June 10, 2010

55) ITC Limited (eChoupals)

危 wēi  danger

As I outlined in a post last year the Indian agricultural market is tough.  Farm ownership tends to be heavily fragmented, the infrastructure is often poor and historically the supply chain has been clogged by middlemen. This makes life difficult for both farmers and the buyers.  For example, often farmers would have to travel for days to a market with no knowledge of current prices, once there the exploitative middlemen could pay below the market rate and refuse to pay any premium for quality.  It has been estimated that farmers were losing up to 60% of the value of their crop as a result.  This in turn disincentivised the farmers from improving their crop quality and made supply to the industry’s big buyers unpredictable.  Large food buyers, such as ITC Limited (an Indian conglomerate), would surely have to accept this status-quo?

机 jī opportunity

No, to the contrary ITC has harnessed technology to overcome these structural problems by investing in internet kiosks in rural villages.  The kiosks, named eChoupals, enable the farmers to sell direct to ITC at an agreed price, give access to best practices and enable them to place orders for agricultural inputs such as seeds and fertilizers.  In order to instill trust in the system ITC trains a local farmer to run the system and places it in their house – on average each serves 600 farmers in the surrounding ten villages.  To ensure that they remain incentivised the sanchalaks receive a small service fee.  Even after this service fee it is estimated that farmers’ profits have increased by more than a third and ITCs costs have reduced. The conglomerate plans to scale up to 20,000 eChoupals by 2012 (from 6,500 today) potentially servicing 15 million farmers.

How About…

  • Harnessing technology to disintermediate inefficient value chains?
  • Empowering local talent to assist in supporting your customers?

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January 26, 2010

32) Kegg Farms

keggfarms_logo_1

危 wēi  danger

Delhi-based chicken producer, Kegg Farms was founded by Vinod Kapur in 1967.  Kapur had realised that the Indian poultry sector lagged behind western markets in its adoption of genetic breeding, accordingly he began breeding birds specifically for the Indian urban market.    The company’s chicken was particularly successful due to its resilience and egg productivity.  However, the company’s solid economics were threatened in 1990 when industrial and foreign trade policies were liberalized, enabling foreign competitors to enter the market for the first time – would Kegg Farms be able to compete with the better-financed global firms?

机 jī opportunity

Kapur rightly predicted that the foreign entrants would focus on the attractive urban markets and switched his focus to the rural market – a tougher proposition because of the harsher environment and lack of infrastructure.  He overcame these challenges by breeding a new bird, the ‘Kuroiler’ which was faster growing, laid eggs more frequently and was capable of scavenging for its food.  He also catalysed the creation of a completely new supply chain by empowering entrepreneurs to take on the required roles – Keg Farms now supplies to 1,500 entrepreneur-owned ‘mother units’ across India which in turn supply to villages through vendors on cycles.  Finally, rural villagers, frequently women, supplement their income by selling eggs or the birds for meat (a liquid asset for when they require money urgently). As of November 2006, Kegg Farms was supplying chicks to about 4 million poor villagers, generating incomes for 700,000 households.

how about…

  • Scenario-planning for potential legislation changes?
  • Where no economic supply chain exists, catalysing the growth of your own through entrepreneurship?

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