S. No.

7
Rural Marketing
(For Class Circulation Only)

Taking the Internet to the villages and empowering rural India with information at the
click of a button is what best describes ITC's much acclaimed initiative - e-Choupal.
ITC's unique web based initiative offers farmers of India all the information, products and
services they need to enhance farm productivity, improve farm-gate price realisation and
cut transaction costs. With the e-Choupal farmers can access latest local and global
information on weather, scientific farming practices as well as market prices at the village
itself through this web portal - all in Hindi. It also facilitates the supply of high quality
farm inputs as well as purchase of commodities at their doorstep.
Given the literacy and infrastructure constraints at village level, this model is designed to
provide physical service support through a Choupal Sanchalak - himself a lead farmer who acts as the interface between computer terminal and the farmers. Full contents of this
site are therefore made available to the registered sanchalaks only.
In a presentation recently made on e-Choupal, ITC's International Business Division head
of research J Ravindra Kumar showed how the e-Choupal initiative gave farmers the
power of scale and better bargaining power when it came to selling their produce and
buying agri-inputs.
Kumar further said that through real-time multicasting ability of the Internet, it was now
possible to delink information from transaction and this in turn places the freedom of
choice in the hands of the farmer. Economic empowerment of the farmers was what the eChoupal aimed at. The e-Choupal also made it possible for the farmers to bundle
information, knowledge, and transaction from independent participants in a
collaborative business model to deliver unique value to the farmer and the business
enterprises simultaneously. Thus, the heavy dependency on the traditional institutional
infrastructure was reduced.
IT can make a difference with regard to heterogeneity was what Kumar emphasised. He
said that the Internet provided low-cost one-to-one interactive notwithstanding the
fragmentation and geographical dispersion.

At the end of the day what a farmer wants to achieve is higher income through increased
yields, improved quality and reduced transaction costs, which is exactly what e-Choupals
provided. These e-Choupals provided the power of scale to the small farmers, customised
knowledge despite heterogeneity and real-time information despite distances.

ITC's e-Choupal leverages IT to improve farmers decision making ability to align farm
output with market demands, and to improve productivity and brings in best of breed
partnerships. The company targeted the bottom rung of the farmers first as the company's
vision was to cover the largest segment of rural India thus spanning 100,000 villages
across 15 states by building capability to deliver superior shareholder value sustainably.
ITC's only mandate was that of Improving quality of life in rural India. And that it did.

E Chaupal Construct

S. No. 8
Rural Marketing
(For Class Circulation Only)

ITC e-Choupal
The Big Picture:
ITCs International Business Division, one of Indias largest exporters of agricultural
commodities, has conceived e-Choupal as a more efficient supply chain aimed at
delivering value to its customers around the world on a sustainable basis.
The e-Choupal model has been specifically designed to tackle the challenges posed by
the unique features of Indian agriculture, characterised by fragmented farms, weak
infrastructure and the involvement of numerous intermediaries, among others.
The Value Chain - Farm to Factory Gate:

e-Choupal also unshackles the potential of Indian farmer who has been trapped in a
vicious cycle of low risk taking ability ---> low investment ---> low productivity --->
weak market orientation ---> low value addition ---> low margin ---> low risk taking
ability. This made him and Indian agribusiness sector globally uncompetitive, despite rich
& abundant natural resources.
Such a market-led business model can enhance the competitiveness of Indian agriculture
and trigger a virtuous cycle of higher productivity, higher incomes, enlarged capacity for
farmer risk management, larger investments and higher quality and productivity.

Further, a growth in rural incomes will also unleash the latent demand for industrial
goods so necessary for the continued growth of the Indian economy. This will create
another virtuous cycle propelling the economy into a higher growth trajectory.

