Cargill India Pvt Ltd

B2B Case Study

Introduction
• Incorporated in US, Cargill Inc. is a conglomerate of food, agriculture, financial and
industrial products.
• Head of refined edible oil business of Cargill India Pvt. Ltd, Siraj A. Chaudhary was
about to develop his own annual marketing plan in India in March 2005.
• Chaudhary was in search of an opportunity to extend the current business to
business(B2B) model to business to consumer(B2C) model to have better control
over cost and revenue.
• Cargill’s initial planning was to launch a product of portfolio of food products,
starting with edible oils for the consumer market and demand will be fulfilled by
imports.
• In 2000, Cargill India had already entered into B2C marketing but had quickly
moved out of it.
Case Background
B2C was a new strategic direction for Cargill Inc., as it was popular for B2B
products and services, Reason for entry are:
1. B2C model would enable the company to tap into the popular end of domestic edible oils
market.

2. It would improve the contribution of Cargill India to global revenues of Cargill inc.

3. If it worked in India, the B2C model could be replicated in different geographies,

particularly in emerging markets.
Food Industry in India
• India being the largest producer of milk and the second largest producer of fruits
& vegetables in the world, it generated 12 % of global food output.
• Having employed 58% of working population, the agriculture contributes only
17% in country’s GDP attributing to the low productivity of Indian farming.
• Among the four phases of value chain of food industry, processing had major
issues that led to significant cost of goods sold.
• The food & grocery category of the Indian retail market was the largest at $165 bn
accounting for 45% of total retail market which was estimated at $365 bn in 2005.
Regulatory & Opportunity
• Regulations
• The Indian food industry was regulated by Government of India.
• The edible oil segment was particularly regulated because domestic production could not
meet the demand making it necessary to import.
• Imports were routed through the State Trading Corporation, a federal government enterprise.

• Opportunities
• Price incentives for local farmers to divert part of their farming to produce edible oilseeds.
• In 1994, edible oils were placed under Open General License.
• The liberalization of imports in compliance with provisions of WTO which mandated free
trade.
• The import substitution policy helped value addition within the country and also prompted
modernization and capacity addition in the processing industry.
Characteristics of Indian Market in B2C
Segment
The Indian food market is different from Cargill Inc’s other global market.
• At-home consumption
1. Large part of food consumption happened within home.
2. According to FICCI, urban Indians ate out 2.7 times a month in 2003 as compared to people living in
other Asian countries like Thailand and Indonesia ate 44 and 15 times respectively.

• Diversity of markets
1. Geographically, India had 28 states and 7 union territories.
2. Variations based on tastes, eating habits, climatic conditions, availability of ingredients and urban-rural
divide.
3. Different cooking oils were preferred in different markets.
4. One-size-fits-all brands would not work. Brands were local or regional rather than national.
• Evolving retail
1. Lack of modern retail in India, typical in the United States and Europe.
2. Over 95% of the retail activity was conducted traditionally through mom-and-pop stores, handcart hawkers, pavement
vendors, general stalls or kirana shops and street side stores like pan and beedi shops.
3. Distribution was a major issue because of poor infrastructure.
4. Lack of cold chain and refrigeration limited the offering by retailers.
5. Shopping for household items done in small quantities and daily rather than monthly in developed countries.

• Younger demographic
1. 35 % of population are less than 15 years and 70% of population are less than 35 years of age.
2. Young population was higher in India as compared to other developed countries.
3. India was a promising market for manufacturing and marketing food products companies.

• Value for money

1. A major driver for consumer choice is value for money.
2. When an Indian consumer experience a perfect mix between quality and price, they think that they got their money’s
worth shows customer satisfaction.
Advantages of B2C
• There is a great opportunity as the “ at home” consumption is high in India.
• A large portion use to shop from retails which provides a big opportunity in terms
of B2C segment.
• OGL and import substitution policy of government.
• Large population of youngsters which leads to higher consumption ultimately a
good opportunity.
• It will help to avoid uncertainties associated with the current B2B model.
• If the model fits in India then the same can be applied rest parts of the world.
• It will also improve the revenue of Cargill Inc. from India which is very low.
Dilemma
• The major issue was related to execute the shift from B2B to B2C.
There were new challenges at various ends i.e. Pricing, sale side, promotion mix and distribution ends.

