+ All Categories
Transcript
Page 1: Rice Bowl Business Plan 1824

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 India’s poorest people is the farming community. Amongst the many documented reasons for the plight of India’s 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 Bowl’s 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, India’s 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.

Page 2: Rice Bowl Business Plan 1824

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.

Page 3: Rice Bowl Business Plan 1824

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 Bowl’s 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.

Page 4: Rice Bowl Business Plan 1824

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.

Page 5: Rice Bowl Business Plan 1824

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 bran layer (containing all nutrients) remains, which makes it more nutritious than white rice.

• Parboiled rice or sella: Raw rice treated through a process of boiling and steaming wherein the nutrients and aroma of the bran are forced into the rice.

The Rice Value Chain

The typical value chain for rice production in India is as follows2:

The typical markup from farmer to consumer is around 47%, which means that the farmer gets about 53% of the final selling price of rice. Interim

1 Rice Industry Overview: Sector Report Batlivala & Karani. 2 http://www.world-agriculture.com/agricultural_marketing/agricultural-marketing-inadequacies-marketing-system.php  

Page 6: Rice Bowl Business Plan 1824

milling processing and milling technology are both critical for yield quality and, therefore, can dramatically affect the final price of rice.

Regulations in Rice Trade

The rice trade in India is highly regulated through a Minimum Support Price (MSP) program which was designed to encourage farmers to increase production. This price assurance is modulated through ‘agriculture produce markets’ locally called ‘Mandis’. Food Corporation of India (FCI) undertakes procurement on behalf of the Government of India and purchases approximately 20-25% of the total national rice production. The Central Issue Price (CIP) for rice is fixed on the recommendation of [the] Commission on Agriculture Costs and Prices (CACP). Rice is sold at highly subsidized prices to families who qualify as “below poverty line”3.

Rice Bowl Business Model

As discussed earlier, the mark up on rice from farmer to consumer is around 47%. One of the key objectives of Rice Bowl will be to reduce the mark up from farmer to consumer by shortening the supply chain, while simultaneously passing on a larger portion of the proceeds directly to the farmer.

To do this Rice Bowl will need to collaborate with farmer co-operatives who will become the starting point of the sourcing strategy. Rice Bowl will work closely with farmer co-operatives to ensure that in addition to increasing revenues for the crops, farmers receive other extension and financial supports necessary to create significant changes in their overall productivity and efficiency.

Some of the dimensions of support required by farmers are:

• Market Access: price, payment terms (cash) • Extension Support: farming practices, weather forecasting etc. • Input Procurement: seeds, fertilizers, pesticides etc.

Role of the Farmer Co-operative

The farmer co-operative will be launched at the producer village level. The co-operative will serve as the contact point during harvest for grain collection and cash transaction with Rice Bowl.

Role of Rice Bowl with Regard to Farmers

Extension support to the farmer co-operatives will be provided initially through the expert contacts of Rice Bowl (and at Rice Bowl’s expense) with an intention to make the farmer co-operative independent over a period of

3 Rice Industry Overview: Sector Report Batlivala & Karani.

Page 7: Rice Bowl Business Plan 1824

time. Further, Rice Bowl will provide coordination with input companies so that the farmers get access to the best inputs necessary for them to increase rice yields and quality. Rice Bowl will provide farmers with the following support:

• Market access: instant cash payment for grains upon harvest • Extension support: visiting experts to provide extension support to

farmers on the best farming practices • Inputs: co-ordinate with seed, fertilizer and pesticide companies to

provide inputs at reasonable prices

Rice Bowl Supply Chain

Rice bowl will procure directly from farmer co-operatives and have the rice milled, processed, graded and packed under contract with rice millers. The rice miller will also serve as the stock point from where packaged rice will be shipped to Rice Bowl kiosks across supermarkets in Chennai.

Market Analysis

Based on primary consumer research as well as data detailing consumption habits of our target population, we have sized and segmented the market for fair trade rice in India.

 Market for Rice in India

With a population of more than one billion, India is among the largest rice markets in the world. Rice is the primary source of carbohydrate for approximately 65% of the population, and per capita rice consumption in India is approximately 75 kg per year (compared to around 5 kg/person/year in Europe)4. In many parts of India, rice forms the basis of all three meals of the day; in South India, for example, rice is transformed into different products customized to suit the occasion, which keeps the product interesting and in demand throughout the year.

