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CHAPTER IV

MARKETING BY DOMESTIC TRADERS

Contents of the chapter

Page No.

introduction

Profile of the respondents

Supply of spices

Sources of spices

Competition

Difficulty in marketing the collected spices

Value addition

Stock velocity

Marketing channels

Operating expenses

Sources of finance

Warehousing facilities

Spices Board and its activities

Government attitude and policies

Summary of hypothesis test results

Factor analysis

MARKETING BY DOMESTIC TRADERS

Domestic traders have a very important role not only in the domestic marketing of

spices but in the international marketing as well. They act as connecting links between

the producers and the exporters of spices. Being a prominent link, both the producers and

exporters have to rely on the domestic traders considerably. In fact they carry out the

'concentration process' of spices and hence they are inevitable links in the process of

marketing.

Since the domestic traders collect spices from the producers directly, majority of

them are operating in major producing centres of spices. They collect spices of different

varieties, in different qualities and quantities and hand over the same to the exporters or

very large wholesale domestic dealers as the case may be. Spices collected kom the

producers are sold with or without further processing, based on the quality and nature of

the produces. (Source- survey data)

Majority of the traders are operating independently while some of them have

direct trade arrangements with the exporters. Similarly, there are traders supplying

produces to the commiss~on agents operating in major towns. However, majority of the

spices traders resort to auction centers for marketing cardamom. Further, there are many

traders acting as agents of'large-scale domestic dealers who supply spices to the various

parts of the country. for domestic consumption. There are co-operative organizations

also engaged in the business of spices, though their role and volume of trade are

insignificant. (Source - Survey data)

The general trends and problems of the spices sector nanually reflect in the

domestic spices trade too. Fluctuations in the quantity of production and prices of spices,

237

variations in the general economic conditions and resultant impacts on the financial

conditions of the spices producers etc., have direct influence on domestic spices trade.

Thus the major factors influencing the domestic spices trade can be categorized as

Production and supply of spices, Demand for spices inside and outside the country,

International and domestic price of spices, General factors including competition,

marketing channels, marketability, operating expenses, Spices Board and its activities,

sources of finance and government attitude and policies.

In this chapter an attempt is made to analyze the perceptions, views and opinions

of the domestic spices traders on the above factors. In order to obtain more clarity, the

following major hypothesis rested in the ensuing pages.

'Domestic spices traders do not differ scale wise or experience wise in marketing

variables'.

The following sub hypotheses are tested to substantiate or reject the major

hypothesis.

Domestic spices traders do not differ either scale wise or experience wise on -

1. Supply of spices

2. Competition in the domestic market

3. Marketability of spices collected

4. Operating expenses

5. Government attitude and policies

Unlike the spices producers, the profile of the respondents revealed that the

majority of the domestic spices traders (81 .I %) belong to low education category (Table

4.1) and only 18.9% to the rest. Hence the variables have been analyzed in terms of the

scale of operation and experience levels only educational status of the respondents.

238

Chi- square test could not be applied in certain cases were cell frequencies are less

than five. in such cases data have been presented with the help of diagnunmes to make

the observations more clear.

4.1. Profile of the respondents

Before proceeding to the analysis and interpretations of the data, it is appropriate

to have a glance at the profile of the sample respondents, which is presented in table 4.1

Table 4.1

Profile of

Description

Scale wise classification

Small

Medium

Large

Total

Education wise classification

Below S.S.L,.C

S.S.L.C- Graduation

Above Graduation & Others

Total

Experience wise classification

Less than 5 years

5-15 years

Above 15 years

Total

Source:- Survey data

23 9

the sample respondents

Number of respondents

12

17

6 1

90

73

11

6

90

13

25

52

90

Percentage

13.3

18.9

67.8

100

81.1

12.2

6.7

100

14.4

27.8

57.8

100

4.2. Supply of spices

Production and supply of spices are seasonal and hence the business of domestic

spices traders is also seasonal. For example the cropping season of pepper is from

December to March dunng the period the domestic pepper market is highly active.

Similarly, the major cropping season of cardamom is from July to December and the

domestic spices market is enriched with the fragrance of cardamom during that period.

In fact. the importers concentrate on Indian spices market mainly during the cropping

season. which gives further momentum to the domestic market. Thus the domestic traders

of pepper and cardamom have their major share of business during the cropping season

itself. Hence the spices trade becomes profitable only if the volume of trade is adequate

enough to compensate the comparatively dull off-season. Thus, adequacy of trade is very

important in determining the return of spices traders.

