Agarbattis

HS CODE : 33074100

Group No-15
Case Study -16

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

1
Agarbatti Industry Overview
 Hand crafted by cottage industries and NGOs in India
 Due to high demand in export market, Industry is orienting towards
export
 Agarbathi 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 60

2
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

Price Points
Rs. 50
East
3% 17%
Others Rs. 2 South
10% 6% Rs. 5 35%
18%
Rs. 15 North
18% 18%

West
Rs. 10 30%
45%

3
Agarbatti Industry export overview – 153 Countries

4
Agarbatti Industry export overview
 Exports (Yr 2012-13)-INR 526.5 Cr. ( $ 87.75 million)
 There are 400 exporters in India
 Biggest 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)

USA NIGERIA

U ARAB EMTS SRI LANKA DSR

MALAYSIA UK

EGYPT A RP CHILE

NEPAL BRAZIL

VENEZUELA SOUTH AFRICA

AUSTRALIA ETHIOPIA

PANAMA REPUBLIC MAURITIUS

SUDAN NETHERLAND

SAUDI ARAB CHINA P RP

SPAIN
5
Country-wise export statistics: INR in Cr.

2007- 2008- 2009- 2010- 2011- 2012- % Growth over

S.No. Country 2006-2007
2008 2009 2010 2011 2012 2013 last 7 Years
1 USA 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 UK 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 -5.69
11 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 57.63
14 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
290.09 266.57 339.66 350.03 383.09 429.97 526.52 81.51
Total

HS CODE : 33074100
6
Export trend (Country-wise)

70.00

60.00

50.00
USA
NIGERIA
40.00 U ARAB EMTS
CHINA P RP
(Cr.)
INR

30.00 UK
EGYPT A RP
BRAZIL
20.00
SOUTH AFRICA
AUSTRALIA
10.00 PANAMA REPUBLIC

0.00

Year HS CODE : 33074100

7
Industry Export Trend:

600.00

500.00

400.00

300.00
(Cr.)
INR

200.00

100.00

0.00
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Year
HS CODE : 33074100
8
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

9
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 Unorganized
 Many agarbatti manufactures are local players with limited resources.
They cannot counter big companies. Eg. MNC like ITC & Cycle

10
Major Players – Pie Chart
CYCLE
16%

ITC MANGALDEEP
8%

NANDI
4%
UNBRANDED PADMINI
60% 3%

PARIMAL
3%

SHANTINIKETAN
MOKSH 4%
2%

11
Export quality brands with Export quality Fragrances

Sr.No. Brands Company name Remarks

RemarksHari Darshan
1 Hari Darshan Sevashrampvt. Ltd,Delhi Export quality
Parampara, touted 10 per cent of turnover
2 aspremium dhoop NRR Group from exports .

3 Medini ,Dharti NRR Group Export quality

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

5 Flora Herbal segment Abyssinia Impex Export quality

segmentEucalyptus,
Balmmint,
Patchouli,Lemongrass,
6 Pine,Citronella, Juniper Abyssinia Impex Export quality
Mangaldeep , Spriha & ITC Ltd
7 many export brands (AgarbattiDivision) Export quality
12
COSTING vs LABOUR IN AGARBATTI
Sr. % cost of the % Labour
No. Particulars Total required
1 Raw Bamboo Sticks 2%
Non-perfumed (non-
2 masala) agarbathi 8% 80%
3 Perfumes 30%
4 Packaging Material 30% 20%
5 Marketing 20%
6 Miscallenious 10%
Total 100% 100%

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

13
Agarbatti – 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

14
 Manufacturing Process
Basic raw material:
Bamboo, wood charcoal, processed perfumes, Jiggat powder

Buy raw Mix in Roll &

Dry Packaging
material proportion perfume

•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 15
Bamboo Scenario
 A 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.

16
 Agarbatti makers
facing shortage of
Bamboo –
Economics Times
17 Aug’13

17
Government’s role:
Bamboo Development Agency (BDA) – Mizoram
ROUND 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.

18
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.

19
JIGGAT ( Adhesive ) Innovation
 AS 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

20
Perfume Scenario
 Perfumes 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.

21
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.

22
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

Wages with Wages for Family of

productivity of avg. 2 Family
Sr. Wages Per 4000 Sticks & 9-10 wages/person/month Members working
No. State 1000 Sticks hrs a day (28 working days) Fulltime
1 Karnatka 45 180 5040 10080
2 Gujarat 34 136 3808 7616
Andhra
3 Pradesh 39 156 4368 8736
4 Bihar 35 140 3920 7840

5 Tamil Nadu 38 152 4256 8512

23
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 .

24
Competition from China in Global Market
•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.

25
SWOT Analysis for Agarbatti Indutries
 STRENGTHS
 Agarbathi is a fast-moving (FMCG) product with a good shelf life
 Non polluting industry (‘green’ labelld industry )
 Hand rolled bathis are having a competitive edge over machine made
Agarbathis
 Art of perfuming is well accustomed
 Large 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

26
 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

27
 Cont.

 OPPORTUNITIES
 Large export market potential.
 Scope for innovations and R&D
 Domestic market expanding
 Free trade regime can provide better raw materials for better price
 THREATS
 Global competition from China, Vietnam , Taiwan
 Unethical practices at local level.
 Forest based raw material supply becoming scarce
 Increase in unemployment.
 Mechanisation
 Import of Machinary from China

28
 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.

29
P-4 Model

30
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

31
Questions
1) 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?

32
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.
33