RICE MARKET IN INDIAST. XAVIER’S COLLEGE (AUTONOMOUS) UNDER THE UNIVERSITY OF CALCUTTA ANALYSIS OF RICE MARKET IN INDIA A PROJECT REPORT (Under the guidance of Prof. VIJAY ANAND SAH) SUBMITTED BY TUSHAR KHANDELWAL IN PARTIAL FULFILMENT FOR THE AWARD OF THE DEGREE IN BACHELOR OF COMMERCE (HONOURS) MARCH 2012 ROLL NUMBER: 314 ROOM NUMBER: 14 Page - 1 - RICE MARKET IN INDIA ACKNOWLEDGEMENT A project cannot be completed alone. It requires the effort of many individuals. I take this opportunity to thank all those people who helped me to complete this project. I express my sincere and deep gratitude to Rev. Fr. Felix Raj, Principal (St. Xavier’s College, Kolkata) Rev. Fr. Dominic Savio, Vice Principal (St. Xavier’s College, Kolkata) for giving me the privilege of being part of the ‘Project’ in partial fulfillment of the requirement in regard to B.com 3rd year degree course. I express my sincere gratitude to Prof. Vijay Anand Sah and other faculty members of the Marketing and Management Department for giving us the opportunity to undergo this project. I further thank him for lending a helping hand when it came to solving my problems related to this project. This project would not have been possible without his valuable time and support. This project is an attempt to talk about the prospects of Rice Market in India Last but not the least I am very much thankful to all those people whom I have approached and collected data from. Page - 2 - RICE MARKET IN INDIA Table of contents Serial no. 1. 2. 2.1 2.2 2.3 2.4 3. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 4. 5. 6. 7. 8. TITLE ABSTRACT Chapter 1 - INTRODUCTION Brief Idea Of Proposed Study Literature Review Research Methodology and Collection Of Data Objective of this Study Chapter 2 – THEORETICAL ASPECT ON PROPOSED STUDY Global Rice Industry Indian Rice Industry Basmati Rice Industry Farmer To Processor Supply Chain Rice Industry Drivers SWOT Analysis Future Outlook of Rice Industry Branding Marketing Value Chain Chapter 3 – COLLECTION OF DATA & DATA PRESENTATION Chapter 4 – DATA ANALYSIS & INTERPRETATION Chapter 5 – RESEARCH FINDINGS & CONCLUSION LIMITATION OF RESEARCH APPENDIX Page 4 5 6 7 8 9 10 12 14 19 21 26 27 28 29 32 33 35 42 44 45 Page - 3 - RICE MARKET IN INDIA ABSTRACT The following research report relates to the rice industry of India. India is the second largest producer of rice in the world. But the contribution of rice in the overall rice production is very minute. Rice is known for its aroma and nutlike flavor. When cooked, it swells only lengthwise, resulting in long slender grains that are dry, separate and fluffy. The production process of Rice is the most critical part because if the rice gets broken it will not command premium price in the export market. Therefore, utmost care has to be taken while producing it so that the grain is long enough to command premium price. For this a company needs to have state of the art production facilities in place. The maturity period also plays a key role because if the maturity period is long the rice produced will be of a superior quality. The research starts from the International market as to how India finds it challenging in marketing its rice produce and evolves out how branding and packaging of rice products has intensified completion in the domestic market. It also attempts to study the taste and consumer preferences regarding their choice of brands and how well they have accepted rice in the new “Branded Avatar”. Today, the need of the hour is bypassing the mandi and thus avoiding extra logistics and tax based costs resulting in the strengthening of the supply chain. The Green Revolution was a golden era in Indian agriculture. Today, the sector requires another similar upheaval. The present scenario looks grim; cereal yields are rising slowly, ground water tables are plunging, and agricultural growth is also very low. Therefore, Indian agriculture needs to change over to better methods in production, sales of rice and on the intermediate supply chain to help ride the wave of the rising global food demand. Page - 4 - demand of rice has been increasing in the country. Madhya Pradesh. Farms cover over half the land and almost 1/3rd is used to grow the two major grains i. Bengal. Agriculture is the main source of income for families in India. Hybrid rice. Maharashtra and Gujarat and towards north-west through Punjab in India to Pakistan. various efforts such as use of High Yielding Varieties of rice.9% from 71mn tones in 2003 to 87. It is expected to grow at 99mn/t in 2011(Source: USDA). A large number of aromatic rice is still grown in these areas.RICE MARKET IN INDIA INTRODUCTION Rice is one of the most important food crop of India and 2nd of the world. Page . preceded only by China.5 mn tones. aromatic rice spread east wards to Orissa. It feeds more than 50 % of the world population. Current production of Rice in India is 87. From this region. The foot hills of Himalayas in the states of UP. Brief Idea of the Proposed Study: The main approach of the whole study is to study the present global scenario in rice market and then break it down to domestic market. west ward to Rajasthan. In2010. With an ever increasing population. Thereafter. Rice Production has increased at a CAGR of 2. Afghanistan. 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. the total area under rice in India was 43mn hectares. India is the second leading producer of rice in the entire world. System of Rice Intensification (SRI) method.5 - . Bihar and Terai Region of Nepal are considered to be the centre of diversity for aromatic rice. Manipur and Myanmar. Rice and Wheat. Assam. India is the home for the aromatic rice. Iran and Iraq (Khush-2000).5mn tones in 2010. Later on Research Studies are also carried out to know the retailers and consumers preferences and choices for various rice types and brands also trying to identify various factors which influence their purchase making decisions.e. Structural Overview of Proposed Study.6 - . Global Rice Structure Page . Figure 2.RICE MARKET IN INDIA Figure 1. The branded Rice market In India currently valued between 600-700 crore. Basmati Rice also known as King of Rice because of its umpteen characteristics rules the rice industry in India. Denmark. The total consumption of branded rice in India is 3. The importance of brands are increasing by the day be it in the case of cosmetics. The largest Rice producing state is Haryana which accounts for almost 60% of the total long grained rice produced in India.RICE MARKET IN INDIA Literature Review: A major change is being witnessed in the Indian consumer market in terms of brands.5 lakh metric tones which is quite a significant figure and considering market consumption patterns industry experts are expecting a rise in the figure by another 20%.96. This global demand for basmati rice has lead to a substantial increase in traditional Basmati growing areas. India is home to thousands of varieties of basmati rice. Most of the Top Rice Brands in India are famous worldwide and are exported to countries like USA.000 tones. The rice market in