The difficulty faced by the d e r s in securing adequate supply of spices can be

observed from table 4.7

Table 4.2

Difficulty in getting supply of spices - Scale-wise

Scale of operation 1 Always / Sometimes Never Total

( 2 5 ) (58.3) (16.7) (13.3) Medium I 7 5 17

1 , (25.6) (44.4) 1 (30) (100) Source: - Survey data Note: - Figures in brackets represent percentages to total.

(18.9) 61

(67.8) 90

(29.4) m~ 15 (41.2) 1 (29.4)

20 (32.8)

27 I (24.6)

26 (42.6)

Total 13 1 40

Chi - Square test result -

Chi - Square Value DF Level of significance Table Value Significant or not

0.84 2 5% 5.991 Not significant Note :- Cells merged appropriately to calculate x value.

The difficulty in getting supply of spices is more or less equal for spices traders of

different scale of operation. Of the small-scale traders, 25 percent 'always' face

difficulties while 58.3 percent 'sometimes' and 16.7 percent, 'never'. Similarly, 29.4

percent of the medium scale traders responded 'always' 41.2 percent 'sometimes' and

29.4 percent 'never'. The large-scale traders also have similar views because 24.6

percent of them oplned 'always'. 42.6 percent 'sometimes' and 32.8 percent 'never'

Of the total, 25.6 percent 'always' have difficulties in getting supply of spices

while 44.4 percent 'somet~mes' and 30 percent 'never'.

It is evident that getting adequate supply of spices as per requirements is a major

problem of spices traders because altogether 70 percent of them are facing difficulties

either 'always' or -sometimes'

A Chi square test applied on the data proves that the spices traders do not differ in

their difficulty because the x ' value 0.84 is less than the corresponding table value at

5% level of significance. rherefore the null hypothesis is accepted.

With the purpose of observing the differences, if any, between the spices traders

of different experience levels. the responses are grouped and presented in table 4.3 which

gives clear indications in this respect.

Table 4 3

Diff~culty in getting supply of spices - Experience-wise

Chi - Square test result

Always Sometimes

2 7 (15.4) (53.8)

11 6 (44) (24) 10 27

(19.3) (51.9) 23 40

(25.6) 44.4)

.-


3.52 '. -, 5% 5.991 Not significant

Note :- Cells merged appropriately to calculate x value.

Source: - Survey data Note: - Figures in brackets represent percentages to total.

Never

4 (30.8)

8 (32) 15

(28.8) 27

(30)

As depicted in the table. 15.4 percent of the least experienced group 'always' face

Total

13 (14.4)

25 (27.8)

52 (57.8)

90 (1 00)

difficulties for getting adequate supply of spices as per the requirements. At the same

time, 53.8 percent of them responded 'sometimes' and 30.8 percent, 'never'. Of the

second category, 44 percent responded 'always', 24 percent, 'sometimes' and 32 percent

'never'. Even the well-experienced traders fmd difficulties to collect spices as per

requirements because 19. i percent of them opined 'always', 5 1.9 percent 'sometimes'

and 28.8 percent 'never'

The Chi-square value 3.52 proves that the difference is insignificant because the

corresponding table value at 5% level is more than the calculated value. Hence the null

hypothesis is accepted and it is inferred that the domestic spices traders of different

experience levels do not d~ffer in their difficulty in getting regular supply of spices.

From the above it can be concluded that -

1. The domestic spices traders of different scale of operation and experience levels

have difficulty in collecting the spices as per requirements.

2. The intensity of difficulty do not differ either scale-wise or experience-wise

This indirectly indicates the stock holding capacity of the producers.

4.3. Sources of spices

Domestic traders commonly collect the spices directly from the producers. Quite

often they buy the produces when brought to the shop. At the same time, there are traders

who buy directly form households too. Further, traders of comparatively large scale,

purchase produces from other small traders. In the case of cardamom, auction centres are

the prominent sources to the traders.

The survey data reveals that the traders prefer different sources based on their

circumstances, scale of operation and experience. Tables 4.4 and 4.5 show the sources of

spices preferred by traders of different scale of operation and experience.

Table 4.4

Sources of spices - Scale-wise

Scale of operation

Small

Medium

Large

Total

Source: - S w e ) data. Note : - 1. Figures in brackets represent percentages to total.

2. Chi-square test not applied since the cell frequencies go below 5.

Directly From

households 10

(83.3 t - 4

(23.5 J

33 (37.7,

3 7 (41.1 4

When brought to the shop

I 2 (16.7)

8 (47.1)

16 (26.2)

26 (28.9)

Other Traders

-

5 (29.4)

18 (29.5)

23 (25.6)

Auction Centres

-

-

4 (6.6)

4 (4.4)

Total

12 (13.3)

17 (1 8.9)

6 1 (67.8)

90 (100)

The small scale splces traders prefer to buy the produces directly from households

because 83.3 percent of them buy 'directly from homes' while only 16.7 percent purchase

spices when brought to the~r shops. The situation is totally different in the case of

medium scale traders because 47.1 percent of them buy the spices brought to their shops

as against 23.5 percent buying from house holds directly and 29.4 percent from other

traders.

