Rural Marketing New

Rural Marketing

-Rural marketing, Definition, Scenario, Rural consumer behavior.

• -Market segmentation, product and pricing, Distribution, Rural marketing strategies, Marketing of consumer durables.

• -Marketing of agricultural inputs, traditional marketing of farm products, defects in agricultural marketing, Grading, storing and processing, External trade in agricultural products.

Reference Books• Sanal Kumar Velayudhan (2007), “Rural Marketing-Targeting the

Non-urban Consumer”, Sage Publications, New Delhi. • 1. Krishnamoorthy, R (2008), “Introduction to Rural marketing”,

Himalaya Publishing House, Mumbai.• 2. Badi, R V and Badi N V (2007), “Rural marketing”, Himalaya

Publishing House, Mumbai.• 3. Balram Dogra, Karminder Ghuman (2008), “Rural marketing -

concepts and practices”,. Tata McGraw-Hill Publishing Company Ltd., New Delhi.

• 4. Krishnamacharyulu, C S G, Lalitha Ramakrishnan (2002), “Rural marketing Text and cases”, Pearson Education (Singapore) Pvt. Ltd, Delhi.

• 5. Pradeep Kashyap, Siddhartha Raut (2006), “The rural marketing Text and Practices”, Himal Impressions, New Delhi.

• 6. Habeeb-ur-Rahman, K S (2004), “Rural marketing in India”, Himalaya Publishing House,Mumbai.

Journals

• 1. Indian Journal of Marketing

• 2. Journal of Rural Development

• 3. Brand Reporter

Cases

• 1) Marketing Strategies of CavinKare Ltd.• 2) Purchasing practices of food, clothing and

consumer durables among farm families of Gadag District in Karnataka

• 3) TTK - Prestige Pressure cookers• 4) NDDBs Kaira district co-operative milk

producers union Ltd• 5) Agriculture Marketing Committee- A play• 6) E-Choupals of ITC• 7) HUL Sakthi

Definition

• As per NABARD, all locations upto a population of 10,000 will be considered as rural. Market existing in those areas is rural marketing.

• General definition- Any market that exists in an area with less than 10,000 population, low density of population and without significant infrastructure facilities is rural marketing.

Census of India (2001)

• Urban

• Minimum 5,000 population, 75% male workforce in non-agricultural activities and population density is over 400 persons per sq km.

• All municipalities/corporations, cantonment board or notified town area.

Others

• RBI- less than 10,000 population

• FMCGs- up to 20,000 population

• Consumer Durables-

• below 50,000 population

Introduction

• 6.38 lakhs villages and over 70% of the people (120 million families) live in these villages.

• Traditional blacksmith, basket and rope making, carpentry, iron works to prepare agricultural implements, mason works for rural housing, retail trading, pot making, leather works, spinning and weaving, traditional handicrafts, fishing, diary, poultry etc..

Non-traditional

• oil processing• tailoring, • comb making,• flour milling, • rice milling,• plumbing works,• repairs,• electrical works etc.

Rural Occupation

Occupation Jan-June 2004 (National Sample Survey Organisation) %

Self-employed in Non agriculture 14.40

Agriculture labour 27.40

Other labour 8.90

Self-employed in Agriculture 35.60

Others 13.50

Rural Marketing Stages

• Before 1960s-focus was on agricultural produce such as paddy, wheat, cotton etc.

• Rural to urban and rural to rural.• 1960-70- Green revolution led to the increased use of

agricultural inputs., • Rural to urban, rural to rural & urban to rural.• 1980s-Demand for consumables and consumer durables

through the efforts of HLL,ITC, Colgate, Godrej, Phillips etc.

• Sachet revolution started during 1978-80 with Valvet shampoo followed by Godrej, Dabur, Tiger biscuits, close up, parachute etc.

How rural consumers are different from urban

• Agricultural

• Near to nature• Less density• Homogenous• Fewer contacts with

outside world

• Manufacturing and services

• Isolated from nature• More density• Heterogeneous• High contacts

Changing Attitude of the Rural Consumer

From To

Pre-liberalization Post-liberalization

Powerless/submissive

Settle for less

Reluctance, avoidance

Abstemiousness (‘not for us’)

Destiny driven and resigned to fate

Simple needs

Informative/outgoing

Stretch for more

Seeking experience

Affordable indulgence

Struggling and aspiring for a better life

State need of hour

Rural Segmentation

6,38,000 Villages

743 Million People

111 Million (Middle & High income group- NCAER)

62% Villages (more than1000 Population)

3% above 5000 Population

Less than 500 Population do not have shops

(National Council of Applied Economic Research-NCAER)

Profile of Villages

Distribution of Villages

No. of VillagesPopulation Percentage of Total Villages

Less than 200 92.541 15.6

200-500 127,054 21.4

501-1000 144,817 24.4

1001-2000 129,661 21.9

2001-5000 80,318 13.5

5000-10,000 18,758 3.2

*Total no. of villages 593,154 100

Hardly any shops in these 220,000 villages

17% of villages Account for 50% of Rural population & 60% rural wealth

*Inhabited villages; total number of villages is 6,38, 691

Source: Census 2001.

Potential for RM• India’s 74 % population has 58% of country’s disposable

income due to increasing incomes, infrastructure like roads, communications, literacy etc.

