Mahindra War Room 2014 AFS Agri Business Caselet

Broadvision Perspectives Client Confidential Page 1 of 2

MAHINDRA AUTOMOTIVE & FARM SECTORS
AGRI-BUSINESS CASELET

Mahindras Automotive & Farm Sectors have independent caselets for the Automotive
Business, Tractor Business and Agri-business - this caselet pertains to Agri-business.

BUSINESS BACKGROUND

Mahindra entered the farm sector in the 1960s with the manufacture of tractors, and have
successfully maintained leadership position in tractors for the last 30 years, selling over 2.1
million tractors across 40 countries to date, the worlds #1 by volume. Mahindra
subsequently added a range of farm mechanization equipment, such as harvesters,
transplanters, tillers etc. under the Applitrac range. In the recent years, Mahindras Farm
Sector expanded the vision beyond just selling of tractors and farm equipment, to
delivering farm tech prosperity. The business was accordingly reinvented in 2010 and
organized as: (a) Tractor & Farm Mechanization Business, and (b) Agri-business
comprising Fresh Produce (Shubhlabh), Crop Care, Seeds, Micro Irrigation & Agronomy
Services (Samriddhi) and New Business Development & Innovation.

In the initial stage, Mahindras strategy was largely Agri-input driven. But after evaluating
the entire agricultural value-chain from Farm to Fork, and leveraging the strengths of the
Farm business, Mahindra has decided to focus on key input businesses on the farm side -
such as seeds, micro irrigation solutions and crop-care. Mahindra Agri business division is
engaged in seed supply, crop care and fresh produce distribution, provides a single source
channel to access all products, services and knowledge needed by farmers to run a
productive farm. Mahindra acquired a majority stake in EPC Industries Ltd - a pioneer of
micro-irrigation in India started in 1986 with French technological support - thereby adding
the capability to design and develop irrigation products of international standard. The
Samriddhi Centre network offers soil testing, agronomy and other services, aspiring to be a
one-stop solution for all farmer needs. The Agri-business division realized the importance of
assisting farmers by providing them market linkages for their produce, which in turn would
help them increase their returns. With this objective, along with an evaluation of the Agri
Value chain on specific business selection criteria, the division has decided to enter key
crops like Fresh Fruits, Dairy, Pulses, Edible Oils (Oil seeds), Processed Foods and
Basmati Rice. Mahindra Samriddhi Services Ltd. is engaged in the fresh fruits business and
is a 100% subsidiary of Mahindra & Mahindra Ltd. The Dairy business foray is already
underway - a decision partly inspired by the National Champions of Mahindra War Room
2012. This years business challenge pertains to the Edible Oil Business.

LIVE CHALLENGE: EDIBLE OILS BUSINESS STRATEGY

With the shift of focus from Generation X to Generation Y, fitness is becoming increasingly
important to the consumer. The cooking medium - Edible Oils - has become an area of
intense scrutiny by home-makers, for its obvious impact on the health of the family at large.
Edible Oils is a critical item on the household monthly purchase basket and a high-
involvement purchase for a growing health conscious consumer segment. Moreover,


Mahindra War Room 2014 AFS Agri Business Caselet
Broadvision Perspectives Client Confidential Page 2 of 2





Refined oil is among the top three largest FMCG categories in India by value,
demonstrating significant growth over time.

The Indian Edible Oil Industry is estimated to be INR 100,000 Crs, with players like ITC,
Saffola, Ruchi & Fortune controlling ~75% of the total market share, followed by 5-6 players
with 3-4% of the market each. The industry is slated for phenomenal growth per capita, with
all the good fundamentals, and offers the opportunity to create an INR. 10,000 Crs company
in less than a decade. However, the industry is also very dynamic and competitive, with not
enough differentiation among the offerings. Almost all competing brands procure seeds
from similar farms and locations, process them using similar technology, and offer similar
products with limited possibility of unique value creation. Brand awareness, propelled by
high decibel advertising, has been the main differentiator, though there are exceptions. In
the recent past, there has been a considerable thrust by current manufacturers and brands
on developing healthier variants of oil and creating a new sub-category of blended oils. Net
Margins are low at 3-4%, de-motivating large companies to enter this business.

Though these risk factors mitigate the attractiveness of this business, when viewed from
the vision of Delivering Farmtech Prosperity, this business gains importance especially
keeping in mind the strong connect that the business has with the farmers. Mahindra
envisions a large number of farmers engaged in this production and by adding value to
them by improving productivity and quality, technology and distribution, aims to connect with
the farmers better.

Considering the Strengths, Weaknesses, Opportunities and Threats outlined above,
first evaluate whether or not the company should focus on selling only in the
wholesale market (B2B) or consider entering the Consumer Branded Edible oils
space (B2C). Kindly provide suitable justification for the segment selection.

Further, based on the B2B or B2C play that the company decides, evolve the entry
strategy for Mahindra to foray into the Edible Oils business, covering:
a. Product Strategy
b. Marketing & Branding Strategy
c. Sales & Distribution Strategy
d. Sourcing Strategy
e. Supply Chain Strategy
f. Financials

Please note that with M&M deciding to get into this industry, the business cannot just be
another me too player. The strategy proposed must thus be on some kind of an innovative,
disruptive business model that will help the group gain a long term sustainable competitive
advantage. The Strategy evolved should help the company differentiate, clearly articulate
the companys right to win in the market place and create a sustainable long-term
advantage.