SUMMER PROJECT REPORTBASMATI RICE INDUSTRY Made by: Anil Kumar Singh MBA 1st Sem. TABLE OF CONTENTS Sno. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Particulars Global rice industry International trade of rice Indian rice industry Basmati rice patent Basmati rice industry How is Basmati rice produced? Industry drivers Supply side of Basmati rice Positives for the industry Research Methodology SWOT analysis New markets Future outlook of the industry REI Agro Kohinoor Foods KRBL LT Foods Analysis Limitation Conclusion Bibliography Questionnaire Page no. Global Rice industry Global paddy production over the 2009 season has been lifted by nearly 10 million tonnes to 678 million tones (454 mn/t on milled basis), the second highest production on record. World rice production is expected to increase by 4% to 710 million tons (474 mn/t on milled basis) in 2010 (Source: FAO). Mn Tonnes 700 600 500 400 300 200 100 0 2005 China India 2006 Indonesia 2007 Bangladesh 2008 Vietnam Others 2009 Global Rice Price Global rice price have increased at a CAGR of 16% from $173/t in 2001 to $570/t in 2009. The major reasons behind increase in global rice price during 2007 to 2009 were: 1. Temporary export bans and restriction implemented by several major and mid-level rice exporters, 2. Weather related problem in specific growing areas, 3. A sharp decline in the value of dollar in fall 2007 and winter 2008, 4. A shift of fund into commodities from stocks and real estate in 2007 and early 2008 that added to price volatility and may have temporarily boosted price. World Rice Price (US$/t) 700 600 500 400 300 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 (JanJuly) International Trade of rice The current forecast for international rice trade in the calendar year 2010, at 31.2 million tonnes, points to a 2.7 percent, or 800 000 tonnes, increase from the 2009 estimate and much higher than forecast last June. The revision reflects larger import requirements by those countries that faced important crop losses in recent months. If confirmed, trade next year would be the second largest after 2007. Source: FAO Much of the expected growth is expected to be driven by larger imports by Asian countries, which are foreseen to reach 14.8 million tonnes on aggregate, almost 7 percent more than last year. Part of the increase would stem from increased purchases by Near East Asian countries, in particular Iraq, Saudi Arabia and the United Arab Emirates, while rice flows into the Islamic Republic of Iran may be depressed by large domestic availabilities and a recent increase in the basmati rice tariff. Among countries in the Far East, imports by Bangladesh, Nepal and especially the Philippines are forecast to rise to offset recent losses from natural disasters. Indian Rice Industry Rice is one of the most important food crop of India and 2nd of the world. It feeds more than 50 % of the world population. Agriculture is the main source of income for families in India. Farms cover over half the land and almost 1/3rd is used to grow the two major grains i.e. Rice and Wheat. India is the second leading producer of rice in the entire world, preceded only by China. Current production of Rice in India is 87.5 mn tones. In 2010, the total area under rice in India was 43mn hectares. Rice Production has increased at a CAGR of 2.9% from 71mn tones in 2003 to 87.5mn tones in 2010. It is expected to grow at 99mn/t in 2011(Source: USDA). With an ever increasing population, demand of rice has been increasing in the country. Thereafter, various efforts such as use of High Yielding Varieties of rice, Hybrid rice, System of Rice Intensification (SRI) method, responsive to high dose of fertilizers coupled with improved package of practices have been made to increase the production & productivity in the country through various centrally sponsored schemes 8 2131 93.8 1744 2078 1984 83. which had been challenged by the Agriculture . non glutinous and particularly good for formal rice cooking. won a controversial US patent for a crossbreed with American long-grain rice. RiceTec Inc. Basmati Rice is a simple grain yet throughout history it has been on royal menus of various cultures as the main dish. Basmati rice is known as the queen of rice. Due to the high amount of starch clinging to the rice grains. meaning 'Queen of Fragrance'.4 2202 96. Its perfume. This company was granted a patent to call the aromatic rice grown outside India `Basmati'. elongation of the grain on cooking and chalkiness.2 2013 87. RiceTec was granted the patent on the basis of aroma.5 2005 2006 2007 2008 2009 2010 Rice production ( Mn. Basmati Rice has been grown in the foothills of the Himalayas for thousands of years. Basmati rice should always be washed before being cooked. resulting in long slender grains that are dry.7 2214 99. separate and fluffy. When cooked. It is long grained. nutlike flavour and aroma can be attributed to the fact that the grain is aged to decrease its moisture content. Tonnes) Rice yield (Kg/hectare) Basmati Rice The name Basmati comes from the Hindi language. The Basmati Rice Patent Basmati rice was developed by Indian farmers over hundreds of years.. India contested the patent for Basmati rice acquired by Rice Tec Inc.6 2500 2000 1500 1000 500 0 2004 88.1 2103 91. it swells only lengthwise. but in September 1997 a Texas-based company. Many have felt that the patent should not be granted since basmati is Indian property.Rice production & yield trend 120 100 80 60 40 20 0 2003 71. As a result of a worldwide citizen campaign against RiceTec Basmati patents. Patent and Trademark Office struck down large sections of the Basmati patent.S. Contrary to misinformation in some sections of the media.2 mmt was consumed domestically. produce 'similar or superior grains' outside India.and Processed Food Products Export Development Authority (APEDA). India has actually won and not lost the Basmati patent battle. In other words. 1997 .granted by the USPTO on September 2. the withdrawal of the grain-specific claims ensured that Rice Tec would not be able to block the country's Basmati rice export to US. Basmati rice industry As mentioned above India and Pakistan are the only producers of Basmati rice in the world. however. The US Patent and Trademarks office accepted the petition and had re-examined its legitimacy. India did not lose the Basmati Patent Challenge. it could. Extensive documentation was submitted to establish that the various Basmati varieties cultivated over the centuries in the subcontinent contained all the 'novel' grain attributes mentioned in the patent.8 mmt was exported and 1.Rice Tec had made as many as 20 claims. Out of the production of 3 mmt in India. around 1. on Aug 14th 2001 the U. In its original patent on 'Basmati rice lines and grains' . . The total production in the year 2009-10 was around 4 million metric tones (mmt) of which India produced 75% and the rest 25% was produced by Pakistan. 4 0.80 2004 0. mainly located in Asia.6 0.10 2009 1.84 479. Oman.50 2006 1. Kuwait.3 1.91 556. .Global Rice Basmati Rice Other Varieties India (75%) Domestic (40%) Exports (60%) Pakistan (25%) Mostly Exports Full Grain Broken Middle East (75%) USA/UK (10%) ROW (15%) Trade in coarse rice is spread in several countries.77 433. Main importers are almost located in Middle East.05 616.2 0. Pakistan: 556 million USD).70 2008 1.5% of respective Basmati export (India: 616.70 2005 1.9% and those of Pakistan 68.71 415. Basmati export (MMTPA) Particulars India Quantity Value (Mn $) Pakistan Quantity Value (Mn $) 2003 0.7 million USD.72 267.18 1079.30 2007 1.16 628. the first five clients of India had a share of 84. although European Union is the third importer. Iran. Basmati rice trade is rather concentrated.17 687. India mainly exports Basmati to Saudi Arabia.56 1958.82 308. with first five importers making 25% of overall rice trade in 2007. European Union.9 Basmati trade is also concentrated by demand side. In 2007. European Union and Yemen. UAE and USA.5% of overall market in 2007.81 439.27 1068. whereas Pakistan does the same with UAE.7 0. The first five importers made 44.1 0. There is a particular process by which paddy is purchased from the mandis. If he has a fair idea of the quality of paddy he will quote his price to the farmer’s agent and the trade will take place. To develop good procurement skills one needs a learning curve which comes through a lot of experience.Market Share in 2007-08 (% of total Export) 2% 3% 46% 4% 13% 6% 10% 16% Saudi A rabia Yemen Republic UAE