The Model in Action:

Appreciating the imperative of intermediaries in the Indian context, e-Choupal
leverages Information Technology to virtually cluster all the value chain participants,
delivering the same benefits as vertical integration does in mature agricultural economies
like the USA.
e-Choupal makes use of the physical transmission capabilities of current intermediaries
aggregation, logistics, counter-party risk and bridge financing while disintermediating
them from the chain of information flow and market signals.
With a judicious blend of click & mortar capabilities, village internet kiosks managed by
farmers called sanchalaks themselves, enable the agricultural community access
ready information in their local language on the weather & market prices, disseminate
knowledge on scientific farm practices & risk management, facilitate the sale of farm
inputs (now with embedded knowledge) and purchase farm produce from the farmers
doorsteps (decision making is now information-based).
Real-time information and customised knowledge provided by e-Choupal enhance the
ability of farmers to take decisions and align their farm output with market demand and
secure quality & productivity. The aggregation of the demand for farm inputs from
individual farmers gives them access to high quality inputs from established and reputed
manufacturers at fair prices. As a direct marketing channel, virtually linked to the mandi
system for price discovery, e-Choupal eliminates wasteful intermediation and multiple
handling. Thereby it significantly reduces transaction costs.

e-Choupal

ensures world-class quality in delivering all these goods & services through
several product / service specific partnerships with the leaders in the respective fields, in
addition to ITCs own expertise. While the farmers benefit through enhanced farm
productivity and higher farm gate prices, ITC benefits from the lower net cost of
procurement (despite offering better prices to the farmer) having eliminated costs in the
supply chain that do not add value.

The Status of Execution:

Launched in June 2000, 'e-Choupal', has already become the largest initiative among all
Internet-based interventions in rural India. 'e-Choupal' services today reach out to more
than 3.1 million farmers growing a range of crops - soyabean, coffee, wheat, rice, pulses,
shrimp - in over 31,000 villages through 5050 kiosks across six states (Madhya Pradesh,
Karnataka, Andhra Pradesh, Uttar Pradesh, Maharashtra and Rajasthan).
The problems encountered while setting up and managing these e-Choupals are
primarily of infrastructural inadequacies, including power supply, telecom connectivity
and bandwidth, apart from the challenge of imparting skills to the first time internet users
in remote and inaccessible areas of rural India.

Several alternative and innovative solutions some of them expensive are being
deployed to overcome these challenges e.g. Power back-up through batteries charged by
Solar panels, upgrading BSNL exchanges with RNS kits, installation of VSAT
equipment, Mobile Choupals, local caching of static content on website to stream in the
dynamic content more efficiently, 24x7 helpdesk etc.

Going forward, the roadmap includes plans to integrate bulk storage, handling &
transportation facilities to improve logistics efficiencies.
As Indias kissan Company, ITC has taken care to involve farmers in the designing and
management of the entire e-Choupal initiative. The active participation of farmers in
this rural initiative has created a sense of ownership in the project among the farmers.
They see the e-Choupal as the new age cooperative for all practical purposes.
This enthusiastic response from farmers has encouraged ITC to plan for the extension of
the e-Choupal initiative to altogether 15 states across India over the next few years. On
the anvil are plans to channelise services related to micro-credit, insurance, health and
education through the same e-Choupal infrastructure.
(Oct. 2004)