• Rural consumers own only 54% of consumer durables i.e. each house hold is having three consumables as compared to urban population having seven consumer durables by an average household (NCAER, 1998).

• Rural markets help to reduce the risk during recession in urban area.

• HLL derive 50% of its revenues from rural areas

• General impression is that the rural marketing is mainly for agricultural inputs

• Had opportunities to market modern goods and services such as consumer goods, durables, financial services, education, health care, telecommunication etc. in addition to agricultural products marketing.

• Worlds 12.4 % rural market lies in India (120 million house holds).

BOP-8 billion population

Most of the times except agro based companies are not serious in rural marketing.

Only when sales saturate in urban markets, they go to rural.

However, rural market experts feel Rs.1,23,000 Crore rural market has the potential to double.

Potential of Rural Marketing

1. Untapped potential for FMCGs

• The total market for durables and non-durables in rural areas is more than urban, though the average consumption is less than urban.

• The essential items including food products is large in rural areas.

• There is a huge potential for nail polish, lipsticks, face cream, shampoo, mosquito repellents in rural areas.

2. Durables

• Purchase and use of items like sewing machine, cassette recorder/radio/transistor, wristwatches, table fan, black and white TVs, pressure cookers etc. are more in rural areas.

• The large population and the low consumption indicate opportunities but geographical dispersion; income variations suggest the challenge of serving rural people.

3. Banks

• Rural markets have potential for banking as

• Only 42 per cent rural households have bank accounts

• Only 21 per cent only have access to credit from a formal source.

4. Health

• ORG-MARG survey indicates pharmaceutical sales in rural areas is only Rs.28.71 billion compared to Rs.155.34 billion total sales of the country.

• NCAER survey, the rate of illness in rural areas is more than urban and therefore demand is more.

5. Communication

• A Gartner forecast revealed that Indian cellular services revenue will grow at a compound annual growth rate (CAGR) of 18.4 per cent to touch US$ 25.6 billion by 2011, with most of the growth coming from rural markets.

• A joint Confederation of Indian Industries (CII) and Ernst & Young report reveals that of the next 250 million Indian wireless users, approximately 100 million (40 per cent) are likely to be from rural areas, and

• by 2012, rural users will account for over 60 per cent of the total telecom subscriber base in India.

Consumer Behavior

• Getting market share is not possible within a short period due to low literacy, low income, seasonal demand and problems of transportation, communication and distribution.

• The number of middle and high income consumers in rural markets is almost equal to that in the urban markets

• Hence, there is a need to understand the rural consumer behavior, attitudes, beliefs and aspirations of people.

Conti…..

• Rural consumer has limited education, less exposed to products and brands, choose price over quality and is influenced by word-of-mouth communication. However, it is changing with increased incomes, situational factors, consumer needs and the market reach out rural consumer.

• Increased demand for batteries due to non-electrification of many areas. TVs and radios that withstands electricity voltage fluctuations are preferred in rural areas.

• Automatic washing machines can’t be used due non pipeline water supplies, washing powder can’t be if it is at streams and ponds. Bicycles and mechanical watches, radios or transistors etc have more demand due to use pattern.

Categories of Spending

Gold Education Health care Purchase of land Conveyance (Durables) Cell phones Other Products

Geographic

• Region South, West, East and North• Density of Population >2,000• Climate Hot, Humid, cold and Rainy.• Every company is targeting to cover villages with

>20,000 each • South are willing to accept the high tech

products because of higher literacy.• Talcum powder in South.• Bullock carts of Western and Estern U.P differ in

the size of the tyres. Western UP speak of Hindustani and Eastern U.P. Bhojpuri.

Demographic segmentation

• In rural areas head of the family make purchase decision.

• Now – a –days school going children are influencing purchase decisions.

• Gender (Male/ Female), Age and Family Size influence.

• Marketers are targeting the younger a lot.

Occupation

• Mobiles, cycles, TVs• Demand is Erratic• Farmers (35-40%) own one third stock of

durables.

• Shop keepers, service occupants consists of only 15-20% but 45-60% durables are with them.

Place of purchase

• Only 5% of rural population bought durables from rural outlets.

• Shaving preparations, bulbs, balms, toilet soaps and washing powders are also purchased from nearby towns.

Social and behavioral influences

• Word of month communication spreads. Asian paints launched bright coloured paints in

a pouch form with the name of Utsav (festival). It painted headman’s house before the festival and post office. (Brand was well accepted by rural people).

• Youth and children influence purchases as children are sent to shop to buy the products without naming the brand.

• Opinion leaders influence.• Retailers influence with credit etc.

Cultural

• Toilet soaps and tooth paste are usually private in urban but it is not for rural like Srikakulam.

• Non-durables are usually bought once in a week from haat and durables like clothes etc. from melas where women are allowed.

• Traditional population oppose urbanization

Packing, Price & Quality

• Packing and price- Small packs.

• Quality and price- Usha sewing machines at premier price due to quality.

Brand preference

• Brand (Local / Regional Specific)

(Eg: Tractors, Fertilizers, Chit fund Companies) • National brands of

Nirma, Lifeboy, Chavanprash, skin creams are preferred in rural areas also.

• But within a household multiple brands consumed like soaps.

• Splendor is popular because of its quality.

Media

• The appropriate media for rural markets is not the same as used for urban markets.

