RURAL MARKETINGCAPITAL INPUTS -

AGRICULTURE

The Company - KBL

• Year of incorporation : 1946

• Manufacturer of the wide range of Diesel Engines, Diesel Generating Sets and Engine Bearings and Engine Valves

• Industries it caters to - Agricultural Machinery, Construction & Material Handling Machinery, Marine applications and equipment used by Armed Forces (Military).

• Sales Income, year ending March 31, 2007 - Rs. 1,883 Cr.

• No. of employees : 2,858

Range of water pumps

About 10 lakh units of agricultural products are produced in a year

40-50% of this consists of Borewell units

Market potential therefore, is huge

The Product

• Small irrigation water pumps

• K4 - ‘Borewell Submersible Pumps’

• Range from 2hp to 30hp – highest selling ones lie within 5-15hp

• Diameter of 100mm, 150mm, 300mm, 250mm

• Thickness ranging from 4inches to 8inches

• Can be used for a depth of 500-600ft underground

• Price – INR 15000 – 25000/-Applications:-• Sprinkler and drip irrigation system• Farm houses• Nurseries & Gardening

Applications:-• Sprinkler and drip irrigation system• Farm houses• Nurseries & Gardening

Some facts & figures

• Estimated number of rural households was 147.90 million, of whom 60.4% were farmer households i.e. approx. 89 million

• Households with one hectare or less land accounted for 66% of all farmer households i.e. approx. 59million

• Non-irrigated farming in India still accounts for:

– 67% of total cultivated area,

• Average grain yields on non-irrigated land in India are only 0.7 to 0.8 tons per hectare, which is only one third the yield level on irrigated land

Source - http://www.mospi.nic.in/press_note_ifh_nss59.htmhttp://www.agbioworld.org/biotech-info/topics/dev-world/policies.html

Drip irrigation system

• International Development Enterprise India (IDEI) implemented the Drip irrigation programme in India started in 1997

• Address the irrigation problems of small and marginal farm families living in water scarce regions of India

• Drip irrigation is a water-saving technology which enables slow and regular application of water directly to the roots of the plants

• Erratic rainfalls make it more suitable.

Source –ww.idei.com

Drip irrigation system

• Drip Irrigation has been rigorously tested with:

– sericulture farmers in South India,

– watershed projects in South India,

– cotton farmers in Madhya Pradesh,

– vegetable growers and agri-input dealers in Himachal Pradesh,

– small farmers in Madhya Pradesh and Rajasthan

• Test-marketed in selected districts of Maharashtra and Gujarat for growing fruits and vegetables.

• Currently IDE (India) is promoting Drip Irrigation kits in Gujarat, Rajasthan, Maharashtra, Karnataka and Uttaranchal

The Market Scenario

Local playersUnnati, Varna, Oswal, Kiwi etc

National playersCRI, Lubi, Texmo, Shakti, KBL

Local Assemblers

KBL owns a 2% market share within this.

Source:- Associate VP, KBL

Total market is about INR 7000 crores

Geographical Presence

• Focus states:– Punjab

– Rajasthan

– UP

– MP

– Chattisgarh

• Secondary focus states:– Maharashtra

– West Bengal

– Gujarat

• Rajasthan – wheat, sesame, groundnut. The waters of the Indira Gandhi Canal (Rajasthan Canal) is now helping in the cultivation of citrus fruits, including tangerines, oranges and lemons.

• Punjab - wheat, maize, rice, and bajra.. The leading cash crop cultivated here is cotton. Other important crops of Punjab agriculture include sugarcane, potatoes, and groundnuts.

• MP - wheat, cotton. Rich in minerals as well.

Manufacturing

• Critical operations done in-house

• ATPP – Assembling, Testing, Painting, Packaging

• 2 major plants – In MP and Pune

• The “head godowns” are at each of these plants with 17 other godowns across India

85%

3%2%

4%6%

Cost components

Material

Transportation

C &F agents

Distribution

Dealers

Sub - dealers

Customer/ End user

About 500 dealers in India

About 400 Sub – dealers in India

• Standard margin for dealers is 30%• Credit period given is 15-30 days • For cash purchases, additional 3% discount is given• On a minimum turnover achieved (5lacs), another 3% is given• Sub-dealers, usually get 3-5% as they do not incur any carrying costs

Competition• Unorganised Players

OSWAL

• One of the leading players, as big as an organised player• More than 750 distributors• 900 varieties of pumps• Most operations done in-house• Production capacity of 2.5lakh units

Unnati

• Unnati Pumps Pvt.Ltd. is one of the reputed manufacturer of India,• Plant at Ahmebabad, Gujarat, India. • Range of over 2000 models of submersible pump sets.• Bore wells ranging from 0.5 hp to 120 hp

Others

• Kit Assemblers• Manufacturing & operating costs are zero• Use the lowest end of components• Have advantageous access to the end user

Competition• Organised Players

Texmo

• One of the oldest players in the market

• Market leader

• Turnover of approx.