India has evolved over the years and today branded rice has become the order of the day. Rice is not only popular in India rather it is in great demand in most of the countries across the globe.76. Iran etc. apparels.000 hectares and the total estimated production is about 11.7 - . The Indian rice producers are going by market trend of producing branded rice which in turn is resulting in stiff competition. Currently the total area under cultivation of Basmati rice in India is about 7. consumer durables or food products. Page . RICE MARKET IN INDIA Below is a list of the Top Rice Brands in India Lal Qilla Double Diamond Brand Rice Hanuman Brand Rice Resham brand Tilda rice Pari Rice Dawat Brand Kohinoor Brand Blue Label Brand Doon Brand Research Methodology and Collection Of Data: The process of research is divided into THREE stages. This will be done by survey method where respondents were asked to fill up the questionnaire and give their opinions regarding the matter addressed to them. the findings of the research are to explain the causes and reasons behind the growing demand of packaged and branded rice in the market and the challenges that lays ahead as it competes with the huge unsegmented rice market. Page . Firstly.8 - . I have consulted many books and recapitulated the knowledge gained from the lectures of my esteemed teachers in college CONSUMER BEHAVIOUR AND MARKET RESEARCH. I had to check many authentic websites and study each topic properly to get a reliable data for my project. identifying and reviewing various challenges and opportunities that await the rice industry. While preparing the project. Thirdly. an overview analysis of rice market in global and national scenario. Facts and figures for primary data are extracted from authentic sources and its reliability can be assured. Secondly. Thus. a comprehensive analysis of consumer and dealer behavior in terms of their brand preferences and choices with regards to procuring and consuming rice. RICE MARKET IN INDIA Objective of this study: To highlight upon the growing demand and opportunities of Indian Rice Industry both Globally and in Domestic Markets To familiarize the readers about the importance of branding and packaging of Rice products and positioning it in the retail market.9 - . To explore and identify new areas of business opportunities whereby rice is used as raw input in various processed foods and other eatables. Page . To study and inform as to how consumers look upon the concept of branding in rice market and tracking their tastes and preferences. 2. Temporary export bans and restriction implemented by several major and mid-level Rice exporters.RICE MARKET IN INDIA THEORETICAL ASPECT ON PROPOSED STUDY Global Rice Industry: Global paddy production over the 2009 season has been lifted by nearly 10 million tones to 678 million tones (454 mn/t on milled basis). A sharp decline in the value of dollar in fall 2007 and winter 2008. Source : FAO Global Rice Price: Global rice price have increased at a CAGR of 16% from $173/t in 2001 to $570/t in 2009.10 - . A shift of fund into commodities from stocks and real estate in 2007 and early 2008 Page . 4. The major reasons behind increase in global rice price during 2007 to 2009 were: 1. World rice production is expected to increase by 4% to 710 million tons (474 mn/t on milled basis) in 2010 (Source: FAO). Weather related problem in specific growing areas. the second highest production on record. 3. in particular Iraq. If confirmed. at 31. World Rice Trade and FAO Rice Export Price Index Rice Imports by Region Much of the expected growth is expected to be driven by larger imports by Asian countries. imports by Bangladesh.2 million tonnes. Nepal and especially the Philippines are forecast to rise to offset recent losses from natural disasters. International Trade of Rice : The current forecast for international rice trade in the calendar year 2010. Page . or 800 000 tonnes. Part of the increase would stem from increased purchases by Near East Asian countries.8 million tonnes on aggregate. Among countries in the Far East.11 - . trade next year would be the second largest after 2007. increase from the 2009 estimate and much higher than forecast last June.7 percent. which are foreseen to reach 14. almost 7 percent more than last year. The revision reflects larger import requirements by those countries that faced important crop losses in recent months. 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. points to a 2.RICE MARKET IN INDIA that added to price volatility and may have temporarily boosted price. The branded Rice sales have taken off in recent years and have been growing at around 15% in the domestic market compared to 5% for unbranded rice. the basmati rice category is growing at 6%.12 - . The total rice market in India is estimated to be worth around Rs 1. of the Rs 3. While the total rice market is growing at 3-4% per annum. Saudi Arabia comprises 60% of the exports. Page . Source: Rice India. while the rest is exported. only around Rs 500 crores worth is sold in branded form. India is the largest producer and exporter of basmati rice accounting for around 74% of the global production. India produces around 2 million tones of basmati per annum.00.RICE MARKET IN INDIA Indian Rice Industry: India is the second largest rice producer in the world with a 20% share in world rice production. indicating a latent robustness in the country’s consumption. Added to this.000 crores (growing at 3-4% annually) of which only 10% of the rice is branded. Indian basmati rice commands premium over its traditional rivals in terms of prices and quality. The country wise breakup of exports is given in the figure below. January 2012. The branded rice sales growth is an impressive 25% in the international market as compared to stagnant sales of unbranded rice. Pakistan is India’s sole basmati competitor in the international market. India exports around one million tones of basmati rice every year. around 50% of India’s total basmati production is consumed within.500 crores worth of basmati rice produced. 