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"SFPCL" as the Golden Gateway towards Success of Agribusiness in India*

CASE STUDY, MARKETING MANAGEMENT
ET Cases, 24 pages
AUTHOR(S) : Prof. Vidhya Srinivas (Assistant Professor, Marketing & HR, Institute for Technology and Management, Navi Mumbai)

Case Preview

“SFPCL” as the Golden Gateway towards Success of Agribusiness in India

 

India is primarily an agriculture country with 60% of its population being dependent directly or indirectly on agriculture. Based on the website policy proposals from India though India is presently the world’s largest producer of pulses and second largest producer of rice and wheat in the world, we still struggle to be living in subsistence. Though it still provides livelihood to many it is still governed by the natural conditions of the country. The various types of farming done in the country includes Subsistence farmingwhich includes production for self-consumption, Commercial farming-where the farmer’s produce is sold in the market for earning money. In this system, farmers use inputs like irrigation, chemical fertilizers, insecticides, pesticides and high yield of variety of seeds, plantation farming – which includes growing of cash crops like tea, rubber spices, and mixed farming – includes raising crops and raring animals simultaneously.

Various crops that the country produces include: Food Grains which include rice, millets, pulses, maze; Commercial crops like Jute, Cotton, tobacco, oil seeds; Plantation crops like tea, rubber; Horticulture  which includes seasonal fruits and vegetables.

Current Situation of Agriculture in India

As per sectorial report August 2014 from IBEF, Agriculture is expected to grow at 4.6 % in 2014. Agriculture production of food grains this year is expected to break the 2011-12 record of 259 million tons (MT). More importantly, agricultural profitability has increased over the last decade with record increases in MSPs (minimum support prices for agricultural produce) for all covered crops. MSP increase in the past 10 years, between 2004-05 to 2014-15, vary from about 125 % for food grains such as wheat and paddy to over 200 % for pulses like moong dal........

Horticulture in India

As per ICAR reports the Horticulture (fruits like Grapes, Mangoes, Pomegranate also including nuts, vegetables including potato, tuber crops, mushroom, ornamental plants including cut flowers, spices, plantation crops and medicinal and aromatic plants) have become a key drivers for economic development in many of the states in the country and it contributes 30.4 % to GDP of agriculture, which calls for technology-led development, where Division of Horticulture of ICAR is playing a pivotal role. The research priorities are for genetic resource enhancement and its utilization, enhancing the efficiency of production and reducing the losses in environment friendly manner...........

Glimpses of Indian Horticulture

• Globally second largest producer of Fruits and vegetables

• Largest producer of mango, banana, coconut, cashew, papaya, pomegranate, etc.

• Largest producer and exporter of spices

• Ranks first in productivity of grapes, banana, cassava, peas, papaya etc.

• Export growth of fresh fruits and vegetables in term of value is 14% and of processed fruits and vegetables is 16.27%

• The focused attention on horticulture has paid dividend and resulted in increased production and export. The production of horticultural produce has increased 7-fold which ensured nutritional security and employment opportunities.

• ............

Problems in Horticulture Marketing

• Horticultural commodities are highly perishable due to which wastages are approximately 30%

• The horticulture markets are highly unorganized and sparsely spread.

• Markets are inefficient, which is evidenced by price gap between producer’s price and consumer rupee.

• ...............

The Cooperative Option

Cooperatives is one form of organization that enables farmers to organize themselves as collectives and move up the value chain by ownership and operation of their own processing units and sometimes extend the chain up to the retail level. India has a large number of cooperative institutions in a vast range of enterprise sectors, but there have been few successes that can be talked about. In fact, the only stars are in the cooperative dairy sector and that too limited to a few states. The cooperative experience in our country has not been a very pleasant one, as cooperatives have largely been state promoted, with a focus on welfare rather than to do business on commercial lines..............

Fruits and Vegetable Scenario in India

Production of Fruits and Vegetables

Fruits and vegetables are seasonal and perishable in nature. Due to insufficient handling and transport facilities, poor availability of infrastructure, as a result of which, the surplus raw material cannot be consumed in time in urban areas and result of this affects the price of the produce. Thus the farmers- producers do not get a good price for their produce and a large amount of it gets spoiled resulting in a huge loss. As fruit and vegetable basket of the world, ................