S. No. 9
Rural Marketing
(For Class Circulation Only)
ITCs Rural Symphony
HARDOI in western Uttar Pradesh is a little over 90 km from Lucknow, the state capital.
Its the kind of place you routinely see in Hindi films; mile upon mile of lonely stretches
punctuated by villages steeped in poverty, an odd farmer thudding around on a motor
cycle, gunman in tow, and wheat crops for as far as the eye can see. Theres nothing here
to indicate that things are any different from what they have been for centuries. But
appearances are deceptive. A few months ago, ITCs International Business Division
(IBD) trained its sights on Hardoi and the wheat it grows. Teams of ITC executives,
trained in rural marketing, moved in to roll out Project Symphony, which chairman
Yogesh C. Deveshwar reckons has the potential to transform the face of his company.
The folks at the hamlet of Arori, 12 km from the nearest highway, arent cued into the
subtleties of Project Symphony. But that does not stop them from being a delighted lot.
Thanks to the project, they now go to what ITC calls an e-choupal, where they use
computers and the Internet to conduct their business. Life is easier for them now.
Thats good news for ITC. Because if ITC manages to capture the value of this wheat
over the next couple of months through the e-choupals, itll be a step closer to its dream
of being Indias largest integrated agri-produce processor which services 100,000 villages
covering 10 million farmers by 2007. But ITC has a more audacious gameplan. It wants
to create what Deveshwar calls "an information superhighway to connect the rural
economy". That means using the e-choupals as a single point of contact between farmers
and a range of suppliers of agri-inputs and consumer goods- Monsanto, Eicher,
Nagarjuna Fertilizers, et al- that are testing the network.
So what does ITC hope to achieve with its e-choupals? And how is it different from other
projects initiated around the same time by companies like Mahindra & Mahindra, Rallis,
Tata Chemicals and EID Parry? In September 2001, we first saw the modelled being
rolled out across soya farms in Dewas near Indore. The idea was to gain control over the
highly competitive soyabean market in Madhya Pradesh, home to traditional soya giants
like the Rs 2,400-crore Ruchi Industries that had a virtual stranglehold on the market.
Since then, other ventures have struggled to scale up ITCs soya choupals, on the other
hand, are now all over MP and cater to more than 6,000 villages. Last year, the company
traded soyabean worth Rs 160 crore. This season alone, it has traded more soya than it
did all of last year. Even competitors acknowledge the achievement. Says Kairas
Vakharia, CEO, Mahindra Shubh Labh: "They (ITC) have done a remarkable job."
The numbers may sound small in the larger scheme of things, but the subtleties of ITCs
e-choupal initiatives are already being picked out by management gurus as evidence of
how corporations can smartly fill institutional voids in emerging markets using the power
of information technology. In a recent article published in CIO, Mohanbir Sawhney of the

Kellogg School of Management says: "ITCs long-term vision for e-choupals is grand.
But the company started with a modest and focused value proposition- helping farmers
get a better price for their crops. This phased approach allows ITC to gain credibility
through early successes and learn from its mistakes." Harvard Business School professor
Krishna Palepu shares Sawhneys sentiments: "It is a brilliant idea. If this experiment
works, you will have for the first time, enough communication capacity to connect with a
market segment that is currently underserved, but clearly has the purchasing power. On
this backbone, one can imagine other FMCG services and products being offered. But
like everything else, it depends on execution." For students at the Kellogg and Harvard
B-schools, the model is a case study.
At ITCs headquarters in Kolkata, Deveshwar is well aware that the company is on to
something big. Although specific numbers are hard to come by at this stage, ITC reckons
that over the next three years, this project could add over Rs 100 crore to ITCs
bottomline on investments of Rs 30 crore so far.
But now, much of that gameplan hinges on the Hardoi experiment. Its an uphill task. In
fact, driving through Hardoi is like travelling in a time machine to the wheat belts of the
American mid-west in the early 1900s. Just replace Hardois gun-toting farmer with a
rancher on horseback, gun slung over his shoulder. Back then, the problems were pretty
much the same as farmers in Hardoi now live with- small regional markets and no
standard grading systems for the wheat. Farmers, even if big, were exploited by traders,
who often brought the wheat at low prices, claiming it was of poor quality or that there
was weak demand. Storage, handling and transport facilities were limited. So
intermediaries like traders were needed. Consequently, intermediary margins were high,
accurate market signals non-existent, wastage rampant, and processing yields low.
Things are different in the American mid-west today. Its farmers produce 36 bushels of
wheat per acre, one of the highest yields in the world, and its millers achieve flour
extraction levels of 75%. Average waste levels of 2% are among the lowest in the world,
and well ahead of the 8-11% in India. Wheat farmers in the US now get 92% of the
delivered mill price as opposed to less than 70% that Indian farmers now take home. The
transformation in America happened for one simple reason- the emergence of two large,
integrated grain processors, Cargill and Archer Daniel Midland (ADM). They ensured a
supply of high-yielding seeds, facilitated rural credit, set up infrastructure to store and
handle grain, and pushed milling technology to improve extraction rates. That is why in
the American mid-west, farmers now drive sleek cars on tarmac as smooth as silk. They
continue to carry guns, but thats a different story.
The moot point is - can ITC do a Cargill? Perhaps not. "Building a vertically-integrated
chain like Cargill will take huge resources, which would be impossible to sustain, says S.
Sivakumar, CEO of ITCs International Business Division (IBD). So what does ITC do?
Simple. It builds an asset-light model. To figure how it works, you have to first
understand how the model was developed and, more importantly, why it worked for soya.
Mission Impossible

