ITC (Indian subsidiary of British American Tobacco BAT) is one of India’ largest diversified conglomerates and has its presence in cigarettes, hotels, paperboards and specialty papers, packaging, agri-business, branded apparel, packaged foods & confectionery, greeting cards and other FMCG products. With a turnover of US$ 2.6 billion, ITC has transformed India’s rural landscape with its Chaupal Sagar (retail) and e-Choupal (online) initiatives.
ITC’s International Business Division, one of India’s largest exporters of agricultural commodities, conceived e-Choupal as a more efficient supply chain aimed at significantly enhancing the competitiveness of Indian agriculture. e-Choupal empowers Indian farmers through the power of the Internet and thus, builds a huge rural distribution infrastructure for ITC.
The e-Choupal model launched in the year 2000, aims to remove bottlenecks present in the Indian agriculture distribution chain, which is characterized by fragmented farms, weak infrastructure, poor agricultural practices, significant wastages, low quality produce and the involvement of numerous intermediaries. By virtually clustering all the value chain participants with the help of information technology, ITC has set up village Internet kiosks managed by a Choupal Sanchalak, himself a local farmer, who acts as an interface between the computer and the other villagers.
These kiosks provide the agricultural community with real time global information on weather, prevailing market prices, price trends, scientific farm, practices and risk management, facilitate he sale of farm inputs and purchase farm produce from the farmers’ doorsteps all in the local language. Though access to crop specific websites, the smallest individual farmer gets the benefit of expertise on the cultivation of his crop
e-Choupal services reach out to more than 3.1 million farmers, growing crops, ranging from soyabean, coffee, wheat, rice, pulses and shrimp in over 31,000 villages through 51050 kiosks across six Indian states.
The e-Choupal assists the farmer in the following ways:
1) Provides farmers with real time information and customized knowledge, enabling them to improve productivity quality of produce and price realization.
2) Allows for aggregation of demand for farm inputs from individual farmers thus giving them, access to high quality inputs from reputed manufacturers at competitive prices.
3) Eliminates middle men multiple handling multiple transportation and wastages hereby significantly reducing transaction costs.
The e-Choupal also provides valuable information for demand forecasting and real time communication to other marketing companies catering to the rural markets trough this channel. This business model can boost the competitiveness of Indian agriculture through higher productivity, higher incomes for farmers, enlarged capacity for farmer risk management, larger investments and higher quality of produce. Having eliminated costs in the supply chain that do not add value, ITC benefits from the lower net cost of procurement (despite offering better prices to the farmer).
The enthusiastic response from farmers has encouraged ITC to plan for the extension of the e-Choupal initiative to altogether initiative to ,altogether 15 states across India, covering over 1,00,000 villages in the next few years. On the anvil are plans to channelise services related to micro-credit insurance, entertainment, telemedicine, education and e-Governance through the same e-Choupal infrastructure.
Choupal Sagar is the second phase of ITC’s noteworthy retail initiative to capture rural markets. It is one of the first organized retail forays by any retailer catering for rural India. The Choupal Sagar is a rural hypermarket (each store is about 7,000 square feet) which provides multiple services under one roof. Besides being able to buy quality products at fair prices for both farm and household consumption, farmers can also sell their produce in these hypermarkets. It aims to provide farmers with invaluable additional services like soil testing, banking, insurance, medical facilities, training and restaurant. The stores stock everything from toothpastes to tractors hair oils to motorcycles mixer grinders to water pumps, shirts to fertilizers. The building also serves as a warehouse for ITC to store produce that it buys through its e-Choupals. ITC plans to open 50 such hypermarkets over the next two years.
ITC has invested over Rs 800 million (US$ 18 million) over three years for its retail initiative. To keep its own investment to the minimum, ITC is encouraging the samyojak – a local broker or middleman co-opted by ITC to pick up equity and manage these shops as part owners. Assisted by four ITC salesmen, the local owners will assess demand ensure just in time delivery manage customer service and keep accounts.
With e-Choupal and Choupal Sagar initiative, ITC has solved one of the biggest problems faced by Indian rural marketers. It has provided the last mile infrastructure to access rural markets. Clearly, ITC’s retail foray is a great example proving the benefits of modern trade. It has helped increase employment, improve supply chain and enhance sourcing from India’s heartland, the region that needs it the most.