ORIGINS OF E-CHOUPAL

The ITC group is one of Indias foremost private sector companies with a market
capitalization of around US$4 billion and annual revenues of US$2 billion. ITC has a
diversified presence in tobacco, hotels, paperboards, specialty papers, packaging,
agri-business, branded apparel, packaged foods and other fast moving consumer
goods.
Spurred by Indias need to generate foreign exchange, ITC's International Business
Division (IBD) was created in 1990 as an agri-trading company aiming to offer the
world the best of India's produce. Initially, the agricultural commodity trading
business was small compared to international players. By 1996, the opening up of the
Indian market had brought in international competition. Large international
companies had better margin-to-risk ratios because of wider options for risk
management and arbitrage. For an Indian company to replicate the operating model of
such multinational corporations would have required a massive horizontal and vertical
expansion. In 1998, after competition forced ITC to explore the options of sale,
merger, and closure of IBD, ITC ultimately decided to retain the business. The
Chairman of ITC challenged IBD to use information technology to change the rules of
the game and create a competitive business that did not need a large asset base.
Today, IBD is a US$150 million company that trades in commodities such as feed
ingredients, food-grains, coffee, black pepper, edible nuts, marine products, and
processed fruits.
Corporate and social responsibility is an integral part of ITCs philosophy, and ITC is
widely recognized as dedicated to the cause of nation building. Chairman Y. C.
Deveshwar calls this source of inspiration a commitment beyond the market.
ITC believes that its aspiration to create enduring value for the nation provides the
motive force to sustain growing shareholder value. ITC practices this philosophy by
not only driving each of its businesses towards international competitiveness but by
also consciously contributing to enhancing This view of social consciousness allowed
ITC to recognize the unique opportunity of blending shareholder value creation with
social development. The social impact of the e-Choupals as envisioned by ITC ranges
from the short-term provision of Internet access to the long-term development of rural
India as a competitive supplier and consumer of a range of goods and services in the
global economy. The sustainability of the engagement comes from the idea that
neither the corporate nor social agendas will be subordinated in favor of the other.

ITCs Agri Business Division, one of Indias largest exporters of agricultural
commodities, has conceived e-Choupal as a more efficient supply chain aimed at
delivering value to its customers around the world on a sustainable basis.

The e-Choupal model has been specifically designed to tackle the challenges posed by
the unique features of Indian agriculture, characterised by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, among others.

e-Choupal also unshackles the potential of Indian farmer who has been trapped in a
vicious cycle of low risk taking ability - low investment - low productivity - weak
market orientation - low value addition - low margin - low risk taking ability. This
made him and Indian agribusiness sector globally uncompetitive, despite rich &
abundant natural resources.

Such a market-led business model can enhance the competitiveness of Indian
agriculture and trigger a virtuous cycle of higher productivity, higher incomes,
enlarged capacity for farmer risk management, larger investments and higher quality
and productivity.

Further, a growth in rural incomes will also unleash the latent demand for industrial
goods so necessary for the continued growth of the Indian economy. This will create
another virtuous cycle propelling the economy into a higher growth trajectory.

The Model in Action:

Appreciating the imperative of intermediaries in the Indian context, e-Choupal
leverages Information Technology to virtually cluster all the value chain participants,
delivering the same benefits as vertical integration does in mature agricultural
economies like the USA.


With a judicious blend of click & mortar capabilities, village internet kiosks managed
by farmers called sanchalaks themselves, enable the agricultural community
access ready information in their local language on the weather & market prices,
disseminate knowledge on scientific farm practices & risk management, facilitate the
sale of farm inputs (now with embedded knowledge) and purchase farm produce from
the farmers doorsteps (decision making is now information-based).

Real-time information and customised knowledge provided by e-Choupal enhance
the ability of farmers to take decisions and align their farm output with market
demand and secure quality & productivity. The aggregation of the demand for farm
inputs from individual farmers gives them access to high quality inputs from
established and reputed manufacturers at fair prices. As a direct marketing channel,
virtually linked to the mandi system for price discovery, e-Choupal eliminates
wasteful intermediation and multiple handling. Thereby it significantly reduces
transaction costs.

e-Choupal ensures world-class quality in delivering all these goods & services
through several product / service specific partnerships with the leaders in the
respective fields, in addition to ITCs own expertise.

While the farmers benefit through enhanced farm productivity and higher farm gate
prices, ITC benefits from the lower net cost of procurement (despite offering better
prices to the farmer) having eliminated costs in the supply chain that do not add value.


The Status of Execution:

Launched in June 2000, 'e-Choupal', has already become the largest initiative among
all Internet-based interventions in rural India. 'e-Choupal' services today reach out to
over 4 million farmers growing a range of crops - soyabean, coffee, wheat, rice,
pulses, shrimp - in over 40,000 villages through 6500 kiosks across ten states
(Madhya Pradesh, Haryana, Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh,
Rajasthan, Maharashtra, Kerela and Tamil Nadu).

The problems encountered while setting up and managing these e-Choupals are
primarily of infrastructural inadequacies, including power supply, telecom
connectivity and bandwidth, apart from the challenge of imparting skills to the first
time internet users in remote and inaccessible areas of rural India.

These interventionshave helped transform village communitiesinto vibrant economic
organisations, by enhancing incomes and co-creatingmarkets. ITCs e-Choupals serve
40,000 villages and 4 million farmers, making it theworlds largest rural digital
infrastructurecreated by a private enterprise.


The value chain


As India's 'kissan' Company, ITC has taken care to involve farmers in the designing
and management of the entire 'e-Choupal' initiative. The active participation of
farmers in this rural initiative has created a sense of ownership in the project among
the farmers. They see the 'e-Choupal' as the new age cooperative for all practical
purposes.
This enthusiastic response from farmers has encouraged ITC to plan for the extension
of the 'e-Choupal' initiative to altogether 15 states across India over the next few
years. On the anvil are plans to channelise other services related to micro-credit,
health and education through the same 'e-Choupal' infrastructure.