To start with, think of a village square- the kind of place we call choupal in north India.
Here people gather to smoke the hookah, watch TV, exchange gossip, laugh a while, talk
work and the weather, before they finally head home. Quaint, but not worth writing home
about. Unless you enable it with a PC, provide access to the Internet, call it an e-choupal,
and build a business model around it in a uniquely Indian way. Conventionally, a typical
farmer sold his produce to a small trader called the kaccha adat. This man, in turn, sold it
to a larger trader called the pakka adat. From here, the produce found its way to the local
mandi (market), where a large trader came into the picture. Brokers touched base with
these large traders and got the soya sold to a processor like ITC. Going through a loop as
this meant procurement costs were as high as Rs 700 per tonne of soya. Add losses in
transit and taxes and the numbers go up even further.
Conventional wisdom demanded ITC build infrastructure to perform the functions of
these intermediaries. At this point, ITCs first fundamental insight kicked in. "You cant
lop off all intermediaries. Each of them performs a valuable function," says Sivakumar.
For instance, one intermediary aggregates the produce, another one takes acre of
logistics, theres somebody else who provides transportation. It is costlier doing it
yourself.
Instead, he reckoned that disintermediation had to take place at the level of information
flows. What it means is that because the farmer lacked the resources to take his wheat to
the mandi, he had to rely on information provided by others in the value chain and,
consequently, accept the prices offered. At the end of all this, the farmer ended up a loser.
"The intermediary has information and, thus, extracts a greater margin. So we said, if you
bring this information to the farmer and go-betweens where they are adding value
directly, you have a business model."
To do that, ITC first leased three soya processing and collection centres. These centres
were created in the mid-90s and had, since then, gone under. Then it started scouting
villages around these centres for lead farmers (sanchalaks) to head each choupal. The
computer was placed at the sanchalaks house and he was trained to use it. This way, ITC
did not have to invest in kiosks. Farmers accepted the concept because the co-ordination
was done by one of them. But the sanchalak had to be chosen very carefully. He couldnt
be too big a farmer because then his interest in making the choupal work would be low.
And if he were a small farmer, the rest of his community wouldnt accept him. Having
put them in place, ITC started to pump information on daily mandi prices through the
Internet into the sanchalaks homes. It also supplied them with information on best
practices in farming and weather forecasts. Farmers would gather as they did at choupals,
check the prices and head out to the collection centres to sell their produce. The idea of
heading out to the collection centres struck the right kind of chords among the farming
community. Here, because systems were efficient, the transactions are completed in a few
hours rather than days as they used to. So they came to the collection centres in droves.
The sanchalaks, for their part in directing farmers to these collection centres, were paid
0.5% for each tonne of soyabean that originated from their choupal.

