Study of Market Potential of products made by SHGs in Local Market

Hindalco CSR Vision - To actively contribute to the social and economic development of the communities in which we operate. In so doing build a better, sustainable way of life for the weaker and marginalized sections of society and raise the country’s human development index

Submitted by
Vivek Kumar Singh MBA Core NMIMS, Mumbai

Table of Contents
Acknowledgements
Executive Summary
Scope of Study
Introduction
Aditya Birla Rural Technology Park
SHG Assessment
Market Research and Analysis
Market Potential for SHGs
Conclusion
Annexure - Market Survey Responses

Acknowledgments

I am grateful to Hindalco Industries Ltd for permitting me for 3 weeks Internship in Rural Development Department. Thanks to Mr Avijit for his support and guidance throughout the internship period. I would also thank Mrs Rajshree Verma for mentoring me in this internship.
I also appreciate the employees and staff of Aditya Birla Rural Technology Park and Mahila Mandal Renukoot for their support and assistance in the entire process.
Finally I would thank the WeCare team in NMIMS for providing me with this opportunity of gaining knowledge about the social issues faced by the society and how a company like Hindalco extends its capacity to curb these issues.

Executive Summary
This report is the study of market potential of products which are made by SHGs which are part of the Rural Development project of Hindalco, Renukoot. A brief summary of the development work and the thrust areas for which Hindalco works on is also covered as part of this study. Training and development activities done in the local communities to develop the competency of the people are also covered in this report.
Market research of Gift Items and Handicrafts was done in the retail stores in Renukoot. Analysis of the research is presented in this report in detail. Market linkage details and recommendations are presented in the end of the report in Market potential.

Scope of Study
This study can be used to develop market linkage of SHGs with the retailers and distributors. This can lead to developing a sustainable business model for the SHGs. SHGs with the required competency level and consistent production capability should be identified first. These SHGs can then collaborate with each other to form a robust supply network for the retailers. This can help in generating income and employment within the groups. Eventually banks will provide loans to these groups which can prove beneficial in long run.

Hindalco’s CSR Activities
Sustainable development of society has been one of Hindalco’s focus areas right from its inception. Hindalco not only takes care of its business and employees but also the society and local neighborhoods. Hindalco reaches out to lakhs of people in the villages and help them in every way possible. Some of the key focus areas of rural development are Healthcare, Education, Skills Training, Women Empowerment and Agricultural Support.

Health care * Medical camps: Taking mobile medical units and providing ambulance service to remote areas. * Health facilities: Setting up well-equipped and professionally manned health centres at several locations. * Regular health camps: Providing family planning, mother and child care and specialised camps for eye care and for cataract; coordinating regular pulse polio immunisation drives; and promoting the awareness, prevention and treatment of malaria, water-borne diseases, TB, HIV/AIDS, and others diseases.

Education * Balwadis: Providing for the primary education of underprivileged children. * Adult literacy: Providing formal and informal classes and active support to the government's mission to improve rural literacy levels. * Merit scholarships / Schemes: Support female students for educational endeavours. * Educational support: Contributing uniforms, textbooks and classroom equipment and undertaking school building construction and maintenance.

Skills training / capacity building * The Aditya Birla Rural Technology Park (Muirpur, Uttar Pradesh, India): Runs over 70 training programmes in diesel / hand pump repair / maintenance, electrical repair/maintenance, bee-keeping, tailoring, knitting and agriculture-related programmes and encouraging self-employment through income-generating projects.

Women Empowerment * Self-Help Groups (SHG): These programmes involve over 11,000 women from rural communities around Hindalco units. * SHG activities: Micro credit and micro finance schemes, entrepreneurship building, oil-processing units, tailoring centres, horticulture and nutrition gardens, diesel and hand pump repair, vermi compost production, mushroom cultivation, food processing, etc. * Awareness building: Health and sanitation, family planning, literacy drives and microfinance; facilitating government loans for small-scale enterprise and rural insurance schemes, etc. * Social causes: Promoting dowerless marriages and widow re-marriages.

Agricultural support * Irrigation schemes: Land brought under irrigation with better yield and multi-cropping methods * Watershed development: Hydel towers, drainage canals, wells, check-dams, pedal pumps and harvest tanks. Training: Field schools train local farmers in modern agricultural techniques for higher crop yield; introducing lac cultivation, post-harvest technology with safe grain storage through an integrated pest-management system, floriculture, horticulture and kitchen gardens; shifting from mono to multi cropping patterns and distribution of high-yield seeds.

Aditya Birla Rural Technology Park
ABRTP is located in Muirpur block of Sonebhadra district in Uttar Pradesh. It is a center for capacity building of rural people around Renukoot. It also extends technical support to the rural communities to transform their lives. The park works in integration of six sections to empower the rural people to harness their potential and skills. Capacity building center, Vocational Training center, Agricultural Research Section, Animal Husbandry, Processing Unit and Rural Hospital are the six sections.
In the Vocational Training Center there are following sub-divisions – 1. Tailoring and Knitting Center 2. Beauty Parlor Course 3. Bag Making 4. Electronics Training 5. Teddy Bear and Handicrafts Making 6. Computer Training 7. Carpentry/ Mason Training
All these courses are of 3 months to 1 year duration with highly subsidized fees of Rs 50-100. The fees ensures that the trainees are regular to the course.