1. Affordability: Here Affordability does not mean that cheaper products should be
made and marketed; the meaning is to reach the customer by satisfying their needs.
The designing of the product should match the needs of the customer. The Customer
should not think that they couldnt buy it, that means it should be in their buying
capacity. The income earned in rural markets is from different ways, so by keeping
this in mind most of the companies should design the product in such a way that it
reaches the customer.
ITC e-Choupal is an innovative market-led business model designed to enhance the
competitiveness of Indian agriculture. e-Choupal leverages the power of Information
and Digital Technology and the internet to empower small and marginal farmers with
a host of services related to know how, best practices, timely and relevant weather
information, transparent discovery of prices and much more. e-Choupals not only
connect farmers with markets but also allow for a virtual integration of the supply
chain and create significant efficiencies in the traditional system.
A business concept embedded with social goals, e-Choupal was designed to empower
farmers and triggers a virtuous cycle of higher productivity, higher incomes, enlarged
capacity for farmer risk management, and thereby larger investments to enable higher
quality and productivity.
Several alternative and innovative solutions - some of them expensive - are being
deployed to overcome these challenges e.g. Power back-up through batteries charged
by Solar panels, upgrading BSNL exchanges with RNS kits, installation of VSAT
equipment, Mobile Choupals, local caching of static content on website to stream in
the dynamic content more efficiently, 24x7 helpdesk etc.
Going forward, the roadmap includes plans to integrate bulk storage, handling &
transportation facilities to improve logistics efficiencies.
'e-Choupal' also unshackles the potential of Indian farmer who has been trapped in a
vicious cycle of low risk taking ability > low investment > low productivity > weak
market orientation > low value addition > low margin > low risk taking ability. This
made him and Indian agribusiness sector globally uncompetitive, despite rich &
abundant natural resources.


2. Availability: The greatest problem in the rural market is to reach the customer or
retailer. Its the logistics way to make the product available there. Once it reaches the
retailers shelf then there will not be any problem. This is because there will be lesser
number of brands available at market and the Influence or image/ Relationship of the
retailer makes the difference. The companies should work out to reach the customer
in time. Most of the products are promoted well but by the time it reaches the
customer it gets late. So reaching the market should be considered. The problems
encountered while setting up and managing these 'e-Choupals' are primarily of
infrastructural inadequacies, including power supply, telecom connectivity and
bandwidth, apart from the challenge of imparting skills to the first time internet users
in remote and inaccessible areas of rural India.


e-Choupal makes use of the physical transmission capabilities of current
intermediaries aggregation, logistics, counter-party risk and bridge financing while
disintermediating them from the chain of information flow and market signals.


3. Awareness: The Awareness program should be in such a manner that it should
reach the customers mindset. The main way of reaching the customer is through the
commercials on media like TV, Radio and Outdoor. The awareness programs should
be conducted at the area (Junction) where the village heads meet or in other way the
meeting place at the villages. The awareness program should be in such a way that it
should contain some message to the audience, there should be some concern for them
and their place. The promotional activities should be good in the local language.

Apart from this there are some things which the company should think of, such as
Color of the product, Packaging, logo and slogan so on. This should be in such a way
that by looking at the product only the customer should feel that they can go for that ,
and they should be in such a position to differentiate the product form the copy cat
one.
Another path-breaking initiative - the 'Choupal Pradarshan Khet', brings the
benefits of agricultural best practices to small and marginal farmers. Backed by
intensive research and knowledge, this initiative provides Agri-extension services
which are qualitatively superior and involves pro-active handholding of farmers to
ensure productivity gains. The services are customised to meet local conditions,
ensure timely availability of farm inputs including credit, and provide a cluster of
farmer schools for capturing indigenous knowledge. This initiative, which has
covered over 70,000 hectares, has a multiplier impact and reaches out to over 1.6
million farmers.


e-Choupal Now
States covered 10
Villages covered 40,000
No. of e-Choupals 6,500
Farmers e-empowered 4 million

4. Acceptability: The most important theme of Marketing Mix is Acceptability. The
customer should think that they can buy the product by putting an extra money on
that. They should feel that the product is designed as per their needs and it should
deliver a great solution to the customer. They should think that the product gives
some value to them , and it should serve the purpose what they are planning to buy
for. The customer should feel the comfort with the product and there should not be
any hesitation to go for it.

So, by these four components of Marketing mix the company can reach the rural
market. The companies which have worked it well they have done their best in the
rural market. The companies like LG and HUL have changed the dynamics of rural
market. So it is important for the companies to think on their marketing mix and make
a competitive analysis to go for the market.

Launched in June 2000, 'e-Choupal', has already become the largest initiative among
all Internet-based interventions in rural India. 'e-Choupal' services today reach out to
over 4 million farmers growing a range of crops - soyabean, coffee, wheat, rice,
pulses, shrimp - in over 40,000 villages through 6500 kiosks across ten states
(Madhya Pradesh, Haryana, Uttarakhand, Karnataka, Andhra Pradesh, Uttar Pradesh,
Rajasthan, Maharashtra, Kerela and Tamil Nadu).

Such a market-led business model can enhance the competitiveness of Indian
agriculture and trigger a virtuous cycle of higher productivity, higher incomes,
enlarged capacity for farmer risk management, larger investments and higher quality
and productivity.
Further, a growth in rural incomes will also unleash the latent demand for industrial
goods so necessary for the continued growth of the Indian economy. This will create
another virtuous cycle propelling the economy into a higher growth trajectory.