U SA Kuwait Netherland United Kindom Others How is Basmati Rice produced? The first and foremost step for the industry player to produce good quality Basmati rice is to procure the best quality of paddy from the mandis. which are highly diversified. Farmer’s Commission agent Kaccha aratya (Farmer’s agent) Trade Take place Commission agent Pakka aratya (Companies agent) Organized & Unorganized players The company’s agent goes and buys paddy from the farmer’s agent. It consists of the farmer’s (seller’s) commission agent (Kaccha aratya) and the company’s (buyer’s) commission agent (Pakka aratya). The company’s agent needs to possess the required skills to determine whether the quality of paddy is good or not. . Therefore the procurement skills of the industry players play a significant role and make a vital difference among the counterparts. In India there are a total number of 220 mandis. But it increases the cost of funding for the company. Therefore a lot of capital is required in this business. As the companies are operating at very high inventory days of almost a year the working capital needs of a company is very high. De-husking This is one of the most critical processes of Basmati rice production because it decides the price and the length of the Basmati rice. rodents. For maturing of the rice proper infrastructure and maintenance is required throughout the maturing process. Insects. The process of milling involves De-husking and grading which are the most critical processes. To have good quality Basmati rice it needs to be properly matured. A good maturing period is generally from 12-14 months. The full grain Basmati rice commands the . • The biggest challenge of maturing Basmati rice is the money involved in it. There are a total of 18 species of insects that infest stored rice in India. rice weevil and rice moth. To overcome the challenges in maturing Basmati rice one can go to the intermediaries who keep the rice for a particular period of time. • Besides the challenge of working capital there are a lot of risks associated with the insects that can hamper Basmati rice when it is stored in the godowns for about a year.Maturing The key ingredient to produce full grain Basmati rice is the maturing period of the rice. This will also result in increase in the price of Basmati rice and lower margins to the companies as the intermediaries would eat out the margins of the companies. Some of them are lesser grain borer. Milling The processing and milling of rice is another important aspect of producing good quality Basmati rice. mites and fungi cause considerable damage to stored rice. There are a number of risks involved in the maturing process of Basmati rice. But the number of varieties of Basmati rice that we get from the processing depends on the processing facilities used by the company. half grain. three-fourth grain and so on. . Grading When the paddy is processed we get various sizes of Basmati rice. Big Bazaar etc. Therefore like every business the distribution channels play a vital role in this business. retail chains such as Reliance retail. Selling and Distribution All the processes become irrelevant if the product does not reach the ultimate consumer. These three companies are more into the branding business as compared to REI Agro which is more into the private labeling segment.best price in the export and domestic market which is the ultimate focus of every company. Different companies follow different types of distribution channels to reach their customers. wholesalers. REI Agro mainly supplies its products through wholesalers and its retail arm Six Ten domestically. while if the company has a sub standard processing facility the quality of rice will also be substandard. Moreover. While on the other hand when we talk about the export market it supplies its products through its owned brand and also through the brands of the companies located in the foreign markets. Domestically they supply their products through kirana shops. the person to whom one has outsourced might not have the facilities which grade rice in a number of different varieties and this will result in less realization for the company. On the other hand the other companies such as Kohinoor Ltd. But then one does not have any control on the milling process. One can also outsource the milling process but the disadvantage of it is the handling.. Full grain. If the company has a good processing facility it will get more varieties of rice. KRBL and LT Foods supply their products through the branded route domestically as well as internationally. With the advantage of the demographics. . the margins of these three companies are lower as compared to REI Agro. Expenditure in life style and premium goods. The average Indian is earning higher than ever before. is projected to account for 70% of all consumers spending by the year 2025. 18. But due to the higher working capital cost and higher procurement costs. urban consumers are likely to represent 37% of the population and still account for 62% of consumption. In year 2008-09 India’s per capita income was estimated to be more than $653 and is expected to rise to $2000 by the year 2016-17 (Source CSO). India is poised to become one of the developed economies in the next 2 decades.3% resulting in an increased demand for Basmati. rather than spending on necessities.In this regard Kohinoor Ltd.869 by the year 2025 at a CAGR of 5. The following are the reasons which will drive the growth of Basmati rice industry in India: Increasing affordability India is the fifth largest country in purchasing power parity and the tenth largest in sheer quantum terms. There is a subtle shift occurring in the Indian spending habit. Basmati Rice Industry Drivers Domestic Drivers India is one of the fastest growing economies of the world. Rising consumerism India is expected to graduate from the 12th largest in the year 2007 to world’s fifth largest by the year 2025 among consumer markets. The estimated cumulative liquid wealth of the Indian affluent class is poised to grow at 50% over the next three years. KRBL and LT Foods have an advantage that they have an established brand which commands higher price in the markets as compared to REI Agro. (Source Mckinsey report) By 2020.. The average household disposable income would reach Rs 3. % of Total 45% 40% 35% 30% 25% 20% 15% 10% 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 Change in taste & preference The rise in per capita income has also resulted in increase in the demand for Basmati rice. But the realization from Basmati rice is higher compared to non-Basmati rice. The domestic consumption of Basmati rice has increased from 0. The expansion of retail stores and hyper markets has significantly contributed to the increase in the demand for Basmati rice. The branded rice category is expected to grow significantly over the next few years. But there is a huge difference in the selling price of . This will continue to grow as the demand from both domestic and international markets is constantly increasing. which generally sells at premium prices in the domestic as well as international markets. Moreover.3%. Basmati rice paddy sells at around Rs 28-32 per kg. consumers are shifting towards packaged rice and becoming brand selective. Daawat. This is because more people can now afford to buy Basmati rice. the farmers are increasing the production of Basmati rice.78mn/t in 2009 at a CAGR of 14.Urban population in India. Lal Quila and Charminar etc. it is a premium variety of rice. The share of branded Basmati rice in total basmati consumption has seen an exceptional rise.3 mn/t in 2009 respectively. Some brands of Basmati rice which have become household names are Kohinoor. Increasing availability The production of Basmati rice has more than doubled from around 1 mn/t in 2003 to 2. while the normal rice paddy sells at around Rs 10-13 per kg. Moreover. With the increase in the standard of living.35mn/t in 2003 to 0. because the production cost of Basmati rice is marginally higher compared to production cost of non-Basmati rice. with the help of the various social campaigns and advertisements from the fertilizer and seed companies.70-75/Kg) of Basmati rice and normal rice (Average Rs. which is forcing the farmers to increase the production of Basmati rice. hybrid rice and various new methods such as system of rice intensification (SRI) are being used by the farmers to produce high yielding rice. But there is a huge difference in the selling price (average Rs. which