Then there were commission agents at mandis to be dealt with. Traditionally, these were
the people who controlled information on prices and, hence, were quite powerful. The
model knocked the wind out of their sails and they were understandably upset. "We were
clear from the outset that intermediaries had a role to play and that e-biz couldnt
disintermediate them," says Sivakumar. So a new role was envisaged for them: they
would be samyojaks, or co-ordinators. Not only would they use their ties in villages to
nominate sanchalaks, but they would also be responsible for the relevant mandi
documentation. In farflung villages, situated miles away from ITCs processing centres,
the samyojaks would also aggregate the grain and bring it to ITC. For this, he was paid a
1% commission. Initially, many were apprehensive, but over time, most of them came in
because when the math was worked out, most intermediaries figured they werent losing
anything. What they lost in margins per unit they made up in the increased volume they
traded. At the end of all these exercises, ITC reduced the cost of procurement to Rs 200 a
tonne from Rs 700 a tonne. That translated into immediate savings of Rs 500 for both the
farmer and ITC.
Armed with these numbers, ITC started looking at how viable it would be if the project
were scaled up. The math looked roughly like this. On an average, it cost Rs 40,000 to set
up a basic choupal. In places where connectivity was terribly poor, and telephone lines to
connect to the Internet still a pipe dream, ITC would have to invest in V-SATs. These
investments jacked up costs by as much as Rs 1 lakh. ITC figures the money could be
recouped in three sowing seasons (18 months). The numbers worked in their favour and
they went all out to saturate MP. At the time of going to print, MP had 1,045 e-choupals
spread over 6,000 villages that covered six lakh farmers.
Having done that, one thing was clear to ITC. Soyabean, at the end of the day, is only a 5
million-tonne crop in MP. Wheat in UP, on the other hand, is 14 times bigger. If they are
to be players of long-term consequence, they have to tackle wheat. But replicating the
soya model for wheat is quite another story.
Mission Hardoi
As our car approaches Hardoi, V. Sreedhar and Rakesh Pandey, managers at ITCs Hardoi
office, excitedly point at the crop. They think it is looking good. The temperature, at
about 8 degree Celsius, is just right. "A days rain and all will be perfect," says Sreedhar.
We finally break journey at Sant Ram Singhs house. He was among the first to sign on as
a sanchalak for the wheat choupal. The managers are greeted with the best palak pakodas
in the world and warmth reserved for close friends. Over the last couple of weeks,
Sreedhar and Pandey have been travelling routinely to Hardoi and meticulously
documenting the characteristics of every strain of wheat each farmer in Sant Ram Singhs
village grows and punching it into massive databases. Itll come in handy when they start
tuning the finer aspects of their revenue model with the wheat crop.
After all, wheat is very different from soya. The numbers tell you that. After eliminating
the inefficiencies that existed on the wheat value chain in much the same way it did with
soya, ITC has, until now, managed to save between Rs 55-65 per tonne, shaving off

almost 10% of the procurement cost. When IBD worked backwards, they figured that
with these kind of savings, theyd never be able to recoup their investments on the
choupal. At best, they could manage 30% of their costs. From ITCs perspective, that just
isnt good enough in the long run.
Remember what we told you about the lack of standard grading systems in North
America during the early 1900s? The problem is acute in Hardoi. It is compounded by the
fact that the Food Corporation of India, the largest grain procurement agency in India,
does not really care what it buys.
Because the high quality wheat that goes into making their bread is available only in
limited quantities, companies like McDonalds can scale up operations only to a limit. Or
for Britannia, the system makes it difficult for them to produce premium biscuits. Even
packaged wheat flour (atta), a market ITC hopes to be in when its Aashirvaad brand is
launched. In atta, penetration never took off and currently hovers at just around 3%. The
problem here really is one of inconsistent quality.
"The other thing," says Sivakumar, "is that atta preferred in Delhi is very different from
that liked in Mumbai. Few people understand these subtleties and nobody addresses these
problems." Is these concerns are addressed, ITC reckoned it could charge premium prices
and make Rs 1,000 from every tonne of wheat it traded in. Equally importantly, farmers
would be paid adequately for premium quality produce.
To do all of this, the origins of the wheat being offered ought to be tracked down. And
thats where the databases Sreedhar and Pandey are putting together come into play.
When what each farmer produces is known, the wheat can be segregated at its origin.
This makes it easier for IBD to sell wheat that meets the exacting specifications of
McDonalds or Britannia. Or. For that matter, ITC could sell various strains of
Aashirvaad at various price points depending on the quality.
There are other attendant benefits in preserving the identity of the wheat. For instance,
take sharbati, a grade of premium wheat. It sells for about Rs 12 a kg. There are grades of
wheat similar to sharbati, but do not command a premium. ITC could blend wheat
costing, say, Rs 7 with the more expensive sharbati, create the same texture, properties
and taste, pay the farmer Rs 8, sell it at Rs 12, and still make a clean kill. That is often the
standard practice among most processors.
Having said that, reaping the benefits of traceability wont be easy. Not enough
premium wheat is grown in the country- largely a function of the fact that until now,
incentives to grow premium wheat didnt exist. This means a few things to ITCs shortand medium- term future. While there are a few dozen wheat strains that grow across the
country, ITC will have to take a call on what strains of wheat to promote. Then it will
have to build sufficient incentives for farmers to grow the kind of wheat ITC wants. Says
a food analyst who declined to be named: "I guess itll be at least three years before ITC
can hope to reap the benefits of inducting traceability into their business model."

