarbatti (Incense sticks) at all the places of worship, religious functions, festive

occasions, weddings. Agarbatti has paramount importance in India. Besides, it is also

used as air- freshener.

Agarbatti Industry is a real employment generator and is capable of providing

employment to the weaker sections of both the urban and rural populace. Most of the

persons engaged in fashioning Agarbattis are women.

A salient feature of Agarbatti Industry is that raw materials are provided by Agarbatti

units to artisans who do the job of rolling of Agarbatti at their home besides looking after

their children and household work. This largely helps them to supplement their family

income. Agarbatti has become a significant foreign exchange earner because of its

demand in overseas markets.

The burning of incense in religious and social functions has been practised in India since

early times. “Dhup” an aromatic powder or paste is burnt in Indian homes as a fragrant

fumigant and is reputed to possess insecticidal and antiseptic properties. Agarbatti also

known, as Udubattis similar to joss sticks are a development of Dhup.

Agarbattis are obtainable in different colors and with different perfumes. The burning

time of an agarbatti varies from 15 minutes to 3 hours according to quality and size.

Agarbatti is also obtainable in other forms such as dashang (stickly paste or powder),

deep (cones and Dhup, tablets etc.).

About 75% of the agarbattis manufactured are of cheap quality containing only charcoal

powder or low quality sandalwood powder with a mixture of 50% of “wood gun”

powder. Cheap perfumes are used to give them a top note. In superior varieties, essential


oils, purified resins, natural fixatives like amber, musk and civet are used along with

synthetic aromatics. Absolutes are used in the costlier types.

The state of Karnataka is referred to as the Capital of Agarbatti. It is the leading producer

of the agarbatti in India, with Mysore and Bangalore being the main manufacturing

centres. The Mysore region is recognised as a pioneer in the activity of agarbatti

manufacturing and this is one of the main cluster activities that exist in the city.

Significant Characteristics of the Agarbatti Industry

1. Technical-know- how is simple.

2. Sophisticated equipments‟ are not required.

3. Implements/tools used are simple, portable and not costlier.

4. Large capital investment is not required.

5. Initially the industry can be started with a small investment even at the residence of the

artisans.

6. It is eco- friendly

7. Highly labour- intensive industry with no dependence on power supply.

8. No work related hazards.


SWOT ANALYSIS

Strength

•Ease availability of Manpower

•Eco-friendly Product

•Lean cost base

• Less Skill Manpower

•Minimum Initial Investment

Weaknesses

•Enhance people‟s efficiency with training

•Scarcity of resources while seasonal

employment.

•Disorganized

•Unstructured workforce –attrition

•Highly labour oriented

•Brand Creation

Opportunities

•High Potential/Demand

•Demography of urban & Rural

•High social exposure for urban & Rural

Threats

• Imports by Multinational Players

• Dependency on supply of Bamboo

•Competition can mushroom very fast


HS Code for Agarbattis

The agarbattis are shipped under HS codes 33074100

The Harmonized System (HS) is an international product classification protocol used by

customs officials for levying tariffs and controlling quotas on imported goods.The HS is

organized into 21 sections and 96 chapters, accompanied with general rules of

interpretation and explanatory notes. First, the system assigns goods to sections, and then

proceeds to assign these goods to their specific chapter, heading, and subheading, in that

order, as necessary.

The international Harmonized System (HS) is administered by the World Customs

Organization and serves as the foundation for the import and export classification

systems used in the United States. The United States import classification system, the

Harmonized Tariff Schedule (HTS) administered by the U.S. International Trade

Commission (USITC), and the U.S. export classification system, rely on the international

HS codes for their 4- and 6-digit headings and subheadings. The World Customs

Organization updates the HS System approximately every five years. The year 2012

marked the most recent HS revision, meaning the next revision will not be due until

2017.

The description for the three HS codes is as follows

3307 - Falls under the Section VI - Products of chemicals or Allied Industries and under

Chapter 33 - Essential oils and resinoids; perfumes, cosmetic or toilet preparations.

Handling section 3307 corresponds to Pre-shave, shaving or after-Shave preparations,

personal deodorants, bath preparations, depilatories and other perfumery, cosmetic or

toilet preparations, Not elsewhere specified or included, prepared room deodorisers,

whether or not perfumed


33074100 - This HS code corresponds to Preparations for perfuming or deodorizing

rooms, including odoriferous preparations used during religious rites: agarbattis and other

odoriferous preparations which operate by burning

Industry Structure

The above picture represents the industry structure of the Agarbatti industry.