Market Segmentation, Target Cities and Size for Rice Bowl

According to the Indian National Census in 2001, India is comprised of 5,161 cities and towns in 35 states and union territories and almost 600 districts 4 http://www.rice-trade.com/rice-in-india.html

Page 8: Rice Bowl Business Plan 1824

across the country. We have adapted the classification used by the McKinsey Global Institute as the basis of our planning, which groups cities and towns into 4 tiers based primarily on population.5 Tier 1 cities include the top 8 cities with a population of over 4 million.

We further evaluated the breakdown of top cities based on SEC classification to assess market potential. SEC classification is based on Occupation and Education of the chief wage earner (head) of the household and has the following classes: SECA1, A2, B1, B2, C, D, E1, E2 (see Appendix 1 for SEC classification criteria). A SEC breakdown of the population of the 8 top cities is given below.6 We will be using the SEC breakdown of population to build the sales forecast.

India Consumer Outlook by SEC Classification

5 Tier 1 cities include the top 8 cities with a population of over 4 million; tier 2 includes 26 cities with a population of over 1 million; tier 3 includes 33 cities with populations of between 500,000 to 1 million; and tier 4 includes 5,094 small towns and villages5. 6 India Consumer Outlook 2005. KSA Technopac.  

Page 9: Rice Bowl Business Plan 1824

Market Size by City7:

City Pop '000 A1+ A1 A2 B1 B2

Total AB ‘000

Greater Mumbai

16,368 859 1,163 782 1,387 1,258 5,450

Delhi 12,791 1,016 1,258 1,102 1,264 1,287 5,927

Kolkata 13,217 817 1,117 946 1,342 1,182 5,405

Chennai 6,425 424 55 7 484 669 567 2,700

Hyderabad 5,534 575 769 520 448 443 2,754

Bangalore 5,687 411 598 331 378 507 2,225

Ahmedabad 4,519 204 265 288 452 363 1,572

Pune 3,756 243 326 223 342 284 1,418

Target Market

The primary target for Rice Bowl will be tier 1 cities since they represent a large population base with a significant upper-middle class. We will begin with Chennai as our entry point and test market. In segmenting the market we will be targeting SEC A and B.

Chennai

The size of our primary target group (SEC A and B) within Chennai is around 2.7 million. Given national per capita consumption of 75 kg, this represents a total market potential of 205,200 tons per year (or 562 tons per day) of rice consumed by our target segment in Chennai.

Assuming that only around 5% of the SEC A and B market can be converted to fair trade rice, it represents a market of around 28 tons per day. Since, we will be among the first fair trade rice brands, we would attempt to capture at least 50% of this potential market - giving us a sales target of around 14 tons of fair trade rice per day.

Customer Behaviour Analysis

Understanding customer behaviour is integral to the success of Rice Bowl, and we have attempted to gain a comprehensive view of our target consumer. To analyze typical customer behaviour, we have drawn from primary personal interviews, secondary quantitative and qualitative studies

7 Estimated from The Marketing Whitebook, Businessworld 2007 -2008.

Sales Target: 14 tons per day

Page 10: Rice Bowl Business Plan 1824

(focus groups) published by Technopak Food & Grocery Retail Trends 20088, and internet surveys pertaining to rice purchasing in India.

Personal interviews revealed the following priorities in food and grocery purchasing habits:

The following data from the 2008 Technopak Food & Grocery Trends Report 2008 reveals important insights about customer behaviour that will be critical for the launching of Rice Bowl:

The following table reveals that a very large portion of consumers still buy from traditional formats (local grocer/kirana shops) even in the presence of modern formats (supermarket, hypermarkets etc).9 However, consumers go to modern stores for staples like rice, spices, and lentils that can be stored and bought in bulk. On the other hand, for fresh produce, the convenience of buying from the local grocer is still more attractive than making a trip to the supermarket. For Rice Bowl this is a significant insight, as consumers will travel to buy rice that is typically bought in bulk.

8 Technopak Food & Grocery Retail Trends 2008 was unveiled at Retail Conclave 2008, February in New Delhi 9 Technopak Food & Grocery Trends 2008

• Proximity and convenience is very important. • Consumer does not like to travel long distances to buy food. • Food and groceries are mostly bought by housewives. • Housewives prefer to purchase fresh produce (vegetables, fruit, milk, meat)

frequently rather than buy in bulk and store purchase several times a week due to

o Perception of freshness o Lack of refrigerated storage space o Need to cook almost 3 fresh hot meals a day

• Housewife typically has reduced mobility to travel distances to buy food

• Food purchase is the domain of the housewife. She is the decision maker on what to buy and where to buy in 95% of the cases.