Mission Impossible II
Until now, this story has revolved almost exclusively around a single domain: how in the
world does ITC plan to fine-tune its procurement models and reduce inefficiencies? Lets
look at it from another perspective. Assume an ideal world where investments from the
soya choupals are recouped in three seasons and those from wheat in five. At the end of
this time frame, anything else ITC chooses to do with the infrastructure is either free or
comes at a marginal incremental cost. The infrastructure includes assets in terms of
computers, modems and solar panels for connectivity; a presence in strategic locations
and warehousing facilities; and finally, relationships built over time with samyojaks,
sanchalaks and farmers.
The point here is a simple one really: why shouldnt these channels be used to sell
whatever the farmer needs? More than anything else, thats what chairman Deveshwar is
banking on. "With the choupal infrastructure in place, we are hoping to create a system
that allows a two-way flow of products and services to the rural economy," he says.
In MP, for instance, ITC tied up with Monsanto to sell high-yielding varieties of seeds.
Here, the sanchalak collects money from farmers and places firm orders. Monsanto
ensures delivery. The sanchalak earns a commission of 2-3%. The samyojak, who now
serves a distribution point for sanchalaks in his catchment area, gets a 1-3% commission
for his services. As for ITC itself, it collects anywhere between 2-3% for each transaction
conducted on the network it has built. Why seeds? For that matter, anything from FMCG
and consumer durables could be delivered through the network. Lanterns and gas-based
stoves, for instance, are in high demand where power shortages are endemic. Having said
this, a pertinent question emerges. What does ITC bring to the table that could lure
companies targeting rural areas? Theoretically, the answers are fairly simple.

In 2000, ITC took an initiative to develop direct contact with farmers who lived in
far-flung villages in Madhya Pradesh. ITC's E-choupal was the result of this
initiative.

First, sanchalaks are as close as any company can get to the end customer. This means
they hold the potential to pick up market signals and consumer information first and
transmit them back to the distribution channel. For companies on the network, this means
having a finger on the pulse of rural India.
Second, the way most FMCG companies currently operate, they are most viable while
servicing populations above 100,000. Remember the clich India lives in its villages? The
clich continues to hold true. There are enormous pockets of widely dispersed markets
where population sizes are below 2,000. ITC, with 1.5 million outlets across the country,
an army of mobile traders and cycle-based distributors claim to understand the nuances of
catering to these populations. So the value proposition here really is that by going on
board with ITC, a potential seller does not have to invest in the infrastructure.
Finally, there is the business of endorsement. A company using the network can ask ITC
to endorse a product. ITC may do that if the product meets certain specifications.
There is no rocket science involved with the revenue model here. ITC simply takes a
small transaction fee for every deal that takes place on its network. The upside potential
is huge. The market for agricultural inputs in India has been valued at Rs 175,000 crore.
As against this, the tobacco market, where ITC is the strongest Indian player, is worth
only Rs 15,000 crore.
So far, from the pilots that ITC has run, things havent quite gone ITC way. Until now,
the network has generated just about Rs 7 crore. To a large extent, this is a function of the
fact that ITC has, until now, dabbled only the products chemicals, herbicides and seeds,
for instance- that are sold strictly on cash payment. Rural India doesnt always work that
way though. The current demand for rural credit is in the region of Rs 143,000 crore. This
reality hasnt been lost on ITC. That is why the company is trying out various initiatives
to integrate credit into its portfolio of offerings. This includes offering kisan credit cards
and roping in banks like ICICI with interests in offering rural credit to opt in to the
network. The second issue thats impeding the network from taking off are channel
conflicts. Most players trying to sell in the rural markets have invested in sales and
distribution channels. Admits Sivakumar: "Channel conflict is a very live issue." There
are glitches to be ironed out. But dont forget India lives in 6 lakh villages.
The Next Step
While the wheat experiment in Hardoi will test the robustness of ITCs model, the
company isnt waiting for the results. "We realise we must keep investing in the model,
keeping in mind our corporate strategy of gaining access to the rural economy. Results
are bound to come," says Deveshwar.
In its existing markets, the model is expanding at the rate of five choupals every day. In
2004, the company will start setting up e-choupals in 11 other states including West
Bengal, Rajasthan, Maharashtra, Tamil Nadu and Kerala, where the company will explore
horticulture, paddy and possibly cotton.

