Chief Executive of ITC-IBD Visits XIMB Campus

Chief Executive of ITC-IBD Visits XIMB Campus

"ITC-IBD, one of the most professionally managed companies in India, is poised to take giant leap from the current position with several new initiatives and grand planning," informed Mr. S. Sivakumar, Chief Executive of the company, during an interaction session with rural management students of Xavier Institute of Management, Bhubaneswar.

"The agri-business initiative of ITC was established to boost foreign exchange earning. In 1999, we had an operation of $ 90 million from commodity business. It was not a satisfactory position for us as we decided that either we will grow or go," elaborated Mr. Sivakumar.

This led to the origin of e-Choupal and extension of agri-business division. Now the e-Choupal model is globally recognized as successful rural initiatives and has entered into case discussion of several B-schools. "The initial model of e-Choupal was based on removing market inefficiencies and we anticipated it to remove in three years period. The second stage of this model is value addition of the product. First is an easier to replicate than the second one," elaborated Sivakumar.

Explaining about the transaction cost saving model of soybean, he said, "Traditionally, farmers spend Rs. 705 as against Rs. 335 in the e-Choupal model, therefore, farmers save Rs. 370 per metric tones. Sadly, these marketing inefficiencies are still prevalent in agriculture marketing operations."

Talking about the challenges, Mr. Sivakumar said, "Building trust among farmers was a major challenge followed by aligning middlemen while struggling with the poor infrastructure which was perhaps easier to overcome than other problems."

Speaking about the recent FMCG foray, he said, "E-Choupal model has helped us in leveraging on this strong rural network. Our van distributes FMCG goods till Sanchalak level, who acts as stockist, and further distributes the same to village retail outlets. Therefore, we have deeper penetration in rural areas with least cost given the fact that we use the same channel for other FMCG company's products as well. Here, Sanchalak acts as demand aggregator and purveyor."

Replying to queries of the rural management students of XIMB, Mr. Sivakumar said, "We don't expect loyalty from the farmers and at every step we want farmers to take informed decision in his interest. If someone can provide him a better price, farmers are free to choose. But we have confidence that we can better price than anyone else, and unless someone comes to loose than that is not a business model because it is not sustainable."

ITC-IBD has several new initiatives in the pipeline, which will usher faster and stronger growth of the company. The new initiative will trigger whole new range of business. "From our experience of rural market, we have realized that rural farmers generally behave like western urban consumer. Inconsistent quality and not poor quality is the major concern in agri-business arena. Matching the quality expectation of consumer and return of farmers are the major challenges," he added.

Concluded.

Contributed by -
Team RMAX,
Rural Managers' Association of XIMB,
Xavier Institute of Management, Bhubaneswar.

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