- 1. Business HeadRural Retail & Agribusiness Milk
Procurement ,G.S.Singh 2009 Solus Logistics Pvt. Ltd F-213/A2nd
floor , Lado Sarai,New Delhi+91 11 42609111+91 1142609114Ganesh
Singh/ RR& AB
2. Page 2 of 14 Milk Procurement Rural Retail & Agribusiness
CONTENTSContent Page No.Background 3-4Kissan Unnati Kendra 5( A new
Generation Rural Business Hubs )Why Rural Retail &
Agribusiness5Dairy Business An update 6Why Dairy Business7Market
Size 8Why Vegetable Procurement 8Retailing Of FMCG, Non FMCG,
Grocery, 8 Oil& Ghee, Spices, Sugar , Non-Food products, etc
9Agri-inputs, Livestock inputs 9 Private Labeling Market size .
9Model- Kissan Unnati Kendra 10What Required11Return On Investment(
ROI )12How can We Associate 13 March 21, 2009Solus/Rural Retail
& Agribusiness 3. Page 3 of 14Milk Procurement . Rural
Retailing & AgribusinessBACKGROUNDKissan Unnati Kendra( A New
Generation Village Level Center with Milk Procurement , Rural
Retail & Agribusiness) Is A small effort for Livestock ,
Agriculture and Rural Development to develop villages as Productive
Unitswhich are networked with global market and self-reliant
through optimum utilization of local resources. If wewant to have
sustainable growth rate of economy at seven percent and above to
achieve the goal of DevelopedIndia by 2020, it is necessary to
bring qualitative change in our Livestock & Agriculture and
ultimately with ourcore competence Of Building Strong Relationship
with Farmers. Through this initiative, we endeavorparticipation of
all in bringing rural prosperity in India through Kissan Unnati
Kendras pesticid The role of KUK is to ensure delivery of
appropriate technologies, quality inputs forLivestock &
agriculture and services to the farmers by linking them with banks,
technology ( Internet ) anddevelopment institutions, Milk Industry
& Agri-industry, training and extension agencies and
Governmentdepartments. These Kendras are expected to perform as
vibrant nodal growth bodies, facilitating farmersthrough Backward
and Forward linkages, delivery of programs, Milk Procurement ,
Vegetable Procurement ,Commodity Procurement on One Hand while
Selling Agri-inputs, Livestock Inputs , FMCG ,Non FMCG, Grocery
onother hand and serving as Two Way Plate-form for villages. In
brief it is a Kendra for social and economicdevelopment of villages
. These centers would not only facilitate the agriculture &
Livestock development butalso develop entrepreneurship at grass
root level through imparting training and promoting allied
businessactivities in villages.Information and Communication
Technology (ICT) has gained momentum in recent years and isplaying
crucial role in social transformation through empowering the
society by access to information andawareness. Kissan Unnati
Kendras will be IT-enabled kendras and this facility serves two
purpose at a time; one,it provides link to the information
resources and makes information accessible, and two, it helps in
digitization oflivestock business , Procurement , local farming,
resources and demographic information. Based on that properresource
planning for the farmers is done. We are sure that these Kendras
with an integrated approach of development will bring qualitative
changes inDariy & Agriculture, paying the way for vibrant rural
society and for the Milk Industry suffering from Non-Sustenance of
Village Level Centers , Good Quality Milk , and Shrinking Milk
Profits. ..There is a major revolution that has begun in our
country. It is taking place in largetracts of rural India,
especially in the north, west and the south. Except for those who
are in the business and theodd perspicacious observer, it is not
yet understood by most. And it is set to explode over the next five
years. March 21, 2009It is the Rural-Retail play. Let me take you
through the story starting with what is happening in
significanttracts of rural India, and then moving on to what some
of the key players are planning in this exciting space. Forthe last
three years, my colleagues have been closely focusing on the
changing face of, and the opportunities in,different parts of rural
India. Here are some nuggets of information.Solus/Rural Retail
& Agribusiness 4. Page 4 of 14 The Indian rural retail
opportunity is currently estimated to be in excess of Rs.