• The print media or magazines not preferred in rural areas particularly women.

• Wall paints, Posters, TV in the most preferred mass media (36%), followed by print media (23%), radio (20%) and cinema (9%).

• Neighbours, friends are major source of information

Case: Purchasing Practices

• Purchasing practices of food, clothing and consumer durables among farm families of Gadag District in Karnataka.

• By Dr. P R Sumangala• Mr. Yallawwa Uppar• University of Agricultural Sciences,

Dharwad.• (Indian Journal of Marketing,

December,2009)

Methodology

• -Survey conducted in 3 Taluks in Gadag District.• -5 % of the villages in each Taluk (10 villages

i.e.3 from Gadag, 5 from Ron and 2 from Nargund)

• -Purposive sampling technique of different land holding families selected such as landless, small, medium and big farmers.

• -20 households from each village comprising of 5 samples from each category.

• -Total 200 households with 50 households from each category.

• -Self structured questionnaire was formed and required data was collected by personal interview method.

• -Data was coded, tabulated, analyzed and interpreted by using suitable statistical parameters.

• Maximum households purchased

• 1.The groceries, perishables, ready to eat mixes and bakery on weekly basis from nearby towns.

• 2. Daily wear of women, men and children purchased once in six months where as occasional wear were purchased during festivals from the shops located in the nearby town.

• 3. Majority of the respondents from all the land holdings adopted cash payment system in purchasing of food, clothing and consumer durables.

• 4. More number of families from Medium and Big farmers owned greater number of consumer durables and they adopted credit and installment system in purchasing of tractors and motorcycles.

• 5. Neighbours and friends were the common source of information for purchasing of food, clothing and consumer durables from families of different landholdings.

Marketing Strategy

• Marketing strategy basically involves effective use of the marketing mix to explore the rural markets.

• Marketing mix indicates appropriate combination of four P’s for achieving marketing objectives.

• Four P’s for product, Price, place and Promotion. These are interdependent and any change in one variable will have an impact on the other.

Continue….

The challenges of four A’s such s acceptability, affordability, availability and awareness comes into picture.

Product and pricing are important aspects. Out of the following listed strategies, one has to

select options that are appropriate according to market segment and the product category in order to have a success in rural market.

– 4 P’s -4 A’s

•

• Product - Acceptability

• Price - affordability

• Place - availability

• Promotion - Awareness

I. Product and Acceptability

• Post liberalization has changed from simple needs to better life style with more information, stretching for more.

• Changing with increased incomes, situational factors, consumer needs and the market reach out rural consumer.

Product

• It is the most tangible and important single component of the marketing.

• It is the engine that pulls the rest of the marketing mix.

• Product is anything that satisfies human wants and includes product quantity, benefits, design, style, colours, brand, services and warranties.

II. Pricing and Affordability

• It is important to both seller and buyer.

• In the competitive economy, price is determined by free play of demand and supply. Price will go up and down with changing supply and demand situation.

• Pricing decisions influence sales volumes, profit margins, trade terms and conditions, advertising, sales promotion and product image.

• Price refers to exchange value of the product and includes

(i) Maximum retail price

(ii) Discounts

(iii) Credit

(iv) Terms of delivery and

(v) Maintenance charges

Low price

• A rural consumer is price sensitive due to low levels of income. But once he is satisfied with quality, he will continue to patronize the same.

• For many FMCG, Rs 5 is an appropriate price to attract new customers. It has been observed that pens, razors, biscuit packs, toothpaste, washing soaps, soft drinks costing around Rs.5 have slowly started selling in villages.

• Eg: Lifebuoy soap 60 grams @ Rs 4.50 sales are 40:60 IN urban: Rural

• 5kg cylinder of BP instead of 14kg

Discounts to dealers, consumers

• (i) Trade discount for wholesaler or retailer usually wholesellers get 3-5% and retailers 7.5 – 10% discounts for consumer products like soap, tooth paste, biscuits, hair care products.

• (ii) Cash discount• (iii) Quantity discount for total volume of purchase during

a certain period or at a time.• (iv) Off – season• (v) Promotion allowances for advertising, delivery van

operation, display products• (vi) Promotional schemes during crop harvesting period

like exchange offers, festival offer, special discounts, product introduction etc.,

Value engineering

• Low margin & High volume• Ex: Nirma – Affordable price, medium quality,

availability at village shops and focus on rural mass media.

• Rupees 5 price point• Ex: Coke & other soft drinks consumers

increased from 16 crore (2002) to 24 crores (2004)

• Ponds talc, Cold cream, Rin, Fair & Lovely etc

III. Place and Availability

• Distribution channels in rural marketing and penetrate into rural markets are crucial.

• HLL, ITC, Ever-ready, Dabur, Nirma are some of the organizations who have good networking.