The large-scale traders are much different in their preferences. Only 37.7 percent

of them buy from house holds directly. 26.2 percent buy when brought to the shop and

29.5 percent of them bu? from other small traders. Moreover, 6.6 percent of the large-

scale traders resort to auchon centres for buying the required quantity. It should be noted

that the auction centres function exclusively for cardamom and the large-scale traders

resort to auction centres tbr buying cardamom.

It can be further observed that altogether 41.1 percent of the traders buy from the

households directl). 28.9 percent when brought to the shop, 25.6 percent from other

traders and 4.4 percent from auction centres. Figure 4.1 gives a better picture of the

situation.

Figure 4.1

Sources of supply of spices- scale wise

Large

Auction centres Other traders When brought to shop Direcly from houesholds

It is very clear from the figure that all the categories of traders purchase the spices

either directly fkom households OT when brought to shop. The large scale traders resort all

sources of supply which indirectly implies the intensity of difficulty in getting adequate

supply of spices. (Table 4.4)

In the light of the above it will be interesting to see the manner in which the

traders of different experience levels collect spices. As noted elsewhere, trader's scaIe of

operation and experience in the field are directly correlated and hence there is visible

similarity between the preferences of the two groups. The following table substantiates

the observation.

Table 4 3

Sources of spices - Experience-wise

Table 4.5 depicts that majority of the traders (69.2 %) belonging to the least

Experience (years)

Less than 5

5- 15

Above 15

Total

experience category. collect spices from households directly while 30.8 percent of them

buy the produces when brought to the shop. However, in the category of average

Source: - Survey data Note: - 1. Figures in brackets represent percentages to total.

2. Chi-square test not applied since the cell frequencies go below 5.

experience group. 36 percent collect from the households, 40 percent when brought to the

Directty I '&'hen brought Prom to the shop

shop, 16 percent from other traders and 8 percent h m auction centres.

Other Traders

-

4 (1 6) 19

(36.5) 23

(25.6)

households 9

(69.2 j 9

(36)- 19

(36.5 1 3 7

(41.1 J

Similarly. 36.5 percent of the highly experienced group buys from households

4 (30.8)

10 (40) 12

(23.2) 26

(28.9)

directly while an equal number of traders buy the required spices from other small

Auction Centres

-

2 (8) 2

(3.8) 4

(4.4)

traders. At the same time 23.2 percent prefer to buy when the spices are brought to the

Total

13 (14.4)

25 (27.8)

52 (57.8)

90 (100)

shop and 3.8 percent purchase from the auction centres.

Figure 4.2 gives a graphical representation of the sources of supply of spices.

Figure 4.2

Sources of spices - Experience wise

B Auction centres 7 When brought to the shop

Directly from households

1 2 3

Low Medium High

The survey data also reveals that there are traders, particularly the

experienced ones, resorting different sources simultaneously in tune with the

requirements.

4.4. Intensity of competition

As in the case of any other business, competition is a common phenomenon

among the spices traders. Inconsistent production and supply, unexpected price trends,

fluctuations in demand from abroad etc. make the spices market unpredictable. Financial

constraints also compel them to avoid overstocking of produces. Hence the domestic

traders are not interested to stock more quantity to meet the future trade requirements.

Instead, they make intensive effort to collect more from producers or other sources,

whenever there is more demand. These all lead to acute competition among the traders

247

for collecting the spices, particularly when the prices are escalating. It is interesting to see

the intensity of competition among the traders which is depicted in tables 4.6 and 4.7.


Table 4.6

lntensity of competition - Scale-wise

- Chi - Square Value DF Level of significance Table Value Significant or not

1.93 2 5% 5.991 Not significant Note :- Cells merged appropriately to calculate x value.

Total

12 (13.3)

17 (18.9)

6 1 (67.8)

90 (1 00)

As per shown in the table. the intensity of competition among the small scale

Source: - Survey data. Note: - Figures in brackets represent percentages to total.