is forcing the farmers to increase the production of Basmati rice.25-30/Kg). No other country can produce Basmati rice as these 2 countries hold the patent to produce Basmati rice. The realization on exports of Basmati rice is more than the domestic sales.70-75/Kg) and normal rice (Average Rs. Supply side of Basmati rice Increasing farmer awareness Nowadays. farmers are shifting towards high yielding production methods. The production cost of Basmati rice is marginally higher compared to non-Basmati rice. Moreover India and Pakistan enjoy a kind of monopoly in this business which further helps them to command a greater price from the global market. Some of the techniques like High yielding variety (HYV) of seeds. Due to the awareness of the various production techniques farmers will make more profits by . Global market drivers Basmati rice can only be produced by 2 countries in the world i. therefore they are able to pay the premium for Basmati rice over the non basmati rice.2530/Kg). India and Pakistan.e. The following are the reasons which will drive the growth of Basmati rice industry globally: Increasing affordability The Middle East accounts for 75% of exports of Basmati rice from India. flavor and taste there is a huge demand of Basmati rice globally. so it is incentive to export Basmati rice. aroma. Theses countries are developed and cash rich.Basmati rice (average Rs. Due to the better quality of rice. the study said. as the demand in both domestic and international markets is increasing. an Assocham survey said. It is evident from the fact that in the last 10 years the exports of Basmati rice have never reduced. are likely to see 20-25 percent decline in non-basmati rice production this kharif season on account of decrease in the crop sowing area due to low rain and shift towards basmati rice. it was observed that a large proportion of cultivation area has been shifted from nonbasmati rice sowing to basmati rice sowing (PUSA 1121 variety of basmati rice) in Punjab and Haryana. Haryana and Uttar Pradesh. and the government hopes to tap the huge markets of China and Mexico in a couple of years. Assured off take of Basmati rice The demand for Basmati rice is constantly increasing in both domestic as well as international markets. So a farmer is shifting his focus from the production of non-Basmati rice to the production of Basmati rice. Similarly the domestic consumption is also increasing because more and more people are shifting towards Basmati rice due to its quality. basmati is exported to over 130 countries. aroma. . Indian basmati rice will shortly enter the kitchens in China and Mexico. • In 2008-09 . At present.Basmati Rice Production 35 lacs Tons and In 2009 . On YoY basis the exports of Basmati rice have increased tremendously. Positives for the Basmati industry • The major paddy growing states of Punjab. The export market of Basmati rice has increased tremendously over the last few years.producing it. Therefore the farmers are assured that whatever they will produce will be consumed either domestically or internationally. flavor and taste. Moreover.There was 50 percent increase in the basmati rice area in Punjab and Haryana. Players in both organized and unorganized market are increasing the procurement of Basmati rice. almost half of the 2. That is what Indian industry is doing. • Saudi Arabia still buys up to 750. • In the new season starting October. • Owing to the government of India's decision to reduce the minimum export price (MEP) of basmati rice.100 PMT.000 per acre against Rs 30. you tend to watch it rather carefully. Who ever imagined that the variety Pusa 1121. • Iran also pays top-notch prices for India’s Pusa Rice 1121.5 million tonnes labeled basmati leaving India will reach Iran.000 tonnes basmati from India. . • A tremendous demand for basmati rice in the international markets has seen the country's basmati rice exports increased from about USD 470 million in 2000-2001 to about USD 1900 million during 2008-09.• It is the inclusion of the PUSA 1121 variety in basmati rice category which gives better returns as it yields about Rs 65. it is a tough bargainer. the country's basmati rice exports are expected to surge by a whooping 33% during the season starting October.000 per acre that one garners from the non-basmati varieties. When 50% of your eggs are in one basket.000-35. fetching around $200/t. India's Food and Agriculture Minister Sharad Pawar had announced lowering of MEP of basmati to $ 900 PMT from the level of $ 1. translating . reducing return on capital High dependence on monsoons High dependence on Middle East Opportunities Consumer’s Ability and willingness to pay for better quality products Increased domestic consumptionto drive due to favourable demographics Greater access to global markets Threats Emergence of low cost substitutes by Pakistan exporters Improved performance by Pakistan exports Significant change in govt. policies could disrupt the business PUSA 1121 – New addition to the Basmati rice family Pusa 1121 is an evolved variety of Pusa Basmati rice developed by Indian scientists. but scores equally.SWOT analysis of Indian Basmati Rice industry Strengths Weaknesses Our global dist.400 for white rice. the country exported around 2.6 mt of basmati rice. it possesses extra long slender grains with good cooking quality and it has longest cooked rice length among all the aromatic rice varieties. The export realizations averaged $1. This variety of rice is known for its extra ordinary length and after cooking elongation. an estimated one million hectares was sown under Pusa-1121 in Punjab and Haryana alone – more than twice the area in 2008.100 a tonne for parboiled and $ 1. It has a milder aroma. Having yield of 13.7 quintals per acre. The length of grain of Pusa 1121 rice can be as long as 9. network consists of both exclusive and non exclusive distributors Our portfolio consists of all kinds of Basmati rice Advanced survey technologies help us in optimizing our procurement process Lower net margins due to little differentiation High working capital requirement. During 2009-10.3 mt is believed to have been constituted by Pusa-1121. In the year 2009. if not more. The area under cultivation of Pusa 1121 is the maximum in the states of Punjab and Haryana.5mm. on other basmati traits. of which 1. New markets New markets China Mexico Japan Australia State run Agricultural and Processed Food Products Export Development Authority (APFPEDA) said that Mexico has contracted for the basmati rice and China is expected to open a market for premium rice soon. The South Asian nation is also aiming to push sales in relatively new markets such as Japan and Australia.15 mt.15 of Pusa-1121 was also consumed within the country. So going ahead we might see a pricing pressure in the branded segment which will affect the overall profitability of the players like REI Agro. roughly 0.3 mt exports. Iran and the U. Besides the 1. the United Arab Emirates. As Pusa 1121 had been accorded Basmati status by the centre and state government last year. Even the farmers are switching towards Pusa 1121 because of its higher yields and lower cost. Due to higher production and supply in the market at a reasonable price domestic consumption of Pusa will increase in the future from current level of 0.into revenues of over $ 1. . Existing buyers are aiming to raise their purchases. Currently the average selling price of traditional basmati rice is around Rs 70-75 per kg which is higher compared to average selling price of Pusa which is around Rs 45-50 per kg.6 mt by the year FY11. Most of the people related to the industry are talking about the ill effects on traditional basmati rice due to higher production of Pusa 1121. the overall basmati production (including Pusa) will increase in future. KRBL and LT Foods. Saudi Arabia. But we believe it will benefit the industry in the long term. are the top four buyers of the premium rice from India. Industry is also expecting the production of Pusa 1121 to be roughly around 1. Currently. Kohinoor.5 billion from a single variety.K. But that was still insufficient in relation to the sheer size of the produce. . But with the addition of the low price Pusa 1121 variety to the Basmati rice family the consumption of Basmati rice will increase in the domestic market. changes are bound to occur in the standard of living and taste and preferences of the people. which tastes similar to Pusa (a lower variety) from India. Therefore.Future outlook of the industry Exports of