1400billion(1) (approximately US$34 billion). The figure is likely
to touch Rs. 1800 billion (approximatelyUS$ 43 billion) in 2010 and
go up to Rs. 2400 billion (approximately US$ 58 billion) by 2015,
accordingto CII Yes Bank Study on the Rural Retail Sector released
during the Conference on Rural Retail: TheNext Phase in Retailing
organized by Confederation of Indian Industry (CII-Northern Region)
. Indias rural markets are growing at double the rate of urban
markets The total number of ruralhouseholds is expected to rise
from 135 million in 2001-02 to 153 million in 2009-10 giving
atremendous push to the rural retail opportunity. The rural
revolution is driven by rising purchasingpower, changing
consumption patterns, increased access to information and
communicationtechnology, improving infrastructure and increased
government initiatives to boost the rural economy. Technopak
estimates that the size of the Indian retail market is at present
around USD 300 billion withthe rural-urban split in the ratio 55
45. The rural market consumes about 53% of FMCG, and 59% ofdurables
in India. To start with, rural India accounts for over 50 per cent
of Indias GDP. Since agriculture is less than 20per cent of GDP, it
follows that three-fifths of rural Indias income derives from
industries and services.There are 739 tehsils that are doing very
well: the ownership of assets and amenities of rural householdsin
239 of them are over two standard deviations better than the mean;
and for the remaining 500tehsils, it is between one and two
standard deviations greater than the average. These are the zones
ofgrowth and prosperity in rural India and, in most parts, belong
to Punjab, Himachal, Haryana,Uttaranchal, Western UP, most of
Gujarat, parts of Maharashtra, parts of Rajasthan, Goa, all
ofKerala, and parts of Tamil Nadu, Karnataka and Andhra Pradesh.
Traditional FMCG players like Hindustan Lever, Dabur and Godrej
have considerably strengthened anddeepened their distribution
channels to leverage higher consumer demand. ITC has been using
e-Choupals to reduce middlemen, increase rural procurement, create
price transparency, cut tradingmargins and transact directly with
farmers. Mahindra Finance has been quietly pushing loansthroughout
up-country India with great success. Sunil Mittals Bharti has
organised farmers in Punjabto grow high value products that are
then graded, sorted, cold stored and shipped for exports. Heritage
Foods India Limited ( Heritage Dairy) has converted its 7000
Village Level ProcurementCenters in Rural Retail & Agribusiness
Centers whereby selling Agri-inputs,Livestock
inputs,FMCG,Non-FMCG,Grocery , Oil & Ghee etc and are Procuring
Vegetables from the same. Amul has also initiated the Rural Retail
Operations with introducing 150 FMCG ,and GroceryProducts through
their exclusive Village Level Center Network. The most audacious
play of all That has in mind is the process of converting the Milk
Procurement March 21, 2009Centers as the New Generation Kissan
Unnati Kendras .Solus/Rural Retail & Agribusiness 5. Page 5 of
14KISSAN UNNATI KENDRA Is a new format of Rural Buisness Hubs (
RBHs) . What does we have in mind ? Essentially, attempting a huge
scale two-way play. First, to have each Village LevelCenter as KUKs
and Procurement Centre for the Fresh ( Milk & Vegetables )
Second, to use these KUKs asretail outlets whereby selling
Agri-inputs, Livestock input , Consumer goods( FMCG,Non FMCG,
Grocery , Non-Foods etc..) , and various types of
financial/insurance products and services, IT access points as
service provideretc.. Rural Retailing through Village Level Center
not only provides opportunity for selling the Branded Products
butprovides excellent opportunity for Developing Own Private Labels
for FMCG , Non FMCG and other Agri-input/livestock input products
for getting more profits & long term market leverages as most
of the Surveyreveals the fact that Rural India Market is still
driven by the Placement and Availability of the Products . Why
Rural Retail & Agribusiness with Dairy Industry ???Milk Pie
(2005-2006) Milk Pie .....2011 2005-2006,Organized Sector , 18%
2011, OrganizedSector , 36%2011, Self 2005-2006, Selfconsumption
,consumption , 46%46%2011,2005-2006,UnorganizedUnorganizedSector ,
18%Sector , 36% The overall scenario of Dairy Business Pie reflects
a shifting pattern of Unorganized Sector ( CollectionOf Milk From
Vendors Class A & B Contractors ) From 36% to 18 % - A
declination of net 18%whereas The Organized Sector Milk Procurement
( collection of milk from Village Level Societies ) with a risefrom
18 % to 36% A Nett rise of 18% by Year 2011. The above shifting is
an indication of losing the Procurement capacity of the Dairy
Individuals whose March 21, 2009Milk procurement is Dependent on
Class A & B contractors and simultaneously shows a significance
ofRise in the Procurement Of Mik with those who are Expanding with
Village Level Centers.Solus/Rural Retail & Agribusiness 6. Page
6 of 14 Dairy Business An UpdateGone are the days when Milk
Business was just Built upon a Gap of Supply V/s Availability &
Most of the Oldtime Leaders in the Industry geared up their
Business in the ERA when Supply & availability was always a
keyfactor for Milk Business . In the Present Era It is not the
Availability and Supply alone which makes the Business Sound and
expandablebut apart Qulality Of Milk is the Strongest Key Factor
dominating others .Milk Quality is like a Fragile Bondwhich
attracts after a long duration & services whereas is Broken by
a Cup Taste of Morning Tea. The use of a Brand is Like a contract
Between Consumer & Company For that every day is arenewal. The
Tough part : just once, the brand fails to meet the customers
expectations or, more exactly, ifit fails to delight the customer,
then the contract loses its value If sales continue to rise,
means.. that contract has been honoured, again and again. We Know
Business Better ???? The First Part of the Contract Between a Milk
Customer and Company is Quality. The Second Part of the Contract is
the Value for Money. The third element of the contract is
Availability. The fourth part of the contract is Service. In
present scenario of Dairy Business Quality Milk is the utmost
priority and for the sake of the samesetting up Village Level
Centers is must. & For Getting Maximum Revenue with Village
Level Centers Rural Retail & Agribusiness is must. WHY ????