Section – B

Business Plan


Introduction about our company

Our company, Shri. KRISHNA exports is a sole-proprietorship business undertaking

export of „Agarbattis‟. We wish to situate ourselves in Mumbai, Maharashtra that is a

well-connected hub for both Air and Sea transport. The initial exports are aimed from

India to United States of America. With extensive Demand for the Agarbattis in USA and

also the due to large chunk of Indian population, United States of America can be seen as

a feasible market for the export business. The main function of the company is trading

and exports.

Business model

We register ourselves on multiple online portals such as Indiamart, Export India and

many other portals. Once the customer shows interest in our product we provide them a

quotation along with the samples of our product in USA. If the customer agrees to the

quotation, we insists the client on opening the Letter of Credit (LC). If Incase the client is

not comfortable with the same, we provide him an option of Advance Payment. Then, we

place the order with the manufacturer who based out of Bangalore, India. Once the

shipment arrives Mumbai quantity and the quality is verified and then it is shipped to

USA. Our source of revenue will be from the export margin.

Order details

Shri. Krishna exporters act as agent. The orders are received through online portals such

as Indiamart and TradeIndia.

Shri. Krishna exports‟ Minimum order price is $5000. Since the manufacturer (based out

of Bangalore) takes order only for very large quantities. Shri. Krishna Exports takes

many small orders from multiple companies. This gives us a competitive advantage.


Possible Tie-Ups

Tie-ups and collaborations with manufacturing units are necessary for the functioning of

our business operations. We have identified „Shrinivas Sugandhalaya‟ manufacturers in

Bangalore, Karnataka.

We have also found that Shrinivas Sugandhalaya is the largest selling brand of agarbatti

in USA because people love the fragrance and the hexagonal packaging.

For in-land logistics, we have identified companies delivering between Bangalore and

Mumbai. A third party appointed locally will undertake the quality assessment etc.

India – US Bilateral Trade

Trade and commerce form a crucial component of the rapidly expanding and multi-

faceted relations between India and U.S. From a modest $ 5.6 billion in 1990, the

bilateral trade in merchandise goods has increased to $ 63.7 billion in 2013 representing

an impressive 1037.5% growth in a span of 23 years.

India‟s merchandise exports to the U.S. grew by 9.7% from $ 9.66 billion during the

period January-March 2013 to $ 10.60 billion during the period January-March 2014. US

exports of merchandise to India fell by 9.7% from $ 5.17 billion during the period

January-March 2013 to $ 4.66 billion during the period January-March 2014. India -

U.S. bilateral merchandise trade stands at $ 15.26 billion during the period January –

March 2014.

Trade during the year the month of March 2014

i) Major items of export from India to US

major items with their percentage shares, are given below) Textiles (17.1%)

b) Precious stones & metals (19.2%)

c) Pharmaceutical products (11.7%)


d) Mineral Fuel, Oil (9.4%)

e) Organic chemicals (5.2%)

f) Machinery (4.7%)

g) Lac, Gum, Resins (3%)

h) Electrical Machinery (2.9%)

ii) Major items of export from US to India

major items with their percentage shares, are given below

a) Precious stones & metals (24%)

b) Machinery (11.3%)

c) Aircraft, spacecraft, Parts (8.2%)

d) Mineral Fuel, Oil etc (7.9%)

e) Optical instruments & equipment (6.8%)

f)) Electrical machinery (6.8%)

g) Misc. Chemical Products (4%)

h) Organic chemicals (3.8%)


Trends with respect to the major items of bilateral trade during the past two years are as

follows.

India’s exports to US

● Cut and polished diamonds and jewellery is a major item of India‟s exports to the

US, accounting for 19.2%. Exports of this item fell from $ 2.10 billion during the period

Jan. – Mar. 2013 to $ 2.04 billion during the period Jan. – Mar. 2014, a decrease of 3.1%.


● Textiles exports accounted for 16.6% of India‟s exports to the US in 2013. Textile

exports grew from $ 1.14 billion during the period Jan. – Mar. 2013 to $ 1.24 billion

during the period Jan. – Mar. 2014, an increase of 9.1%.

● Exports of pharmaceutical products grew from $ 1109 million during the period

Jan. – Mar. 2013 to $ 1242 million during the period Jan. – Mar. 2014, an increase of

12%.

● Exports of mineral fuel, oil grew from $ 615 million during the period Jan. – Mar.

