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India Development Foundation 1

Emerging Trends in

Indian Agribusiness

Market-linkages from ‘plate’ to ‘plough’

Amir Ullah KhanIndia Development Foundation

October 8, 2005




The Presentation Agenda

Agribusiness Scenario in India

Emerging Trends: Case Studies

Concluding Remarks




Need for integration…• Agriculture production demand-driven than

being supply-led.• Changing consumer preferences

– High value-addition

– High quality and safety standards

• Quality: Driver of growth

• Streamlining the chain – increase in marketingefficiency




Marketing / Branding / Value Propositions

Demand Generation through Value Addition (Processing, Better Service Delivery)

Consumer

Cooperative Sector/Farmers’

InstitutionsPrivate/Public Sector Informal Sector

Building Effective Backward Linkages

Farmer/Farmers’Institutions

(SHGs / CIGs)

Farmer

Farmer/Farmers’Institutions

(SHGs /CIGs)

PrimaryCooperatives/

SHGs

Conduct & Performance of Markets & Marketing Institutions

I n s t i t u t i o n a l M e c h a n

i s m s

Plate -to- Plough: A Story of Linkages

V E R T I C A L

I N T E G R A T I O N

/ C O O R D I N A

T I O N

Source: NABARD





Agribusiness Scenario in IndiaEmerging Trends: Case Studies

Concluding Remarks




Examples from Indian Agribusinesses

Case OneDairy: Milkfed (Punjab)




Dairy: Milkfed (Verka)

Yes

Own

Brand,Retail

Outlets

Yes

Own

Chilling,Processing

Units

Yes

Own and

Contract

Yes

Coop.

Members

Verka’s

Presence at

different

levels in the

value-chain

Branding

andMarketing

ProcessingInput and

SupportServices

Milk

Production

Levels of

VerticalCoordination




Milkfed Contd…

State

Fed.

DistrictUnions

VillageCoops.

0.4 mnfarmers

6500VCS

Contract

Procurement

11

Unions 2 Feedunits

800

Transport.

Contractual

Agreement

Captive Units

NDDB




Milkfed Contd…

Milkfed

(Verka)

Farmers

Supply of

inputs, creditand payment for

milk

Supply of Milk

NDDB

Technical

assistance, finance

Payments (fees,

interest…)StateGovt.

Finance




Milkfed Contd…

• Modelled on the ‘Anand-pattern of three-tier

cooperative structure’.

• Closely-knit vertical structure

• Mobilization of farmers – procurement base – Village Chairman (to monitor farmer behaviour)

– Peer-pressure and peer-group monitoring

– Patronage refund (sharing of profits)

• Turnover: INR 590 crores in 2004-05





Case TwoMarine: ITC Aqua-choupal




Integration: Different levels in the

value chain

YesYesYesYesITC Aqua

Choupal

YesYesYesYesChirag

YesYes No NoBenFish

No NoYesYesSIFFS

Marketing

& Exports

ProcessingInput and

SupportServices

Primary

Producers

Levels of

Presence




Marine: ITC Aqua-choupals

• Launched in 2003 in coastal Andhra Pradesh


• Total shrimp exports from Andhra Pradesh: INR 5000 crores in 2003-04

• Seven districts in Andhra: Srikakulam, East andWest Godavari, Krishna, Guntur, Prakasam and

Nellore.

• More than 10,000 farmers in more than 100villages in Andhra Pradesh




ITC Aqua-choupal contd…

Fish

Farmers

Pratinidhi

Aquachoupal

10000

farmers

42

ITCLabs. ITCProcessing

ITCPackaging

At Vishakapatnam

Exports

Input

firms




Aqua-choupal Contd…• Vertical coordination at farm-level: Important

role played by the ‘pratinidhi’. – Builds ITC’s brand among farmers

– Encourages farmers to use ITC’s choupals, labs

– Monitors quality at farm-level, extension services

• 1 per cent share in final sale value (pratinidhi)

• Lab charges: INR 1000 to 1500 – Tests in stages: Incremental charges

– INR 50 per sample to pratinidhi




Aqua-choupal contd…

• Internet facility at the choupal

– Price discovery (choice of sale to farmers)

– Information: Extension services

– Free to regular farmers of aqua-choupal

• Payments: INR 5 less than the market-price – Share the transportation costs

– Prompt payments (unlike other players: credit

dominated business)

– Provide discounted inputs (at farm-gate)





Case ThreeHorticulture: MahaGrapes




MahaGrapes

Yes

Own

Brand

Yes

Own

Units for

Primary

Processing

Yes

Own and

Contract

Yes

Coop.

Members

MahaGrapes’

Presence at

different

levels in the

value-chain

Branding

andMarketing

ProcessingInput and

SupportServices

ProductionLevels of

VerticalCoordination




MahaGrapes

Grape

Growers

Coop.

Societies

MahaGrapes

MSAMB

16

Coops.

2500

farmers

Finance, Technical Support

Govt.

APEDA

NCDC

Finance

Technical

Support

ExportAssistance

Training




MahaGrapes Contd…

MahaGrapes

Cold

Storages

Organic

Inputs

Pre-

cooling

Packaging

Cargo

Agent

PrimaFoods

Tesco(UK)

Edika

Germany

Levard

Holland




MahaGrapes Contd…

• In 2004-05: Exported 64 containers of grapes

– 10 packs x 1440 kgs x INR 50 per kg


• UK, Netherlands and Germany major markets• MahaGrapes charges INR 4 per kg of grapes

exported: meet operational costs

• Rest of the earnings: Distributed among grape

sellers




MahaGrapes Contd…

• Preference to buy from ‘members’

– Non-members approached when demand not met

from members.

• Tesco - £1 per kg of grapes

– Prima foods: 1 percent of Tesco’s payments

– MahaGrapes: INR 4 per kg of grapes exported; bears

transportation expenses – Farmers get close to INR 60 per kg in export-market

vs. INR 25 in domestic markets





Agribusiness Scenario in IndiaEmerging Trends: Case Studies

Concluding Remarks




Concluding Remarks…

Integration

• ‘unlocks’ profits in the value-chain

• increases marketing efficiency of the

agribusiness firm – Increase in income to primary producers

– Decrease in price of the products




Contd…

• Different formats of integration emerging

– Cooperatives of the ‘Operation Flood’ model

– Cooperatives of the ‘MahaGrapes’ model

– Vertical coordination of ITC e-choupals format

• Corporates and firms interacting directly with

the farmers

• Contract farming – an option for coordination between different levels in the supply-chain



Thank You.

India Development Foundation

C/o Confederation of Indian Industry

249-F, Udyog Vihar, Phase IVGurgaon, Haryana

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