SHGs Assessment
Self Help Groups are primarily community owned institutions which evolve through a process of social mobilization wherein the poor are organized and their capacities are built up to tackle various issues that are critical for mitigating poverty and ultimately overcoming it. By organizing themselves the poor gain through collective strength and access knowledge by generation of capital to improve their own savings.
In the long run the SHGs are expected to evolve into self reliant and self sustainable community owned institutions to effectively bring about perceptible change in the living conditions on a larger and visible scale.
Hindalco has taken an active role of formation of SHGs around the four development blocks of Sonebhadra district of Uttar Pradesh. It identifies the need of SHGs for rural development, poverty alleviation and empowerment of women. It has adopted a total of 182 villages and identified 389 SHGs.
Market Research and Analysis
The objective of the research was to identify the products which can be sold in the local market and which can be made by SHGs.
The most common business which these SHGs do is of the agricultural products. Abundance of land and access to markets makes it very attractive. Women of these SHGs procure the agricultural produce in small quantities and sell these products in the local markets. They add a small margin of Rs 2-5 per kg and hence derive the profit from this. But the sales are usually in small quantities and these profits are also very small. The entire process is very much disorganized and there is very less synergy between the members of the group as a whole. Hence this cannot be sustainable in the long term for the SHG.
A new avenue which the SHGs can venture in is Gift Items and Handicrafts. Training Centers in Renukoot and Muirpur provide adequate skill development and competency to the women and girls who register for the courses. Currently the training centers only sell the entire produce of the training in camps which are held once or twice in a year.
Market Survey of the Gift Shops in Renukoot was done to analyze the products that are sold in these shops. Below are some of the common features of these retailers. 1. They get the supply from cities like Kolkata, Mumbai, Varanasi, Allahabad. 2. Teddy bears which are sold range from Rs 50 to Rs 2500 depending on the quality and size. 3. Small gift items are sold at Rs 30-50. 4. Supply is fairly seasonal ranging from Rs 5000-25000 per month in a shop. 5. Some of the shops have their own production in Calcutta and Varanasi from which they procure the materials. 6. There is no brand importance for any of the gift items or handicrafts among the customers. 7. Margin is kept at 30-40% above the cost price. This includes the transportation cost which is around 5-6%. 8. Inventory turnover period is 2-3 months. Hence the supply is taken for at least 2 months which costs the retailers more at a time. 9. Sales is heavy during festivals and occasions like Valentine’s Day and Teachers Day. 10. Plastic Paris is one item which sells regularly.
When asked about changing/adding supplier following points came up. 1. Retailers are willing to take supply from other suppliers if they get more margin. 2. Since brand is not important in these items the retailers only look for the adequate quality.
Market Potential for SHGs
Based on the market analysis it is possible for the SHGs to develop a sustainable business model. The only concern would be the quality of the finished products which is one of the most important aspects that the retailers look for.
Below is the step-by-step model which they can follow. 1. Coordinate with the Training Center to develop the competency to produce Gift Items and Handicrafts. 2. 3-4 SHGs can combine their efforts and become a concrete supplier. 3. They should then develop market linkage with the retailers. 4. Margin and quality should be negotiated with these retailers. 5. They should be in constant touch with the retailers to understand the types and variety of the products that are in demand and focus the production on those items. 6. A constant production capacity should be built to form a robust supply chain. 7. Profits should be used to develop the living standard as well as developing the business also. 8. Hindalco CSR department should monitor, advice and support them at every step.
The retailers who are willing to tie-up with the SHGs gave following reasons – 1. Transportation cost will be saved. They can sell the products at the same margin and gain more profit. 2. Local supplier network would ensure that the turnover period is low and they can stock the products better. Low stocks will develop the cash flow of both SHGs and retailers. 3. Since brand is not of importance it would not be an issue if these retailers procure the items from SHGs. 4. The retailers wanted to start at a small scale of Rs 5000-6000 per month. If the model works well then they can increase the procurement even more.

Conclusions
Hindalco has taken many steps to develop the communities around Renukoot. The acceptance and respect of the company throughout the communities is also commendable. The company staff and employees are very much committed towards the work of rural development.
But it is not the responsibility of Hindalco only. Communities should also come forward and reciprocate the efforts. Only then all these development works would become sustainable. They should support the work done by the company. Linking the SHGs will create synergy among the groups and they can have a common goal of development. Training provided by the company in Rural Technology park and Mahila Mandal give these SHGs sufficient competency. They should try and develop this competency into business which can help them in developing the lives of many stakeholders. They can become role models for others in the community.
One of the ways identified during this internship period was the market linkage of the SHGs with the retailers. If the SHGs can do so they will be able to make profits and earn employment as well. Retailers are also willing to tie-up with the SHGs as it will be beneficial for them as well with low transportation cost and better inventory management.
Finally the work done paid off and 2 shops are willing to start the tie-up on a trial basis.

Annexure – Market Survey

Riya Gift Corner
Name of Owner – Vicky Gupta
Contact Number – 9793082282
Location – Renukoot

Survey Questions – 1) What are the items sold?
Gift Items, Handicrafts, Plastic Paris statues, Teddy Bears 2) Where are these products procured from? Any tie-up with the supplier?
From Kolkata. Supplier is a family member. 3) How much is the monthly procurement and procurement period?
Rs 20000 to 25000. Supply is brought once in 2 months. 4) What are the margin and demand?

Product | Selling Price | Margin | Supply (Procurement) | Demand (Sales) | Teddy Bear | 50-2500 | 30% | 20,000 | 27,000 – 30,000 | Plastic Paris statues | 50-60 | 30% | 20,000-30,000 | 25,000 – 30,000 | 5) Are they willing to tie-up with the SHGs for procuring these products?
Yes. But they will start of on a trial basis procuring 5000-6000 worth of products. Quality and designs will be of importance. 6) Other Remarks
They can make them a regular supplier if they get a better margin. For the same margin also they can tie-up as the transportation cost will be less.
Supply has to be uniform and regular to develop a better network.

Similar reponse was received from below retailers –
Prashant Gift Corner (Opposite Petrol Pump)
Pooja Novelty Store (Anita – 7860785595)