2013 to $ 999 million during the period Jan. – Mar. 2014, an increase of 62.6%.

● Exports of organic chemicals fell by 6.4% from $ 592 million during the period

Jan. – Mar. 2013 to $ 555 million during the period Jan. – Mar. 2014.

US exports to India

● Exports of precious stones and metals which accounted for 24% of exports from

US to India fell by 23.2% to $ 1118 million during the period Jan. – Mar. 2014 from $

1455 million during the period Jan. – Mar. 2013.

● Machinery exports fell by 20.5% from $ 663 million during the period Jan. – Mar.

2013 to $ 527 million during the period Jan. – Mar. 2014.

● Exports of aircraft, aviation machinery and parts, grew by 37.8% to $ 383 million

during the period Jan. – Mar. 2014 from $ 278 million during the period Jan. – Mar.

2013.

● Exports of mineral fuel oil grew by 26.83% to $ 369 million during the period Jan.

– Mar. 2014 from $291 million during the period Jan. – Mar. 2013.

● Exports of optical, photo, surgical instruments fell by 1.7% from $ 324 million to

$ 318 million during the period Jan. – Mar. 2014.


Market research

Agarbatti Industry export overview

Exports (Yr 2012-13)-INR 526.5 Cr. ( $ 87.75 million)

There are 400 exporters in India

Biggest export market is US, UK, followed by Latin America eg. Peru, Argentina &

Brazil, also countries like Egypt, UAE, Nigeria & Sri lanka

Pie chart for Export more than 10 Cr INR ($ 1.66 Million)

Country-wise export statistics:

INR in Cr.

Sr

no.

Country 2009-10 2010-11 2011-12 2012-13 % growth

over 5 years

1 USA 38.19 48.56 51.91 61.91 162

2 Nigeria 17.18 21.58 25.45 33.44 194

3 UAE 21.50 20.75 17.11 28.76 133

4 Sri Lanka 25.53 29.36 23.98 21.32 83

5 Malaysia 16.87 12.79 15.42 20.11 119

6 UK 11.95 8.97 14.84 18.21 152

7 Chile 10.10 12.18 12.56 16.13 159


The primary market for our Business is USA. Since there is a consistent demand for the

Agarbatti in UAE and UK due to several reasons, we will focus to expand our business in

these two countries. So our secondary and tertiary market will be UAE and UK

respectively.

