Issues of marketing of and trade in Coffee assumes importance due to its export potential as well as the livelihood dependency of large number of small growers (98% of holdings).To help the small growers move up in value chain, vertical integration becomes a greatest measure. So, we are proposing a research to understand the success of vertical integration through cooperatives and the factors affecting the same.

1. RESEARCH PROPOSAL ON IMPROVEMENT IN THE VALUE
CHAIN BY COLLEVTIVE MARKETING BY SMALL GROWERS
SUBMITTED TO : DR JOHN S
MANORAJ
COURSE NAME : RURAL
MARKETING
SUBMITTED BY : GROUP -2
Devesh Shukla
Swikar Nivruthi
Aparna.N
Hemanth
Harshad
INDIAN INSTITUTE OF PLANTATION MANAGEMENT

2. IS COLLECTIVE MARKETING OF COFFEE BY SMALL
GROWERS HELPING THEM TO MOVE UP IN VALUE CHAIN?
ABSTRACT:
Issues of marketing of and trade in Coffee assumes importance
due to its export potential as well as the livelihood dependency of large number of small growers
(98% of holdings). Global coffee market is characterized by enormous clout of roasters and
exporters at the upper end of the value chain (who appropriate over 60% of value) and
increasingly the value accrued to the primary producers has reduced (to mere 6 – 7%).To help
the small growers move up in value chain, the feasibility of collective marketing enabled by
Government, NGO and multi sectoral partnerships is studied to understand the advantages of this
approach.
JUSTIFICATION:
1. PRICE REALISATION:
Price realization by small growers is also very less due to Income Tax laws(section 7B), which
imposes tax on green coffee. This is also perceived as a major factor that discouraged
growers to undertake any processing and moving into value addition or focusing on quality
improvement.
2. LACK OF MARKET AWARENESS:
Marketing of coffee through e-auctioning and other platforms like MCX or NCDEX appear to
be having limited impact on the situation of small growers as very few of them participate on
such platforms owing to small quantities, cost of entry as well as lack of awareness and
understanding.
3. CONTROL BY LOCAL AGENTS:
It is estimated that over 80 per cent of the producers sell Coffee to local traders (who are linked
to curing agencies and exporters) at the farm gate. The marketing chain consists of local traders
(agents), curing agencies and exporters. Agents who are spread across the villages collect the
coffee and they are controlled by exporters and they mutually benefit the information on the
price movement as well as supplies. In a way this completely keeps small growers isolated from
marketing decisions.
4. HIGH LABOUR COSTS:
Growers feel that they are not able to make profits as cost structure is still high especially due to
labor costs which accounts for almost 55 per cent of input costs.
5. QUALITY REQUIREMENTS:
Lack of knowledge of quality requirements by small growers and lack of collective approach
prevents traders from purchasing from small growers and also lesser price premium is given.

3. 6. KNOWLEDGE DISSEMINATION:
Technical know-how, professionalism and new dynamism and leadership are evolved in
collective farming with active support from the Government and Coffee Board.
OBJECTIVES:
1. To understand the difficulty faced by small growers in coffee cultivation.
2. To understand the Socio economic status of small growers.
3. To analyze and understand the requirements to join coffee marketing cooperatives.
4. To understand the advantages got through collective marketing.
5. To understand about the awareness of collective marketing approach.
INDIAN COFFEE TRADE CHANNELS:
Source : Paper on Coffee value chain and GI in India

