CEO, Louis Dreyfus Commodities Ltd. Discusses Agricultural Marketing with IIFT Delhi Students

CEO, Louis Dreyfus Commodities Ltd. Discusses Agricultural Marketing with IIFT Delhi Students

The CEO of Louis Dreyfus Commodities Ltd., Mr. Govind Ambady opened the discussion on the relatively unexplored area of Agricultural Marketing at an event organised at the Indian Institute of Foreign Trade, India’s premier institute for International Business. Accompanying him was well-known commodities expert, Ms. Nidhi Nath Srinivas.

At the outset, Mr. Ambady outlined the topmost priority of a manager – and that is to simplify chaos. As for India, we stand among the top 15 nations in absolute GDP and our economy clocked a growth rate of 6.2% in 2008-09. The services, industry and agriculture sectors have been the star performers. Yet, infrastructure is floundering, six out of ten Indians still live in villages and corruption is rampant in PDS and other aid schemes, lamented Mr.Ambady.

Despite these setbacks, rural India still holds out the next big ticket in retail. It has been observed that a pan-India approach does not necessarily work. Each region is a market in itself. So creating a brand and sustaining it is the need of the hour. A prime example is Kellogg’s which lost money in Japan for 25 years, but recouped their losses in the year after that. This success was attributed to the generational change in consumer taste and an overhaul in strategic thinking!

The rural market picture is encouraging with consumers ready to splurge, as also willing to explore new products and services, and retailers need to target them. “But to accomplish this, today’s young managers need to think 10 times faster than what we do currently”, opined Mr. Ambady. He concluded with the fact that FII’s had poured in USD 2.3 Billion in the last month alone which is a true reflection of their bullish stance irrespective of the slowdown.

The focus then shifted to commodities and sugar in particular. India is a serious player in the sugar market and ranks second only to Brazil in world sugar production. Globally, it is the largest consumer of sugar. Sugarcane gives more profit than any other cash crop. No wonder the prices of sandesh in Kolkata are an indicator of sugary dynamics being played out between Maharashtra and UP, which are the leading states in cane production. The pricing is fixed by the government with the help of SMP (Statutory Minimum Price). It is a highly regulated industry. 10% of all sugar produced has to be sold to PDS at lower prices. It is interesting to note that sugar is still sold loose and no brands exist as yet.

It is no secret that currently the country is facing a huge sugar deficit and prices are bound to head north in the near future. In today’s times a successful sugar business model would involve not only setting up a sugar company but also trading in by-products and co-generation of power, having overseas presence, hedging operations and establishing refineries near ports. The event was attended by IIFT students who now definitely have a new avenue to explore with agricultural marketing.

Concluded.

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