Distribution

• The distribution from producer to consumer requires a large number of intermediaries and this increases overhead costs. There are about 52 lakh retail outlets in India out of them, 17 lakh outlets are in urban and 35 lakh outlets are scattered in about 6.30 lakh villages servicing to rural outlets is a challenge. Distribution system has two sub – divisions i.e.,

• (1) Channels of distribution and (2) Physical distribution

Channels of Distribution

• The channel members are wholesalers and retailers who are middlemen in distribution and they perform all marketing functions. Channel members are useful to producers well as consumers. These channels may be of different types –

• 1. Manufacturer consumer• Ex: Rhythu bazaars, Village artisans• 2. Manufacturer Retailer consumer• Ex: Mahindra & Mahindra tractors• 3. Manufacturer distributor Retailer consumer• Ex: Agri – chemicals• 4. Manufacturer C & F (Carrying and Forwarding)

Agents Distributor Retailer consumer

Ex: Colgate, HUL, Parle

Physical Distribution

• Physical distribution activities include order processing, handling & goods, packing, warehousing, transportation, inventory control, banking and customer service.

• 1. Company owned delivery vans• Ex: Bharat petroleum has introduced rural marketing vehicle

(RMV) in Punjab in 1999, it moves from village to village and fills LPG cylinders.

• 2. Hired vans• Ex: HUL use hired vehicles to reach to rural retailers• 3. Bullock carts or camels – for remote villages.• 4. Mobile traders• Ex: People move from house to house by bicycles or on

foot.

• 5. Syndicate distribution• Ex: A firm manufacturing edible oils and

one dealing in biscuits, tea and coffee could jointly service rural retailers.

• Cavin kare used the distribution network of Amrutanjan company for chick shampoo

• 6. Satellite Distribution• Ex: HUL, Nestle, Marico have appreciated

stockiest to service the village merchants and the merchants get stocks from stockiest.

• 7. Haats: Traditionally on certain days of a week both sellers and buyers meet in village to buy and sell goods and services.

• Participation of companies would not only promote products but also understand the shared values, beliefs and perceptions of rural consumer. Haats are generally held where the population is >2000. Each haat covers surrounding 15 – 20 villages.

• Ex: parachute oil, tiger brand biscuits are promoted through haats.• 8. Melas: these are different types i.e., commodity fairs, cattle fairs

and religions fairs and may be held only for a day or may extend over a week.

• Ex: kisan mela in Ludhiana is an annual Mela. Maruthi have been able to book cars.

• - HUL, Colgate, Britannia

New channels

• HLL, ITC, Ever-ready, Dabur, Nirma are some of the organizations who have good networking.

• E-Choupals (ITC)

• SHG (Prestige, HUL)

• Unemployed youth, Integrated outlets (Coromandal) etc.

IV. Promotion & Awareness

• To communicate effectively, it is important to understand the aspirations, fears and hopes of rural customers. Even if one company had a national strategy it has to act locally.

• Ex: Shampoo in Rajastan• - Education instead of promotion for interaction• - Customization, Regionalization.• - Mass media – TV in the most preferred mass media

(36%), followed by print media (23%), radio (20%) and cinema (9%)

• Outdoor media: Wall painting, video vans etc.,

Colgate Add

Nagarguna Urea Add

Santoor soap Add Rin & Surf Add

Cocacola Add

Thumsup add

Pepsi Add

Un–conventional platforms: Mandis, Haats/ Melas (faires) mainly religious like kumbh mela at Haridwar, Allahabad. FMCG giants like HLL, P& G set up branded kiosks.

Marketing & Research Team (MART) conducted survey & found these places are effective.

• - Pilgrimage sites• - Rural games• - Primary health centre• - Schools

Alternative Media for rural marketing:

• To reach illiterate and less privileged Nautanki, Puppet shows, Burrakata, Folk theatre for social protest against injustice like Naxalism.

• Internet: e-choupal Innovative & Special promotion

• Ex: Scare crow, Midwife, uniform to rural postman, One on One contact, demonstration like motor-cycles.

Rural Marketing Strategies

• Key Elements to be considered

• Cultural diversity,

• Lifestyle,

• Standard of living,

• Disposable income,

• Consumption pattern and

• Communication facilities available

1. Competitive strategy

• Examine the conceptual framework of Michael Porter’s five force model strategy.

• a) Supplier: The Company has to make high quality products but also sell at cheaper price. This is possible only when company has suppliers who can supply quality raw materials at cheaper price.

• b) Customer power: The word of mouth is very crucial in rural markets. The retailer has a high bargaining power but it can be neutralized through promotional and brand building efforts that create consumer pull, which forces the retailer to stock a particular brand.

• c) Potential Entrants: Local and regional players offer terms more attractive than the existing players. The servicing of existing company is up to expectations of retailer like non – supply of products in time etc., would allow new entrants. Then, it is difficult to regain the position it lost.

• d) Substitute products: Counterfeiting is prevalent in rural markets due to illiteracy, low awareness and dependency on retailers. Ex: Cool drinks. Hence, companies should focus on packing and brand identity to counter the substitute products.

• e) Competitors: Retailer may be keeping different brands but only selected brands are sold more as per advantage of retailer.

2. Product Strategy

• Product mix modification to suit the rural conditions as ‘Splendor’ for rugged terrain.

• a) Understanding of valued product- Rural consumers are extremely aware of equation of price, quantity and image.

• One should concentrate on these aspects rather than frills.

• b) Packing: Size of pack to affordability, storability, display ability matters. Packing is one of the most important components in the marketing mix.

• c) Branding strategy Product has to be at reasonable price, packing, communication and target audience in their understanding languages.

• d) Logos and Symbols: These are important as most of the rural markets should be done in a manner to maintain low cost, refill packs etc.