1 billion in 2005 at 1. Basmati accounts for only 2% of India’s Rs 1. The median age of the Indian population is one of the youngest in the world. signifying a huge growth potential.2 billion in 2002 to more than 8 billion in 2030. Page .1% annually over the next three decades. complemented by an increase in income levels. increasing consumerism and increase in the share of organized retail.7% per annum. growth in the Indian population from 1. which could translate into encouraging spending patterns. averaging around 24.000 billion rice market by volume and about 5% by value.13 - . rising disposable surpluses. Rising disposable incomes are growing branded volumes. The Indian retail space is also experiencing enormous growth in retail chains and malls. Recent projections made by the IMPACT model developed at the International Food Policy Research Institute (IFPRI) indicate that the demand for rice will increase by 1. Demand for branded rice is likely to grow at around 15% . Growing per capita incomes. A rising number of Indian expatriates as well as a growing preference for basmati in the Middle East are likely to keep demand on the boil.RICE MARKET IN INDIA Outlook Ahead : The demand for basmati rice is expected to grow for the following reasons: Growth in world population from 6. nutlike flavor and aroma can be attributed to the fact that the grain is aged to decrease its moisture content.. This segment thus offers opportunities in marketing of branded grains. Page . Many have felt that the patent should not be granted since basmati is Indian property. resulting in long slender grains that are dry. as well as grains processing. This company was granted a patent to call the aromatic rice grown outside India `Basmati'. strengthening production to around 34 million tones by 2014. Basmati Rice has been grown in the foothills of the Himalayas for thousands of years. The US Patent and Trademarks office accepted the petition and had re-examined its legitimacy. When cooked. elongation of the grain on cooking and chalkiness.RICE MARKET IN INDIA Branded rice is becoming popular in both the domestic as well as the export market. The global rice trade is expected to grow at 2-3% p. It is long grained. Rice Tec was granted the patent on the basis of aroma. separate and fluffy. but in September 1997 a Texas-based company. Basmati Rice: The name Basmati comes from the Hindi language. won a controversial US patent for a crossbreed with American long-grain rice.a over the next 10 years. India contested the patent for Basmati rice acquired by Rice Tec Inc. it swells only lengthwise. Basmati Rice is a simple grain yet throughout history it has been on royal menus of various cultures as the main dish. Rice Tec Inc. Basmati rice is known as the queen of rice. which had been challenged by the Agriculture and Processed Food Products Export Development Authority (APEDA). Due to the high amount of starch clinging to the rice grains. non glutinous and particularly good for formal rice cooking. The Basmati Rice Patent Basmati rice was developed by Indian farmers over hundreds of years. Basmati is expected to maintain a robust growth of over 6% in the medium-to-long term. Indian Basmati rice commands a premium in the international market. Its perfume. meaning 'Queen of Fragrance'. Basmati rice should always be washed before being cooked.14 - . although European Union is the third importer.5% of respective Basmati export (India: 616. 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.5% of overall market in 2007. around 1. Main importers are almost located in Middle East. Pakistan: 556 million USD). Trade in coarse rice is spread in several countries. Basmati rice trade is rather concentrated.7 million USD. Iran. In 2007.9% and those of Pakistan 68.2 mmt was consumed domestically. Out of the production of 3 mmt in India. Basmati trade is also concentrated by demand side. with first five Importers making 25% of overall rice trade in 2007.RICE MARKET IN INDIA Basmati Rice Industry: As mentioned above India and Pakistan are the only producers of Basmati rice in the world.15 - . whereas Pakistan does the same with UAE. The first five importers made 44. European Union. India mainly exports Basmati to Saudi Arabia. the first five clients of India had a share of 84. Market Share in 2011-2012 (% of total share) Source: APEDA Page . Kuwait. European Union and Yemen. UAE and USA. mainly located in Asia.8 mmt was exported and 1. Oman. The company’s agent needs to possess the required skills to determine whether the quality of paddy is good or not. A good maturing period is generally from 12-14 months. There are a number of risks involved in the maturing process of Basmati rice.RICE MARKET IN INDIA 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. In India there are a total number of 220 mandis. Maturing: The key ingredient to produce full grain Basmati rice is the maturing period of the rice. The biggest challenge of maturing Basmati rice is the money involved in it. It consists of the farmer’s (seller’s) commission agent (Kaccha aratya) and the company’s (buyer’s) commission agent (Pakka aratya). 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. The company’s agent goes and buys paddy from the farmer’s agent. There is a particular process by which paddy is purchased from the mandis. As the companies are operating at very high inventory days of almost a year the working Page . To develop good procurement skills one needs a learning curve which comes through a lot of experience. To have good quality Basmati rice it needs to be properly matured. which are highly diversified.16 - . Therefore the procurement skills of the industry players play a significant role and make a vital difference among the counterparts. For maturing of the rice proper infrastructure and maintenance is required throughout the maturing process. Full grain. 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. The full grain Basmati rice commands the best price in the export and domestic market which is the ultimate focus of every company. If the company has a good processing facility it will get more varieties of rice. Three-fourth grain and so on. 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. rice weevil and rice moth. Milling: The processing and milling of rice is another important aspect of producing good quality Basmati rice. There are a total of 18 species of insects that infest stored rice in India. To overcome the challenges in maturing Basmati rice one can go to the intermediaries who keep the rice for a particular period of time. rodents. mites and fungi cause considerable damage to stored rice. The process of milling involves De-husking and grading which are the most critical processes. Grading: When the paddy is processed we get various sizes of Basmati rice.RICE MARKET IN INDIA capital needs of a company is very high.17 - . Insects. Some of them are lesser grain borer. half grain. Therefore a lot of capital is required in this business. But it increases the cost of funding for the company. But the number of varieties of Basmati rice that we get from the processing depends on the processing facilities used by the company. while if the Page . 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 ayear. who act as purchasing agents for buyers at a local.18 - . One can also outsource the milling process but the disadvantage of it is the handling. Export of Rice indirectly through recognized Export House. The rice produced out of such paddy is sold at different times and different years due to ageing requirements. Trading House. Rice is sold for export through the following means: Direct Export out of India by Rice Miller.RICE MARKET IN INDIA company has a sub standard processing facility the quality of rice will also be substandard. The paddy is bought from various Mandies across the State of Punjab. Backward traceability is not practical and also non-achievable. But then one does not have any control on the milling process. 