Setting up village level centers is a time consuming process which
involves heavycost in setting up the systems and Eventually felt as
sensitive for long term Sustenance . The Milk Procurement Societies
are mostly governed by the Society Incharge / Center Incharge or
sometimes incase of Bulk Milk coolers it is operated by the company
itself . The basis for meeting the operating expense at thecenter
is the Milk commission Per Litre paid to center/society incharges .
On an average basis One milk society atvillage level procures 100
200 ltrs of Milk Per day and that contributes almost Rs 50 to Rs
100 for the societyincharge as the compensation towards the same
which is examined as insufficient for his survival and thus he
looks/ slips for alternate options. The companys Gross Contribution
with one village Level center i.e 100-200 kgs Milk is also not more
than Rs 50 -100/- ( shrinking everyday ) after meeting all the
expense of Procurement , Management , Processing & marketing
March 21, 2009etc. it has been estimated that with an average sale
of Rs 2500*/- with each VLC the incharge gets extra profits of
Rs200 300 /- Per day whereas Company also gets the similer extra
amount from the Same Village Center withthe same infrastructure and
resources This profit is almost equal to when we make the milk
collection 4 timesfrom the same Village Level Center ?????? Rural
Retail & Agribusiness Activities provides SPACE for both
working on long term basis.Solus/Rural Retail & Agribusiness 7.
Page 7 of 14 Why Dairy Industry ????Core business is Milk
Procurement . Established Network of Village Level Centers, Bulk
Cooling Units / Chilling Centers Established Two time Reach (
Logistics) Built in Rural Team Best Relationship with Farmers
Shrinking Profits How this Network Facilitates the Rural Retail and
Agribusiness Centers Milk Cooling Units /Chilling Centers are the
established HUBS . These hubs can act as a Cooling Unit for other
fresh Produce i.e Vegetable also. This Hub can act as a Centralized
Warehouse for all the FMCG , Non-FMCG, Grocery ,Agri-inputs,
Livestock-input products etc. Village Level Centers (VLCs ) will
work as the basic facilitators for Procurement of Vegetables as
well for selling the Products* with set pattern of commission .
These village Level centers will act as Spikes . The Fresh
Vegetables & Commodity etc will be procured from the villages
and will be send to Chilling Center(Hub) whereby the Reverse
Logistics will supply the Products on pre-set route to the village
Level centers. Market Size : ( A) Vegetables Food Tobacco and
Beverages contributes to the bulk of the Expenditure Made by a
Common Man from hisearnings to the Tune of 51 % of his total
expenditures. With respect to the total Food Expenditure this can
be further split as under: a) Cereals - 31 % March 21, 2009b)
Milk-16 %59 %28% c) Vegetables-12 %Solus/Rural Retail &
Agribusiness 8. Page 8 of 14 Why Vegetable Procurement???Vegetable
business has got serious attention in recent years after inception
ofOrganized Retail Industry in India . The 30- 40% sale of most of
moderntraders( Retailers) is with Vegetables only . This can be
exploited as a verylucrative market for selling the vegetables as
a) Most of the Retailers do not have expertise of Rural Backend
Operations and are still are procuring their vegetable needs from
the Local Mandi which forces them to cost 20-25% more in landed
cost when accounts for the total expenditures of Vegetable
Purchasing Team, Warehousing Expenditures, Commission Paid to
Vendors, Multi-channel Mandi commissions etc b) The quality of
Vegetables they are getting from mandi is not upto mark as the
Vegetable Quality is determined with the Handling i.e Less handling
more quality. c) In the current Recession Period when most of the
Retail Companies are bent upon Cost Cutting operations the most hit
listed one is the To Cut down the Warehousing Cost . d) In absence
of Permission from FDI regulations to procure directly from the
farmers it is a serious play for the coming Foreign Giant Companies
to compete for the Local Hawkers for their Vegetable Needs through
their Cash & Carry / Whole Sale Formats. e) The Need of Hour is
to Serve as a Strong Backend Supply Company with end to end Cold
chain Facilities and providing them the Fresh and March 21, 2009
affordable One Stop sourcing . f) Apart from the modern trade the
