AgarbattisGroup No-15Case Study -16

Yusuf Shaikh – 92Avinash Patil – 73Shyam Yadar – 110Vijay Dhadwal-17Akshay Polekar – 79Hitesh Patel - 72

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HS CODE : 33074100

Agarbatti Industry OverviewHand crafted by cottage industries and NGOs in IndiaDue to high demand in export market, Industry is orienting

towards exportAgarbathi is a fast-moving (FMCG) product with a good shelf life

Market Size- INR 4648 Cr. ( $ 774.8 million), 60% is Unorganised

Agarbatti (INR 4084 Cr.) + Dhoop (INR 564 Cr.)

Growth: 12% p.a, although export growth turn 22.46% in FY12-13,

Where as growth in consumer durable is stagnant.

Exports (Yr 2012-13)-INR 526.5 Cr. ( $ 87.75 million)

Domestic Agarbatti Market - INR 4122.3 Cr. ( $ 687.05 million)

Note : assumption ,1 $ = INR 602

Agarbatti Industry domestic overview

Domestic Agarbatti Market - INR 4122.3 Cr. ( $ 687.05 million)61% of total consumption is in rural area. 2/3rd of the production is consumed by lower income group.3% of the production is consume by Higher income group

Rs. 26% Rs. 5

18%

Rs. 1045%

Rs. 1518%

Rs. 503%

Others10%

Price Points

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Agarbatti Industry export overview – 153 Countries

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Agarbatti Industry export overviewExports (Yr 2012-13)-INR 526.5 Cr. ( $ 87.75 million)There are 400 exporters in IndiaBiggest export market is US, UK , followed by Latin

America eg. Peru, Argentina & Brazil, also countries like Egypt, UAE, Nigeria & Srilanka

Pie chart for Export more than 10 Cr INR ($ 1.66 Million)

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Country-wise export statistics: INR in Cr.

S.No. Country 2006-20072007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

% Growth over last 7 Years

1 U S A 34.03 29.25 33.55 38.19 48.56 51.91 61.91 81.96

2 NIGERIA 13.02 12.70 21.12 17.18 21.58 25.45 33.44 156.86

3 U ARAB EMTS 18.30 18.16 21.68 21.50 20.75 17.11 28.76 57.21

4 SRI LANKA DSR 11.81 12.38 20.41 25.53 29.36 23.98 21.32 80.49

5 MALAYSIA 10.65 12.06 14.91 16.87 12.79 15.42 20.11 88.88

6 U K 10.62 8.47 9.77 11.95 8.97 14.84 18.21 71.47

7 EGYPT A RP 10.24 8.22 11.33 11.47 15.09 15.01 17.88 74.62

8 CHILE 8.57 6.73 9.30 10.10 12.18 12.56 16.13 88.24

9 NEPAL 4.14 4.95 6.13 6.66 5.24 11.04 14.57 251.73

10 BRAZIL 14.65 11.78 11.71 10.17 8.59 14.27 13.82 -5.6911 VENEZUELA 6.17 6.84 6.85 6.22 7.18 12.47 13.77 123.08

12 SOUTH AFRICA 7.66 7.37 8.15 10.00 9.80 10.46 13.68 78.63

13 AUSTRALIA 6.92 6.17 7.72 6.95 7.70 10.44 10.91 57.6314 ETHIOPIA 5.85 7.83 8.48 7.15 7.92 9.41 10.90 86.21

15 PANAMA REPUBLIC 1.01 1.19 1.35 2.24 2.39 2.35 10.67 954.41

16 MAURITIUS 5.30 4.75 8.49 8.43 7.28 8.11 10.07 89.98

17 SUDAN 3.40 2.42 5.71 6.03 5.30 7.66 9.87 190.49

18 NETHERLAND 5.38 4.63 6.25 5.35 4.83 6.01 9.49 76.25

19 SAUDI ARAB 5.69 4.48 6.52 5.42 4.45 7.00 9.11 60.12

20 CHINA P RP 0.42 0.74 1.49 3.69 4.20 8.45 8.84 1993.63

21 SPAIN 5.96 4.87 5.90 8.30 8.35 9.70 8.80 47.59

  Total290.09 266.57 339.66 350.03 383.09 429.97 526.52 81.51

6HS CODE : 33074100

INR

(C

r.)

Year

Export trend (Country-wise)

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HS CODE : 33074100

Industry Export Trend:

Year

INR

(C

r.)