ITCCorporates Presence in Rural India

Coromondal – Super Stores

HLL – Micro credit / Life style Products

HCL

Nirma

ICICI

Mahindra & Mahindra

Product strategies used by companies in rural markets are

• a) Sturdy products: Rural consumers believe that heavier the item, higher the power and durability-Eg-Bullet, Rajdoot, Ambassador

• b) Designing products: Development of new products to suit field conditions.

• Ex: PVC shoes, Chappals, Sampoorna TV which can withstand Power fluctuations (LG Electronics ) Large wheel base motor cycle, chota coke.

• c) Small unit packing: Ex: Tiger Brand biscuits, Ponds 20 gram talcum powder, Cavin kare’s 4ml – 50 paise chick shampoo, Rasna

• d) Utility products: Rural people are more concerned with utility than the appearance/ show.

• e) Branding – Brand name also conveys quality of the product.• Ex: Lal saboon (Lifebuoy)• Coconut tree (parachute)• Amul (NDDB milk)

No frills product

• Product cost can be brought down by reducing the sophistication

• Ex: Maharaja appliances – washing machine.

• Refill/ Reasonable packing

• Ex:Coffee

Hiring Strategy

• Hire rural background graduated on regular pay and also use the services of unemployed rural youth at village level promotions.

Social Strategies

• Not only selling a particular products but look at and relate into the holistic development of the society.

• Ex: Encourage primary Education, Partnership with NGO’s, Employment of rural youth.

Marketing of FMCG

• Fast moving consumer goods are very frequently used, sometimes daily and relatively faster at the retailer end. Such as toilet soap, washing cake, bars, soaps, edible oils, tea, washing powder, liquid, salt, biscuits etc.,

• The biggest player in rural market is HLL followed by Colgate, ITC, Jyothi labs, Eveready and LG Electronics.

• - HLL derive 50% of its revenues from rural areas• - ITC Choupals• - HLL introduced Surf in 1959. Karsan Bhai Patel (Nirma chemicals)

started Nirma in 1969 and revolutionalised and it is the largest seller today.

• - Coca Cola India ltd.

Indian FMCG Journey So far..

“LACKLUSTER” STAGE – 1950’s to 1970’s

• “RURAL SENSITIZATION” STAGE – 1970’s to 1990’s

• “LIBERLIZATION BOOM and STABLIZATION” STAGE - Post Liberalization (1991 - 2000)

• “DROP” STAGE – (2000 – 2005)• “BOOM REVISTED” STAGE: 2005 onwards

Product use and CustomersProduct /Customer Men/Farmers Women Youth Children

Chocolates - Mango - Mahalacto - Asha

Beverages-Thumpsup-Coke

Biscuits - Parley-g - Tiger - Crack jack - Good day

Economic Value Creation

Sales ($ Million) 150 100 180

Gross margin (%) 18 18 25

Return on capital employed (%) 121 93 22

Source: John Ripley, Senior Vice President, Unilever PLC.

Nirma HLL (Wheel) HLL (Surf)

Consumer Durables

• Durable goods are the one that usually last over an extended number of uses.

• The consumers purchasing these items are spending the savings of few months or years on these articles and want to be double sure on the long time performance.

• Only about 26% households have TV sets, <4% refrigerators, <1% washing machines, radios are >67% households.

Product use and CustomersProduct

/demographic Men/Farmers

Women Youth Children

Motor cycles

Televisions

Tooth paste - Colgate - Close up

Soap- Santoor- Lux- LifebouyDetergent- Rin- Surf- ETA

Shampoo- Chik - Clinicplus- Head&Shoulder

Untapped potential for FMCGs and durables:

• The large population and the low consumption indicate opportunities but geographical dispersion; income variations suggest the challenge of serving rural people.

• The essential items including food products is large in rural areas.

• Purchase and use of items like sewing machine, cassette recorder/radio/transistor, wristwatches, table fan, black and white TVs, pressure cookers etc.

• There is a huge potential for nail polish, lipsticks, face cream, shampoo, mosquito repellents in rural areas.

Case:TTK-Prestige Pressure cookers

• When its sales have saturation during 1999, it has started exploring the rural market. It has launched pilot project in Mahaboobnagar district on 2002 with the help of marketing & research team (MART) utilizing the SHG movement. There were over 4 lakh SHG in A.P during 2002. Dealers have started demonstrating and educating SHG members

• The project involved• - Appointing women as the dealers of the prestige.• - Setting up an assembly plant in A.P• - Using rural women as employees.

Agriculture scenario

• Agricultural contribution to GDP has come down to 20-22% (2003-04) from 56% (1951-52) but the volume of population depending on the farm sector has not reduced proportionately

• The productivity levels of 0.95 tones per hectare during 1961-63 enhanced to 2.00 tones per hectare by 1990.

• India is the third largest producer of food with an annual output of 600 million tones

India

• Total area 329 Mill hectares

• Total cropped area 190 Mill hectares• Net area 142 Mill hectares• Net irrigated area 54.6 Mill hectares• Population 1027 Millions• Rural 742 Millions• No. Of villages 6.5 lakh• No. Of rural markets 36,000 • Official languages 18

Production• We are worlds largest producer of milk 100 million tones,• 2nd largest producer of rice 88• 2nd largest producer of wheat 72• 2nd largest producer of sugar 25• 1st in pulses 15• 1st in fruits and vegetables 185• 4th in poultry 46.20

billion eggs• Meat 4.45 million

tones• Fishery 6.50 • 3rd largest in cotton 27 million

bales.