Basmati rice from India is likely to rise this year with production slated to increase by at least 10 lakh tonne. the demand for Basmati rice is poised to increase in the next few years. Moreover India will get the advantage of its demographic changes. Iran used to buy rice from Thailand and Pakistan before shifting to the Indian crop a few years ago after 1121 was introduced in the country. As shown in the graph below the maximum growth of population will take place in the age group of 15-64 i. Super variety of Basmati.e. Production of Basmati rice in the country is likely to go up to 50 lakh tonne this year from 40 lakh tonne last year. According to industry estimates. Faced with competition from the Super variety of rice from Pakistan. Last year. India exported 8 lakh tonne of Basmati rice to the country after which Iran suddenly put restrictions on Indian exports on alleged presence of heavy metals in the Indian crop. according to estimates. pulling down procurement price of the crop. Earlier. has a price of $1000 per tonne. the working class. export of Basmati rice this fiscal is likely to touch 20 lakh tonne against 16-17 lakh tonne last fiscal.300 per tonne. Presently the Basmati rice consumption domestically is very low because of the premium prices. Indian Basmati prices in the international market have also come down.100 and $1. Export of Basmati rice from India has been growing at a rate of 50-60%. The prices of Pusa 1121 this year is between $1. As the working population of the country will grow. and the goodwill of the customers have enabled the company to consolidate on its leadership position. In a short span of time it has risen to the position of an undisputed leadership in the industry. Sundip Jhunjhunwala. The company was formed with a vision to consolidate the fragmented basmati rice industry. out of the box approach of the management.Population in millons 1600 1400 1200 1000 800 600 400 200 0 2000 2005 Age 0-14 2010 Age 15-64 2015 Age 65+ 2020 All ages 2025 REI Agro Company background REI Agro was established in the year 1994 by Mr. A unique business model. In the beginning the company focused more on processing rice rather than the sale of branded . The company processes rice with the state of the art rice processing unit supplied by the world leaders in food processing equipments. Production and capacity utilization trend REI has increased its processing capacity on YoY basis over the last few years with the total processing capacity of 902280mn/t p. The production has also increased from 194000mn/t to 430000mn/t in the same period. It offers various brands under 3 heads namely Premium. Mohali. Today the company caters to the domestic and international markets through its branded and indirect sales. Lately the company has entered in wind power generation as well with a total generation capacity of 46MW wind farms. Currently 6Ten is operating 344 stores in the NCR. Hungama Economy Hansraj. Brands Premium Kasauti 6Ten Retail Mid-range Mr. Midrange and Economy. Tamil Nadu and Gujarat. The capacity utilization of the company has increased from 62.basmati rice. Ambala etc. Brands REI Agro offers a wide range of brands in Basamati rice. Miller.5 % in the year 2003 to 75 % in 2009. Raindrop REI Agro launched 6Ten chain of retail outlets in the last quarter of the fiscal of 2006-07.a. Chandigarh. located in Rajasthan. There was a fall in the . But as the company has comfortably established itself in the industry it has started sale of branded basmati rice as well. Jalandhar. Panchkula. Some part of domestic sales of Basmati rice is done by 6Ten though it is a separate company from REI Agro. Maharashtra. 5 397.capacity utilization in the year 2007 due to substantial capacity ramp up during the year but after that it has only increased and touched new highs.6 74. Production and Capacity utilization trend 500 450 400 350 300 250 200 150 100 50 0 66.8 429. paddy is kept for around 18 months which is the longest ageing period of any company in the industry. The same holds for Basmati rice as well. the better it is” and therefore it commands a premium price over the other wines.8 62.5 90 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 Production (in 000 MT) Capacity utilization in % 75 194 Production of Basmati rice at REI REI Agro processes Basmati rice to make it excel for the quality conscious market.7 207 265.3 77. 230. The matured paddy is then processed with the help of the state of the art facilities at the company. At REI before starting with the processing of Rice. • Processing and maturing There’s a common saying for Wine that “the older it is. REI’s huge presence in 170 mandis out of 220 mandis in Northern India gives the company first mover advantage and allows it to procure the best quality of paddy for the production of Basmati rice.9 59. Due to the huge presence REI procures around 17% of the total basmati rice paddy produced in India. The quality of paddy will ultimately determine the premium it will command.6 288 . The production of Basmati rice goes through a series of processes: • Procurement of Paddy The first and foremost step in producing good quality Basmati rice is the procurement of the best quality of paddy.9 74. Head Rice yield As the company has increased its maturing period of rice to around 18 months it has enabled to produce more of full grain rice. This has helped the company in getting a higher yield of the full grain rice from paddy. The sorting of rice is done at 6 different points which gives the company an advantage to offer Basmati rice at various price-points with various varieties. Due to the higher yield of the full grain rice the margin and head rice yield of the company has substantially increased over the last 5 years. • Distribution and consumption REI Agro has a huge network of distribution with around 500 distributors across the country. This helps in increasing the revenues for the company. But higher maturing period also increased the company’s financial leverage ratio. which will definitely command a premium Ageing (months) .The following is being represented by the EBITDA margins of the company which have increased from 8% to 18% over the last 5 years. The company also supplies to its subsidiary company Six Ten which is an alternative vehicle to access the domestic customers.Utmost care is taken by the experts who make sure that each grain of rice produced conforms to strict corporate policy. Maturity period 20 18 16 14 12 10 8 6 4 2 0 2003 2004 2005 2006 2007 2008 2009 2010e On YoY basis the company has increased its maturing period of the basmati rice by holding more inventory than the previous period. The other players in the industry are still operating at 40% head rice which gives an enormous advantage to the company. Since then it has been treating every milestone achieved as a stepping stone to go past another one. Ready to Eat products.over other rice. It’s a feat that Kohinoor Foods Ltd. that looks after the European markets. USA that looks after the North American and Canadian markets. in India and in over 60 countries. The company has two 100% fully owned subsidiaries – SOL Inc. Today. but also a wide assortment of food products that includes Basmati Rice.. embarked upon its journey in 1989. Seasonings and Frozen Food. UK and the Middle East. To be a globally competitive organization. in the UK with headquarters in London. has strategic bases in US. Kohinoor Foods Ltd. Over the last 7-8 years the company’s yield of head rice has increased from 30% to around 54%. operating from New Jersey. Head Rice yield 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 Others % 2009 2010 E 37 33 33 33 28 33 24 33 20 33 18 33 18 33 13 31 30 36 39 43 47 49 49 54 Head rice % Broken rice % Kohinoor Foods Company background Kohinoor Foods Ltd. consumer's lives have been touched by not only some of the finest basmati rice brands. The joint-venture company Rich Rice . pulled off by spreading the authentic India flavour abroad. and Indo European Food Limited. Cook-in Sauces and Cooking Pastes to Spices. Haryana is one of the largest in the country with an unbelievable milling capacity – 50 metric tonnes per hour. . Some of the leading brands are as follows: Kohinoor Super Kohinoor Platinum 365 Brands Kohinoor Gold Kohinoor Silver Charminar Production capacity The rice factory at Murthal. Kohinoor Foods Ltd. Fully automated through the entire chain of processing and final packaging. the factory uses the world’s best technologies and equipment for churning out rice grains that can only be described as impeccable.Raisers Factory LLC operating from Dubai. 