Statistics of import of Agarbattis to US from different countries

Source

2011 2012 2013 2014

--thousand dollars-- Percent January-June

of total --thousand dollars--

All sources $20,949.00 $23,815.70 $23,320.60 100.00% $12,107.10 $10,412.50

India $10,637.40 $11,599.00 $11,090.40 47.60% $5,783.70 $4,960.20

China $3,653.00 $4,789.40 $4,913.30 21.10% $2,511.30 $2,184.10

France $2,667.00 $3,242.70 $2,908.50 12.50% $1,473.70 $1,160.90

Thailand $1,235.00 $1,509.80 $1,422.60 6.10% $879.50 $570.30

Japan $1,023.60 $920.50 $808.70 3.50% $459.30 $402.70

Hong Kong $844.80 $909.80 $633.80 2.70% $373.90 $662.40

United

Arab

Emirates

$28.00 $41.80 $456.30 2.00% $108.00 $6.50

Vietnam $178.50 $222.90 $319.90 1.40% $117.00 $193.30

Macao $19.50 $60.40 $127.50 0.50% $105.20 $58.30

Indonesia $26.40 $20.20 $77.10 0.30% $48.10 $0.00

Australia $45.90 $20.20 $61.80 0.30% $34.80 $0.00

Saudi

Arabia $101.20 $69.50 $52.30 0.20% $45.10 $28.50

Nepal $31.70 $44.20 $50.30 0.20% $9.50 $4.30

Taiwan $35.00 $34.50 $49.00 0.20% $34.80 $50.10

Germany $33.50 $35.80 $42.60 0.20% $25.10 $20.50

Greece $34.80 $58.20 $39.80 0.20% $23.00 $14.10


United

Kingdom $29.40 $41.00 $36.50 0.20% $25.80 $13.20

Malaysia $9.10 $12.90 $33.40 0.10% $3.30 $4.00

Italy $40.50 $58.90 $32.60 0.10% $2.60 $2.50

Netherlands $40.80 $2.20 $27.10 0.10% $14.20 $4.40

Egypt $0.00 $5.30 $22.60 0.10% $4.00 $0.00

Korea,

Republic of $8.40 $3.70 $19.40 0.10% $0.00 $6.80

Trinidad

and Tobago $0.00 $0.00 $19.00 0.10% $6.00 $0.00

Pakistan $8.20 $0.00 $16.00 0.10% $4.50 $8.00

Peru $0.00 $17.90 $14.90 0.10% $0.00 $14.80

Singapore $11.90 $0.00 $8.60 0.00% $0.00 $0.00

Ecuador $0.00 $0.00 $7.90 0.00% $0.00 $18.90

Fiji $26.90 $31.40 $6.80 0.00% $3.50 $7.10

Mexico $8.20 $12.60 $6.10 0.00% $6.10 $9.70

Ethiopia $3.40 $0.00 $3.30 0.00% $0.00 $0.00

Spain $0.00 $0.00 $2.90 0.00% $0.00 $0.00

Republic of

South

Africa

$73.70 $3.00 $2.90 0.00% $2.90 $0.00

Source: US International Trade Commission Tariff Database

US is the largest importer of agarbattis throughout the world. India stands as the largest

exporter of agarbattis to US followed by China. India‟s captures 47.6 % of the total

import of agarbattis to US. It is followed by China which stands at 21.10 %


Business Start-up plan

Our first step will be to establish a current account with HSBC Bank that can handle

FOREX business. The major requirement is to maintain an AMB (Average Monthly

Balance) of Rs. 1,50,000 in a combination of Savings/Current Accounts/Fixed Deposits.

HSBC is also present in United States of America (USA).

Once a current account eligibility is fulfilled, we will approach the office of the Joint

Director General of Foreign Trade (JDGFT) of the west region to apply for IMPORT

EXPORT CODE [10 digit IE CODE] . For applying for an I E CODE- a certificate from

the Bank that states we have a current account operating with the Bank and the account is

obtained.

After the receipt of an I E CODE from the JDGFT- we have attained eligibility for

IMPORT AND EXPORTS of such commodities that are otherwise not restricted nor

permitted by the prevailing EXIM policy that exists at that time.

While exporting a commodity the tax and levies that accrued in exports need to be

reimbursed as drawback/refund with appropriate forms.

There are other benefits also available for exporters to make the pricing competitive to

the international pricing. But for an exporter to be eligible for such benefits- we need to

be a member of the promotion council of our category of exports.

In this case, we aspire to be a part of the Export Promotion Council. We are eligible for it

with a copy of IE code and bank certificate with a chartered accountant‟s certificate of

the export turnover of the preceding 3 years. Even if we have nil export, eligibility is

considered.


Incentives

There is 12% duty drawback for agarbattis.

In the case of perfumed agarbattis, taking into account the incidence of duty on packing

material, the drawback rate has been increased from 9.2% to 12%.

Duty Drawback is the special rebate given under the Section 75 of Indian Customs Act

on exported products or materials. Duty drawback rates or concession are only applicable

on products which are used in the processing of goods manufactured in India and

exported and imported to foreign countries.

Duty drawback rates differ from item to item and are normally fix either as a percentage

of the value of goods exported or as a specific value for every unit of the commodity

being exported.

There is also 7% drawback on BRC (Bank realization certificate)

BRC Bank Realization Certificate is issued by bank to its customers against any specific

documents. Normally BRC is issued by bank to their customer who has been in to export

business on each shipment of export proceeds. Various export promotion agencies

provide incentives, import duty exemptions and other financial assistance to the

exporters. These agencies require to be submitted export proof by exporters to claim such

benefits. One of the proof of exports other than export promotion copy of shipping bill,

Mate Receipt issued by the carrier and/or customs authorized ARE-1 (for goods under

central excise only) is Bank Realization Certificate BRC issued by the respective bank

who received foreign amount for exporters.


Shipment

The shipping agent is usually chosen according to the preference of the client. The

shipping cost is Bourne by the client.

That document and the payments are handled by the Custom Housing Agency.

The documents include

1. Bill of lading

2. Certificate of origin

3. Insurance certificate

4. Immigration certificate

The shipment usually takes less than 45 days to reach the client.

Licenses required

The licenses which are required for export of agarbatti are

1. IEC -

2. Pan card

Export Import Regulations

• Import-export Code (IEC) Number obtained from the Director General of Foreign

Trade (DGFT)regional office

• Registration with Chember of Commerce

• Registered under the Indian Company Act and Export Promotion Councils to obtain

registration cum membership certificate (RCMC)

• Registration with Income Tax authorities for exemption of taxes.