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ITC: Enduring Value

Sab Saath Baadhein

Media Centre


ITC readies model for brand Choupal evolution 07 Dec 2011

The Times of India

ITC is refreshing the storyboard for e-Choupal. The decade-old initiative, one of the largest Internet-based interventions in rural India that helps farmers with better income for their produce, wants to innovate its business model as the rapidly improving wireless communication makes individual farmers more savvy with price discovery mechanisms.

Now operating in 40,000 villages across 16 states, e-Choupal created an urban-rural transaction highway for agri commodities, credit, insurance, consumer goods and even four-wheelers. ITC is strategizing its next evolution. So what is next?

The diversified conglomerate, valued at over $30 billion in stock market, is building rural manpower skills, a sort of youth employment exchange; advisory business in agri commodities; community driven eco-tourism projects and is even exploring a model for selling fresh fruits and vegetables in the cities. Some of these could emerge as the anchor business with a few rider businesses for support.

What’s got ITC geared into putting e-Choupal through a process of constant innovation is a key learning that business models need to be least vulnerable to market distortions created by government action. e-Choupal’s expansion was frozen after the government, in its bid to fight inflation, rolled back certain reforms in APMC (Agriculture Produce Marketing Committee) Act and Essential Commodities Act. Although e-Choupal further deepened its network within existing villages of operations, ITC decided against making fresh investments to expand the model to newer villages. It had a target of reaching 100,000 villages.

The cigarette-to-hotels conglomerate is now striving to ensure brand ‘Choupal’ is well leveraged and meets certain basic goals as it continues to evolve. “There are two aspects to our vision for e-Choupal. One, it is a platform that connects rural India to the rest of the world. It’s a two-way transaction flow—whether you are sourcing agricultural commodities, or connecting employable youth to markets—between rural and urban. The second dimension is it is focused on delivering a triple bottomline outcome,” S Sivakumar, chief executive, agri business, ITC, told TOI.

e-Choupal originated with the idea of making Indian agriculture globally competitive and self sufficient. The idea was to put more money into the hands of farmers with efficient price discovery mechanism and cost reduction in the sourcing process. This, in turn, helped the company create value-added products like Aashirvaad atta. Several studies have shown that the price dispersions that existed between mandis shrank wherever e-Choupal was set up.

But today, price discovery is not the sole preserve of ITC in an inter-connected world bursting with information. ITC is sieving through several ideas, which will ensure that Choupal remains relevant with the changing times. This is when ITC decided to get into the agri advisory business. It then studied the possibility of agricultural extensions and explored rural employment projects.

“It should be a business which touches a large number of people. Another business is ecotourism. But how many villages lend themselves for this kind of activity. It’s a potential business option for a later date. One characteristic is that the business model should create sufficient revenues to pay for the cost of infrastructure that is laid to build that business,” said Sivakumar.

However, with rural markets and consumption patterns themselves undergoing a change, how relevant will e-Coupal be? “That’s the kind of evolution we are talking about. From agriculture commodities to rural youth getting employed, it is a continuum, which is evolving. The idea is to be relevant to the market place, to fill certain institutional voids. As infrastructure improves and institutions come into place, such voids will not be there. These will morph into something else. When connectivity becomes good, the kind of transaction we are conducting is different from what we did 10 years ago. So we disengage from that activity and move into newer activities. Interestingly, there are emerging economies in the global context and emerging rural markets will leapfrog. Thus at any point the number of experiments we conduct need to scale up. Each is relevant for a particular kind of market situation. It has to evolve and that's how we are designing the business model,” said Sivakumar.

When ITC started piloting Choupal Fresh in Hyderabad a year ago, it was a model to deliver fresh fruits and vegetables to consumers and institutions based on demand, mitigating chances of value reduction for the farmer or surplus or shortage situation leading to price volatility. The model ITC created is based on demand forecasting. Whatever is produced, gets consumed. It has worked well in Hyderabad. Will it be scaled up to other cities as well? ITC will take a call on this next year.

KEEPING PACE

  • ITC wants to ensure brand ‘Choupal’ is well leveraged and meets certain basic goals as it continues to evolve
  • It is building rural manpower skills, advisory business in agri commodities and community driven eco-tourism projects
  • It is even exploring a model for selling fresh fruits and vegetables in the cities

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