INR 3billion

• More than 2500 dealers across India

• Strategy is to deliver highest quality through constant innovation

CRI

• One of the few players to have fast captured foreign markets, in more than 70 countries

• First player to introduce 100% stainless steel pumps

• More than 277 types of pumps

• Wide range of Submersible pumps and motors in 3”, 4”, 6”, 8” & 10

Lubi

• Group sales turnover : @US$ 65 Million

• 400 Distributors & Dealers

• Global Presence - North America, Europe, Middle East, North & Central Africa & South East Asia.

Challenges faced by KBL

• Depleting water table

• Availability of electricity

Natural/ National constraints – limited control

Market/ Marketing constraints

• Database of the customers

• Unorganised market

• Distribution

• Education and training of the users

Water & Electricity

• The United Nations Development Programme (UNDP), in a report released on November 9, 2008, has said that

“lack of water is caused by lack of power, rather than by limited resources. The scarcity at the heart of the global water crisis is rooted in power, poverty and equality, not in physical availability”

• India – biggest irrigation system – poorest in performance

• Due to siltation, about 1.95 billion cubic metres of reservoir capacity are getting silted up each year

• Dam lobby:

“In India, about 13% of the population has access to irrigation. Within this group, the richest one-third of farmers receives 73% of the subsidy.”

Source - Himanshu Thakkar is Coordinator of the South Asia Network on Dams, Rivers & People, and Editor of Dams, Rivers & People) InfoChange News & Features, November 2008

Water & Electricity

• Areas like Punjab have effective water management systems in place

• However, MP lacks basic infrastructural facilities and in spite of huge potential for agriculture, the numbers reflected are very poor

• Gujarat – The Sardar Sarovar Dam across Narmada today, supplies water to Bhuj as well and stands a prime example of good water management

• In Maharashtra – Satara to Kolhapur belt, the planning is good

Source - Himanshu Thakkar is Coordinator of the South Asia Network on Dams, Rivers & People, and Editor of Dams, Rivers & People) InfoChange News & Features, November 2008

Steps taken by KBL5 Promise Plan

• Sustainable development

KBL will work with the government towards a better India

– Launched a program “Ek boond” in Rajasthan

– Work in tandem with the local body to map & document the entire area, water reservoirs, retention bodies, etc

– Currently, no clear blue print is available about various pockets ‘madakkas’ that retain water thereby, making cultivation difficult

• Research & Development

Joined hands with Central Board of Irrigation & Power (CBIP) which promotes research & professional excellence in Water Resources, Energy and Allied Field

Steps taken by KBL5 Promise Plan

• “Enlightenment”

In Andhra Pradesh and Punjab, the cost of electricity for irrigation for majority of the farmers is fixed per month. It implies that at the margin, farmers incur almost a zero cost for irrigation in the short-run.

KBL helps these farmers with a “light box” that helps them measure the consumption of electricity used for irrigation.

• Incentives

Cash prize worth INR 2 to 5 lakhs is given to top 3 farmers across India who have used innovative measures to save water and electricity

e.g. – Shree Padre and his Rain Water Harvesting project across India.

• Education & Training

Source – www.godnewsindia.com for more information on Shree Padre

Other initiatives

• Mandi Activation

– In more than 500 select states

– KBL branded artificial wells are set up

– A live demo of the product is then given at these Mandis

– Entertainment in the form of mimicry artist, on-the-spot games, etc are conducted to attract eyeballs

– Total cost per mandi – Rs. 150,000/-

– Total eyeballs – 3000pax

– Cost per contact – approx. Rs. 50/-

– Conversion rate – 0.5% over 6 months

• Mukhiya Program

– Targeting the influencer

– In more than 1000 villages in 7 states in a span of 3 months

– 2 day program spanning 4-5 hours each

– Day One – One-on-one discussion with the Mukhiya, presentation and demo of the product

– Day Two – Similar presentation done to a slightly larger group of people, mainly farmers that are invited by the Mukhiya

– Cash incentives are provided to the Mukhiya

• Enabling the Enablers

• Mechanics and Plumbers play a huge role in the sale of submersibles

• They are usually consulted with by the farmers before making a purchase

• Most of the times, they are also called to lower the pump

• KBL therefore, holds a “KBL Partners Meet” about 6 times in a year to inform, educate and win the support of these enablers

• The Mechanics and plumbers are also given a chance to interact with the local dealer/ sub-dealer, thus encouraging some form of mutually beneficial partnership

Way forward

• KBL, is still a small player in the segment

• It is a distant follower and therefore, needs to focus on establishing a stronger foothold

• Recommendations

– Focused segmentation

• Small farmers across Talukas – Districts – Pin codes

• Agri input dealers

• NGOs – for promoting awareness

• Static & Dynamic promotion

– Wall paintings

– Pamphlets

– Video Van shows

– Farmer meetings

– Continue with the existing programs

• Distribution Network

– Increase the number of sub – dealers

– Tie-up with government bodies like IDEI

“If a postman can reach every pin code, so can KBL”

Subodh SrivastavaAssociate Vice-PresidentMarketing & Distribution

KBL