RURAL MARKETING

Submitted to
Dr. JOHN MANO RAJ
Submited By
Harisanth R ABPM-11
Nandhini R ABPM-24
Saurabh P ABPM-26
Sampat ABPM-33
CORE MODEL ELEMENTS

 Market linkages

 Direct purchasing relationships with the farmer

 Quality assurance

 Direct collection

 Technical assistance
 BARRIERS
 The barriers mean the proprietor of a small vegetable farm in India, for
example, may realize only 25 percent of the eventual market value of his
produce.

 Intermediaries such as transporters,

 Traders,

 Commission agents and

 Wholesalers typically extract between 30 and 45 percent of the final market

value, while spoilage and wastage may account for up to another 30 percent
lost.
REASONS FOR EMERGENCE

 In the case of the rural poor, the obstacles are both

 geographical -dispersed farms
 communities
 organizational - overly complex and inefficient supply chains.
 PRIVATE COMPANIES
 The high supply-chain costs suggest opportunities for direct sourcing from those near the

base of the pyramid.

 Reliance,

 ITC,

 Birla,

 ShopRite,

 The Future Group are already managing their own supply chains in new retail operations

for fresh fruits and vegetables.

 Other companies like Tata, DCSL, and Mahindra, which
traditionally operate in discrete segments, are expanding elsewhere
in the supply chain.

 The most prominent example is ITC’s now famous e-Choupal

initiative, which relies on village-based kiosks, the Internet, and its
own collection points to bypass local mandis for crops such as soya
and wheat, which delivers procurement cost savings to ITC of about
1.5 percent per transaction, spread over millions of transactions
 These private initiatives are sourcing from relatively large farms and
have not fully engaged the poor living further down the income
scale.

 The reason is simple economics: it’s easier to deal with a few big
producers rather than manage many small ones.

 But several innovators are pioneering financially viable business

models that engage small producers in supply chains.
 SERP
 In the south Indian state of Andhra Pradesh, the Society for the Elimination
of Poverty (SERP), a public agency.

 It organizes more than 800,000 poor women into self-help groups and
federations primarily to provide access to credit, banking, and other services.

 It has also arranged buyer relationships with two large agencies of the state
government, Civil Supplies Corporation (CSC) of India and AP Markfed (a
government-created co-operative marketing organization)

 To procure commodity crops like maize and rice from farmers in the SERP
network and sell them on to buyers at the top of the supply chain.
 Challenges
 Although deep procurement has proven successful and scalable in a variety of sectors, and
is the business model that most consistently involves large corporate entities, it is not
without problems.

 First, it bypasses traditional intermediaries who have a strong interest in opposing supply-
chain innovation.

 ITC’s e-Choupal manages this problem by absorbing intermediaries into its network.

 SERP handles it through its mission that is according to supporters, it creates more than
enough social capital in local areas through the self-help groups to drown out complaints
by intermediaries.
 A second issue involves generating sufficient throughput to justify creating and maintaining
a procurement network that reaches deep into the pyramid.

 Although individual procurement centers are each inexpensive, creating a network requires
significant fixed cost, especially if circumstances require many hubs and intermediate
collection facilities.

 SERP is investigating the sourcing of additional crops as well as using the network for
distribution.

 ITC has recently begun to use its e-Choupal network to push products down the chain —
everything from insurance to water filters are being distributed via the Choupal Saagar
stores and network
 Third, it is critical to find a buyer atop the supply chain to guarantee that outputs will be
purchased.

 This is the role AP Markfed performs for SERP.

 A final issue involves again, the substantial disincentives to work with large numbers of
marginal producers.

 The key to this model is building supply chains that source from the poor but are
competitive with those using larger producers.

 Other Indian Examples for Agriculture: Birla’s More, ITC Choupal Fresh, Reliance Fresh,
Metro

 Dairy: AMUL
 EXAMPLES

 Nestle Pakistan’s deep procurement model collects milk directly from 160,000 small
Pakistani farmers spread over 125,000 square kilometers of land primarily in Punjab.

 Hortifruti was founded in 1972 and was acquired by Walmart in 2006.

 Thirty years ago, it created the “Tierra Fertil” (“fertile land”) program to facilitate
agricultural modernization among small and medium producers.

 Sahyadri farms- FPO follows the deep procurement model with association 8000+ farmers
to supply Residue free fruits and vegetables to 30 different stores in tier 1 and tier 2 cities
of Maharashtra