90% of the crop is sold by farmers with small holdings to traders. government-mandated marketplace. called a mandi. Farmers have only an approximate idea of price trends and have to accept the price offered them at auctions on the day that they bring their grain to the mandi. Different companies follow different types of distribution channels to reach their customers. 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. traders are well positioned to exploit both farmers and buyers through practices that sustain system-wide inefficiencies. Uttar Pradesh. Export of Rice indirectly through other Rice Millers Exporters. Therefore like every business the distribution channels play a vital role in this business. Star Trading Houses etc. Moreover. Haryana. Delhi etc. As a result. Export of Rice indirectly through registered Exporters traders. Selling and Distribution: All the processes become irrelevant if the product does not reach the ultimate consumer. REI Agro mainly supplies its products through wholesalers and its retail arm Six Ten Page . 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. KRBL and LT Foods supply their products through the branded route domestically as well as internationally.. The causes include remnants of scarcity-era regulation and an agricultural system based on small. inefficient landholdings. 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. who act as purchasing agents for buyers at a local. Yet most Indian farmers have remained quite poor. Farmers have only an approximate idea of price trends and have to accept the price offered them at auctions on the day that they bring their grain to the mandi. and employs 66% of the workforce. The agricultural system has traditionally been unfair to primary producers.19 - . the margins of these three companies are lower as compared to REI Agro. It produces 23% of GDP. retail chains 13 such as Reliance retail. Because of the Green Revolution. In this regard Kohinoor Ltd. On the other hand the other companies such as Kohinoor Ltd. India’s agricultural productivity has improved to the point that it is both self-sufficient and a net exporter of a variety of food grains.RICE MARKET IN INDIA domestically. feeds a billion people. As a Page . Big Bazaar etc. But due to the higher working capital cost and higher procurement costs. Farmer to Processor Supply Chain Agriculture is vital to India. These three companies are more into the branding business as compared to REI Agro which is more into the private labeling segment. government-mandated marketplace.. wholesalers. Ninety per cent of the crop is sold by farmers with small holdings to traders. Domestically they supply their products through kirana shops. called a mandi. Such a market-led business model can enhance the competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity. A schematic representation of farmer to processor supply chain and processor activities.RICE MARKET IN INDIA result. traders are well positioned to exploit both farmers and buyers through practices that sustain system-wide inefficiencies. and enlarged capacity for farmer risk management. This has made him and Indian agribusiness sector globally uncompetitive. This will create another virtuous cycle propelling the economy into a higher growth trajectory. Basmati are indicated below: Page . a growth in rural incomes will also unleash the latent demand for industrial goods so necessary for the continued growth of the Indian economy. higher incomes. larger investments and higher quality and productivity. Indian potential farmers who have been trapped in a vicious cycle of low risk taking ability > low investment > low productivity > weak market orientation > low value addition > low margin > low risk taking ability.20 - . despite rich & abundant natural resources. Further. With the advantage of the demographics. Rice Industry Drivers: India is one of the fastest growing economies of the world.RICE MARKET IN INDIA Source: ITC Ltd. In year 2008-09 India’s per capita income was estimated to be Page . Increasing affordability India is the fifth largest country in purchasing power parity and the tenth largest in sheer quantum terms. India is poised to become one of the developed economies in the next 2 decades. The following are the reasons which will drive the growth of Basmati rice industry in India: 1.21 - . consumers are shifting towards packaged rice and becoming brand selective. Expenditure in life style and premium goods. 2. Daawat. 4. Moreover. The average Indian is earning higher than ever before. The domestic consumption of Basmati rice has increased from 0. This will continue to grow as the demand from both domestic and international markets is constantly increasing. 18. urban consumers are likely to represent 37% of the population and still account for 62% of consumption.869 by the year 2025 at a CAGR of 5. the farmers are Page .RICE MARKET IN INDIA more than $653 and is expected to rise to $2000 by the year 2016-17 (Source CSO). With the increase in the standard of living. The expansion of retail stores and hyper markets has significantly contributed to the increase in the demand for Basmati rice. Change in taste & preference The rise in per capita income has also resulted in increase in the demand for Basmati rice. Some brands of Basmati rice which have become household names are Kohinoor. This is because more people can now afford to buy Basmati rice. There is a subtle shift occurring in the Indian spending habit.78mn/t in 2009 at a CAGR of 14.3%. is projected to account for 70% of all consumers spending by the year 2025. 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.3% resulting in an increased demand for Basmati. Increasing availability The production of Basmati rice has more than doubled from around 1 mn/t in 2003 to 2. The estimated cumulative liquid wealth of the Indian affluent class is poised to grow at 50% over the next three years.22 - . Lal Quila and Charminar etc. By 2020. 3.35mn/t in 2003 to 0. The average household disposable income would reach Rs 3. The share of branded Basmati rice in total basmati consumption has seen an exceptional rise. rather than spending on necessities. The branded rice category is expected to grow significantly over the next few years.3 mn/t in 2009 respectively. which is forcing the farmers to increase the production of Basmati rice. therefore they are able to pay the premium for Basmati rice over the non basmati rice.2530/Kg). The realization on exports of Basmati rice is more than the domestic sales. Basmati rice paddy sells at around Rs 28-32 per kg. So a farmer is shifting his focus from the production of non-Basmati rice to the production of Basmati rice. it is a premium variety of rice. Moreover.23 - . farmers are shifting towards high yielding production methods. These countries are developed and cash rich. flavor and taste there is a huge demand of Basmati rice globally. 