100 super distributors and 600 stockists. the plant is ISO 9001:2000. HACCP and BRC certified along with being EUFSA and USFDA compliant. Even in India. UAE takes care of the markets in the Middle East. is more into the branded segment so it offers a wide range of brands in Basmati rice. Not only that. Brands Kohinoor Foods Ltd. has a wide-spread presence that boasts of an extensive and unmatched distribution network with more than 200 thousand retail outlets. Facts about the Rice Factory: Area of about 36 acres with a production capacity of 1000 metric ton per day. with a lot of research work behind it. the manufacturing facility has a strong scientific procurement system.Also. The entire chain is documented to the minutest detail ensuring 100% traceability as per international norms. an able. One of the largest storage capacities – 20. 50. The company gives the farmers all the help they need in bringing up their crop with good vigor and health. R&D teams regularly visit the farms and advise the farmers with the status of their crop and remedies of diseases. In addition to that. The company has contract farming to ensure consistency of agri produce and control on the entire value chain of basmati. They are tested under various parameters of the company.000 metric ton of rice. Kohinoor Foods Limited draws samples from different zones and tests them in the laboratory. Before the harvesting happens. if any. The zones that conform to the quality standard norms of the company are selected for the procurement of the paddy. . The paddy is received and stored in controlled atmosphere with tight pest control measures. ranging from Jute & Cotton Bags to Laminate Pouches. Paper & Tyvek Bags to Non-Woven Fabric Bags Paddy Procurement Kohinoor Foods Limited does the procurement of paddy in a very scientific way. This is done right from sowing to transplanting and harvesting of the crop. Pet Jars. technical team of procurement personnel takes care of what is sourced for produce.000 metric ton of paddy 5 milling lines with milling capacity of 6 metric ton per hour Mechanical Dryers with paddy drying capacity of 1000 metric ton per day Silos attached with dryers for safe storage of paddy (8 silos with 300 metric ton capacity and 3 silos with 500 metric ton capacity) Parboiling capacity of 500 metric ton per day Semi-automated packing plant with imported metal detectors and check weigher systems Most versatile packaging offered. The company’s ‘Organic Basmati Program’ is in collaboration with Uttarrakhand Government of India . Kohinoor Foods Limited conducts contract farming for growing Organic Basmati Rice. India – one of the places where Basmati Rice originated.Organic Basmati rice Looking at the stressful life and heightened awareness of health among the consumers. What started with a small area of about 110 hectare in 2005 is today extended to around 750 hectare. The company procures Organic Basmati Rice by coming in direct contact with the farmers. under their ‘Organic Basmati Export Program’. The total area of farming Organic Basmati Rice is intended to cross a target of 1200 hectares soon. Kohinoor Foods Limited has contracts with 8 big groups of farmers comprising a total of 1128 farmers. helping them in production and by using the required technology. This is done in Dehradun. 5 MW plant in Ghaziabad 12. Energy Division 10. 740 lacs. KRBL is the largest exporter of Basmati rice in India (Basmati sales account for 85% of KRBL's total revenues) & its packaged Basmati products have gained a brand image of their own. from seed development and multiplication (QSDIP program) to contact farming and marketing. including 150 MT/hr capacities at Dhuri & existing 45 MT/hr capacities at Ghaziabad. KRBL became the largest rice miller in the world with a total capacity of 195 MT/hr. the Company holds 11 % market share of the total Basmati exports from the country and has strong presence internationally in markets like Saudi Arabia. Today. In 2008-09. US & Middle East.5 MW power plant in Punjab Energy Division 3. which account for 80-85% of KRBL's total export revenues. 1. . With this acquisition.580 lacs. The plant also has rice bran oil capacity of 42 MT/day. Also. they are also the world's largest Basmati rice exporters and leaders in innovation across the value chain. Manufacturing Capacity KRBL acquired an integrated rice processing plant at Dhuri (in the state of Punjab) in FY06 at a cost of Rs. the Company's energy division constituted 0. The Dhuri facility is expected to be a major catalyst for future growth of KRBL.KRBL Company Background India's first integrated rice company. The total divisional sales accounted for Rs.56% of the total revenues. Kuwait.5 MW plant in Maharashtra The Company has three power plants as shown above. The facility also enjoys mandi tax exemption (4% tax exemption upto August 2015) that could enable it to market its produce at a more competitive price. mainly in storage. with hands-free. packaging and finishing of rice for exports. KRBL is has also set up a husk fire power plant. Focusing on extensive health and hygiene.most of the paddy requirement for this plant would be met by procuring it from Punjab. head rice and broken rice). Expansion plans Going ahead. imported machines. the high-end packaging plant caters to the needs of modern retail in US.500 lacs. Both the Ghaziabad and Dhuri units have world-class milling facilities that enable the Company to produce quality rice and better head rice quantity. at an investment of Rs. The company will . Europe. the Company plans to earmark investments to the tune of more than Rs. The Company is in the process of commissioning a state-of-the-art packaging plant. thus leading to savings in the logistics cost.500 lacs in capital assets during fiscal 2009-10. Revenue Model Value added products make a difference KRBL has achieved significant success in deriving and marketing of by. The Delhi-based Grading plant separates milled rice (mixture of different sizes: whole grain.products from the milling of rice. 1. 7. The Ghaziabad plant is currently working on 90% capacity utilization. Approximately 50 % power will be used for internal consumption thus reducing the power cost substantially. India). In this scenario. as Lalchand Tirathram Rice Mills. In line with this vision. In 1978 Mr. LT Foods Company background In 1965.use husk to generate power at very low cost. In 1980. processing and marketing of branded basmati rice and manufacturing of rice food products in the domestic and overseas market. The balance will be sold. with a clear vision of taking his company to a global level. Simultaneously. the company started exporting Premium Rice.Arora joined the family business with his father. V K Arora felt the need to promote branded and packaged products. the company decided to face the challenges in domestic markets by setting up a modern. state-of-the-art rice factory in Sonepat. Ash from the process will be converted into amorphous silica used in cosmetics & cement industry. All these activities will help the company to improve on its bottom line. V. Unorganized players with inconsistent quality products were crowding the market. in a little village in Amritsar (Punjab. the company started the business of milling.K. Mr. Shri Raghunath Arora started a small trading company which grew from being a commissioning agent to a partnership firm by 1977. Haryana in 1984. Bhikiwind. . an Indian rice player had acquired a US Company. It is ranked among the top 50 companies by Dun and Bradstreet 8th Edition of India’s Top 500 companies 2007. LT Foods is ranked among the top 10 food processing companies in Northern India. First time in the Industry. LT Foods set up State-of-the-art plant set up in the Mandideep. The exports contributed around 48% to the total revenues of Rs. in Dec 2007. The company exports Basmati rice to almost 40 countries worldwide. Daawat is registered as one of the premium and top basmati rice brands in the country. 