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ITC: Enduring Value

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ITC plans to up rural market penetration 25 Aug 2007

Economic Times

BETTING big on the farm sector, ITC is planning to increase its penetration in the rural areas. As part of this plan, the company will introduce a small hypermarket format in select states with an investment of around Rs 80 crore. It will also open more e-choupal kiosks.

The company believes that these initiatives will help farmers in less developed markets like Uttar Pradesh, Madhya Pradesh, Rajasthan and Maharashtra to get a better return for their produce.

“We are planning to increase our farmer service centres in rural areas (e-choupal kiosks) from the present 6,450 to 20,000 by 2012. We are looking at setting up 40 small hypermarkets in the first phase on the similar lines of our existing hypermarket model — Choupal Sagar next year at an investment of Rs 2 crore each. In the second phase we will add 30 new small hypermarkets,” said, S Sivakumar, chief executive (agri business division), ITC.

While the big format Choupal Sagar occupies an area of about 6 acres to 10 acres, the small centres will be spread about 2 acres. This is expected to help marginal farmers as it will provide them a smaller catchment area to market their produce. The model will also help bring down operational cost, said Sivakumar.

Talking to reporters on the sidelines of Custommerce, an industry event focusing on customer management, he said, the new initiatives will be targeting states, where the back-end operations and farm marketing are yet to evolve.

“For states such as Andhra Pradesh, Punjab and Karnataka, we have a different strategy. In these states, our focus will be on horticulture and Choupal Sagars and kiosks will help us improving the farm to market lineage. Besides, in coastal districts of AP, we are also helping farmers to take up aquaculture,” he said.

These initiatives, he said, would also help the company achieve higher export returns. “These kiosks are mainly information centres, where farmers can access information on foreign market requirements, traceability norms and other quality criteria. Also, we sell financial products including crop insurance to farmers. This will trigger them to adopt slightly risky but high return crops and farming practices like organic cultivation methods,” he said.

The company had earmarked to spend Rs 5,000 crore on its echoupal division since its inception in 2,000. It is still ploughing back money into the system though some of these centres have become selfsustainable. The plan is to continue to invest till 2012.

“We expect this venture to bring in returns after the expansion is completed,” he said.

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