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. so it is incentive to export Basmati rice. while the normal rice paddy sells at around Rs 10-13 per kg.70-75/Kg) and normal rice (Average Rs.2530/Kg). hybrid rice and various new methods such as system of rice intensification (SRI) are being used by the farmers to produce high yielding rice. The Middle East accounts for 75% of exports of Basmati rice from India. because the production cost of Basmati rice is marginally higher compared to production cost of non-Basmati rice. But there is a huge difference in the selling price of Basmati rice (average Rs. with the help of the various social campaigns and advertisements from the fertilizer and seed companies. Some of the techniques like High yielding variety (HYV) of seeds.RICE MARKET IN INDIA increasing the production of Basmati rice. But there is a huge difference in the selling price (average Rs. aroma. which is forcing the farmers to increase the production of Basmati rice.70-75/Kg) of Basmati rice and normal rice (Average Rs. Due to the awareness of the various production techniques farmers will make more profits by producing it. But the realization from Basmati rice is higher compared to non-Basmati rice. Due to the better quality of rice. Increasing farmer awareness Nowadays. which generally sells at premium prices in the domestic as well as international markets. Supply side of Rice: 1. The production cost of Basmati rice is marginally higher compared to non-Basmati rice. Page . Similarly the domestic consumption is also increasing because more and more people are shifting towards Basmati rice due to its quality. The export market of Basmati rice has increased tremendously over the last few years. Players in both organized and unorganized market are increasing the procurement of Basmati rice. Haryana and Uttar Pradesh.RICE MARKET IN INDIA 2. Page . Indian basmati rice will shortly enter the kitchens in China and Mexico. an Assocham survey said. Assured off take of Basmati rice The demand for Basmati rice is constantly increasing in both domestic as well as international markets. It is evident from the fact that in the last 10 years the exports of Basmati rice have never reduced.Basmati Rice Production 35 lacs Tons and In 2009 . and the government hopes to tap the huge markets of China and Mexico in a couple of years. On YoY basis the exports of Basmati rice have increased tremendously. Therefore the farmers are assured that whatever they will produce will be consumed either domestically or internationally. basmati is exported to over 130 countries. it was observed that a large proportion of cultivation area has been shifted from non-basmati rice sowing to basmati rice sowing (PUSA 1121 variety of basmati rice) in Punjab and Haryana. flavor and taste. Moreover.There was 50 percent increase in the basmati rice area in Punjab and Haryana.24 - . aroma. the study said. In 2008-09 . as the demand in both domestic and international markets is increasing. At present. 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. Positives for the Rice Industry: The major paddy growing states of Punjab. 5 million tonnes labeled basmati leaving India will reach Iran. In the new season starting October.000 per acre against Rs 30. Owing to the government of India's decision to reduce the minimum export price (MEP) of basmati rice. fetching around $200/t. you tend to watch it rather carefully.000 tonnes basmati from India. the country's basmati rice exports are expected to surge by a whooping 33% during the season starting October. 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 2008-09.25 - .000 per acre that one garners from the non-basmati varieties. Iran also pays top-notch prices for India’s Pusa Rice 1121. Page . it is a tough bargainer. Who ever imagined that the variety Pusa 1121. When 50% of your eggs are in one basket. That is what Indian industry is doing. Saudi Arabia still buys up to 750.RICE MARKET IN INDIA It is the inclusion of the PUSA 1121 variety in basmati rice category which gives better returns as it yields about Rs 65. almost half of the 2. India's Food and Agriculture Minister Sharad Pawar had announced lowering of MEP of basmati to $ 900 PMT from the level of $ 1.000-35.100 PMT. 26 - .RICE MARKET IN INDIA SWOT ANALYSIS Future outlook of the industry According to industry estimates. according to estimates. Production of Basmati rice in the country is likely to go up to 50 lakh tonne this year from 40 lakh tonne last year. pulling down procurement price of the crop. Faced with competition from the Super variety of rice from Pakistan. export of Basmati rice this fiscal is likely to touch 20 lakh tonne against 16-17 lakh tonne last fiscal. Indian Basmati Page . Export of Basmati rice from India has been growing at a rate of 50-60%. 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. changes are bound to occur in the standard of living and taste and preferences of the people. Page .RICE MARKET IN INDIA prices in the international market have also come down. Earlier. Therefore. Last year. 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. the demand for Basmati rice is poised to increase in the next few years. The prices of Pusa 1121 this year is between $1. which tastes similar to Pusa (a lower variety) from India. 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.100 and $1.27 - .300 per tonne. has a price of $1000 per tonne. Super variety of Basmati. Presently the Basmati rice consumption domestically is very low because of the premium prices. As the working population of the country will grow. Moreover India will get the advantage of its demographic changes. and European Union & USA. Lal Mahal.852 to 2. KRBL Ltd. have made a foray in branding rice with considerable good results but the effort is too little and is almost negligible when it comes to exports. More than 90% of Indian rice is sold in the world under private label of the foreign companies who get the rice packed of their own brand and enjoy the premium by such branding. Saudi Arabia. Saudi Arabia and UAE. 2166 to 10. In addition to generic Indian name of Basmati . The need to promote brands is even more to get better realization for export. Some companies like Kohinoor.RICE MARKET IN INDIA Branding: Rice is sold more as a commodity than as a product. Absence of branding in the rice industry also leads to short charging the consumers who may be palmed off a cheaper variety as a superior variety because consumer goes by the physical parameters which are smaller in many cases. Daawat. Basmati rice is exported to over 100 countries in the world major markets being UAE.18 mt. None of the Indian brand. Yemen AR. etc. it is necessary for companies to promote the individual brands.582 crore . This makes it difficult for a consumer to differentiate between rice of company from rice of another company and also rice of one type from another type. Indian rice is not sold under an Indian brand but in the brand of the importer. Unfortunately Indian rice companies lack the understanding between branding and packaging. Lal Quila.. not even in the countries which are our predominant buyers like Iran. India Gate. The approval from Plant Quarantine Authority in China is expected soon. Iran. Recently Mexico has permitted import of Basmati rice from India. During the preceding decade Basmati rice exports have increased from 0. except for difference