Marico: Disintermediating The Copra Supply Chain

Abstract

The traditional copra supply chain involved coconut farmers, copra converters, traders in terminal markets, up-country traders, traders in futures markets, different kinds of brokers, and millers who converted copra into coconut oil. Marico was a major player in the branded coconut oil market in India and needed to procure almost 15 per cent of the copra supply. The copra supply chain exhibited significant price volatility and supply disruption risks. The case describes the initiatives taken by Marico between 1991 and 2007 to disintermediate the copra supply chain. These initiatives involved setting up copra collection centers and web based reverse auctions to aid price and quantity discovery. Marico was now able to source copra directly from small farmers who otherwise had to sell to Marico through a long chain of intermediaries. In 2007, Marico set a target of sourcing 25 per cent of copra by 2011 through copra collection centers in the southern Indian states of Kerala and Tamil Nadu. However, it was uncertain whether copra collection centers and reverse auctions could coexist. Marico also needed to determine the appropriate level of disintermediation which would best suit its supply chain strategy.