4. LITERATURE REVIEW:
1.Dorsey (1999) in his study entitled ―Agricultural Intensification, Diversification, and
Commercial Production among Smallholder Coffee Growers in Central Kenya‖ highlights that
the research summarized in this article establishes direct links between the scale, process, and
output Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark. 18 of
agricultural production by examining the dynamics of intensification, crop diversification, and
commercialization. Small farm survey results from Kirinyaga District, Kenya, show that
diversified production provides smallholders with the opportunity to select a particular crop or
crops for commercial production (such as coffee, French beans, or tomatoes) in order to increase
farm-generated income while meeting increasing demands for local farm produce and export
crops. The study shows that income per hectare (acre) does not consistently increase with
increasing farm size, regardless of the level of commercialization. Smallholders operating at the
1.2 to 1.6 hectare (3-4 acre) scale appear to engage in higher-risk, more diversified, commercial
production strategies than those with less area under production.
2.Smith (2010) in his study entitled ―The Evolution Of Coffee Markets For Sustainable
Development: A Honduran Cooperative‘s Experience With Fair Trade‖ explores the barriers
coffee farmers of Cooperative Copan in Western Honduras face in effectively participating in the
Fair Trade Please purchase PDF Split-Merge on www.verypdf.com to remove this watermark. 31
market, as well as the opportunities Fair Trade offers in improving the conditions of these
farmers and the environment. It also highlights the political and economic relationships that
constitute the global coffee industry and the many links between points of production and
consumption along the coffee value chain. Fair Trade has become an important alternative trade
strategy in the world economy as it confronts the power inequalities and exploitations within the
North-South trade relations.
SOURCES OF DATA:
Both primary and secondary data collection method are used to understand this feasibility of
collective marketing.
PRIMARY DATA:
Discussions with key informants is used in our approach collect as much information as
possible about the research area and cooperatives .Lengthy conversations held with these key
informants were recorded and transcribed later from which, in the informants’ own views, much
needed data on the cooperative movement in Karnataka in general and in coffee sector in
particular were extracted. These discussions also paved the way for refining the questions
designed for the farmers’ formal interviews. Questionnaire was prepared for the same.
SECONDARY DATA:
This technique helped in acquiring secondary data which were analyzed in order to
have better insights into the agricultural situation in Karnataka and in particular, the
cooperative movement in the coffee production. The data were also used in providing
background information on the study area and the cooperatives which acted as the
research subject.

5. COOPERATIVES AND ASSOCIATIONS OF GROWERS – A study of
COMARK
Following the liberalization of the market in the early 1990s, cooperative growers’ societies have
developed, like the Indian Coffee Marketing Cooperative (COMARK). COMARK is the only national
level co-operative institution of coffee growers in the country. The main objective of the co-operative
society was to collect coffee from the small growers and sell it in the global market. It has been started in
1992 with the shared capital from nearly 5,500 coffee growers and the government through the National
Cooperative Development Corporation.
Due to a frost in Brazil, prices went up. COMARK collected coffee from the growers and sold it at the
right time. In the first year, the co-operative made a significant amount of profits. It exported around
14,000 MT and marketed 6,000 MT in the domestic market till 1997 (Ambinakudige, 2006). They
distributed all the profits to the members immediately. But the next year, when the society sold the coffee
for lower price, no members came forward to give back the money. Afterwards, co-operatives started
selling their members’ coffee at the ICTA auction. But as the volumes sold at this auction decreased, co-
operatives failed to adapt to new marketing strategies, including direct export. Confidence in these
structures has also decreased as corruption scandals broke out. Furthermore they were slow to pay their
members, thus facilitating agents’ success.
Only one region has been successful in setting up these groups so far, Andhra Pradesh. In this region,
government agencies and the Coffee Board heavily supported their creation in Araku Valley’s tribal area.
Hence, this region has become the first growing region of the Non-Traditional Areas, and they now
market and export directly the coffee they produce.
TOOL FOR DATA COLLECTION:
Questionnaire is prepared and circulated to select farmers who are joining the cooperatives and
those who are not
1. General Information
Interviewer (Initials) Date of interview:
District: Sector:
Name of the respondent Age
Education:
Number of respondent's
Household
permanent members
Number of dependents
(children under 12 years
and elders)
2. Farming System
Crops(other than
coffee) and livestock
Total Area planted:
Other cash crops:
Livestock owned:

6. 3. Rationale of growing coffee and purpose
Number of years growing coffee :
What type of coffee do you grow ?
4. Awareness about cooperative marketing
Main source of
information
1.Neighbours
2- Local market
3- National newspaper
4- Radio/ Television
5- Cooperative
6- Community leaders
7- Government agents
5. Cooperative members
Which coop? Year of membership: Result
Decision to join the
coop
0- Compulsory
1- Expected benefits
2- Followed others
Has the coop helped
you get access to any of
the following services
or reach the following
benefits?
1- Improves my household’s
current livelihood
2- Important in times of
emergency
3- Reduced burden/risk
4- Access to technical advice
and training
5- Higher prices
6- Access to inputs
7- Job
8- Certification

7. 6. Non members
Questions Options Result
Reasons for not joining
the coop
0- No real benefits
1- No clear idea about the coop
functions
2- High membership fee
3- The coop is far away
4- Requirements are high
5- Bad coop leadership
6- Will think about it
Outcomes:
The feasibility of collective marketing with respect to coffee is studied and it is found to improve
aid the beneficiaries in the following areas
Access to road transportation
Access to land
Access to seeds and fertilizers
Availability of credit
Market availability
Get fair prices
Low input cost
Subsidies availability
Benefits:
Farmers are benefitted through increased farm income, quality of supplies and products.
Rural communities are benefitted through added community income, strong rural communities
Consumers are benefitted through quality produce and lower production and marketing costs.
General benefits of participating in collective farming includes
Collective bargaining
Storage facilities
Standardization and grading
Market infrastructure
No illegal deductions
Fair distribution of income
It is ensured through our research that the reach of good agricultural practices and marketing
benefits are well absorbed through collective farming approach.

8. Beneficiaries:
Farmers -mainly marginal farmers
Traders from farm to markets
Government organizations
Members of NGO’S who involved as institutional bodies
Banks through which the financial transaction takes place
Consumers as they get comparatively low prices
OBSERVATION AND CONCLUSION:
Few observations from the study are as follows
1. Origin is not taken into account anywhere in the chain. This is reflected by the fact that
mixing different origins takes place at different stages and especially at the curing works’
level. Moreover, none of Indian coffee-growing region has got a reputation on the
international market that could allow fetching higher premiums. On the domestic market,
coffee-growing regions are famous for being coffee-growing regions, not for the quality
of the coffee they produce.
2. In Coorg, two large companies – Tata Coffee and BBTC – own several estates and have
differentiation schemes. Vertically integrated, they cumulate all the functions in the chain
and try to sell their coffee as differentiated coffee (sustainable estate-branded coffee).
3. Some planters try to brand their coffee and do it far downstream in the chain. This
constitutes one of the main trends in the sector, but is still limited to a few medium to
large producers. They adopt ingredient-based branding strategies for their coffee.
4. Local price-discovery and hedging mechanisms did not yet succeed in reaching the
minimum liquidity. However, positive impacts for chain participants include better
information and financial infrastructure as well as access to new markets and finance
sources.
For farmers who aim at increasing production and improving their incomes, membership to
cooperatives signifies security of accessing inputs especially chemical fertilizer, security of
market for the produced coffee and security of income since cooperatives offer steady prices.
Furthermore, cooperatives are sources of reliable and cheaper credit which is another incentive
for farmers who have short term money requirements for consumption and investments.
Membership also increases with farmers’ perception of risk sharing for the loss of produce due to
highly perishable coffee and burden sharing in terms of coffee processing. In addition to this,

9. other incentives such as offering rebates after coffee sales and distribution of dividends from the
realized profits might increase the cooperative’s attractiveness.
Indian co-operatives now face three main challenges: building members’ confidence by showing
transparency, implementing fluidity in the payment of their members, and succeeding in reaching
new markets.
After a thorough study on the marketing benefits by collective farming, we were able to arrive at
the conclusion that farmers could move up in the value chain and increase his share in the global
market by adopting the collective approach.