in price. with a corresponding increase in forex from Rs. APEDA is continuously working for exploring new markets.28 - . Page . low value addition and absence of linkages in the markets could be effectively dealt with by encouraging private sector investments in infrastructure projects followed by reforms in the market. Page . high wastage. While several steps have been taken by the Government to introduce a more liberalized market regime such as liberalization of the Essential Commodities Act. risk management. Market yards function without any forward and backward linkages and ware causing obstacles to establishing value addition. Representatives from the private sector expressed the opinion that the market place was not always the most efficient way of handling trade in foodgrains. In several instances farm gate procurement was a better option and eliminated the need for double handling.29 - . opening up of future markets. formulation of integrated food laws and a Model Act on Agricultural Marketing. The agriculture sector has to be transformed from supply driven to demand driven to make it cost competitive. Soft infrastructure to facilitate flow of market information and agri knowledge to farmers need developing alongside physical infrastructure. Issues facing this sector of low productivity.RICE MARKET IN INDIA Marketing: Efficient marketing is crucial for the future growth of agriculture. introduction of the negotiable warehouse receipt system. 3.RICE MARKET IN INDIA Five steps of the Marketing Process: The marketing process comprises of five steps which marketers have to take as part of their integrated marketing effort: 1. Many activities are to be Page . This step also requires the marketers to decide what key benefits in a product or service to offer to the selected target customers and on what aspects to differentiate from the competition. This step also involves identifying the potential buyers. Analyzing marketing opportunities to identify unfulfilled or under fulfilled needs that a marketer may satisfy through its products or services. market segmentation. The marketer may also first identify unfulfilled or under fulfilled needs in the market and then develop a suitable product or service offer to satisfy these identified needs.30 - . A marketer may have a product or service concept developed first and looks for the needs in the market that can be satisfied by these products or services. Once the marketer has identified the potential opportunities in the first step now is the time to select the groups of potential international customers (target markets) to whom to sell the products or services. market targeting & market positioning. demand measurement & forecasting. This analysis can be done through information seeking and analysis or through market research (secondary or primary data collection and analysis). 2. firms have to adopt appropriate business and marketing strategies. Since a firm needs to offer best value to the potential customers to makes its products and services more salable compared with competitors. The aspects on which the segments are based must be relevant for the marketer to develop its products and services and the marketing programs. Segmentation involved identifying groups of potential customers from the total potential market that are homogeneous on certain aspects of identity and behavior and are heterogeneous on the same aspects from others in the target population. Details on these strategies may be found in strategy subject and books. this requires aligning and coordinating numerous activities and efforts. coordination and optimization of its business and marketing effort. 5. Developing a good marketing program is not good enough for success. i. Other scholars have identified that successful firms adopted strategies that were aligned with their market position. 4. A firm also needs to manage the international marketing effort properly. operational excellence. To create a strong marketing impact a firm needs to develop appropriate programs in these four key areas and also need to ensure that all these four aspects of a firms marketing program are well coordinated and in conformity with each other to give a clear image to the target market of the firm’s brands and its products.RICE MARKET IN INDIA undertaken in a firm by many people and in a number of departments to produce and deliver final products and services to its customers. Porter has concluded that successful firms have adopted one of the three strategies. cost leadership. This requires the firm to adopt a coherent and appropriate logic or strategy to direct and control the alignment. place.. Marketing mix identifies four key areas for developing a well coordinated marketing strategy.. Quite often firms fail not because they did not have a viable marketing program. Other researchers have asserted that firms have achieved success in markets through adopting on of the three value discipline strategies..e. At the same time to achieve best value for the buyer and bet profits for the firms. but that they failed in properly implementing their well designed plans. i. follower & nicher strategies. i.e. The fourth step in the marketing process is developing the international marketing mix. Firms also need proper analysis. differentiation or focus. the firm needs to optimize all the activities. implementation and control of their marketing programs. product. Various researchers have studied successful companies around the world and attempted to identify how these firms have aligned and coordinated their activities and efforts. challenger. price & promotion.e.31 - . a market leader. efforts undertaken and resource utilization. planning. Page . customer intimacy or product leadership. 32 - . As we can infer from the diagram the money will be blocked for around 18 months. so the fully integrated player will have the maximum requirement of working capital. Since it is a very long value chain a player can enter and exit at any point. 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 company who is a fully integrated player from purchase of raw paddy to finally selling it to the ultimate consumer will have a higher margin. The Pucca Artiyas or the agents of the companies purchase raw paddy from the farmers and keep it with themselves for 2 months. Page . 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. The stockists or the company if in case the company is fully integrated it keeps the paddy for 4 months before the raw paddy is properly milled and graded.RICE MARKET IN INDIA Value Chain: The value chain of the Rice industry is being summarized in the following diagram. The milled rice is again kept by stockists for 4 months before it is disbursed to the distributors. 