• This expansion will be based on “make or build” i.e going for reverse
integration or not.
Going for reverse integration can be cost effective but at the same time it is lengthy and complex .
Challenges for Cargill
• Building networks among vendors and customers, setting up manufacturing
capacity in a small period was a challenging job.
• It was not easy building food brands in India and moreover creating a supply
chain network was very expensive.
• Diversified and scattered population of India.
• Cargill was known as B2B, so Chaudhary was concerned about the recruitment of
specialist staff in B2C segment.
• There were other issues like pricing, adverting, competitors, etc.
Market Potential of Cargill
Market potential analysis comprises evaluating the overall market size of the related product that the
firm is planning to launch. This will involve defining – Why the target market segment needs the
product and how it will provide a solution to full its consumers’ needs.
Market potential of Cargill India Pvt Ltd. products various on factors such as:
1. Maturity of the market. In mature markets the profitability is often stable but the market potential is less as
most of the players have already taken market share based on the segment they are serving. New players
have to go for market share strategies in marketing.
2. Technological competence of the existing players and culture of innovation and development in the industry.
Continued…
1. Untapped market sizes and barriers to both enter the market and serving the customers. Often companies can
easily see the unfulfilled needs in the markets but they are difficult to serve as there are costly barriers.
2. Define the core need that your product is serving and list out all the direct and indirect competitors in the
market place. This will help not only in positioning of the product but also in defining or creating a segment
better.
3. Uncovering the current and untapped market sizes and barriers to serving the larger market. Analyze the areas
that you need to sort out while launching the products to wider market and what are the challenges the firm
will face in market place.
4. Estimate the current stage in product life cycle and its implications for marketing decisions for the product.
Case Solution
• Yes, the B2C was the right thing to do for the Cargill India as in India people have
a habit of preparing food at homes for most numbers of times, eating outside is
very less as compared to US, Thailand and Indonesia.
• India being the 2nd largest market as per population there was a huge scope for
Cargill to increase its revenue many fold in India.
• Most important part of this process was the distribution. India market was
scattered and widely spread, beyond that people in different region had different
taste and preference for edible oil, eating patterns were different. So, Chaudhary
was correct that, approach need to be slow as cracking the complex process would
be hard for once, but viable option in long run.
Cont.
• Major advantage of Cargill was its import, being an old company Cargill had an
access to various category of edible at a reasonable rate.
• Only advertising on TV and radio was not the feasible option for Cargill, as it
would only cause awareness, but major success of operation was with reaching the
distribution.
• There are more than 12 million small retail outlets (Kiranas) are there. So in order
to reach maximum retail stores, the option with Cargill was to go for the hub and
spoke, where hub is the main warehousing unit in each major district and spoke
are the regions nearby hub and hub should be given responsibility to sell the
edible oil packets and pouches in rural segment, an extra commission to spoke, on
selling it to retail outlets.
Marketing Plan
The elements of the marketing plan, that would ascertain profit and growth for
Cargill India are:
1. Branding of the product, through edible oil are available in loose in Indian markets, but
with the latest trend, refined oil is experiencing increase in sales. So, branding of the
product was very essential.
2. Brands are not born but made, so the process might take some time but in few years down
the line Cargill will have huge profits.
3. A combination of above the line communication (largely advertising) will cause awareness
in the mind of people by which people will develop liking for the products. Radio
advertisement in local language and TV commercial would play a major role behind the
success of this.
Marketing Plan
• Hiring good experienced employee in the field of marketing and branding, as
Cargill did not any experience in the field of B2C segment.
• Major attention should be given in the field of packaging. Buying capacity of
maximum population of India is not good, so Cargill should decide 250ml special
packs for rural areas and pack of 500ml, 1ltr, 5ltr and 10ltr there on, depending
upon the segment and market.
• Below the line communication would also play a major role behind the success of
sales, as Indian consumer are price sensitive, promotional scheme would attract
many consumers and will lead to volume sales.
Marketing Plan
• Keeping price in affordable range which is best suitable of large population of
India, (AKA Middle class population). All the six competitor has popular branded
oil in there respective region and few common market were the competitor with
one another, there oil brand name were synonym for oil in India. So task for the
brand management was to come up with brand name which are familiar with
health and could spelt easily.
• Come up with variant of mustard oil, soy oil, Palm oil and new variants of oil like
olive oil which has been new concept in India in early 2000.
• Following the strategy of competitive pricing as Indian consumer are price
sensitive, they compare the products of same category of different brand in terms
of pricing and quality, so setting up a price which will built sale for the company.
Conclusion
• Cargill company has huge resources in term of Human resource, finance required.
Indian market is huge and has huge potential as still few players are there in edible
oil segment, India spends more 45%’ of food products plus more then 80% of this
45% of this is consumed by household, so in this case B2B model would not be of
much use, rather then B2C is a more viable option, i.e. tapping individual HH
• Edible oil seed demand projection has shown that total demand will increase for,
10.9 in 2004 to 21.3 in 2015 as per exhibit 8 of case study. Cargill should also go
for backward integration in India, in terms of growing of mustard, this will help
company to decrease it’s cost of procurement from other vendors