Rajasthan is the largest state in India – in terms of landmass and also happens to the number 1 state in terms of consumption of Desi Ghee (Clarified Butter).

Interesting Fact: Within Rajasthan - Jodhpur district is the largest consumer market of Desi Ghee (per capita) across Asia

With such a large addressable market – many players (both cooperatives and Private) have introduced their respective Ghee Brands (both the Cow Ghee and that made from Buffalo). While the RCDF (Rajasthan Co-Operative Dairy Federation) has a pan-Rajasthan presence (through its brand Saras and its milk parlors) and commands the largest market share in the overall ghee sales, many private players (Amul, Gowardhan, Paras, Mahaan, Nestle, Krishna, etc.) have taken the leadership position in certain pockets of the state.

In order to better understand – what drives the sales of Desi Ghee across Rajasthan, I embarked on a 10 days trip across the state – traveling nearly 2500 kms across the length breadth of the state.

The trip was broken down into 2 phases:

Phase 1: From Gurgaon (Haryana) I travelled south to Hindaun and Karauli, moving onwards to Jaipur, Kishangarh, Ajmer, moving further south to Kota, Bundi, then towards the west to Bhilwara,

Phase 2: Travelled further west to Bhinmal, then towards the north to Pali, Jodhpur, Bikaner and Hanumangarh – before finally coming back to Gurgaon.

Desi Ghee Value Chain

During the journey I held meetings with Distributors and Retailers in each of the region – trying to understand the factors that impact sale of different brands in their respective regions. At times would also catch hold of customers who would come to the retailer stores – and interact with them to understand their decision-making process in buying one brand of ghee over the other.

Key observations from the Market Visit:

• Credit Sales at the Retail counters in the norm across major regions in the state – as people are engaged in the occupation of agriculture (payment depends on the agriculture season)

• The major towns act as the feeding market for large number of satellite towns or adjoining areas – thus a brand that commands leadership position in the feeding town, also becomes the default leading brand in the adjacent markets as well.

• Rajasthan has presence of large number of non-agmark brands (not-complaint with quality standards laid down by the government agency)

• The Retailer is the primary influence/decision maker in determining the brand that will succeed or fail in the market. Consumers trust them and don’t question the brand of ghee that the retailer sells to them.

• Brand Loyalty for Desi Ghee brands in higher in the metro towns (close to 40-45% brand loyal customers), this drops to 20-25% in other towns across the state. Even these brand loyal customers are at times convinced by the Retailer to buy another brand.

• Customers are very quality conscious

• Desi Ghee currently sells/retails (sold to the customer) at anywhere between - INR 350/360 (Buffalo Ghee) to INR 450/500 (Cow Ghee), with the final price determined by the Retailer basis the competition from other Retailers, relationship with the customer, whether customer is paying upfront or taking products on credit, etc. (MRP is not applicable to Ghee)

I am listing below the factors that will determine the success of any Desi Ghee brand in the Rajasthan market

• Retailer Margins: Retailers tend to make substantial margin on selling Ghee to their customers, they expect a minimum of 10-15% margin, thus brands that want to succeed in Rajasthan, need to ensure that Retailer Margins are kept in mind

• High Quality: The Desi Ghee from RCDF is the benchmark in terms of Quality, thus for any desi ghee brand to be successful – it has to be very close to the quality parameters of Saras

• Competitive Rates: For a new Ghee brand to be successful in the Rajasthan market – it should be priced lesser to largest private brand in that region, the Trade Channel (Distributors and Retailers) compare a new ghee brand with the prices of RCDF ghee and with those of private players. The New Ghee Brand cannot be priced higher than the RCDF ghee ‘Saras’

o Recently the market saw a huge price cut by the RCDF – nearly shaving off INR 100 in the prices for its Buffalo Milk made Desi Ghee and Retails at INR 335 to 355 compared with INR 450 just 12 months back. This has resulted in other major brands also slashing their prices by nearly INR 40-50 in order to protect their respective market shares (Lot of pressure on all major dairy players in the Rajasthan Market)

• Lucrative Retailer Schemes: As Retailers are the major influencers in the entire value chain – a ghee brand should look at ways in which they can lure the Retailers by giving them rewards, cash discounts, etc., which can indirectly reduce their costs and increase their overall margin.

• In-Store Promotions: To grab the customers eyeballs – in store promotions are the best medium for a Desi Ghee Brand. Various options like printed T-Shirts, Scratch Pads, Pens, etc for the Retailers will go a long way in increasing the sales of the brand in the market.