KARTAR AGRO INDUSTRIES PVT. LTD.

Marketing Strategy for Udupi region

1/6/2012

Executive Summary
Kartar Agro Industries (Pvt.) Ltd. supplies harvesters to farming communities across the country. The company offers sales and service for close to 10 types of harvester machines. However, due to variance in the market for harvesters in South India as against the market in North India, Kartar is looking at developing a marketing strategy to promote sales to the farming community in the Southern markets. Udupi is a coastal district in Karnataka with close to 110000 ha of arable land. Paddy, groundnut and black gram are the predominantly grown field crops here. Harvesters have the potential to offer the farmer a speedy harvest at a reasonable price, but most farmers in India and especially South of India are small farmers owning an average of 2 acres of land as against the national average of 3.3 acres. Thus, the farmer is forced to depend on neighbouring farm owners to jointly lease the harvester. Thus, an efficient marketing strategy is required to make the farmer aware of the benefits of using the harvester, to help push sales in co-operatives and to local distributors. The proposed strategy focuses on dealing with growing competition, sales growth, utilising the distributor network efficiently, insights into new product development and strategy for market growth.

Table of Contents Contents

Executive Summary .......................................................................................................................... 2 Table of Contents .............................................................................................................................. 3 Summary of Current Situation ........................................................................................................... 4 Focussed Assessment of Market Opportunity..................................................................................... 5 Financial and Marketing Goals .......................................................................................................... 7 Summary of Companys Marketing strategy .................................................................................... 10 Month-Month Marketing Budget ..................................................................................................... 12 Forecast of Month-Month Unit Sales ............................................................................................... 12 Monitoring and Evaluation of Marketing Plans/Actions ................................................................... 13

Summary of Current Situation

Agriculture contributes to about 16% of Indias GDP, the highest in the world. Consequently, Indias agriculture equipment market constitutes about 10% of the global market share and has a potential to grow much higher. Harvesting is the process of gathering the mature crop. It marks the end of the farming cycle and the produce is then sent for further processing if required and subsequently to the market. Thus, harvesting is a very important function of farming as proper harvesting ensures good quality of the final produce and eliminates wastage. Efficient harvesting will also reduce the turnaround time for the farmer and help him prepare the land for the next crop cycle quickly. In the Southern states where the climatic conditions favour paddy cultivation throughout the year, paddy is harvested in three cycles: Pre Winter- Pre Kharif Harvest Summer- Rabi Harvest Winter- Khariff Harvest In the pre- winter and winter harvesting cycles, due to the presence of slush on the ground, a special type of harvester with tracks will be required. A harvester with wheels would suffice during the summer harvesting cycle. Harvesting was traditionally done manually using a sickle. However, the costs of harvesting manually are high. Close to 20 labour hours/day are required to harvest an acre of land. The harvester on the other hand can harvest 8 acres of land in about 4 hours. The harvester uses a rake to cut, feeds it to a thresher and finally a separator separates the grain from the chaff. In small farms the major competition to harvesters is the use of manual labour for harvesting. The harvester technology has improved over the years. From the manually operated to the tractor pulled harvester, we now have fully mechanised- self propelled harvesters. The quality of output is much higher than when harvesting is done manually and wastage of grain is minimal. It also saves an enormous amount of time and labour. With the lucrative market opportunities in India, several foreign equipment manufacturers like John Deere, New Holland and Same Deutz have entered the Indian market with several more waiting to follow suit.
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In Udupi, a region with high consumption of rice and excellent conditions for paddy cultivation, several small and medium farmers exist. Though the farmers own small areas of land, they are reasonably prosperous owing to good rainfall and fertile lateritic soil suitable for cultivation. The region however, has just one distributor for harvesters who sells and leases the equipment and provides a driver and cleaner for operating the harvester.

Focussed Assessment of Market Opportunity

Below is the growth of Harvester sales in India:

It can be clearly observed that the demand has increased by almost 5 per cent in the decade from 1994-2006. Going by the trend, the current estimates for Harvester sales in India would be close to 435000. In the Udupi region, due to shifting of cropping patterns to commercial crops, farmers are combining paddy with another economically viable crop to receive better returns. Thus, there exists a demand for combine harvesters that can harvest multiple crops. Another issue with this region is the rainfall. The area receives incessant rainfall from June to November which affects the pre-khariff harvest. The regular wheel driven harvester would get stuck in the slush of the fields. Hence, there is a growing demand for the track harvester in this region. The track harvester however, is expensive and the track needs to be changed for every 1000 hours of operation. Also, as mentioned earlier, the farmers own small areas of land that cannot be economically serviced by a harvester. This drives the farmers to come together to jointly hire a harvester.
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The farmers usually end up quarrelling amongst themselves as to whose land has to harvested first as this farmer would have an advantage at the marketplace. Thus, to avoid this, there is a growing need for small size harvesters that can perform all the functions of the existing ones on a smaller area of land. Usage of the tractor driven harvester in this region is not very feasible as the terrain in this region is hilly and the farm lands have uneven contours. The tractor-harvester connection is often broken and the farmer ends up spending time and energy in fixing the joints. Also, since the harvester is not firmly held to the ground, the stalk is not cut completely off the ground. The lucrative market for Harvesters in this region has led to entry of big players like Panesar into the market. These companies come with a strong history of technological development and service. Panesar for instance has won several awards of excellence from both the state and central governments. The companies however are not based out of any region in South India and depend heavily on logistics to transport their machines from Punjab or Haryana (where most manufacturers are located) to the South. During the peak season, when demand is high, supply often falls short. Thus, what these companies gain in expertise and technology, they lack in efficient supply. This can be capitalised upon to increase the market share.