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HS CODE : 33074100

Usage in Diff. Country Incense sticks are not only a part of Hindu rituals or customs; they have been used since

centuries in Chinese, Egyptian, Tibetan and Japanese cultures. They use it not only as a part of their religious ceremonies but also for personal things like aromatherapy.

India: Prayer, religious reasons. It’s root can be traced out from VEDAs dating back at least 3500 years.

Egypt: to counteract unpleasant odors & to drive away demons and please the Gods.

Rome: used in every occasion by Romans and their wealth was measured by amount of incense present in one's home.

Africa: mosquito-repellent incense sticks have a popular market.

China: Aroma therapy, spiritual reasons

Overseas: Ambience creation & Aroma therapy

US, UK : Ambience creation & Aroma therapy

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Agarbatti Manufacturing Scenario..

800 registered and 3000 unregistered units, only 10% are engaged in exports, most of them are in Karnataka

Small units numbering 10,000 operates in different parts of country. Providing employment to over 12 Lakh people

60% are UnorganizedMany agarbatti manufactures are local players with limited

resources. They cannot counter big companies. Eg. MNC like ITC & Cycle

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Major Players – Pie Chart

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Export quality brands with Export quality Fragrances

Sr.No. Brands Company name Remarks

1 Hari Darshan RemarksHari Darshan Sevashrampvt. Ltd,Delhi Export quality

2Parampara, touted aspremium dhoop NRR Group

10 per cent of turnover from exports .

3 Medini ,Dharti NRR Group Export quality

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Ratnamala, Decent, Empress, Cherish , Super Sandal, Relax, Fascinating India, Surprise, Paramhans, Success, Amber Flora Abyssinia Impex Export quality

5 Flora Herbal segment Abyssinia Impex Export quality

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segmentEucalyptus, Balmmint, Patchouli,Lemongrass, Pine,Citronella, Juniper Abyssinia Impex Export quality

7Mangaldeep , Spriha & many export brands

ITC Ltd (AgarbattiDivision) Export quality

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COSTING vs LABOUR IN AGARBATTI

Sr. No. Particulars

% cost of the Total

% Labour required

1Raw Bamboo Sticks 2%

80%2

Non-perfumed (non-masala) agarbathi 8%

3 Perfumes 30%

20%4Packaging Material 30%

5 Marketing 20%  6 Miscallenious 10%  

  Total 100% 100%

Perfumes cost involved 30%, as 66% it is imported.

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Agarbatti – From Batti to BrandAgarbatti – From Batti to Brand• Highly labour intensive

process

• Raw Batti predominantly imported from Vietnam. ITC is one of the first to begin indigenization by providing necessary tools and training.

• ITC has direct arrangements with International Fragrance houses for its perfume requirements

• Packaging materials supplied by ITC and external sources

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Manufacturing ProcessBasic raw material:Bamboo, wood charcoal, processed perfumes, Jiggat powder

•Raw material•Bamboo•Wood charcoal•Processed perfume

•Agarbatti requires•Stick•Adhesive paste known as Jiggat is made from powdered barks of Machilus macrantha (commonly know as Golum)•Charcoal Powder•Series of natural products in various combinations to provide fragrance Bamboo•Sandal wood powder•Perfumes•Diluents like DEP

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Bamboo ScenarioA 40% increase in demand for Bamboo & 25% in charcoal is also

predicted. Supply issues with respect to these are also not addressed.

Industry already source splints bamboo far away from north east India.

The diversion of upland areas from bamboo to Tea plantation. The main reasons for conversion of bamboo areas into tea include: 1. Transportation of bamboo is difficult due to its length 2. Lack of awareness among the local people about the potentiality of bamboo

and they do not see any bright prospects in the future. 3. As the tea factories are coming up locally and ready infrastructure is

available in the region, They feel that there is more security in taking up tea plantation.

4. No knowledge of government support available for bamboo plantation 5. Producers of bamboo do not know whom to sale their produce. 6. Backward and forward linkages are not clear to the people.

The present study revealed that home-based workers producing bamboo sticks receive a little over 2% of the final retail value.

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Agarbatti makers facing shortage of Bamboo – Economics Times 17 Aug’13

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Government’s role:

Bamboo Development Agency (BDA) – MizoramROUND AGARBATTI STICK PRODUCTION UNITS: With the increasing demand for round agarbatti stick in the country, BDA has come up with the idea of setting up round agarbatti stick unit in the state for which Lunglei, Haulawng and Saiha was chosen and fund from BAFFACOS (Bamboo Flowering Famine and Combat Scheme) was utilized for the purpose. At present all the above units are doing fairly well and the finish product of Haulawng and Lunglei unit are being sold to ITC Chennai through CBTC.  