2008 was 50 million tonne per hour. which has huge demand in export markets. Profit after Tax. 695 crores in FY 2007-08. It bought US based $20-million Kusha Inc. INR Crores 35 30 25 20 15 10 5 0 2005 2006 2007 2008 2009 Indian Subsidiaries:Dawaat Foods (P) Limited . Bhopal (MP) for Parboiled Rice. making it the largest basmati rice retailer in the country. In the last two years Country’s top line has grown by 20% while net profit has gone up by 2.5 times In 2007. Exports are growing at a CAGR of 15% over the last 4 years. post which Daawat group’s share in the US retail market increased from 7% to about 51%.About the Company The milling capacity of the capacity as on July. LT International Limited LT International Ltd. For the same.S. . Bhopal. Kusha Inc.. Nature Bio Foods Limited The company recognized that organic food is the future of the world and in the same direction. the wholly owned subsidiary of the company was incorporated to cater the need of organic market which is approximately a market of 22 billion dollar world wide and growing with the peace of 10%. This acquisition has increased our market share from 7% to 52% appx in U. company initiated steps few years back. milling unit in Mandideep. Staple Distribution Company Ltd.a wholly owned subsidiary of LT Foods Limited. Overseas subsidiaries Kusha Inc. a wholly owned subsidiary of the company has been incorporated to play and establish itself as a backend player for Modern retail. The company has made an investment of 23. Rice processed here caters to the institutions and requirements of Middle East markets as well.5 crores in this subsidiary.S. (formerly known as LT Overseas Ltd. with the brand name “Royal” and the said company have been acquired in December 2007 by LTO North America Inc. market. is the largest distribution company in U. Looking at the potential and boom in retail business.The wholly owned subsidiary of LT Foods Ltd. . LT Foods North America Inc. a subsidiary of the company is engaged in trading of varied merchandise. for production of parboiled rice.) was set up with state of the art technology. Staple Distribution Company. LT Foods North America Inc. Sona Global Limited & Nice International FZE Middle East market has a potential and to capture market share and strengthen our presence Sona Global Limited Dubai and its subsidiary Nice International FZE. to capture market share as well as to strengthen our presence in U. Value chain The value chain of the Basmati rice industry is being summarized in the following diagram. Since it is a very long value chain a player can enter and exit at any point. But the entry or the exit of a player is very important as it will determine the margin and the working capital requirements for that particular player. Before distributing to the wholesalers and exporters the distributor matures the rice for 2 more months. Finally fully matured rice reaches the retailers who sell it to the ultimate consumers. a wholly owned subsidiary has been formed in California. A company like REI Agro who is a fully . Dubai were formed and these are engaged in trading of rice and rice products in the Middle East. The milled rice is again kept by stockists for 4 months before it is disbursed to the distributors. The stockists or the company if incase the company is fully integrated like REI Agro keeps the paddy for 4 months before the raw paddy is properly milled and graded.S. The Pucca Artiyas or the agents of the companies purchase raw paddy from the farmers and keep it with themselves for 2 months.. As we can infer from the diagram the money will be blocked for around 18 months. Ultimately it’s the decision of the player to enter or exit at anytime as the value chain is very long in case of this industry. They focus more on brand building and rely on trading as well because they are not fully integrated as REI Agro. so the fully integrated player will have the maximum requirement of working capital. That is why players like LT Foods. This also means that the pressure of working capital requirements is less on these companies. KRBL and Kohinoor Foods who are more into the branding segment have fewer margins as compared to REI Agro which is evident from the graph given above. It will also have the highest working capital requirement in the industry as it will perform each and every function from procuring of raw material to finally selling the finished product. His margins would also shrink as the intermediaries would eat out the margins for providing the relevant services of storage or maturing on behalf of him. EBITDA margins 20% 15% 10% 5% 0% LT Foods KRBL 2007 2008 Kohinoor 2009 REI Agro As against this if a player wants to enter at a later stage he will have less requirement for working capital.integrated player from purchase of raw paddy to finally selling it to the ultimate consumer will have a higher margin. But pros and cons are also associated with the timing of the entry or exit by the company. . REI agro sets the price of paddy which others follow. Processing facility REI Agro has an advantage as it has the best processing facility in the industry which has a good grading process that enables it to get 6 varieties of rice. It purchases paddy from 170 mandis out of 220 mandis of India which gives him a first mover advantage. REI Agro purchases the paddy directly from the mandis through its agents and performs all the functions from milling to distribution on its own. working capital and infrastructure to produce all of the Basmati rice on their own so they also rely a bit on trading of Basmati rice.e.17%. On the other hand the other players do not have the required skills. which consists of the black spots and other damages. Because of the huge participation in the market i. . facilities. This enables it to get greater realization as compared to other players. The following chart clearly depicts that REI Agro has spent the maximum amount on building its infrastructure and other facilities to get the better product with good quality. The details of the Gross Block of the top players are given below which shows the amount spent by companies on their processing facilities and other infrastructure.ANALYSIS Paddy purchase REI Agro has an advantage over the others when it comes to procurement of paddy from the mandis. which gives them the best realization and margin in the industry. when compared to its counterparts who get only 2-3 varieties of rice. These players purchase paddy in small quantities and sometimes they purchase from REI Agro or other agents as well which drags down their margin because of the higher cost of procurement. Being a fully integrated player. Bulk purchase of paddy and prompt payment to the farmer’s agent by REI also allows him to get a discount of 6-10% as compared to other players of the industry. Moreover the company also has the Ultraviolet machine which removes the rice. It buys almost 17% of the Basmati paddy produced in India. they either purchase paddy from the farmers & matured it till 240260 days or they outsource some of the paddy from the REI agro. size and realization of the basmati rice. Other players are not fully integrated. which ultimately reflects in the profitability and margin of the company. REI Agro has the longest inventory days of 344 days compared to industry average of around 266 days. Lesser no. Hence. Due to its backward integration of the business from procurement to selling the product. of maturing days affects the quality. higher maturing days gives REI an . which requires the higher no.Gross Block (in million Rs) 5000 4000 3000 2000 1000 0 2005 2006 LT Foods 2007 KRBL Kohinoor 2008 REI Agro 2009 Maturity period Inventory days 400 350 300 250 200 150 100 50 0 2005 2006 LT Food KRBL 2007 kohinoor 2008 RE agro I 2009 Among the industry players. of days for maturing process. company has all the facilities and capacity. edge over the others in terms of quality. 