Inputs Marketing

• Consumables – seeds, fertilizers, manures, pesticides, animal feeds, veterinary products, energy (Electricity, petrol, diesel oil, baskets etc).

• Durables – farm machinery, irrigation equipments, construction materials (cement, bricks) transport equipments

(tractors, trailers, tempos, carts etc) sprayers etc.,

I- Seeds

• Green revolution of 1965 – 70 was mainly with high yielding dwarf varieties and seed played major role. Government has also initiated following steps:

• - Seed Act of 1966 regulating quality of seeds sold – labeling, certification

• - Amendment of Industrial licensing policy in 1987 which removed restrictions on investment of foreign companies.

• - Seed policy of 1988 for free important vegetable and flower seeds.

• - Commercial cultivation of BT cotton.(2002)• Indian seed market was about Rs. 3,000 crores (2004-

2005) excluding to farmer exchange among themselves

Seed companies

• Public sector: State farms, NSC, State seeds corporations.

• Private sector - MAHYCHO (Mahindra Hybrid seeds co. Ltd) Indo – America Hybrid seeds Ltd., Bangalore.

• Nuziveed seeds, Hyderabad, Nath seeds, Aurangabad, Raasi seeds, salem etc.,

Seed production and Distribution

• Seeds are living organism and has limited shelf life and highly seasoned. The package contains germination, Physical purity, Inert materials, moisture, genetic purity, shelf life, MRP etc.,

Opportunities

• Distribution is through distributors who get 5 – 7.5%, retailers (10-15% margin)

• Our country is one of the leading seed producing centers due to favorable climatic conditions. Total cropped area is 190 million hectares i.e., one of the highest in the world. Irrigated area is 55 million hectares.

• Pest resistance verities are a challenge.

Fertilizers

• The fertilizer consumption has increased dramatically from 2.66 million tonnes (NPK) in 1971 – 72 to 18.07 million tonnes in 1999 – 2000.

• This is one of the important factors for increased food grain production of 105 million tonnes in 1971 to 212 million tonnes in 2003 – 04.

• The consumption for rabi is 53.40% and kharif season is 46.60%. U.P is the highest consumer of fertilizers (Sugarcane, paddy) followed by A.P, Maharastra, Punjab and West Bengal.

Fertilisers

• Fertilizers marketing is about Rs. 30,000 crores.

• India is 3rd largest producer and consumer of NPK fertilizers. Some of the important companies are IFFCO, KRIBHCO, Nagarjuna, Godavari, Zuari, SPIC, FACT etc

Plants require 16 elements

• Those are carbon, hydrogen, oxygen, nitrogen, Calcium, Ferrous, Managanese, Zinc, etc., Carbon from carbon dioxide of air, oxygen from air and water and hydrogen from water. Balances of all elements from soil.

Manures

• They are relatively bulky materials to physical conditioning of the soils

• FYM

• Green manure

• Compost

Pricing• Fertilizers prices are subsidized by government to encourage its

usage and to maintain uniformity. Different geographical zones are allotted different quantities. Fertilizer industry co – ordination committee (FICC) fix retention price. Govt. Subsidies increased from Rs . 505 crores in 80 – 81 to Rs, 16,000 crores in 2004 – 05. to reduce the cost of all fertilizers except urea.

• Pricing: fertilizer prices are segmented by government to encourage its usage and to maintain uniformity. Different geographical zones are allotted different quantities. Fertilizer industry co – ordination committee (FICC) fix retention price.

• General prices during 2003 – 04• Urea – Rs 483/quintal• DAP – Rs 935/ quintal• MOP – Rs 445/ quintal• Complexes – Rs 698/ quintal

Pesticides

• Crops are subjected to the attack of pests like insects, fungi, bacteria and viruses and the loss is estimated about Rs. 20,000 crores.

• There are different methods of control such as physical, biological, cultural and chemical methods.

• The chemical control is common and they are insecticides, fungicides, weedicides and rodenticides

Market

• The consumption of pesticides varies depending on crop, agricultural conditions, pest incidence. Cotton and paddy account for about 50% of pesticides consumption in our country. The peak consumption is during July –October.

• The share of insecticides in value terms is 65%, fungicides 15%, weedicides 17% and others 3%

Companies

• Multinational - BASF, Buyer, Cheminova, Dow, Dupoint, Syngenta

• Indian companies – Excel Industries, Indofil, Nagrjuna pesticides ltd.,

• Public sector – Hindustan Insecticides Ltd., State agricultural industries.

• Products are formulated in different forms such as liquids, dusts, granules and WP and in different concentrations.

Others

• 1. Bio-fuel/ethanol Industry

• 2. Organic products

• 3. Medicinal and aromatic plants

• 4.Floriculture

• 5. Mushrooms

• 6. Biotechnological inputs-Biotic and abiotic tolerant varieties, high nutritive value varieties production.

Tractors

• Tractors are mainly used for farming operations, transportation and as a power source. Tractor sales are about 2.5 lakh per annum and it is 4th in the world ranking

• The tractor density in India is 10 for 1000 hectares and it is lower to world average of 50 – 60 tractors per thousand hectares. The tractor sales are fluctuating 2.7 lakh in 1999 – 2000, 1.7 lakhs in 2002 – 2003, 2.47 lakhs in 2004 – 05. Hence, Indian tractor industry is looking towards exports.