Of course, much of all this will depend on whether the gun-toting farmers of Hardoi give
the project a thumbs up.
BUILD A COMMUNITY-CENTRIC MODEL
(or lessons from e-choupal implementation)
Allow the community to manage itself
To build trust, ITC carefully hand-picked a farmer, as a sanchalak, to lead a community
of farmers. Since he is typically a person of stature in his community, the sanchalak finds
it far easier to enlist the support of his brethren. Of late, to strengthen community ties,
ITC has begun offering rewards for community-building efforts.
Dont disintermediate, instead redefine roles
ITC took care to ensure that it did not knock out the intermediaries like the commission
agent from the value chain. Instead, it gave them a new role without disturbing their
income flow. As a result, the channel did not react adversely and become a hindrance.
Put existing relationships to use
ITCs cigarette distributors came in handy when the company began setting up the wheat
choupals in UP. Cigarette volumes had begun to plateau, so these wholesale distributors
were open to a new revenue stream. They became samyojaks. They became responsible
for storage, mandi documentation and maintaining records.
Offer immediate gains for buy-in
Since ITCs model offered immediate gains for farmers rather then savings some time in
the future, it was easier to sell the concept.
Customer feedback as a source of innovation
Any new initiative is first tested with the sanchalaks to check if it would be viable.
Besides, regular choupal meets are held. These help generate new ideas.
(Charles Assisi & Indrajit Gupta, Business World, Jan. 20, 2003)

S. No. 10

Rural Marketing
(For Class Circulation Only)
ITC eChoupal

Brief description

Through creative use of Information Technology, ITC eChoupal creates sustainable

shareholder value by reorganizing the agri-commodity supply chains simultaneously
improving the competitiveness of small farmer agriculture, enhancing rural prosperity and
contributing to the quality of life in rural India.

Vision, Objectives and Goals

Resource flows are the results of entrepreneurial resourcefulness, and competitive

enterprises create successful economies. Resourcefulness provides a positive attitude to
economic development. This attitude requires suitable market accessories such as eChoupal
that spur economic activity and then raise the modal incomes of millions of households in
thousands of agrarian communities leading to very large-scale development (VLSD).
IT, e-commerce and virtual networks have a substantive impact on the resourcefulness of
the frontline actors in the farm economy. ITC eChoupal creatively leverages information
technology (IT) to set up a meta-market in favour of India's small and poor farmers, who
would otherwise continue to operate and transact in 'unevolved' markets where the rentseeking vested interests exploit their disadvantaged position. eChoupal also sidesteps the
value-sapping problems caused by fragmentation, dispersion, heterogeneity and weak
infrastructure. ITC takes on the role of a Network Orchestrator in this meta-market by
stitching together an end-to-end solution. The solution simultaneously addresses the
viability concerns of the participating companies by virtually aggregating the demand from
thousands of small farmers, and the value-for-money concerns of the farmers by creating
competition among the companies in each leg of the value chain.
eChoupal is an integral part of ITC's competitive strategy to create shareholder value. The
creation of shareholder value is enmeshed with the economic empowerment, market linkage
needs and increase in modal incomes of India's agrarian communities leading to enhanced
quality of life in rural India
ITC eChoupal, with its digital infrastructure and associated human and organization
capacities built (5400 choupals / 35000 villages), has the vision of reaching and servicing
agriculture, healthcare, education, gender and community needs of 100,000 villages / 10
million households by 2010.

