IPCSL Case Study Essay

In 1944, Debi Prasad Aggarawal had realized the need for a ratty storage celerity. Consequently he established a facility with the latest cold storage equipments from the UK which was mainly utilized by the potatoes harvest.Debis son, Jadish, succeeded him as Managing director in early 1960. Jagdish had successfully opened virgin grocerys and brought new clients when he started promoting the facility to fruits producers.In 1977, Sanjay Aggarawal, Debis grandson, joined the confederation with the task of supervising and the construction of the new 2500 MT facility in Azadpur.Fruits & Vegetables marketThe growers of fruits and vegetables in India mostly harvest their produce manually, transporting to orchards for grading & packing. Afterwards, the fruits and vegetable are shipped to wholesale markets by road.India being worlds second largest fruits producer with integral of 44 mn MT (approx 10% of worlds production) and one of the largest vegetable producers in the world with ar ound 86 mn MT, the new Sabji Mandi at Azadpur is Asias and one of the worlds biggest fruits and vegetable market in volume of produce handled contributed to the huge demand for cold storage facilities.Commission agentsAt the arrival of fruits at Azadpur, the commission agents take charge of the produce by offloading, storage and sale at a rate of 6% of the sale amount. During this subprogram all the expenses involved are borne by the growers.As a way to get business, some of the commission agents offer growers advance loans at the commencement of the fruits term and deduct the same amount when the produce is sold in the market.As the fruits reach the market, some will be sold on the same mean solar day while roughly 45% 60% need cold storage facility to be sold at a later date or at the off-season.WholesalersWholesalers buy the produce from commission agents which in turn they sell to sub-wholesalers.Cold storage IndustryA conventional cold storage facility can preserve fruits f or a period of 10 days to 2 months depending of the type of the fruits while a CA or GC storage facility can double or triple this period respectively.The total capacity of storage facilities available was nearly 10.35 mn MT against total produce of everywhere 130 mn MT, this can demonstrate the very high demand of storage facilities.IPSCL has differentiated itself from the market by upgrading the facility to state-of-the-art Gas Controlled cold storage (3900 MT, around 78% of the capacity), Controlled Atmosphere Cold Storage (100 MT, 2% of the available capacity) and a Deep Freezer storage (1000 MT, 20% of the capacity).Besides, there was a lack of refrigerated trucks to mobilize the produce from the growers location to the wholesale markets and from the markets to sub-wholesalers or retailers. The refrigerated trucks play a vital role in ensuring the freshness, quality and resolution of the produce.G everyplacenmentAimed at encouraging the growing industry, the GoI offered a cap ital investment Subsidy Scheme for the construction, expansion and / or modification of cold storage units. controversyBesides IPCSL, no other cold storage facility is direct under the GC or GA technology. However due to this technology differentiation, IPCSL was operating at a very high cost in comparison to the other facilities. In fact, the conventional cold storage facilities where offering their clients a wrong almost equal to IPCSLs operating cost.CustomersIPCSL has two types of customer, commission agents & wholesalers who store their fruits to sell at a later date or off-season.The fruits and vegetables market has seen well-nigh 60% growth owing to the increase in income of the middle-class category in India.ObservationsThe cold storage services is a expenditure driven over quality driven market, the cold storage service providers currently in business are not having whatsoever points of differentiation which led to a legal injury war and very slim margins. The very low profit margins have restricted the competitors from changing out their old technology storage facilities to an international model facility.Some of the customers (wholesalers & commission agents) are not highly appreciating the cold storage services especially during the winter season where the fruits and vegetables dont get stirred much due to the very low temperature.In the case of conventional cold storage facility, the only way to make decent profit is by maximizing the sales volume and effectively utilizing capacity available (dynamic facility management system). This would give some cost preference over competitors allowing to capture large market share and make higher profit margin.In the case of IPCSL, the GC & CA storage technology is giving them a market progress to charge a premium wrong. However the customers should value the added services provided over the difference in charges.Other than the limitation in the period fruits and vegetables can be stored in the con ventional cold storage facility, there are additional quantities wasted during storage & handling which will not be the case in GC or CA operated facility. This will decrease the cost per kg and increase the wholesalers / commission agent profit margin.IPCSL didnt focus much on marketing of their new state-of-the-art cold storage facility instead, they focused on the value they add to the fruits and vegetables industry.As rightly quoted by one of the companys senior managers to Sanjay, the fruits and markets industry lack formal education. It takes time to show value and build confidence. However, to speed up the learning curve and attract customers, price & marketing strategy can play a crucial factor especially in the introductory stage.Recommendations & SuggestionsMarketingIPCSL should offer the large, large-middle or all clients a free, discounted or at-cost trial to demonstrate the difference in quality between the conventional facilities against the GC & CA operated ones.IPCSL should organize visits / tours for the large wholesalers to the facility to show how other than can they store the fruits and vegetables and exhibit the benefits to the prospective clients.As IPCSL is a high-end cold storage service provider, the marketing strategy should focus on the clients of the same level i.e. the wholesalers and commission agents dealing with organized retail stores, hotels etc. these clients are willing to pay some extra charges for higher quality fruits and vegetables which cannot be matched by any other cold storage facility in the market.PriceIPCSL should strategize a price discrimination based on the volume similar to what the competitors are doing. The price discrimination will attract the large exporters, high volume wholesalers and commission agents towards IPCSL.From IPCSLs revenue statement it is obvious that more than INR 6 mn is hardened cost while variable cost is around INR 7.5 per 20kg box. IPCSL priced their services at INR 60 for merchandis e fruits and INR 20 for Indian fruits against INR 10 per 20kg box by competitors for imported and Indian fruits. Alternatively, IPCSL should price their services at the point where they maximally utilize their 5000 MT facility. The determined price along with the 5000 MT sales volume (if achieved) should mask up for the variable cost (INR 7.5 per 20kg box) as well as the very high fixed cost.