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. The primary aim for applied research is discovering. measured with numbers." Different approaches to research encompass both theory and method. solutions. QUALITATIVE AND QUANTITATIVE RESEARCH AND DATA GATHERING: The design of any study begins with the selection of a topic and a research methodology. The term research is also used to describe an entire collection of information about a particular subject. and criteria of "proof. how science should be conducted. By contrast. Qualitative research is conducted in a natural setting and involves a process of building a complex and holistic picture of the phenomenon of interest.RICE MARKET IN INDIA COLLECTION OF DATA & DATA PRESENTATION INTRODUCTION TO RESEARCH METHODOLOGY: Research is defined as human activity based on intellectual application in the investigation of matter.33 - . and analyzed using statistical techniques. and what constitutes legitimate problems. To accomplish research objectives both primary and secondary data is collected. Two general approaches are widely recognized: quantitative research and qualitative research. interpreting. These initial decisions reflect assumptions about the social world. Quantitative research is an inquiry into an identified problem. a study based upon a Qualitative process of inquiry has the goal of understanding a social or human problem from multiple perspectives. Page . based on testing a theory. Research can use the scientific method. The goal of quantitative methods is to determine whether the predictive generalizations of a theory hold true. but need not do so. and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe. Bar diagram . Secondary data has been used because gathering data from websites and books is much easier than collecting it firsthand. b) Secondary Data: Secondary data is the data that have been already collected by and readily available from other sources.34 - . The lengths of the bars are proportional to the frequencies. This was also a requirement due to the paucity of time. Such data are cheaper and more quickly obtainable than the primary data and also may be available when primary data cannot be obtained at all.Questionnaires are a popular means of collecting data. Primary data takes a lot of time and the unit cost of such data is relatively high. Page . The widths of the bars should be equal. Primary data is more accommodating as it shows latest information.RICE MARKET IN INDIA DATA SOURCES: a) Primary Data: Primary data is the specific information collected by the person who is doing the research.A diagram for showing the frequencies of a variable that is categorical or discrete.It is a ladder diagram because the diagram appears as individual lines or "rungs" connected between two vertical lines. but are difficult to design and often require many rewrites before an acceptable questionnaire is produced. Pie chart -A diagram which is used when it is desired to emphasize the proportions of a set of data when data items are grouped into classes according to the value of some variable. The statistical tools used for data crunching are: Line diagram . Questionnaire. For completing this project I’ve taken the help of questionnaires and have conducted a factor analysis test to accomplish the research objectives. Primary data is accumulated by the researcher particularly to meet up the research objective of the subsisting project. of the respondents opined that they rarely have rice as a part of their regular diet. Also there were 44% respondents having rice once a day in their meal. Very few. Thus it is quite evident that rice in this region has a huge demand throughout seasons as it’s a compulsory diet in daily meals.RICE MARKET IN INDIA DATA ANALYSIS & INTERPRETATION Response To Question 1. We could see that as many as 30% of the respondents consume rice twice daily in their meals. They mainly consume it in some festive occasions and dining. Consumption Pattern Options Twice Daily Once a day Weekly Rarely Total Responses 15 22 11 2 50 Percentage 30 44 22 4 100 Analysis : The response to above question was quite on the predicted lines as in Bengal rice tops the list in terms of choice of staple item.35 - . Page . 4%. 36 - . These respondents also chose pulaos and biryani as their favorite rice dish in one of the questions asked in the questionnaire. Options Basmati Gobindo Bhog Miniket Basskaati Ratna (Boiled rice) Total Responses 11 23 7 5 4 50 Percentage 22 46 14 10 8 100 Analysis: This question was of great importance in the survey questionnaire as it highlighted the consumer taste and preferences among various varieties of rice.RICE MARKET IN INDIA Response To Question 3. Govind Bhog was a clear favorite (46%) among the opinion leaders in households (mainly the female head). The aromatic smell and superior quality is what most respondents liked about Govind Bhog. Page . This was followed by respondents liking Basmati Rice the most. Page .RICE MARKET IN INDIA Other varieties like Miniket.37 - . Response To Question 4. It was clearly seen that family with large number of family members have greater demand for rice in their monthly basket of consumption as compared to small and single families which had moderate demand and consumption. Ratna and Basskaati are also gaining popularity in some households after reckoning their prices and ease of availability. Options 0-3 kgs 4-7 kgs 8-10 kgs More than 10 kgs Total Responses 8 16 21 5 50 Percentage 16 32 42 10 100 Analysis: Family size is an important determinant for the above observation. Options Kirana Stores Retail Outlets Wholesale Market Ration Shops Total Responses 21 16 7 6 50 Percentage 42 32 14 12 100 Analysis: From a marketers point of view this question holds of great importance as to how and where to position the products in the market place so as to attract the target audience. This category of respondents mainly belongs to middle and upper income class who purchase their monthly grocery items from retail malls in packaged form. Many respondents preferred kirana stores (42%) over the others. There was near about equal number of respondents (32%) preferring purchase from retail outlets like Food Baazar. Page .38 - . Reliance Fresh. Spencers etc. Lower income group respondents purchased rice mainly from ration shops (12%) in loose form.RICE MARKET IN INDIA Response To Question 6. The main reason for such choice was ease of availability (nearer to house) and confidence in the seller. Options India Gate Kohinoor Daawat Lal Qilla Tilda Unbranded/Loose Packages TOTAL Rank 1 Rank 2 Rank3 Rank 4 Rank 5 Rank 6 TOTAL 28 9 2 10 1 0 50 7 8 13 20 0 2 50 5 10 8 7 14 6 50 1 8 15 4 6 16 50 1 9 12 2 14 12 50 8 6 0 7 15 14 50 50 50 50 50 50 50 Analysis: The results here were quite startling as it was seen that India Gate was a clear dominant brand (Ranked 1 by 28 respondent) in the rice market. Page . Leaving behind Kohinoor no other brand made any significant in the minds of the consumers. Respondents confirmed that the advertising of India Gate in and around various media has benefitted the brand a lot as it has successfully created an impact in the whole competition.39 - .RICE MARKET IN INDIA Response To Question 7. Other brands were far trailing behind India Gate. 40 - .RICE MARKET IN INDIA However it was also noticed that the wholesale market also has a great influence among the consumers as they tend to believe that the quality of rice in this