Tripura Bamboo Mission (TBM) The State Government has launched the Tripura Bamboo Mission (TBM) in the year 2007, under PPP framework, for integrated development of the Sector. The catalytic role played by TBM has resulted in the turnover of Bamboo Sector in the State increasing three-fold in 3 years. Value addition is taking place in Agarbatti sector, new handicraft products have been designed and launched, marketing of products has been organised.  60% of the requirement of the entire country for bamboo sticks for Agarbatti-making is met from the State.

Incense sticks / Agarbattis - An Handicraft Industry Recognizing the unique nature of the units engaged in the manufacture of this product and acknowledging that incense sticks / agarbathis is a specialty product, the Ministry of Commerce, Government of India, accorded the status of "Handicraft Industry - Hand made typically Indian" to this industry in 1983.  

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JIGGAT ( Adhesive ) Scenario Jiggat powder is essential raw material. Demand for jiggat

is increasing. A 50% increase in the demand for Jiggat powder is expected.

However, Jigat is obtained from the bark of a tree, Maclilus makaranthacommonly known as Chang peechala , Mandaiawaal, jeelseem and Basra bukhui. These trees are found in the North-eastern region.

Absence of targeted programs to augment Maclilus makarantha has jeopardized future of this cottage industry.

While some jigat is produced within India, a considerable amount were imported, mostly from South East Asia, predominantly from Indonesia and Thailand.

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JIGGAT ( Adhesive ) InnovationAS A SUBSTITUTE for JIGGAT : The substitute

developed is an agro-based biopolymer (93-95%). Laboratory trials with the substitute indicate that the new binder is better than Jiggat. Substitute for 'Jigat‘ which is not at all related with any forest product, but otherwise also economically competitive and abundantly available and were sent to leading agarbatti manufacturers for their assessment trials and overwhelming reports are pouring in that it is very much suitable for agarbatti making. The technology for the manufacture of the substitute is simple and can easily be translated to industrial production. It is hoped that in the near future after the transfer of technology, impending threat for the survival of Machilus macrantha / Litsea Chinensis and pressure on natural forests shall be overcome.

- Source: National Research Development Corporation

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Perfume ScenarioPerfumes cost involved 30%, as 66% it is

imported.NR group which is well known with its brand Cycle

agarbatti is innovating for new fragrances along with foreign brands to fulfill requirement of Overseas customers. So that the margins can be extended.

Also other exporting brands are innovating for a new fragrances like Ratnamala, Decent, Empress, Cherish , SuperSandal, Relax, Fascinating India, Surprise, Paramhans, Success, Amber Flora by Abyssinia Impex LTD.

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Conditions of workers:Home base workers engaged in agarbatti making in

Bangalore live and work near factories. Agarbattis are rolled on the pavements and lanes around home in urban slums. The task is extremely arduous and repetitive.

Karnataka is only state under purview of “Factories Act and which consequently has to pay wages in line with minimum wages for home workers and has to provide factory based workers with social security.

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Wages and Earning Women worker constitute 90% of the work force of the industry Contractors give the raw materials directly to the workers to produce

the agarbatti at their homes The trader gives the raw materials to the contractor who in turn gives

it to the workers to be rolled at home

Sr. No. State

Wages Per 1000 Sticks

Wages with productivity of 4000 Sticks & 9-10 hrs a day

wages/person/month (28 working days)

Wages for Family of avg. 2 Family Members working Fulltime

1Karnatka 45 180 5040 100802Gujarat 34 136 3808 7616

3Andhra Pradesh 39 156 4368 8736

4Bihar 35 140 3920 78405Tamil Nadu 38 152 4256 8512

         

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Overall Raw Material, taxation & Labour Migration Impact

Shortage of raw material could jeopardize economic growth & viability of industry, leaving thousand employed or displaced by substitutes.

• Industry is taxed at multiple levels. Raw material taxes on bamboo, charcoal, jiggat & aroma range in between 25% to 90%.

• In addition to which sales tax on finished produce are levied. • Different rates of taxation and differing labour law across states

create an anomalous situation. • Traditional labourers are gradually shifting to the more lucrative

garment industries. Workers are also increasingly coming from the adjoining states to replace the traditional labour from TamilNadu and Karnataka.

• Thus it may hamper quality as regular work force is being replaced with new unskilled workforce .

