How ITC avoids Supply Disruption in its Food Business
ITC’s food business completely relies on the agriculture produce from the Indian Farmers. Through its e-choupal initiative, ITC has ensured raw material security for its food business.
By Harish Kumar Kanakasabapathy
The Indian packaged foods industry is estimated at US$ 11 to US$ 13 billion and has an immense opportunity in India. With increase in urbanization & change in lifestyle, people are adapting to packaged food habits. This trend has led to the surge in consumption of packaged foods.
The Indian Multinational Conglomerate, ITC has diverse presence in FMCG, agriculture products, hotel and paperboard. ITC’s major food brands are Aashirvaad Atta, Sun feast & Bingo Snacks & yippee. The revenue from the food business is closer to Rs. 9,000 crore for ITC. The company is also into exports of food grains, marine products, spices, processed fruits etc. ITC has farm linkages with 17 villages in India & sources wheat, oil seeds, spices, coffee leaves, potatoes, milk etc.
Challenges for food brands:
The livelihood of the Indian farmers largely depends on the monsoon rains. However erratic climate change leads to untimely rain and draught. These farmers own smaller plots of land leading to meager earnings with no access to technology, modern farming machines and best farming practices. These farming challenges are a roadblock to the scalability of food brands and sometimes supply disruptions. Here’s an inspiring story of how ITC empowered the marginal farmers in rural areas to overcome their farming challenge and ensured security to its farm produce procurement for its food business.
ITC envisages achieving revenue of Rs. 1 lakh crore by 2030 from FMCG alone, of which 60-65 percent is to come from its food business. ITC’s food business completely relies on the agriculture produce from the fragmented farmers in India, for meeting its current requirements. Also to achieve the scalability of its food business, farm productivity is much important for ITC. ITC has widely networked with the farming community across 10 states in India through its ‘e-choupal’ initiative to bring in efficient farm practices.
The e-choupal initiative:
To support rural farmers ITC has introduced e-choupal system across 10 states in India. e-choupal is an information centre with a computer & internet connectivity, set at various villages in these states. The e-Choupal has a network of 4 million farmers in over 35,000 villages by setting 6100 kiosk across 10 states.
The centre provides information to farmers on best farming practices & weather information. It also helps farmers in soil and virus testing. Farmers can also hire mechanized farm machines from ITC at friendly prices that help farmers to speed up sowing & harvesting during peak seasons. These farm machines improve the crop yield.
Farmers sell their yields to middlemen at prices lower than minimum selling price (called MSP). The e-choupal service, provide real time information on prices at different mandis. This helps farmers sell their produce at global market prices. ITC also has its own mandi called Choupal Saagar where farmers get paid at reasonable prices compared with other mandis. This guarantees ITC an assured supply of agricultural produce for its food business and export needs. Choupal Saagar also help ITC cut all the intermediaries and purchase agricultural produce directly from farmers. This keeps procurement cost under check & helps ITC retain good margins.
ITC has also launched small hypermarkets in these villages that sells everything for farm needs as high yield seeds, fertilizers, pumps etc. Through these hypermarkets they also sell their packaged food brands, their by increasing the brands reach.
ITC also runs training classes for the farmers. Farmers are taught here on sowing additional crops between two cropping seasons. This generates additional income to farmers and at same time, help ITC meet their requirement for agricultural produce.
In India, extreme weather has led to water woes for the farmers as it had disrupted the agriculture cycle. ITC has also erected water harvesting structures in villages hit by draught. These structures help the farmers to irrigate their fields throughout the season.
ITC’s rural initiative is a life changing game for farmers. The initiative has to a extent curbed farmers from migrating to cities abandoning their farms. E-choupal initiative ensures the livelihood of farmers and at same time help ITC meet its 2030 target of Rs. 1 lakh crore revenue through its FMCG business.
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