• Details India World % RankTotal area 329 mill ha 13,387 2.5 7Land area 297 mill ha 13, 048 2.3 7Arable land 162 mill ha 1,387 11.7 2Irrigated 57 268 21.3 1Crop 212 2,100 10.1 3Production Tractors 2.4 mill 32.0 7.5 4

Classification of tractors

• Less than 30 HP – Small• 31 – 40 HP – Medium• > 40 HP – Large• The mid – segment of 31 – 40 HP is the core of the tractor

industry in India. • Company wise market share• Company Market share (2004 – 05)• Escorts 12.8• International Tractors Ltd., 11.3• M & M 26.5• TAFE 22.3

Tractors Accessories

• The implements are Disk harrow, Disk Plough, leveler, mounted mould board plough, trailers etc.,

• Potential: custom hiring, contact farming, corporate farming, Organized retailing will boost the demand for tractors in addition to transport segments.

Market for outputs/agriproducts

• Unorganized market is subject to malpractice of middlemen. Only 40 – 60% of the price paid by consumers goes to farmers.

• These are primarily three types of players involved in marketing of agricultural produce such as Govt; Private and Co – operative.

Post Harvest Losses• Post harvest losses Rs.58,000 crores per annum that is about 30%

of total food production. • The food grain losses worth of Rs.10,000 crores are equal to what

Australia produces in a year (20 MTs).• Fruits and vegetables worth of Rs.30,000 crores is more than what

UK consumes in a year. • The losses are in the process of transport, high moisture at the time

of storage, birds pickings, threshing loses, rodents in the field and storage and insects in the storage. The losses at different levels:

• Farmers 15%• Traders 4%• Agents 2%• Wholesalers 1%• Retailers 8%

Processing Industry

• India’s processed food industry accounts for 14 per cent of the total industrial output and 6.5 per cent of GDP.

• It employs over 15 lakh people or nearly 20 per cent of industrial force but hardly 2% of the produce is processed as against 80% in Malaysia, 78% in Philippines, 70% in Brazil and 30% in Thailand.

• Level of processing in India:• Fruits & Vegetables 2%, • Poultry 6%, • Milk 35% • Marine products 8%

Government• Government play an important role. These steps include

establishing regulated markets, constructing warehouses, grading and standardizing produce, standardizing weights and measures, providing maximum support price and providing market prices through AIR etc.,

• - Directorate of Marketing and Inspection under the Ministry of Agriculture is responsible for administering federal statistics and conducting market research concerned with the marketing of agricultural produce.

• - Commission for agricultural costs and prices decides minimum support price (MSP) for selected crops.

• - Food corporation of India was established in1965 to procure and distribute through public distribution system. PDS is a network of 3.5 lakh fair price shops that are monitored my state governments.

• Central & State warehousing corporations are operating from 1980s to store agricultural produce.

Regulated Market Yards

• There are about 6,640 (1991) regulated markets under state governments ( Marketing departments) to which central Govt. provides assistance in the establishment of infrastructure and in setting up rural warehouses. Under these market yards, agricultural produce is sold through open auction by commission agents or the brokers or some other auctioneer in the presence of the seller or his agent and the competing traders. The offer of the highest bidder is accepted with the consent of the seller. The seller has the discretion to refuse if he feels bid is too low. They also provide storage facilities and advances to products.

Private Sector

• Farmers sell most of their produce in the private sector to traders who are also moneylenders. Other ways of selling are

• 1) Weekly village market (Haat)

• 2) Traders who come to village

• 3) Directly to rice mills or some other processing or corporate sector.

Co – operative Sector

NAFED (National agricultural Co-operation Marketing Federation) of central Government established in 1958 as an apex body of state marketing federations to handle domestic and export marketing.

• Large co-operative enterprises such as milk, sugar, spinning mills, edible oils handle marketing operations. Sugar production of about 50% is coming from co-operative sugar factories.

• Organised retailing: They will be beneficial to both farmers and consumers because better supply chain management and due to elimination of middlemen.

Case study: NDDB

• (NDDB) Kaira district co-operative milk producers union Ltd established on 14th Dec 1946.

• They started supplying to Bombay Milk scheme and it led to sound foundation for future growth under the leadership of Mr.Verghese Kurien.

• During1940’s milk collection of 250 liters/ day in Anand expanded to >1000 villages collecting 60 lakh litres and distributing them across the country (2004).

• Amul is the product of Anand milk union Ltd.

Defects in Agricultural marketing

• 1) Lack of organization among producers because of small and marginal farmers.

• 2) Forced sale due to indebtedness that is influenced by number of factors.