3.43. Kohinoor and LT Foods which are at 1. size and realization. This is because it has a very long maturity period with the help of which it produces the best quality rice in the industry. Although the working capital to Balance sheet and debt equity ratio is very high of REI Agro the margin of the company is also the highest in the industry. REI Argo’s working capital to balance sheet ratio is 87% in 2009 which is highest as compared to its peers which are averaging at around 79%. the working capital need for the company is the maximum in the industry. Similarly the debt-equity ratio of REI is 4. quantity.1 respectively. other players of the industry outsource some of their work to the intermediaries which reduces the working capital requirement for them.48 and 4. Therefore. .9 in the year 2009 as compared to other players such as KRBL. As the company is fully integrated from procurement to selling. the price of rice produced by it commands premium over the rice of others which ultimately helps in increasing the margin of the company. which resulting in better margin compare to industry players. On the other hand. the requirement of working capital is huge in this industry. Financials Working capital to balance sheet ratio 90% 85% 80% 75% 70% 65% 2005 2006 LT Foods 2007 KRBL Kohinoor 2008 REI Agro 2009 Because of the higher inventory days. Due to higher working capital debt and huge capex. While other players do not have all the facilities in place so they outsource some of their work to the intermediaries which requires lesser working capital and capex. the other players have an edge over REI Agro which has better return ratios which follows outsourcing business model.R e tu rn o n e q u i ty 25% 20% 15% 10% 5% 0% -5% -10% L T F o o d sK R B L K o h in o o rR EI A g r o 2005 2006 2007 2008 2009 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2005 R e tu r n o n c a p i ta l e m p l o y e d 2006 2007 2008 2009 L T F o o d sK R B L K o h in o o rR EI A g r o The inventory days of the companies in the industry are very high due to which they require huge working capital to run the business. This shows how REI Agro is different in terms of its business model when compared to its peers. interest and depreciation costs of REI Agro drags down the overall profitability of the Business. Similarly when we talk about the advertising expenses of various companies REI Agro is far behind its peers. The brands of the companies such as LT Foods. As mentioned above. REI Agro is more into the volume and private labeling business while the rest of the players are into the branded and packaging business. Examples: Charminar. Therefore. not all the players are fully integrated as REI Agro. The advertising expenses incurred by . Daawat and India gate etc. KRBL and Kohinoor Foods are the ones that incur maximum expenditure on advertising and promotion. Kohinoor and KRBL have become household names. It is not even visible if we look at the chart below. which has all the facilities from procurement to selling in place. The company has the highest processing and maturing capacity compared to its peers which requires huge capital. 00 4.00 5. KRBL has the lowest Debt equity ratio among all the players because the company is more into branding business. INR million 250 200 150 100 50 0 2005 2006 LT Foods 2007 KRBL Kohinoor 2008 REI Agro 2009 The business of Basmati rice is such that a lot of debt is involved as a lot of capital gets blocked in the maturity period of rice.00 1.00 2005 2006 LT Foods 2007 KRBL Kohinoor 2008 REI Agro 2009 . Advertising expenses.00 0.00 3. Therefore. the Debt equity ratio of all the players is relatively high. While REI Argo’s brands such as Real Magic and Kasauti are never heard by a common man.00 2.the companies show that exactly. Debt equity ratio 6. On the other hand in 2009 the ratio was highest for REI Agro because it is more into the volume business in which everything from production to distribution is done by the company itself. 8% 5.0 31.0% 3.7% 247.3% 3.1 2007 18% 17% 10% 8% 20% 2.8% 3.2% 2.6% 9.7% 3.8% 3.2 2007 9.5 61.8% 2008 14.2% 22.2 40.4 64.9% 2009 14.8% 17.1% 3.79 10% 242.3% 3.2 2005 10% 10% 6% 4% 20% 2.4 9.8 66.8% 305.7 14.6% 6.8% 4.5% 284 57 34 2009 18% 17% 4% 2% 10% 4.4% 1.0% 4.9% 7.4% 12.1 72.3% 190.7 34.1 10.0% 1.4% 15.7 2006 8.2 69.4% 4.02 11% 217.9% 4.5% 15.9 10.6% 5.0% 6.1% 3.94 12% 222 63 86 227 91 22 312 153 23 331 79 33 344 88 45 .2 2008 10.3 33.7 2008 18% 16% 7% 6% 19% 4.4% 3.5% 7.1% 6.Equity ratio RoCE (EBIT on TCE) Days Inventory Debtors Creditors Kohinoor Food EBITDA EBIT PBT APAT RoE Debt.4% 2.8 37.6% 1.7% 3.2 19.4 17.1% 7.5 2008 11.5% 4.0 8.0% 205.3% 11.7% 0.4% 15.4 2006 7.3% 219.87 10.6 12.9% 13.6% 5.6% 0.2 2009 13.8% 1.7 48.0 2005 7.9% 3.43 10.4% 175.8% 3.2% 220.5% 2.0% 15.8% 6.3% 1.6% 6.0% 2.7% 4.3 34.5 52.9 63.4% 9.1% 6.67 8.3% 5.1 71.1 2007 9.7 40.7% 3.1% 4.6% 3.1 8.1 2005 6.1% 15.8 7.4% 13.0 199.2 2006 16% 15% 11% 7% 20% 2.4% 6.09 15.4% 219.8% 4.9% 1.0% 15.3 2009 14.0% 5.4% 232.Equity ratio RoCE (EBIT on TCE) Days Inventory Debtors Creditors 2005 8.8 7.6 7.4 36.4% 4.70 12% 166.6% 8.5% 10.Equity ratio RoCE (EBIT on TCE) Days Inventory Debtors Creditors L T Food EBITDA EBIT PBT APAT RoE Debt.4% 9.4 42.1 189.8% 12.93 6.4% 4.3 214.1% 259.Equity ratio RoCE (EBIT on TCE) Days Inventory Debtors Creditors REI Agro EBITDA EBIT PBT APAT RoE Debt.8% 17.8% 18.3 52.1% 2006 11.Financials of all the companies in the organized market KRBL EBITDA EBIT PBT APAT RoE Debt.8% 2007 12.31 12% 169.4 53.7 178.2% 10.5 226.7 32.0% 3. • A company needs a very strong balance sheet to follow this kind of model. • Being the largest producer of Basmati rice it also has the advantage of economies of scale. The other model is followed by rest of the 3 companies whereby these companies produce less and also rely a bit on trading. • It has the longest maturing period among the industry with the help of which it makes good quality rice which commands premium over its competitors. The benefits to REI Agro are as follows: • Being a fully integrated player REI Agro has the best processing facility and therefore it commands better margins because it does not have to pay anything to the intermediaries unlike its peers. • The requirement of debt and working capital is immense as a lot of money gets blocked during the maturity period. One is the fully integrated which is followed by REI Agro in which each and every thing from procurement to selling is done by REI itself. • It also has its own retail chain in the form of 6TEN through which it sells its products directly to the customers and thereby eliminating the costs incurred on the intermediaries.Conclusion Basically there are 2 types of models which are followed by the companies in this industry. • It also gets discount on purchase of paddy as it makes bulk purchases as compared to other 3 players. This model is more of a volume driven which is followed by REI Agro. . The ill effects of the following Business model are as follows: • Being a volume player the company cannot command a premium price unlike a branded segment player who can easily command premium from its customers. • The company can also benefit in case of an economic downturn as it is a volume player and not a branded segment player. Moreover these companies focus mainly on brand building and selling. • These companies are more likely to lose out incase of economic downturn as they will have to reduce premium prices charged through their respective brands. This leads to brand loyalty which ultimately benefits the company.• The company cannot establish rapport with its customers as it is not following the branded segment model. The benefits of this model are as follows: • The players following this model are into the branded segment and can therefore command premium price from the customers. . The ill effects of the following Business model are as follows: • The following companies do not have their own distribution network and have to rely on suppliers and distributors and thereby reducing the margins. The other business model is followed by 3 companies namely KRBL. The players in this model focus more on brand building and selling. • A customer when buys a brand and is satisfied makes repeat purchases. the margins are further reduced due to the intermediaries present in the value chain. Therefore both the business models have their pros and cons and it is ultimately the decision of the player to follow whichever business model he likes. • The retail industry is all set to grow at a rate of 9% every year which will ultimately benefit these players. Kohinoor and LT Foods. • As these companies also rely on a bit of trading as the production is less. • These companies are also known by the customers as these companies repeatedly advertise themselves which leads to brand recognition by the customers. Particulars Fully integrated Premium price Branding/Advertisement Working capital requirements EBITDA margins Financial cost Maturity period Varieties of Rice produced REI Agro √ × low high high high high 5-6 LT Foods × √ high low low low low 2-3 Kohinoor × √ high low low low low 2-3 KRBL × √ high low low low low 2-3 . aspx http://www.eurosa.ltoverseas.com/business-opportunities-articles/a-market-study-of-indianbasmati-rice-import-and-opportunities-1233358.htm http://www.no-patents-on-seeds.com/2009/03/23/stories/2009032350250400.com/company-facts/ltfoods/history/LTF .articlesbase.org/index.environmentportal.php?option=com_content&task=view&id=77&Itemid=107 http://business.htm http://www.htm http://www.html