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Rice Bowl Business Plan 1824

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Business plan
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  • Rice Bowl

    Background

    Despite the economic growth and prosperity that India as a country has achieved over the past decade, there is one stark reality that is indisputable this growth has been inequitable with the gap between the rich and the poor widening and more than 75% of the population still living on less than two dollars a day. Consequently, one of the biggest challenges today for India and the developing world is poverty eradication.

    As a historically agrarian society, one of the largest constituents of this demographic of Indias poorest people is the farming community. Amongst the many documented reasons for the plight of Indias farmers, one key element is the lack of a fair price for their goods sold. Currently, small and medium scale farmers typically sell their produce to kirana or middlemen, who capture inequitable value in the value chain by capitalizing on farmers lack of price information and low bargaining power.

    Rice Bowls vision is the eradication of poverty through equitable and fair development. Our mission is to provide sustainable livelihoods for farmers in India through the creation of local markets for their products at fair prices. We aim to achieve this through the creation of a fair market for SME farmers in India by incorporating best practices from the fair trade movement so as to improve farmers income levels and contribute significantly to their socio-economic development.

    We intend to do this by retailing rice as a premium fair price product to our target market of upper middle class and high-income families in India. These SEC A and SEC B customers will be our primary clients who will be reached through in-store kiosks in supermarkets.

    Other key stakeholders will be the farmers working through cooperatives and partner organizations such as rice millers, supermarkets, NGOs and banks.

    By linking these stakeholders together, Rice Bowl will attempt to fill a market gap by offering farmers a fair price for their product while keeping the cost to the consumer competitive.

    Market Failure and Social Need Addressed

    National fair price markets are underdeveloped in India, leaving many small-scale farmers without access to fair pricing, long-term contracts, advance payment and debt financing, and development assistance associated with the fair trade movement. Additionally, Indias growing middle and upper classes do not have access to fair trade goods, which are typically shipped to Western countries for consumption. Consequently, there exists a market gap between farmers who would benefit from fair trade exchange and Indian consumers who would value supporting equitable economic development within India.

  • Figure 1

    With so many basmati farmers in India participating in the export market for rice, the need for more equitable rates has been well established. Typically, farmers have sold rice to local agents, receiving low rates which often do not cover the cost of production. Farmers are also typically indebted to these middlemen after taking out usurious loans to pay for basic needs (Figure 1). Fair trade has stepped in to correct this market failure between local farmers and the export market. By connecting farmers with consumers wiling to pay a premium to cover both the costs of production and investment in meeting social needs of local communities, the global fair trade movement has successfully intervened to improve the lives of small-scale farmers.

    There is a clear opportunity to bring the gains of the global fair trade movement to the local level.

    Strategy

    Rice Bowl will achieve its mission by entering into profit-sharing arrangements with supermarkets that will house retail kiosks selling fair trade rice (shop-in-shop concept). These kiosks will specialize in high-quality, local rice and will carry only products that have been sourced according to fair trade standards. Rice Bowl will work closely with local NGOs, banks, cooperatives, and farmers to support the development of fair trade markets for rice throughout India.

  • Social Enterprise Design Criteria

    Social Criteria

    Fair Trade philosophy is relatively nascent in India and a comprehensive outreach campaign targeted to all stakeholders based on their specific needs is critical to the success of Rice Bowl. Working with farmer cooperatives in India is a time consuming process given the caste and power dynamics in rural India. This will need to be considered when drawing up expansion timelines and growth plans.

    There is a strong educational component to Rice Bowls strategy, which includes providing farmers with agriculture education, training on organic growing, higher yield strategies and business basics. A targeted marketing and advocacy campaign is required for the target consumer to drive home the benefits of the fair price model. Consequently, we will partner with NGOs and other stakeholders already working in this space to develop a local fair price market and educate consumers.

    Business Criteria

    The expansion and growth plan for Rice Bowl is provided in Table 1 below:

    PHASE PRODUCTS SERVICES TIMELINE

    I

    White Rice - Ponni and Parboiled - Idli rice as detailed in the Industry Analysis section

    Market access: instant cash payment for grains upon harvest Years 1 - 3

    II

    Add further rice varieties including organic and hand pounded rice

    - Market access: instant cash payment for grains upon harvest - Long Term Contracts Year 4

    III

    expand product portfolio to other rice varieties from the rest of India.

    - Market access: instant cash payment for grains upon harvest - Long Term Contracts - Extension Contracts Years 5 -6

    IV replicate model to other cities in India

    - Market access: instant cash payment for grains upon harvest - Long Term Contracts - Extension Contracts - Input support Years 7 - 9

    V

    expand product portfolio to include rice related products sourced through cooperatives

    - Market access: instant cash payment for grains upon harvest - Long Term Contracts - Extension Contracts - Input support Years 9 - 11

    Table 1.

  • Other financial criteria and breakeven requirements are detailed in other sections in this document.

    Institutional Criteria

    Rice Bowl will be set up as a non-profit in India with a board that consists of representatives from the cooperatives and other partner organizations and also relevant corporates to be decided in consultation with the key stakeholders.

    It will be managed professionally by a team headed by the CEO and including key corporate functions such as Finance, HR, Marketing and Operations. Corporate accounting and reporting practices will be followed to ensure that operations are transparent to all stakeholders, specifically our most important clients the farmers and their cooperatives.

    Given that the primary aim of Rice Bowl is to improve farmer welfare in India, the key principles of fair trade, fair price, long-term contracts and advance payment will be strictly adhered to. The requirement for minimum labour standards is much harder to achieve given the nature of agriculture in India, and Rice Bowl will take an advocacy approach on this front with a view to establishing these standards through consensus.

    Social Enterprise Concept

    Business Description

    Rice Bowl will address a market failure and ensure that producers get a fair share of profits from the sale of their produce. By linking farmers to local consumers by using a judicious mix of market access mechanisms and continuous support and inputs, Rice Bowl will be able to shorten the supply chain from farmer to consumer, ensuring that leakages are minimized and thus transferring an equitable share of profits to farmers. Farmers and their families can therefore use agriculture as a viable source of income, enabling them to put money away for key social needs like education and health.

    Products and Services

    In Phase I of the business plan Rice Bowl will sell premium, high quality rice sourced from Tamil Nadu. As the enterprise grows, these products and services will scale as detailed in Table 1.

    This plan will ensure that while satisfying the immediate needs of farmers for better income from their produce, other growth and development needs are also met ensuring efficiencies of crop yields are achieved through innovation. We hope to achieve a sustainable, profitable fair price market for rice in India. By way of this market, we expect higher wages for farmers, which in turn will result in improved welfare.

  • Necessary Conditions and Enabling Circumstances

    A retail market is available for the products Collaborators buy-in Collaborators/partners convert buy-in to involvement Farmers/co-ops translate learnings into action Price premiums trickle down to farmers

    Industry Analysis

    There are around 36 main varieties of rice grown in India (although the total varieties are estimated to be over 4,000). The annual production of rice is around 125 million MT out of which 12 million MT is produced in Tamil Nadu the target state for Rice Bowl.

    In India, among consumers, rice is differentiated broadly under two types: basmati and non-basmati. Aged basmati rice is retailed at a very high premium and is usually sold to high-end restaurants and in select shops and supermarkets. Among the non-basmati varieties, there is very little differentiation and the prices charged are mostly based on the type of treatment/processing1:

    White rice or raw milled rice (aka polished rice): Most of the outer layers like husk and bran are removed from the kernel through the milling process.

    Brown rice: Only the husk is removed while the br

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