Financial and Marketing Goals

The following perception map helps understand the present perception of Kartar Combines:

The above map offers an insight into the consumer perceptions of some of the key players in the harvester market in India. Punjab Tractors which manufactured harvesters under the brand name Swaraj( now sold to Mahindra Tractors) is the largest manufacturer of harvesters in India. The following Marketing and Financial goals are specified: 1. Setting up a distribution and service centre in the Hubli-Dharwad region: The Hubli-Dharwad region is a major trading centre for agricultural products in Karnataka. It is well connected by railways and roadways and its proximity to major agriculture regions in North Karnataka and neighbouring Maharashtra and Andhra Pradesh offers a strategic location advantage. The trade fairs that take place in this region can be used to promote the Harvester machines. Also a service centre in this area would benefit the end users of the harvesters. This would improve the perception on quality. The costs for this proposal would be as follows:

Cost of setting up office Rent Staff 5000*12 10000*12 7000*12 Cost of setting up service centre Tools/Equipment Rent for service centre Staff Overheads Total
(Yearly estimates)

60000 120000 84000

50000 10000*12 3*8000*12 120000 288000 50000 772000

It can be seen that this operation would cost close to Rs. 8 lakhs to begin operation. 2. Evolving a sales and promotion plan: Promotion can be done at the trade fairs as discussed earlier. Trade fairs and market places are places where farmers gather for trade. This should be capitalised to counsel the farmers on the benefits of using a harvester and promotion of Kartar combines. These fairs will also offer the company an opportunity to gather and analyse farmer insights into the products. As the farmers have a very local view of the products and rely on information gathered locally, sales will be driven strongly through the distributor networks. Key locations will be identified and distributors will be setup in these locations. The distributors will be incentivised to drive sales and offer timely service. In order to push further sales, the company will approach the govt. representatives of the Rural Development department and push for sales in co-operatives in the districts. Small farmers depend heavily on co-operatives for advice on purchase of equipment and for loans. Thus, if co-operatives and the local govt. can be convinced about the product and its offerings, a further boost to sales can be achieved. For the above plan, a marketing team will be developed to handle the Karnataka, Andhra and Maharashtra regions.

The cost of implementation would be as follows: Karnataka Andhra Maharashtra No. of personnel Fixed resource Variable pay TA/DA Total pay per 20000 5000 5000 150000 18000 5000 5000 84000 18000 5000 5000 56000 290000 5 3 2

(Monthly estimates)

Thus, this plan would cost the company close to Rs. 36 lakhs p.a. 3. Product development: As understood from the primary market research, there is a need for smaller harvesters which the farmers (or a smaller group of farmers) can own and operate. There exists a demand for harvesters which are:

a. Small sized, yet match the functionality of current harvesters b. Cost effective and can be used on smaller areas c. Able to harvest multiple crops d. Able to harvest crops in all seasons
Kartar makes primarily two different types of harvester. Tyre Base. Track Base. Tyre Base Ashok Leyland, 4 Cylinder, 76 PS @ 2200 RPM Width: 2740 mm or 3040 mm Height Adjustment: Hydraulically Cutting Height Min.: 100 mm Cutting Height Max.: 700 mm

Features Engine Cutter Bar

Track Base Ashok Leyland, 4 Cylinder, 76 PS @ 2200 RPM Width: 2300 mm Height Adjustment: Hydraulically Cutting Height Min.: 100 mm Cutting Height Max.: 700 mm

Transmission

Manual. 3 gear + reverse

Type: Fully Hydro Static Controlled Speed: 0-10 Km/hr. Rs 1700000-Rs 1900000 + Rs 100000 for track

Price

Rs 1700000-Rs 1900000

replacement every 1000 hours

Mini Harvester Specs (by Rajkumar Agro Engineers Pvt. Ltd.): Features Engine Cutter Bar Transmission Price Mini Combined Harvester (Tyre) 19.8/2200 kw/rpm 3800 x 1750 x 1650 (mm) Cutting Width : 1360 mm Manual Rs 250000 Mini Combined Harvester (Track) 19.8/2200 kw/rpm 3800 x 1750 x 1650 (mm) Cutting Width : 1360 mm Manual Rs 415000

Hence, this calls for the research and development of a new harvester type which can harvest multiple crops and which can be converted from wheel to track. Thus, R&D will have to work on developing a new design. There exist such products in the market already. Om Harvester combines manufactures mini-harvesters that can be efficiently used on small farms. Thus, the company could look at buying R&D from such companies or acquiring the smaller companies. A feasibility study will have to be carried out to study potential acquisitions. 4. Competition: The company will aim to gain sufficient market share in this region to become the market leader. The company will aim at improving its perception on price and quality vis--vis its competitors. This will offer the company an advantage to negotiate better deals with both farming communities and the govt. agencies.