The Current Supply Chain Status

The main reason for the poor state of horticulture appears to be the long and fragmented supply chain. The supply chain ranges from farmer to orchard farm owner to consolidator or aggregator (commission agent1) to Trader/Transporter (Commission agent 2) to wholesaler to small roadside vendor/Retailer/Super market/ Handcart vendor to finally consumer...............

SFPCL: The Golden Gateway

One of the best ways for “inclusive growth” in promoting rural vibrancy is agriculture production by farmer collectives which will sustain the economic strength. This can be achieved by farmer induced quality production, value addition, storage and marketing. The farmer collectives can be “Farmer Owned Companies” and is more relevant under the economic liberalization and market economy.............

Prerequisites of a Farmer Producer Company

• Minimum five Directors are required

• Minimum 10 primary producer members or two producer institutional members and maximum any number

• Only primary producer can be member or producer institutions

• Only One type of Share Equity

• Only one vote irrespective of number of shares held

• .............

Objectives

SFPCL was therefore established with the aims to make organization of farmers from Nasik and surrounding districts particularly of horticulture crop producers with major objectives as follows:

• To harness the knowledge and innovative technologies of growing and protecting crops using low-cost and eco-friendly approaches by providing right advice at right time.

• Minimizing the cost of production by providing and preparing quality inputs at minimum cost.

• Optimization of revenue by using innovative systems of marketing farmers produce.

• Establish backward linkages with farmers for supply of raw material by providing them necessary agro inputs, training and extension service and also providing them assured market place for their produce.

• ....................

SWOT of SFPCL

Strength:

1. Location: The SFPCL Project is proposed at Mohadi, Tal. Dindori , Dist. Nasik which is just 20 KM from Nasik city and 10 KM from Mumbai - Agra National Highway. The surrounding area of the proposed project is well known for grape, onion, tomatoes & other horticulture crops in India. . The regions identified for the purpose of this project in Maharashtra..................

2. Excellent Infrastructure: General considerations like of an eco- industrial facility by maximizing green space and open spaces, and provision of green belts have been rendered. The design envisages functional and accessible work place by incorporating prudent and scientific planning principles and includes the following: .................

COMPETITION for SFPCL

There are 10 strong players in the fruit and grapes market but they are prominently traders and only SFPCL stands out as a producer company. Mahindra ShubLabh caters to the farmers with land holdings between 15 to 20 acres and have ye not served the marginal farmers. They serve to the high end farmers and provide miniscule consulting and majority in services as packaging and distribution services for fresh produce both domestically and abroad............

MARKETING STRATEGIES for Horticulture produce

The market analysis covers the following details about:

The overall market, Changes in the market, Market Channels, pricing and costing, Marketing Information system

Horticulture marketing in India:

• Most of the horticultural commodities in India operate under the normal forces of Demand and Supply

•The buying and selling of the horticulture produce takes place in the market yards where numbers of market functionaries are involved.

• ...................

Retailing Business Model at SFPCL

SFPCL follows the Value Chain Business Model (VCM) for retailing FFV. Organized retailers who adopt VCM procure the produces directly from farmers and sell to customers by avoiding intermediaries. This model is based on its core growth strategy of backward integration and progressing towards building an entire value chain starting from the farmers to the end consumers. Very fewer players are involved in this model compared to the traditional retailing model or organized retailer’s hub and spoke model............

Marketing Strategy for Fresh Fruits & Vegetables (FFV) adopted by ©SFPCL

Companies with a well-structured marketing department and with the right marketing strategy will be better-placed than their competitors to access new markets and increase their market share. Their revenue sources will be more stable and their customer loyalty will be higher. Excellent Quality, branding, packaging and after sales are key success factors to SFPCL.........