• Loyalties are strong with housewife. Getting her to switch is challenging.

• Housewife still a regular shopper at the kirana store even in cases where modern retail format is located in close proximity, particularly for daily needs.

Page 11: Rice Bowl Business Plan 1824
Page 12: Rice Bowl Business Plan 1824

The Technopak Food & Grocery Report revealed the following drivers of loyalty toward traditional and modern stores:

Stated Critical

Needs The Commitment Drivers

The Traditional Format Shopper

Polite, courteous staff, availability of store staff, wide range of brands, Fresh, high quality stocks, Reasonable prices, Availability in all pack sizes

Quality products, at reasonable prices, polite and courteous store staff

The Modern Format Shopper

Polite, courteous staff, Fresh, high quality stocks Availability of latest products brands

Availability of latest products, brands, freshness of produce Private labels Modern shopping experience

Among the consumers who bought from modern formats, the study revealed that close to two-thirds claim that ‘availability of high quality store brands’ (private labels) is extremely important in their choice of a store. Purchase of private labels in the last 3 months among modern format shoppers was as high as 59%.

The Modern Format Shopper

Modern format stores are seen as a place to buy pre-processed, packaged foods whereas dairy and other fresh perishable items are bought from traditional format sources. The following table reveals the types of goods purchased at modern format stores versus traditional format stores. For example, 95% of customers say they purchase staple foods at modern format stores and 23% of customers say they purchase staple foods at traditional format stores10:

% of shoppers who made purchases in the last 3 months at… Products Modern format store Traditional format store Staple Foods 95 23 Fruits & Vegetables 55 70 Milk & fresh milk products 21 83 Other milk products 38 36 Heat & Serve / ready to serve

24 23

10  Technopak  Food  &  Grocery  Trends  2008  

Page 13: Rice Bowl Business Plan 1824

Frozen vegetarian food 32 21 Eggs 37 56 Fresh non-veg (meat/Fish) 9 72 Frozen non-veg (meat/fish) 18 23 Health drinks, tea, coffee etc

94 10

Fruit drinks, soft drinks, other packaged drinks

91 15

Snacks, savouries, sweet and confectionery

91 13

Other packaged food 50 10 Toiletries and cosmetics 95 10 Homecare and cleaning 94 10 Sanitary products 95 9 A web-based survey was conducted to collect further primary market research. The survey inquired about participants’ understanding of fair trade, willingness to buy fair trade products, interest in premium rice, and influence of brand loyalty and brand recognition on purchasing. The results of the survey indicated that quality and convenience are the primary drivers of rice purchase. While there was interest in premium products, respondents also indicated an unwillingness to pay a premium over their current brand of rice. Most respondents felt ambivalent about fair trade products, and the majority do not currently purchase any fair trade products. Survey results and respondent feedback have suggested that consumer education about fair trade and the details of premiums will be critical to Rice Bowl's success (see Appendix 2 for sample responses).

Our primary interviews revealed that issues around quality and fair trade resonate most with women shoppers. In order to reach this consumer segment, however, attention must be paid to the quality of branding efforts. Consumers perceive supermarket brands as high quality. Any competing brand for this consumer segment must make an effort to have a contemporary feel.

Page 14: Rice Bowl Business Plan 1824

Given the above, the following conclusions form the basis of our marketing strategy:

Channel Selection

We have considered the following sales channels for Rice Bowl:

1. Exclusive Rice Bowl retail stores

2. Retail through kirana stores by appointing distributors

3. Retail through a kiosk in a profit-sharing arrangement with supermarkets (shop-in-shop concept)

The key criteria used to evaluate the above options are as follows:

• Scalability: ease of scaling the model nationwide and ease of day-to-day operations

• Market penetration: potential to capture market share from existing rice brands

• Investment level to risk: the scale of investment needed vs risk of failure

• Margins over cost: mark-up less distribution, retail, promotional and selling overheads

• Competitive pressure: including concentration among modern formats and risk of price wars

• Brand building opportunities

• Rice bowl needs to target women shoppers within the target market of SEC A & B.

• Need to construct a brand of fair trade rice that can compete with packaging and grading standards given by supermarkets perceived quality is important.

• Need to have outlets that have contemporary feel.

• Price point should comparable to supermarket private-labels.