http://www.thaindian.moneycontrol.php? option=com_content&task=view&id=74&Itemid=42 http://www.aspx http://www.com/newsportal/business/indian-basmati-set-to-enter-chinamexico_10066425.thehindu.in/node/249077 www.rediff.Bibliography http://www.com/InvestorRelations/analyst_coverage.html http://www.ltoverseas.com/2007/12/28/stories/2007122850980700.htm http://www.in/index.com/InvestorRelations/analyst_coverage.thehindubusinessline.com/report/2009/may/12/rice-production-seen-at-record-99-point37-mt-in-08-09.thehindubusinessline.com/2009/01/03/stories/2009010351690300. As well as on other parameter's such as Commission. Degree of research question crystallization: . Sales Force. To know the Consumer Behavior towards product. To know the advertising strategies research design Purpose of study: . the hypothesis .ltoverseas. Credit Period. To know the promotional Strategies. Moreover.com/AboutUs/CorporateProfile.Exploratory study As per my objective of the research. so that they hold with company products and provide them to end user. www. the research questions would try to find out the current situation in the market regarding the satisfaction level. To know the price of the product. Thus I selected my research objective as: RESEARCH OBJECTIVES Research Objectives are as under: • • • • • • • • To identify the Marketing Strategy of Basmati Rice. etc. Delivery mechanism.Descriptive The study focuses on the satisfaction level for different products. To know the positioning of Basmati Rice in the market.aspx RESEARCH METHODOLOGY For any fmcg company to have efficient distribution channel needs to have satisfied intermediaries. To identify the area of service in which company needs to Improve? To help the Company in designing proper strategies for rural area. I have gone to the market and interviewing retailer's and Wholeseller's in the area of Sagar. Approach: Interview (Personal Contact) Instrument: Questionnaire • Questionnaires Designing: It is the most crucial part of any market research. Retailers Attitude towards sales force etc.is not pre-defined here. Even from Area Sales Manager I identified various Parameters to be listed in my questionnaire's have . I have collected Primary data by personally surveying Retailer's & Wholeseller's in the sampling area specified. Interrogation takes less time than observation and gives information that is more purposeful Research environment: Field study. Versatility of the questionnaire will help to cover almost all related factors impacting the satisfaction of the target sample. Competitive Products. Method of data collection: .Interrogation & Personal Interview Based on my initial observation. So that the study will be carried out in field. I have meet more than 50 retailers during my training period in order to learn the Order taking Mechanism. POP Displays. DATA COLLECTION & DESIGN Data source: Primary source To satisfy the objective of the research it is necessary to get the response from the respondents. I have prepared a questionnaire to collect the response from retailers and whole sellers as primary data. but it would be define during the study. Survey is the main part of the study and primary data collection. which act as primary source of data. I have taken a due care in designing the Questionnaire for my research. Here research problem is also general. correct sequence. • • Type of Question: Close Ended Number of questions: 40 SAMPLING PLAN Sampling Area Sample Population Sample Size Method Of Data Collection Sampling technique :Sagar : Customer’s. what should be wording of each & layout of questionnaire as a whole. : 40 : Questionnaire : Convenience Sampling . • Type of Questionnaire: Structured Non Disguised I have arranged the questions in a specific order to get the facts and the interviewer be asked to response strictly in accordance with a pre-arranged order. Retailer's and wholesalers of Sagar Area.taken utmost care in deciding right question. The objective of the survey was disclosed every time before getting the response from the respondent . As a result of this it was not possible to gather full information about the respondent. • Some time the retailers & customer do not respond rightly to the questionnaire. • Some time the problem which I face is language problem for which I have to make them understood. • Sample size was very small as compare to the population of Sagar city. • People did not give full response and they are bias in some personal questions. .LIMITATIONS • Limited Time available for interviewing the respondent. • The time constraint face in my project might have affected the comprehensive of its findings. : ---------------------------------------------------------------------------------------------------------------------------------------c) Kohinoor (d) REI Agro Q. Are you aware of any sales promotion schemes?--------------------------------Q8. Why are you using this Brand? (a) Cheap (b) Tasty (c) Brand Image (d) All Q9. What is view about packaging? (a) Highly Satisfactory (b) Satisfactory (c) Not Satisfactory Q6. Offer your suggestion to the dealer? ------------------------------------------------------------------------------------------Date: Thanks for your Co-operation Signature .2 You purchase the above brand because of the? (a) Price (b) Quality (c) Packaging (d) Others Q3. Do you get any. Taste of this Rice is? (a) Excellent (b) Good c) Better (d) Same as other Q5. Discount or other schemes while purchasing the products?-------------------------------------------------------------------------------------------Q7.QUESTIONNAIRE Name : Address: Contact No.1 Which Rice Brand do you use? (a) LT Foods (b) KRBL Q. You buy the Basmati Rice on basis of ? (a) On you’re one (b) Advised buy the friends (c) Advertisement (d) Demonstration of the Product Q4. NEHA DUBEY (Lecturer of MBA Deptt. Contents and presentation of the subject matter 2. SVNIT) for the partial fulfillment of the degree of Master of Business Administration is satisfactory in respect of :Comments By Deptt. Embodies the original work of the candidate. 4.. Language 3. under the guidance and supervision of MISS.CERTIFICATE DATE: __________ The project report titled “MARKETING STRATEGIES OF INDIA GATE BASMATI RICE” in Sagar City Prepared by ANIL KUMAR SINGH (MBA 1ST Sem). Examiner Supervisor Head of 1. Submission within due date . NEHA DUBEY (Lecturer of MBA Deptt. To the best of my knowledge the report does not contain any work which has been submitted for the award of any degree.O. anywhere. Sagar (M. SVNIT) affiliated by Dr. . conduct under the supervision of of MISS.Signature of Examiner of Supervisor Signature Signature of H. DECLARATION BY CANDIDATE I declare that the project report on “MARKETING STRATEGIES OF INDIA GATE BASMATI RICE” .D. in Sagar City is my own work.).P.. Hari Singh Gour University. .Signature of the Candidate ANIL KUMAR DUBEY MBA 1st SEM. SVNIT. I would to express my deep sense of gratitude to Miss. Ashish Tiwari & Mr. Lecturer for her valuable guidance. Chaitanya Kaushikya and to . Mr. Cooperation & Constant encouragement during the project preparation. Neha Dubey. She is very supporting and without her help I would not have completed my project report successfully. Pramesh Gautam Head of the MBA Dept. Sagar for providing me the opportunity of doing the project report. I express my heartful thanks to Miss. Preeti Shukla. ACKNOWLEDGMENT I would like to pay my sincere thanks to Dr. advises. which were the inputs for my survey.the staff of SVNIT. PREFACE The project report has an objective to get the MBA student familiar with real life business situation and gives an opportunity to the student of understand the theoretical concepts of marketing and finance in practical way. In today’s world “Consumer is the King” consumer test and preference go alone way in the actual . I am very thankful to retailer and customer whom I had approached for collection of necessary data and who give their valuable time and comments. Date: Place: Anil Kumar Singh MBA 1ST Sem. Parents and friends for their kind support and suggestion. pie diagrams etc. The main aim of the survey report was to determine the Marketing Strategies of India Gate Basmati Rice in Sagar City. graphs. . Every research work has to deal with various people in concern organization and each of them have their own opinion and thinking about various topics.sales of the product. I tried my best to express the report through satisfactional representation. and it helped me to enhance my knowledge I am extremely happy to place before our esteemed teachers.