Transferability

The basic tent of the project has been that a mutually beneficial model would deliver a
sustainable value. The farmers primary beneficiaries, Sanchalaks bridge with the
community, participating companies, rural consumers and ITC itself have befitted through a
robust commercial relationship. Just like any other successful business model, the
transferability, scalability, viability and endurance are a determinant of participants ability
to continuously deliver a clear and measurable value.
The ITC eChoupal model demonstrates that a large corporation can play a major role in
reorganizing markets and increasing the efficiency of an agricultural system, while doing so
in ways that benefit farmers and rural communities as well as shareholders. The case also
shows the key role of information technology in this case provided and maintained by a
corporation, but used by local farmersin helping bring about transparency, increased
access to information, and rural transformation. ITC eChoupal has catalyzed the formation
of communities vertical communities (reflecting homogenous needs viz soyabean
farmers) and horizontal communities (reflecting heterogeneous wants viz rural consumers)
based on a new economic hierarchy facilitated by benefits through improvement of their
primary income generation activity e.g., agriculture and equitable distribution of surplus
value across the stakeholders.
From the inception, the participation of diverse agencies, each with their specialized
competencies, with ITC playing an orchestrating role, ensured empowerment of the
communities, scale up beyond critical mass levels and consequently set the basis for a much
higher order of value generation and sharing.
The project started in Madhya Pradesh (Central India) with a pilot of 6 choupals (village
community kiosks) in June 2000, and as of today, lent itself to be scaled up to 5400
choupals across 6 states (MP, UP, Karnataka, AP, Maharastra, Rajasthan) reaching
3,500,000 farmers engaged in 12 agri-commodities.
ITC eChoupal model robustness derives from the astute blending of the core competencies
of ITC, specializations of diverse agencies, lessons learnt through the project approach of
rational experimentation what we call Roll Out, Fix It, Scale Up, and the conceptual
strength of the model tested across different regions, crops and socio-economic conditions.

Project summary

ITC eChoupal is designed (1) to address challenges faced by small farmers due to
institution voids, low risk appetite, numerous intermediaries and infrastructure bottlenecks
(2) to manage the intricate dynamics of multiple agri-value chains for global
competitiveness and (3) to suit the socio-economic character of different regions. As a
collaborative and sustainable model built through innovative usage of ICTs, it is, on one
hand, a globally competitive demand led food supply chain and on the other, a powerful
vehicle that catalyzes rural transformation, mitigate rural isolation and facilitate a cost
effective channel for quality goods and services contributing to a better quality of life in
rural India.

ITC eChoupal is a one-stop-shop on the internet, transmitting Information (weather, prices,

news), transferring Knowledge (farm management, risk management), facilitating sales of
Farm Inputs & Consumption goods (screened for quality, price) and offering the choice of
an alternative Output marketing channel (convenience, lower transaction costs) to the
farmer right at his doorstep.
The model exemplifies sustainable convergence of apparently contradictory objectives of
shareholder value maximization and creation of social wealth. It is the core tenet that drives
and is key to the scalability of the model. The project started in Madhya Pradesh (Central
India) with a pilot of 6 choupals (village community kiosks) in June 2000, and as of today,
is scaled up to 5400 choupals across 6 states (MP, UP, Karnataka, AP, Maharastra,
Rajasthan) reaching 3,500,000 farmers engaged in 12 agri-commodities in 35000 villages.
ITC eChoupal, with its digital infrastructure and associated human and organization
capacities built, has already become rural Indias largest Internet based intervention and is
surging towards the vision of servicing 100,000 villages by 2010 reaching out to 10 million
farming households.
In the last four years of operations, our market share has gone up from 8% to 12%, the
transaction costs have come down from 8% to 2% and the farmers price realizations have
gone up by 20 to 25% through better price discovery, low wastages, yield improvements
and new trading contract formats. The e-Choupal system gives farmers more control over
their choices, provides a transparent process, a higher profit margin on their crops, access to
information that improves their productivity and above all respect and fairness for the local
people and communities.
The eChoupal has become a reliable resource development platform by enabling a low-cost
and highly effective channel for distribution and marketing of a range of goods & services
into rural India (packaged consumer goods, healthcare, home appliances, education, life and
general insurance products etc) triggering a transformation in rural landscape and
livelihoods.
The project is awarded ICC-UNDP-IBLF World Business Award in 2004 for furthering
Millennium Development Goals & Development Gateway Award in 2005 for contributions
to development of rural communities.

(www.stockholmchallenge.se/data/itc_echoupal)