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•The Chinese, for instance, have brought in innovations such as prayer kits and aroma incense boxes that come with accessories. These sets, comprising two bags of incense sticks, four bags of incense cones, a candle and incense holders appeal to the Western consumer. Compared to this, the Indian pouch looked outdated. “As Chinese and Thai products are more attuned to international designs, we cannot afford to ignore the trends,” he says.•NR Group has thus launched Iris, an incense stick brand to suit the needs of the international customer. For instance, the incense stick sets come with African prints or the British checks or pastels, in keeping with the design trends of the year.•Bangalore-based Moksh Agarbattis too has brought in ‘better packaging and modern designs for the export market.' Mr K.K. Rao, General Manager, Moksh Agarbattis, says that it's only of late that the Chinese incense sticks are seen in the international market. “They are still the leaders in the raw stick market (sticks without incense), but we see some of them now offering fragrant sticks,” he says.•Although the US and Europe have traditionally been large markets for agarbatti exports, of late, the South American market has taken to incense sticks in a big way, points out Mr Arjun Actually, it's hip to light incense sticks in Brazil and Argentina now,” he says.

Competition from China in Global Market

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SWOT Analysis for Agarbatti Indutries

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STRENGTHSAgarbathi is a fast-moving (FMCG) product with a good shelf lifeNon polluting industry (‘green’ labelld industry )Hand rolled bathis are having a competitive edge over machine made

AgarbathisArt of perfuming is well accustomedLarge labour base, Has a huge potential to generate

employment, specially women employment & hence will help for women empowerment through a women employmnet

Reputed supporting institutions present.No electric power requirement

Cont.

WEAKNESS Less Promotion as compared to other Items Least automation ( Automation is in bamboo cutting only ) Finance is not liberal since industry involves large working capital. Sluggish progress in R&D No level playing among the states in respect of raw material

supply, implementation of various laws, acts etc. Unethical practices prevailing which may hamper export market Child labour in the industry could impact on their health and

educational status which may hamper export market Export procedures tedious. Other than 100% Export Oriented

Units, Exports is loss-making activity. Addition of unskilled & untrained labour due to migration

impacting quality of Hand roll agarbatties. Lack of mutual trust between labour & brands Customer awareness is very low amongst low-end producers. People at lower strata of the industry are less educated or illiterate Poor living condition at bottom of the network

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Cont.

OPPORTUNITIESLarge export market potential.Scope for innovations and R&DDomestic market expandingFree trade regime can provide better raw materials for

better price

THREATSGlobal competition from China, Vietnam , TaiwanUnethical practices at local level.Forest based raw material supply becoming scarce Increase in unemployment.Mechanisation Import of Machinary from China

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P 4 Approach P-1: People mean the rural community in an identified cluster.

The demand should come from the community themselves for setting up the agarbatti enterprises. Packages of capacity building plan will help to facilitate the community.

P-2: Public, the government agency will play an active role in the program by providing logistic, financial and infrastructural aid to the entrepreneurs in order to maintain of rules and regulations in turn creating a stable environment.

P-3: Private Entrepreneurs or any similar agency like CBOs or NGOs may also be partner in the sector. These agencies will facilitate marketing and capacity building. They can also provide services to the community enterprise of the sector.

P-4: Partnership may be directly or indirectly under the approach. All the partners finally end up in a common platform for the development of the agarbatti sector, each partners provide their support in their area of specialization.

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P-4 Model

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References Department Of Commerce ITC portal Wikipedia www.moneycontrol.com DGCI&S Google V.G.Jenner I.F.S. & Md. Selim Reza Economics Times 17 Aug’13

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Questions1) How the investment in R&D by private players like

ITC & NR group, will help to tackle unsustainable growth of the industry?

2) Would industry be able to maintain balance between Automation & Cottage Industry ( Hand Made Product) to avoid unemployment in Industry?

3) Would industry dynamics help in Empowering rural women employee with reasonable return for their work?

4) How government will help to tackle, disparity in wages, which is resulting shifting of labour force?

5) Would industry with recent automation & innovation in RM (specially in perfume & packaging) be able to earn reasonable FOREX for India?

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Questions by Yusuf

1) Why Agarbatti manufacturing should remain as cottage industry?

2) How can this industry be use to empower destitute women. Can issues like child labour be taken care.

3) What decision Govt. should take to tackle issues like unsustainable growth of the industry?

4) What measure can be taken by MNC’s to develop new aromas.

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