market is far superior and fresh than any other purchase outlets. Options Low Prices Freshness Of Stock Credit Availability Nearer to House Different Varieties Available Confidence in Seller Servicing Rank 1 (V. Imp) 49% 61% 24% 28% 45% 50% 15% Rank 2 (Imp) 19% 21% 4% 7% 16% 25% 0% Rank 3 (Average) 20% 16% 11% 18% 14% 9% 0% Rank 4 (Not So Imp) 5% 0% 13% 19% 7% 7% 13% Rank 5 (Not Imp at all) 7% 2% 48% 28% 18% 9% 72% Figure 3 : Various factors Influencing Consumer Decision Making in rice Market Page . Response To Question 8. The result shows us how freshness of stock is an important function as most respondents felt that the rice which they are purchasing should be fresh and of good quality.RICE MARKET IN INDIA Analysis: Consumer Behavior towards rice products and brands could be very well studied from the above question.41 - . Price has always been an important determinant in consumer decision making process as many consumers relate premium price to good and superior quality. Also locations having different varieties of rice in display with them attracted a lot of consumers as it enjoyed trust and reliability of the respondents. Brands Aroma Fields Lal Qilla India Gate Kohinoor Daawat Tilda Target Market High High High & Mid High & Mid Mid Mid Page . Here the respondents were asked to rank various factors on their choice of purchase from a scale of 1 to 5 (where rank 1 meant the most important factor and rank 5 meant least important). 42 - . the need of the hour is bypassing the Mandi and Page . Today. Domestic brands like India Gate and Kohinoor are performing well in overseas market too. Proposed Operational Model for Procurement of Paddy: Setting up facilitation centre at the production centers will go a long way in providing good quality produce to the millers / consumers. Hence this raises an important issue in marketing and positioning the rice brands in a manner which would hold the customers to the brands and uplift brand loyalty. Over the last five years quite a few brands have come up and this industry too is getting segmented according to the needs and demands of its consumers. The domestic rice market too is full of potentials and promises to be a major player in food processing industry. India being a critical player in this industry will dictate terms in years to come by as it is backed by a huge potential of providing quality rice in comparison to other rice exporting nations. this will also enable the producer to get a fair share of the price. The Urban population also is quite well adapted to shopping in retail outlets where all the items are displayed under one roof. not only in domestic markets but also in global markets.RICE MARKET IN INDIA RESEARCH FINDINGS & CONCLUSIONS One of the most highlighting features in this research report is the vast opportunities that the whole rice industry has. The competition is intensifying in this segment which in long run is quite a healthy scenario for the industry. This facilitation will drive reforms in the agriculture marketing sector and will also bring transparency in the market transactions. The facilitation centre will establish a backward linkage with farmers and a forward linkage through other interested exporters including millers. This will link the farmers to the markets/ millers/other stake holders by shortening the supply chain. This will provide real time prices which can be quoted for buying through a transparent system. The facilitation can include individuals. Page . partnership/ proprietary firms.RICE MARKET IN INDIA thus avoiding extra logistics and tax based costs resulting in the strengthening of the supply chain. companies etc. The model proposed is as under: It is proposed that a Facilitation Center should be set up by a farmer co-operative at various rice producing districts of the country.43 - . group of farmers / growers / consumer. while at the same time providing a complete back up of traceability. It cannot be comtrolled by the researchers and can even affect the analysis of reseach adversely. Best care has been taken to keep the survey results free from any bias and undue influence. middle class and also from lower income group.44 - . mainly in Kolkata and Howrah region.RICE MARKET IN INDIA LIMITATION OF RESEARCH: Limitations are conditions that restricts the scope of the study period or may affect the results of the research. due to time and resource constraints. Since the sample size is small (50) so the results can be different from actual facts and may not give a appropriate judgement and findings. One of the limiting factor of my project was that I have taken sample respondents only from urban area. Page . The age group chosen for the questionnaire survey was between 25-55 years which includes respondent from upper class. 45 - . 4-8 c.RICE MARKET IN INDIA APPENDIX List of Abbreviations: Sl. Basskaati e. Basmati b. 1.. : Email Id: ……………………………………………….Compounded Annual Growth Rate Questionnaire: Name : Age : Gender : Occupation : Contact No. No List Of Abbreviations 1 CAGR . ….. Twice Daily b.... (Specify) Page . Miniket d.. More Than 8 3..... ………………………………………. ………………………………… ……………………………. Number of family members a. Weekly d. Your Combination: ………………………. Once a day c.... …....... The variety of rice you mostly prefer to eat a. Ratna (Boiled Rice) f. Rarely 2. How often do you consume rice in your meals? a. 0-3 b. Gobindobhog c. India Gate b. Kohinoor c.46 - . Freshness Of Stock c. Confidence that the Shop does not cheat g.RICE MARKET IN INDIA 4. 4-7 kgs c. More Than 10 kgs 5. (Specify) 8. Rice Dishes mostly prepared at your Home a. 8-10 kgs d. Monthly Consumption of Rice in your Family (Qty) a. Biryani e. Lal Qilla e. Plain Rice b. Any Other ………………. Daawat d. Kirana Stores b. Different Varieties of Rice Available f. Your most preferable mode of buying Rice a. Tilda f. Low prices b. Wholesale Market d. Your reasons for the above BEST choice a. Fried Rice c. Retail Outlets c. Ration Shops 7. Unbranded/ loose packages g. Your Combination ………………. Which of the following mentioned brands you prefer purchasing? a. Credit Availability d. (Specify) 6. 0-3 Kgs b. Servicing of mixing Oil/Preservative (Rank each from a scale of 1-5) Page . Nearer to house/ Door Delivery e. Pulao d. Indian Farming Special Issue Basmati Rice.agricoop.nic. Singh.codexalimentarius.icar. References & Bibliography: 1.fciweb..nic.in www. 3.fao.org www.apeda.nabard. New Delhi 135-154.agmarknet.P.in www.org Page .47 - . Email responses.gov. personal interaction. Websites: www.in www. Pvt.in www. Upper Middle Class and Lower Income Group.org. Ltd.K. Population: Urban Demography: Middle Class.nic.in www. Vol 59(1): 7-11.nic. The Basmati rice of India in Aromatic Rices Eds. Mode of Data Collection: Form fill-ups. Shobha Rani N. Singh V. (2000).ncdc.net www.in www. Oxford & IBH Publishing Co. Prasad GSV and Viraktamath BC (2009) National System for Evaluation of Basmati rices for yield and quality traits. R. 2.RICE MARKET IN INDIA Sample Information: Sample Size of the Survey: 50 respondents Age Group: 25-55 years.
Report "Rice Market in India (Final for Submission)"