ITC In Rural India

Anjali
Ankit
Ankur
Ashish
Bhakti
Brian
About ITC
 ITC was established in India in 1910 by British American Tobacco as Imperial
Tobacco Company.
 ITC's Packaging & Printing Business was set up in 1925 as a strategic backward
integration for ITC's cigarettes business.
 First six decades of the company's existence primarily devoted to the growth
and consolidation of the cigarettes business.
 In 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business
Division for export of agri-commodities.
 In 2006-07,total revenue generated was $3.1 billion, 46% of it was accounted
by cigarettes.
 Diversified into multiple businesses over the years.
 Started the e-choupal system with a view to penetrate the rural markets in
India. 
Business Model
Recover costs through the inherent value in transactions,
instead of charging the farmer
 Reconfigured tradition procurement system by launching e-choupal.
 Introduced hub and spoke system – unbundling and dispersing the
transaction components.
 Creative use of information technology through its web portal.
 Offered the choice of alternative output marketing channel in terms of
convenience and lower transaction costs.
 Created an inter-locking network of partnerships bringing the best in class
information, knowledge and inputs.
 Broadened rural distribution scope by building rural mini-malls.
 Worked with an NGO to form water users associations and funded programs
for building water harvesting structures.
 Took initiatives for improvement of livestock and putting better dairy farming
practices in place.
4 P’s in Rural Marketing
1. Product
 Innovative product designs and packaging.
 Avoiding Marketing Myopia
 Application of value engineering.

2. Price
 Use of backward and forward integration.
 Value based pricing strategy.
 Effective total quality management.

3. Promotion
 Brand association with culture.
 Use of symbols and icons.
 Traditional communication methods.
 Use of local language.

4. Place
 Starting production in rural areas-easy distribution
 Tie up with Public Distribution System.
 Development of rural shopping malls.
 Using a combination of wholesellers & retailers.
Challenges
• Distribution and Logistics :
• Infrastructure a challenge
• Lack of efficient distribution network prevents penetration of
products/services in rural India.
• Payment Collection :
• Majority of rural population still unbanked- non cash collection
unlikely.
• Cash collection : difficult to monitor.
• Time-tested manufacturer-distributor-retailer network(the only
real success so far)- setting up such a structure is rarely feasible.
Challenges Cntd.
• Pricing - To provide a price that is affordable
• High Poverty level
• Skeptical Customers(less use of new brand)
• Poor literacy rate
• Rigid social customs
• Promotion and marketing communication
• Strong need for regionalization
• Delivery should be in local language
Opportunities
• Untapped Rural Potential
• Majority(60%) population lives in villages
• Infrastructure improving rapidly
• Low penetration rate hence more opportunities
• Improving social indicators
• Increasing income
• The rural market is growing faster than urban India now
Marketing strategy of ITC
• A special marketing strategy, rural marketing has emerged- involves
delivering manufactured or processed inputs or services to rural
producers or consumers.
• It Focuses on rural segment and uses Overall cost leadership to win a
large market share.
• Develop e-Choupal as a significant two-way multidimensional delivery
channel, efficiently carrying goods and services out of and into rural
India.
• Has formed Strategic alliances with multinational companies(Wimco,
Sunfeast) which complement or leverage their capabilities and
resources.
• Targeting changing perceptions.
• Providing what customers want- The customers want value for money.
They do not see any value in frills associated with the products.
HUL comparison with ITC
HUL, ITC take battle to villages