Export of Fresh Vegetables has booked significant growth in past
few yearsSolus/Rural Retail & Agribusiness 9. Page 9 of 14 (B)
Retailing Of FMCG, Non FMCG, Grocery, Oil& Ghee, Spices, Sugar
, Non-Food products, Agri-inputs, Livestock inputs in Branded and
with private Labeling Market size .RuralUrban Monthly Per Capita
Expenditure ( MPCE) Rs.5651060Food305 441 Cereals 103 106 Milk
&M.Products,Vegs,Edi.Oil 107 165Non-Food260 619 Fuels &
Light5496 Clothing & Footwear45 74(As per the sixtieth National
Sample Survey on Household Consumer Expenditure in India carried
out by the NationalSample Survey Organisation (NSSO) in the
Ministry of Statistics and Programme Implementation, Government of
India,(Report No. 505). ) Market Size :Market Size in Rural India
for Food , Grocery, and other Products is almost equalto the
consumption of individual urban. The Market size can be estimated
with the number ofHousehold we are reaching i.e with One Chilling
Center whereby 100 -150 villages andapproximate 5000 Farmers are
directly / indirectly attached and one farmer purchase averageRs 50
/- per day or Rs 1500 /- per month products the One chilling canter
can sell Rs + 1 croreProducts. / month .The Average GP for Food +
other products can be estimated with 10 %contributing 10 lacs /
month .(The same chilling center if Procures 20,000 Ltrs milk per
daycontributes app. 600000 litrs of milk with Aprx. GP of Rs 6 lack
only) March 21, 2009Solus/Rural Retail & Agribusiness 10. Page
10 of 14ModelKissan Unnati KendraGrocery ,FMCG,Food,Non-Food,
Spices,MilkSugar etcKISSAN Procurement Livestock Needs-Cattle
Feed,UNNATI Vegetable March 21, 2009KENDRA ProcurementAgriculture
Needs-Fertilizers,Pesticides,See Commodity, Procurement Solus/Rural
Retail & Agribusiness 11. Page 11 of 14 What Required ????To
Convert the Milk Procurement Centers into New Generation
RuralRetail & Agribusiness Centers ???? Village level centers
Chilling centers / bulk cooling points Investment upto Rs 5 crores
for converting 10 ChillingCenters and 1500 VLCs in Rural Retail
centers Expertise to do the Business Willingness to do the
business. March 21, 2009Solus/Rural Retail & Agribusiness 12.
Page 12 of 14 Rural Retail & Agribusiness Expected ROI Sheet
Rural Retail Business Potential Workouts Number of Chilling
Centers10 Number of Village Level Centers@ 150 center/cc1500Sale of
One Village Level Center per day ( Rs)3000 Sale of One Village
Level Center per Month ( Rs) 90000 Sale of One village Level Center
Per Year (Rs) 1080000Sale of total VLCs per year162, 0000000 GP (
15%) 24,3000000 NP ( 3% )4,8600000Agribusiness Purchase of
Vegetables Per day per Chilling Center ( MT)5 Per Month Per CC
Vegetable Procurement ( MT) 150 Per Year Per CC Veg. Procurement
(MT) 1800Total Veg. Proc. From 10 CC (MT) 18000 Average Value of
the Vegetables @ Rs 5/- per kgs90000000Gross Margin on the
Vegetable Purchased @ 15 %13500000Nett Margin over the Vegs. @ 5 %
4500000 March 21, 2009 Nett Profit before Taxes ( A+B)
53100000Solus/Rural Retail & Agribusiness 13. Page 13 of 14 Who
We are and How Can we ASSOCIATE ?? We are a company presently doing
business in Delhi with Cash & Carry (Whole Sale ) with Name
SAHI KEEMAT. And have initiated the business inDelhi with 10 Stores
and more than 200 Franchisee on fast rolling. We are a team of
Experts with + 15 years Experience in Retailing Venturewith
privilege of setting up Known companies from Scratch and havescaled
up upto a business volume of + 100 crores several times . We have
experts for Rural Ventures having vast experience of workingwith
Dairy Industry, Especially with Milk Procurement ,
Vegetableprocurement , Setting Up Rural Retails , Developing Own
Label Productsfor Agri-inputs, Livestock inputs,FMCG and Non Foods,
etc We have a dedicated team of IT professionals for setting the
Edgetechnology with at par excellence. We have access to all the
Modern Trade( Retail ) Markets and Export. We can be your best
partner with EXCELLENCE of Trade in Setting UpVenture with saving
Time and money having ability to take off withminimum gestation
period We can Share with you Expertise , and also can associate
with you . We can facilitate our own Cash & Carry ( Whole Sale
) Stores for theliquidation of Fresh ( Vegetables & Milk ) .
March 21, 2009Solus/Rural Retail & Agribusiness 14. Page 14 of
14 March 21, 2009Solus/Rural Retail & Agribusiness
