ITC Blog

Monday, September 03, 2007

ITC stepping up rural push via Choupal stores

ITC, the country’s biggest tobacco company, today said that it would set up small-format stores in rural areas, on the lines of its existing hypermarket chain Choupal Sagar, by early next year.

The Kolkata-based company also plans to raise the number of its fruit and vegetable outlets to about 200 in three years, as it cuts dependence on cigarettes.

“The idea is to penetrate the rural areas where the income levels are even lesser, through smaller Choupal Sagar stores, each on an area of about one acre,” S Sivakumar, chief executive officer of ITC’s agri business, told journalists on the sidelines of the CII Marketing Summit here.

These stores, which would each cost Rs 2 crore, would be set up in small towns and rural areas of Uttar Pradesh, Madhya Pradesh, Rajasthan and Maharashtra, Sivakumar said.

ITC also plans to operate 50 of the Choupal Fresh stores by March in the cities of Hyderabad, Pune and Chandigarh. The company currently has three stores (one each in these three cities) selling fresh produce. In the second phase, ITC would set up 140 new stores in other cities including Kolkata, Delhi and Mumbai.

Sivakumar said that the company was also looking at a multi-fold increase in the number of its internet kiosks, or e-Choupals (named after the Hindi word for a village meeting place) where villagers can access the internet.

“We will increase the number of e-Choupals from the current 6,400 in 130 districts, to 20,000 across 350 districts, in the next 5-6 years,” Sivakumar said.

ITC uses its network of internet kiosks and rural supermarkets to buy produce from farmers. It purchases produce such as wheat directly from farms, selling it as the Ashirvaad brand of flour and using it as an ingredient for its Sunfeast range of cookies.

Farmers sell their crops online, then deliver the produce to supermarkets called Choupal Sagars run by ITC, where they can buy everything from mobile phones to pesticides. ITC operates 18 Choupal Sagars. The company is also focusing on strengthening health services in rural India.

“Having looked at poor health facilities in rural areas, ITC is scaling up the health services and we have already experimented in Madhya Pradesh and would be soon expanding to Uttar Pradesh and Maharashtra,” Sivakumar said.

ITC, 32 per cent owned by British American Tobacco, is adding new businesses, such as clothes retailing, to cut its reliance on tobacco revenue and will compete with Reliance Industries in the fresh food industry.

Sales at chain stores in India may rise more than eight-fold to $97 billion (Rs 397,700 crore ) by 2012, consultant Technopak Advisors estimates.

“It’s a positive move for ITC to invest more in expanding its network of stores and is in line with its plans to increase revenues from businesses other than cigarettes,” said K K Mital, who helps manage the equivalent of $49 million of stocks at Escorts Asset Management in New Delhi. “The competition in the retail business is intensifying, but ITC has a unique business model.”

Reliance Industries, previously an energy company, is opening Reliance Fresh stores. Earlier this month, Wal-Mart Stores, the world’s biggest retailer, and India’s Bharti Group agreed to set up wholesale stores.

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