HUL - largest pure-play FMCG company in the country

launched Khushiyon Ki Doli - Aggressive coverage expansion
• Main commodities include non-food items.
• Provide valuable health and hygiene information  promotes company’s products.
• Designed to make information accessible to the illiterate.
• Widest portfolio of products sold via a strong distribution channel.
• HUL always believes in customer friendly products with major emphasis on low cost .
• The Company has been launching new products and brand extensions, with investments being
made towards brand-building.
ITC - not a pure-play FMCG company
e-Choupal V3.0 - Discover new anchor businesses & insulate risks of reversal
• Started with tobacco products and moving to FMCG products.
• Established computer kiosks for real-time info on prices and providing direct link to ITC.
• ”Sunehra kal” program – for water harvesting.
• e-Choupal : enabled decentralized price discovery and selling in villages. Delivery and payment
were centralized at procurement hubs, which included storage warehouses.
• ITC is focusing on delivering value at competitive prices.
• ITC is eyeing the pie which HUL and other FMCG players currently enjoy.
Rural Marketing Strategies-4 A’s
• Availability
• Products/Services should be available to the end consumers.
• Should maintain continuous inventory and aggregate demand
• Could be done with the help of retail outlets, choupals, mandi,
etc.

• Affordability
• Rural market-price sensitive.
• Price that is affordable.
Rural Marketing Strategies-4 A’s
Cntd.
• Acceptability
• Convincing customer to buy product
• Product must suit rural market(culture and personality)
• Should be easy to understand
• Awareness
• Making customer aware of the product.
• Effective communication helping consumer recognizing the
brand.
• Providing active services and wide range of products.
PEST
• POLITICAL
• Encouraging FDI’s.
• Political will in supporting CSR.
• NREGA implementation implies increased rural spending power.
• Investing in rural Infrastructure.
• ECONOMIC
• Encouraging GDP figures (17% from agriculture).
• Less corporate tax propose in DTC.
• Liberalized economy.
• Inflation (food prices though are stabilizing).
PEST
• SOCIAL
• Buying tendencies is largely based on trusted referrals
• Spending power of rural India is increasing as compared to few
years earlier.
• Farmers harrased by middlemen looking for better avenues to sell
products
• TECHNOLOGICAL
• IT has increased information penetration in rural India
• Electricity and telecommunication has brought rural population
closer to mainstream
• Better farming techniques & HYV crops increased agricultural
productivity
PORTER 5 Forces -Rural Market & ITC

Threat of New Entrants:

Very little

Bargaining power of
Competitive
Bargaining power of seller
Buyers: Moderate rivalry From LOW
HUL

Substitute products:
Local cheaper substitutes
BCG matrix for ITC in Rural India
Comparison of Mandi and E-Choupal

1. Operation outside the mandi.

2. Transparency of the eChoupal - cross-check ITC’s prices.
3. Convenience - processing facility.
4. Entrepreneur role for Sanchalak
The Value Chain - Farm to Factory Gate

Agri Input Retailer

Input
Cos Stockist
Seed Kaccha
Fertilizers

r
Broke
Chemicals
Practices
Trader

Processor
Adat

Farmer
Pakka
Govt
Dept of Agri VLW

Univ.
Met Dep
MSP
Insurance
Practices
Adat
Weather

Money Lender
In other words..

The Value Chain - Redefined

Kaccha

Agri Input Retailer

Input
Cos Stockist
Seed
Fertilizers

r
Broke
Chemicals
Practices
Trader
Adat

Processor
Farmer Choupal

Govt
Dept of Agri VLW

Univ.
Met Dep
MSP Sanchalak
Insurance
Practices
Weather

Money Lender
Transaction Costs
The Mandi Chain
Rs per MT

Trolley Freight to Mandi = 100

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

Commission to Agent = 100

Cost of Gunny Bags (net) = 75
Processor Labour (Stitching, Loading) = 35
Labour at Factory (Unload) = 35
505
Incurs
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
Labour Khadi Karai = 50 270
Handling Loss = 50

Sanchalak = 50
Commission to Agent = 100
Processor Cost of Gunny Bags (net) = 75
Labour (Stitching, Loading) = 35
505
Incurs 185
Labour at Factory (Unload) = 35
Freight to Factory 100 = 250
Transit Losses = 10
775
Total Chain 185
THANK YOU