Summary of Companys Marketing strategy

With the above marketing goals in view, the following strategy is suggested: 1. Growth Strategy: By setting up a marketing team in key trading areas, promotional activities can be undertaken. The farmer conglomerates can be addressed to press for the need for using a harvester for better quality and efficient generation of output. Credibility can be strengthened by setting up a service centre for timely service of the machines. This credibility can be leveraged to push sales in the co-operatives which would offer a wider reach to potential customers.

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2. Sales Strategy: The distributor network will be increased for quicker delivery of the machines and to push sales. Distributors will be offered incentives to motivate them to push sales. Also, a marketing team would co-ordinate with the govt. agencies and local cooperatives to generate demand and supply the machines. 3. New Product Design Strategy: To keep pace with the changing requirements of farmers and the variance in the requirements of farmers of different regions, the marketing team will gather insights into the requirements and work with the design team to help develop a customised product for the farmers of this region. Potential takeover opportunities will be studied. 4. Competitor Strategy: The company, by way of frequent promotion and participation in trade fairs and regular interaction with farmers will attempt to gain market share to become the market leader in the Southern region. By offering a customised product for the farmers in this region at a competitive price (so that farmers can make purchase or hire decisions individually), the company will strive to attain market leadership and sustain it over the long run. The company will undercut imitations of the new product (which is bound to happen once the new product becomes successful) by offering best in class service and credit support.

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Month-Month Marketing Budget

The month-month marketing budget for the first year of implementing this strategy is as follows: January February March Salaries of Marketing Personnel TA/DA Promotional Fairs Distributor commission Prototype/Demo Miscellaneous Total 275000 15000 100000 10000 10000 410000 275000 15000 100000 10000 400000 275000 15000 100000 10000 400000 April 275000 15000 20000 100000 10000 420000 May 275000 15000 100000 10000 10000 410000 June 275000 15000 100000 10000 400000 Decembe r 275000 15000 20000 100000 10000 420000

July Salaries of Marketing Personnel TA/DA Promotional Fairs Distributor commission Prototype/Demo Miscellaneous Total 275000 15000

August 275000 15000

September 275000 15000 20000 100000 10000 420000

October 275000 15000

Novembe r 275000 15000

100000 10000 400000

100000 10000 400000

100000 10000 10000 410000

100000 10000 400000

The distributor commission includes discounts and commission over and above the selling price offered to them (5 distributors receiving 20000 each). This is to incentivise them to push sales.

Forecast of Month-Month Unit Sales

The average arable land in the Udupi region alone is 62000 ha (153000 acres) for paddy and close to 10000 ha (25000 acres) of other field crops cultivated. Taking the average size per farm to be about 2.5 acres, this would give a figure of about 71200 farmlands owned by individual farmers. A steady growth in sales is needed to capture the maximum market share.

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Keeping these figures in mind, the following unit sales maybe forecasted: Year 2 ( with mini harvester) 12 5 2 2 10 2 2 8 8 12 8 10 81

Month January February March April May June July August September October November December Total

Year 1 8 2 2 2 8 2 2 5 5 8 5 5 54

Thus, the focus would be on pushing sales around the peak harvesting season. Once the mini harvester is rolled out into the market, the sales figures are expected to grow by almost 50% owing to pushing sales to individual farmers at an affordable price. A gradual year on year growth is predicted hereon.

Monitoring and Evaluation of Marketing Plans/Actions

After the strategy is rolled out, periodic audits will be conducted to ensure that marketing is aligned towards the stated goals. A three prong audit would be conducted for: 1. Environment Audit: Audits will be conducted to analyse the changing environmental condition. Market size, growth, competitors, dealers etc. will be audited periodically. 2. Marketing Objectives and Goals Audit: Audits will be conducted to ensure that the goals and objectives are being met. Variance analysis will be conducted to understand and evaluate variances in targeted figures. The percolation of the goals and objectives to the key stakeholders viz. Sales force, marketing team and channel partners will also be studied to ensure that everyone shares the common goals. 3. Marketing Strategy Audit: The effectiveness of the strategy in achieving the stated goals and objectives will be studied. If need be, the strategy will be modified to steer
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the team towards the objectives. An audit of the allocated resources and their effectiveness will also be conducted to improve efficiency.

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