Page 15: Rice Bowl Business Plan 1824

We have used the following scale to analyze the viability of each retail channel:

1   2   3   4   5  Most Unfavourable  

Unfavourable   Moderate   Favourable   Most Favourable  

Key Area   Exclusive Rice

Bowl Stores  Retail through kirana stores by appointing distributors  

Retail through existing supermarkets – Rice Bowl kiosk  

Scalability of Business Model  

2   4   5  

Market Penetration  

2   5   5  

Investment level to Risk  

2   3   4  

Margins over cost   2   3   4  Competitive Pressures   3   2   3  Brand Building Opportunities  

5   2   4  

Summary of Rating  

16   19   25  

Based on the analysis above, we will target the most important supermarkets and establish a profit-sharing arrangement with them in return for visibility and access to their customers. Rice Bowl kiosks in supermarkets will be a low-cost alternative to setting up exclusive stores. At the same time, Rice Bowl will have an opportunity to access existing footfalls within these stores. Furthermore, by associating with certain supermarket chains, Rice Bowl can get immediate access to hundreds of supermarkets across the city of Chennai, which has approximately 451 supermarkets11.

Rice Bowl can negotiate with supermarkets on the following basis:

• Rice Bowl will be marketed as a fair trade brand. Supermarkets will be able to project a more equitable image among their customer base by associating themselves with fair trade brands like Rice Bowl.

• Supermarkets will get a share of the profits in return for providing space in their store for the Rice Bowl kiosks.

11http://local.google.co.in/?hl=en&q=supermarkets&near=Chennai,+Tamil+Nadu+India&fb=1&view=text&sa=X&oi=local_group&resnum=1&ct=more-results&cd=1

Page 16: Rice Bowl Business Plan 1824

Rice Bowl Cost Structure

Rice Bowl Marketing Plan

The Rice Bowl marketing plan will focus on SEC A & B women who frequent supermarkets for their grocery shopping. The value proposition will be quality rice that gives producers a fair deal. Rice Bowl will use farmer testimonials to connect the shopping experience for urban consumers with the reality of small-scale Indian farmers. Rice Bowl kiosks will be stylishly designed to

Page 17: Rice Bowl Business Plan 1824

reflect ‘green’, farmer and rural imagery along with nutritious, wholesome, and aromatic properties normally associated with rice. The kiosk will be large enough to stock daily targets of 300 kg rice, and will have one sales person behind the counter.

Over a period of time, Rice Bowl will aim to build a community of users to trigger a fair trade movement within the target city of Chennai, which can then be replicated in other cities.

Competition

The biggest competitive threat will be premium basmati rice and supermarket private labels. As noted earlier, there is a good deal of loyalty towards supermarket private label products in India. Given our conservative market share estimates, however, we believe our targets are achievable. Additionally, further research is needed regarding the perception of fair trade brands within the target market in Chennai prior to launch in order to support branding and communication strategies.

Operational Requirements

Farmer Level

Identify Farmer Co-operatives based on procurement target Sign MOU with Co-operative Organize extension support services pre-seeding and through crop life cycle Procure paddy

Miller Level

Identify Miller Sign MOU Organize paddy shipments Rice shipment to supermarkets

Supermarket Level

Identify supermarket chains Sign MOU Install kiosks Develop promotional material Sales

The initial phase will require personnel in the following functional areas in order to complete the tasks mentioned above:

• Sourcing: 1 person • Sales & Marketing: 2 persons • Accounting & Logistics: 1 person

Page 18: Rice Bowl Business Plan 1824

Management Requirements

To achieve the growth plan outlined in Table 1, Rice Bowl will need an experienced CEO to manage strategy, branding, and growth as well as a proficient COO to oversee company operations. Once proven, the model will expand beyond Chennai and additional managers will be hired.

Rice Bowl’s Board of Directors will also play an instrumental role in the company’s ultimate success. As noted earlier, this Board will consist of Rice Bowl’s CEO, along with key stakeholders including farmers, co-operative leaders, and strategic figures from within partnering NGOs.

Financial Requirements

Rice Bowl will seek startup funding to complete further market research and pilot the model in Chennai. Funding in the amount of $25,000 will initially be sourced through grants or soft loans from major foundations involved in economic development and fair trade initiatives, such as OxFam. Follow-on funding in the form of repayable grants or soft loans will be pursued once the model is proven for expansion into other regions of the country. Rice Bowl will incorporate as a Section 25 company registered under section 25(1)(a) and (b) of the Indian Companies Act. Please refer to Appendix 3 for financial projections.