• - Farmers borrow money from money lenders for cultivation expenses

• - Uneconomical land holdings.• - Lavish spending during festivals and marriages• - Indebtness passed from generation to generation• - Lack of market information• - Inadequate transportation facilities.• 3) Superfluous middlemen• Too many intermediaries between farmer to consumer

• 4) Multiplicity of market charges upto 20% goes to meet various expenses• - Commission• - Brokerage• - Handling charges• - Weighment charges• - Samples (shared by buyer & commission agent)• - Rent for storage• 5) Mal – Practices in unregulated markets• - Weighment, Sample, differential price for same grade etc.,• 6) Lack of grading specifications• 7) Inadequate storage facilities – usually for storage in earthen cylinders, pits lined

with strong mud/ Concrete. Storage losses range from 1.5 – 2.5%• 8) Poor transportation system• 9) High cost of borrowing• 10) Lack of standard weights and measures• 11) Adulteration• Ex: Damping of cotton by middlemen• - Small chippings stones in rice.• - Salt with chalk• 12) Lack of marketing information

Regulated Markets

• Market committee consists of nominees of state Govt, local bodies, traders and farmers pre – committee formulates rules and regulations and market fee various 0.5 – 2%. Disputes from buyer & seller are settled by committee

• Objectives: • - Ensure a fair price to producers• - Provide congenial environment for business

transaction• - To stabilize the prices• - To provide common place for buyer & seller

Problems

• - Location not in proximity• - Payment delays• - Presence of middlemen• - Working hours• - Lack of information on incentives• - Malpractices by corrupt officers and employers• - Management not on democratic lines• Many state governments have established

terminal markets by amending agricultural product marketing committee act. Ex: Rhythu bazaars in A.P & T.N

Organized Retailing

• Retailing is the largest industry in the world• India ranked second most attractive retail market

after Russia as per Global Retail Development Index 2004 brought out by AT Kearney.

• Estimated $ 350 billion retail marketing in India.• Most of the retailing is under unorganized

sector and only 3% is in the organized sector. • About 70% of retail trade is concentrated in food

and grocery products (milk, grain, vegetables, fruits) and fast moving goods (soaps, detergents etc.).

Grading

• It involves division of products into classes made up of units of similar characteristics.

• Ex: - Tea graded as BOP (Broken Orange Pekol), OP and Dust

• - Staple length in cotton

• - Moisture, inert materials in grains.

• - Germination % in seeds.

Types of Grading

• a) Mandatory – GOI fixed standards and grades for Agriculture commodities meant for exports.

• b) Centralized – Subject to inspection and audit, co-operation, private agencies, farmers associates. Items covered are ghee, curd, milk, edible oils, jam, juices etc.

• c) Variable – Farmers fix their own method of standards.

Advantage and problems of Grading

• Advantages:• Grading helps in fixing of price.• - Quality assurance• - Facilitates selling• Problems:• - Many products have no standards• - Poor testing facilities• - Even the graded produce may perish by the time it

reaches to consumer• - Each and every product grading is a different task

AGMARK • The directorate of marketing and inspection (DMI) headed by

agricultural marketing advisor (AMA) to the GOI implements marketing programmes of the central government under DMI and maintains a close liaison between central and state governments through its regional offices. The directorate has specified grade standards for various agricultural products under the agricultural products grading and marketing Act 1937.

• AGMARK label indicates the quality and purity of the product based on the prescribed standards.

• There are about 15,000 licenses who are marketing their produce under AGMARK certification. There are 718 approved grading/ testing laboratories consisting of 111 state owned, 549 licensed private packers, 9 co – operative and 49 private/ commercial labs. DMI has 22 regional Agmark labs with its central Agmark lab at Nagpur.

Bureau of Indian Standards (BIS)

• Previously known as Indian standard Institution (ISI). The ISI Act was passed in 1952. It is managed by board members consisting of central and state governments; research institutes, labs and development boards. Its activities are two fold – formation of Indian standards and their implementation by promotion and through voluntary and third party certification system. ISI label is an indicator of the quality of the product.

• It has central lab at Delhi, regional labs in Chennai, Mumbai and Kolkata. It has prepared standards for 14,000 products covering agriculture, chemicals, Civil, Mechanical, Electrical, Electronic, Textile etc. ISI has 2,000 standards covering agriculture inputs such as fertilizer, seeds, pesticides agricultural machinery. ISI is compulsory for exports and for government rate contract.

eChoupal

• Another example of the bottom of the pyramid targeting at work is eChoupal in rural India. ITC manages an agricultural trading company. To eliminate the inefficiencies in its supply chain caused by corrupt middle men at local rural markets, it created a network of “e-Choupals” (choupal = village square) in rural communities. Through these e-Choupals, individual farmers have been able to check the market trading price of their produce and sell it directly to ITC. Both the individual farmers and ITC have increased their revenues, because the layers of ineffiency no longer have a role in the transaction between seller and buyer.

Rojamma• Rojamma is a single parent living in a

small village in Mahabubnagar district in Andhra Pradesh. When her husband left her, she earned a few rupees working in her mother's field but found it difficult to support her two daughters. Then she joined a women's self-help group and found out about Project Shakti.

• Rojamma has opened an outlet in their village and started selling Unilever products. She has started making profit of Rs.2,000 per month. By the end of 2004, over 13,000 women entrepreneurs were selling to 70 million consumers in 12 states (a 30% increase in rural population reached by Hindustan Lever). By the end of 2006, 30,000 Shakti entrepreneurs reached 1,00 000 villages in 15 states. Shakti has brought them self-esteem, a sense of empowerment and a place in society. As Rojamma says: "When my husband left me I had nothing except my daughters. Today everyone knows me. I am someone now". It has meant she has been able to send her daughters to school, giving them the chance in life she didn't have