Exhibits

Exhibit I: Wastage in the Various Crops

Exhibit II: SWOT Analysis of Farmer Producer Company

Exhibit IV: SFPCL Markets

Annexures

Annexure I: Profile of Mr. Vilas Vishnu Shinde

Annexure II: Project Details

Annexure III: Project Timelines

Annexure IV: Pictures of SFPCL

Annexure V: Selection of Location

Annexure VI: Growth in the Number of Registered Farmers in SFPCL

Annexure VII: Food Processing Industry

Exhibit III:Total export to EU Market for the year 2013 and 2014

Teaching Note Preview

“SFPCL” as the Golden Gateway towards Success of Agribusiness in India

 

Synopsis

The Case entitled “SFPCL The golden gateway towards success of Agribusiness in India” covers various important aspects of the current state of Agriculture in the country. Though India is known to be an Agrarian Economy, the conditions prevailing for the farmers are still below subsistence level. Poverty, illiteracy, family size, small land holdings, societal norms, natural calamities, suicides all put together adds to the agonies to these farmers. There have been the state regulation of agricultural markets was created to protect farmers from the exploitation of intermediaries and traders and also to ensure better prices and timely payment for their produce. But with passing time these markets have, however, have become more bureaucratic conservative and have acquired the status of restrictive and monopolistic markets, providing no help in direct and free marketing, organized retailing and smooth raw material supplies to agro-industries. There is, in the process, an enormous increase in the cost of marketing and farmers end up getting a low price for their produce. Post-harvest losses are estimated to be of the order of 5%-7 % in food grains and 25%-30 % in the case of fruits and vegetables. In this scenario though there are many private players in the market as exporters and supply chain agents, they are more driven to profits rather than bend towards farmer’s welfare. It is important for the farmers to be self-reliant and self-sufficient and this is possible by being a “Farmer Producer Company”. There have been many FPC existing in India, predominantly in the South of the country, but SFPCL has embarked a niche in the agricultural fraternity.................

Case Positioning and Setting

The case study can be used with different perspectives, under the following subject heads as Rural Marketing and/or Agribusiness Marketing. This case can also be used as innovative marketing strategies with Agriculture as the base, Farmer Producer Company (FPC) as an extended and innovative way in Entrepreneurship, innovative ways of Branding and marketing F &V, also as a part of International Marketing. This case can be used as a USP, as value added, as way forward, as assessing the current situation, etc....................

Expected Learning Outcomes

The case covers various aspects of the business which includes:

  • • Current state of agriculture especially the horticulture market in India
  • • Issues that farmers face, and dealt with in an Agri-economy like India
  • • Emerging concept of Farmer producer company
  • • Evolution of the concept of Farm to Fork
  • • Innovative models in Marketing for a FPC as niche as SFPCL

 

Assignment Questions

  • I. What are the various options of minimizing the risk on the farmer’s produce and getting the due credit to farmers for his produce?
  • II. What are various marketing strategies commonly practiced for marketing horticulture produce in India?
  • III. Explain the Export procedure for F & V.
  • IV. .......................

 

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Abstract


India has been an agriculturist country. With the retail boom in the country most of the corporates have been venturing into agribusiness, as there has been a dramatic shift from purchasing at neighborhood kirana stores to shopping at supermarkets. But along with this the truth remains that between 1995 and 2010, 1.5 lakh farmers committed suicide across the country.

The case will primarily explore, "SFPCL" as the golden gateway towards success of agribusiness in India. This case study tries to assess the problems faced by the farmers in general along with how farming can be looked at, as a profitable sector. This case will also assess the evergreen concept of “Co-operatives".

Though India has a large number of co-operative institutions in a vast range of enterprise sectors there are very few success stories recorded, except for the co-operative dairy sector because the co-operatives are primarily focused on welfare than on commercial lines. The corporates have therefore never emerged as successful business enterprises but only as extended areas of state.

The Mutually Aided Co-Operative Societies (MACS) attempted to act as a remedy not as a permanent cure as it was not accepted by many states. The case analyses a progressive move taken by the farmers from Nasik and surrounding districts and they have come together to develop “Sahyadri Farmers Producers Company Ltd. “(SFPCL) specifically concentrating in the areas of horticulture.

SFPCL aims to include low-cost approaches and cost of production, creating innovative systems and creating retail chain in horticulture produce.



* GSMC 2014, IIM Raipur

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