Key Risks and Opportunities

We have identified several risks associated with this project:

• Rice consumption and economic status: Some research indicates that rice consumption is inversely proportional to household income, suggesting that the premium market segment may not purchase substantial quantities of rice. This risk is mitigated, however, by the sheer size of the rice market in India. While it may be true that upper-middle class Indians do not eat as much rice as Indians of lower economic class, it remains the case that average rice consumption of the upper-middle class segment is still much higher than the average European consumer.

• Rice as a premium product: While basmati rice is widely acknowledged as a premium product, other varieties of rice are less recognized. Some marketing efforts may be required to educate the target market segment as to the wide variety of rice available and specific benefits of each.

• Government regulation of rice prices: As noted earlier, the Indian Government places significant regulations on the price of rice and purchases a significant portion of the rice produced nationally. This rice is then sold at subsidized prices to the “below poverty level” segment to promote food security. This risk is mitigated by way of target market

Page 19: Rice Bowl Business Plan 1824

segment—Rice Bowl will target upper-middle class segments whose purchasing patterns and price sensitivity are unaffected by government pricing regulations.

• Social enterprise risks: Some additional risks should be considered when starting a social enterprise, such as legal structure; while incorporating as a non profit offers significant benefits when attracting start-up funding, it may result in legal limitations for follow-on funding or expansion as Rice Bowl grows. Other legal structures will be explored to ensure the best fit to achieve Rice Bowl’s social mission of poverty eradication for small-scale Indian farmers. Likewise, the risk of mission drift must be closely monitored.

• Other risks: Rice Bowl will also need to address the risks common to conventional start-ups, including economic climate, tax implications, legal and contractual risks and human resource requirements. Additionally, natural disaster could significantly impact Rice Bowl’s ability to do business if rice crops are affected.

Rice Bowl also enjoys significant opportunities:

• Growing middle class: India has one of the fastest growing middle-class consumer segments in the world, predicted to reach some 583 million people by 2025. “These households will see their incomes balloon to 51.5 trillion rupees ($1.1 billion)—11 times the level of today and 58 percent of total Indian income.”12

• Established fair trade movement: Rice Bowl can benefit tremendously from the existing fair trade movement and lessons learned from pioneers in the industry. Fair trade has grown in Western countries to represent a significant portion of sales in commodities such as coffee, tea, and chocolate. Rice Bowl has a unique opportunity to introduce fair trade purchasing on a local and national level through the sale of rice.

Conclusion

As demonstrated, Rice Bowl has the potential to significantly impact the income and welfare of small-scale rice farmers in India through the development of a national fair trade rice movement. Building on the successes of the existing fair trade industry and capitalizing on a quickly growing middle class who will value quality rice and fair trade principals, Rice Bowl has a unique opportunity to not only become a self-sustaining high-impact social enterprise, but a profitable business in the long run.

Word count: 4930

12 Farrell, Diana and Eric Beinhocker. “Next Big Spenders: India’s Middle Class”. BusinessWeek: May 19, 2007  

Page 20: Rice Bowl Business Plan 1824

Appendix 1: Market Socio-Economic Classification

Socio-Economic Classification Grid

Education/ Occupation

Illit

erat

e

Scho

ol u

p to

4 Y

ears

/

liter

ate

but

no

form

al s

choo

ling

Scho

ol 5

-9 y

ears

SSC/H

SC

Som

e co

llege

but

not

gr

adua

te

Gra

duat

e /

Post

G

radu

ate

- G

ener

al

Gra

duat

e /

Post

G

radu

ate

- Pr

ofes

sion

al

1 Unskilled workers E 2 E 2 E 1 D D D D 2 Skilled workers E 2 E 1 D C C B 2 B 2 3 Petty Traders E 2 D D C C B 2 B 2 4 Shop Owners D D C B 2 B 1 A 2 A 2 5 Entrepreneurs

Employees None D C B 2 B 1 A 2 A 2 A 1

6 Entrepreneurs Employees < 10

C B 2 B 2 B 1 A 2 A 2 A 1

7 Entrepreneurs Employees > 10

B 1 B 1 A 2 A 2 A 1 A 1 A 1

8 Self-employed professionals

D D D B 2 B 1 A 2 A 1

9 Clerical/Salesmen D D D C B 2 B 1 B 1

A Supervisory level D D C C B 2 B 1 A 2 B Officers/Executives:

Junior C C C B 2 B 1 A 2 A 2

Appendix 2: Survey Results

Page 21: Rice Bowl Business Plan 1824

Can you name a few top-of-mind brands?

Page 22: Rice Bowl Business Plan 1824
Page 23: Rice Bowl Business Plan 1824

Top Related