Fertilizers on Wheels
By POH SI TENG
It's a few hours before sundown when a white and lime green truck rolls into Vanukuru village, located in the south eastern Indian state of Andhra Pradesh. The squeaky clean vehicle, equipped with a flat screen television and a loud speaker, stands out among old, grimy shops at the town center where it's parked. The truck, named "Krishi Vigyan Vahan," which means farmer's knowledge carrier, soon draws a crowd of about 40 farmers who have just returned from the fields. Before long, a shaded booth displaying a colorful array of fertilizer products is set up. Then, a video starring local film stars promoting fertilizers is screened on the television and blasted through the loud speaker.
As the crowd begins to grow, a marketing agent from a fertilizer company starts talking about the importance of zinc, iron, boron and other micronutrients to plant growth, plugging his products in the process. He is flanked by two other company representatives, a loyal customer and a village sarpanch – elected head of the village – who lends his legitimacy to the promotional event.
This scene has been replicated in more than 2,600 villages and satellite towns across India. It is part of a marketing strategy by the Mumbai-based fertilizer company Aries Agro Ltd. to tap into new markets which are the remote rural areas that do not have fertilizer retail stores and where there are improved irrigation systems.
Since its launch in June, Aries Agro, which focuses on micronutrients but also produces secondary nutrients and packaged water-soluble primary fertilizers, has rolled out more than 70 such trucks across the country. The trucks are tracked via satellite and the data -- net weight, distance covered, time spent at each stop – is compiled daily at the Mumbai headquarters.
"By actually going on the mobile format, which is basically my rural retail vehicles, I'm covering six to seven villages a day. So my cost is getting spread over six or seven villages, rather than an entire investment on physical infrastructure in one village," says Rahul Mirchandani, executive director of Aries Agro. The company has so far invested 48.80 million rupees ($1.05 million) into the vehicles and has forked out another 34,000 rupees towards operational costs per vehicle each month.
Aries Agro, a medium-sized fertilizer company, has a production capacity of 84,000 tons of micronutrients and 60,000 tons of secondary nutrients and water-soluble primary fertilizers per year. Last year, the company made a net profit of 57.12 million rupees.
Primary fertilizers consist of nutrients such as nitrogen, phosphorus and potassium that are needed in large quantities for plant growth, while secondary nutrients such as calcium, magnesium and sulphur and micronutrients such as zinc, boron, iron and manganese are used in smaller quantities.
India is one of the largest producers of primary fertilizers in the world –second largest producer of nitrogen after China and third largest producer of phosphate after China and the U.S., according to the Fertiliser Association of India or FAI. From 2008 to 2009, the country produced 33 million tons of primary fertilizer products. The estimated total consumption of primary fertilizer products in the country increased from 45.96 million tons in 2007-2008 to 50.8 million tons in the last fiscal year. There is more demand than domestic supply of primary fertilizers.
As for micronutrients, the annual production of zinc sulphate alone was about 88,000 tons in 2008-2009, according to FAI.
"I used to travel (to the fields) during the agricultural season and I see the demand (for micronutrients) is increasing," says Kanak M. Sarkar, president of the Indian Micro Fertilizers Manufacturers Association, adding the increase in demand stems from years of product demonstrations by fertilizer companies.
According to Mr. Sarkar, in the recent years, large primary fertilizer companies have noticed this and are also entering the market, competing with 400 to 450 smaller micronutrient companies in the country.
"We have to fight this problem. I cannot foresee what will happen in the future. (But) we cannot just leave this field open for them," says Mr. Sarkar.
But for Mr. Mirchandani from Aries, larger companies entering the micronutrient production business would only expand the market and create more demand. Smaller companies, he says, would however, have to provide value-added bonuses to their products in order to compete. For Aries, it's letting farmers book for products off the truck and providing accident and health insurance coverage for purchases -- a 50,000 rupees coverage for a purchase worth 1,000 rupees.
"It's useful to buy (from the truck), because we are getting a receipt, insurance coverage and the product for 1,000 rupees. It's worth it," says Nellore Chandramouli, a 52-year-old farmer in Vinjanampadu village in Andhra Pradesh.
But the vehicles are still a substantial investment -- more than eight times the cost of outsourcing promotional programs through an external company. Aries spent about a million dollars on the trucks this year and $122,508 while outsourcing promotions last year. Company executives say promotions when outsourced, were smaller in scale and had less reach to remote rural areas.
Coromandel Fertilisers Ltd., one of the big players in fertilizer production in India, spent about 500 million rupees in setting up 412 retail outlets in Andhra Pradesh, selling fertilizers, pesticides, veterinary products and household items. The venture has since brought home 2 billion rupees in revenue in the last fiscal year. Company representatives say they expect the retail stores to break even in 2010.
"The breadth of Andhra Pradesh is being covered by these centers now. We're moving now into Tamil Nadu, Maharashtra and Karnataka in the years to come. So the idea is to get direct retailing to the farmer," says V. Ravichandran, managing director of Coromandel Fertilisers.
In addition to its retail stores, Coromandel Fertilisers, which has a manufacturing capacity of 3.1 million tons per year of fertilizers, has also been marketing its products by sending vehicles to remote parts of Andhra Pradesh. The company has a ground staff of 1,200 individuals connected to villages throughout the state.
But be it via retail stores, trucks, farmers meetings or media advertising, fertilizer companies, big and small, primary, secondary and micronutrient producers, agree that having product demonstrations is the key to selling new products and expanding the market.
"We believe in approaching the farmers directly," says Mahesh Gopal Shetty, director of the Karnataka-based Multiplex Group of Companies, which produces micronutrients, bio fertilizers, organic manure, pesticides and bio pesticides. "Seeing is believing for these guys."