Very high

3 (25)

6 (35.3

28 (45.9)

37 (41.1)

(41.7 2

(11.8)

trades is comparativelq less than among the others. Of the small-scale traders, 41.7

High

4 (33.3)

9 (52.9)

percent responded 'low' as against 33.3 percent 'high' and 25 percent, 'very high'. At the

same time 1 1.8 percent of the medium scale traders opined the intensity of competition as

10 23 (16.4) 1 (37.7)

low while majority (51.9%) responded 'high' and 35.3 percent 'very high'. Moreover,

Total 17

45.9 percent of the large-scale traders responded 'very high' while 37.7 percent 'high'

36

and 16.4 percent, 'low

(18.9) ; (40)

Altogether 18.9 percent observe 'low' degree of competition among the traders

while 40 percent observe 'hlgh' and 41.1 percent 'very high' competition.

The Chi-square test result proves that the spices traders do not differ scale-wise

on intensity of competition because the x value 1.93 is less than the corresponding table

value at 5% level. Therefore the null hypothesis is rejected.

It can be further inferred that the intensity of cornpetition increases along with the

scale of operation. The major reason behind the situation is that the quantity of spices

required for large-scale traders is very high and the produces may not be available in the

market as per requirements especially due to competitive threats kom the small and

medium scale traders

In the light of the above observations, it will be appropriate to see the degree of

competition among the traders on the basis of their experience. Table 4.7gives the details.

Table 4.7

Intensity of competition - Experience-wise

1 Experience Low

- (38.5) 2

(8) Above 15 10

(19.2) 17


High I Veryhigh I Total

1 (18.9)


(6 1.5) 15

(60) 13

(25) 36

13.37 .. 7 5% 5.991 Not sirmificant

Source: - Survey data. Note: - Figures in brackets represent percentages to total.

(40)

Note:- Cells merged appropriately to calculate x value

8 (32) 29

(55.8) 37

Table 4.7 shows that the competition faced by 38.5 percent of the least

(14.4) 25

(27.8) 52

(57.8) 90

(41.1)

experienced category is 'low' while that of 61.5 percent is 'high'. It deserves special

249

(1 00)

mention that none of them responded 'very high'. Of the average experience category

only 85 percent responded 'low' as against 60 percent experiencing 'high' and 32

percent, 'very high' competition in the field. The highly experienced category also has

somewhat similar views because 19.2 percent of them responded 'low', 25 percent

'high' and the majority (55.8 %) observes 'very high' competition.

The Chi-square test result indicates that the difference is significant at 5 percent

level because the x ' value 13.37 is higher than the corresponding table value. Therefore

the null hypothesis is rejected and it follows that the domestic spices traders of different

experience levels differ in the intensity of competition faced.

The following conclusions can be inferred from the analysis.

1. There is intense competition among the spices traders in the domestic market.

2. Spices traders of different scale of operation do not differ in their views about

the intensity of competition in the domestic market.

3. Spices traders of different experience levels diier significantly in the matter

of competition. The experienced traders facing more competition than the new

entrants.

4.5. Difficulties in marketing the collected spices

Spices collected by the traders are marketed through different channels and the

demand for spices is always seasonal. However, the domestic spices traders are able to

market the spices collected by them without much difficulty. The market, including

domestic and international. is able to absorb any quantity of production, even though the

prices may be fluctuating. In other words, the spices market seldom experiences rejection

of produces.

Because of the above-mentioned peculiarity majority of the domestic traders are

able to sell whatever quantity collected by them. This is evident from tables 4.8 and 4.9.

Table 4.8

Difficulty in marketing the collected spices - Scale-wise


Always

(8.3)

(11.8)

Chi - Square Value ?% Level of significance Table Value Significant or not

1 .a27 I 5% 3.841 Not significant 2 Note:- Cells merged appropriately to calculate x value.

Sometimes

2 (16.7)

3 (17.6)

As depicted in the table, only 8.3 percent of the small-scale traders 'always'

Large i 10 I 1 (16.4) (9.8)

Total 9 15 (10) 1 (16.7)

experience difficulty in marketing the spices collected while 16.7 percent responded

Never

9 (75) 12

(70.6)

'sometimes'. At the same time, 75 percent of them opined that they 'never' face any


- Total

- 12

(13.3) 17

(18.9) 45

(73.8) 66

(73.3)

difficulty in marketing. It is very important that 70.6 percent of the traders belonging to

6 1 (67.8)

90 (100)

the medium scale do not have any diff~culty in selling the produces collected by them

while 17.6 percent of them 'sometimes' and 11.8 percent 'always' encounter difficulties.

Among the large scale traders.73.8 percent responded 'never' while 16.4 percent

'sometimes' and 9.8 percent 'always'. Altogether, only 10 percent of the traders

responded 'always', 16.7 percent 'sometimes' and 73.3 percent 'never'.

The Chi-square value 1.027 is less than the corresponding table value at 5 percent

level and it can be safely concluded that spices traders of different scale of operation do

not differ in difficulty faced in marketing the collected spices. Thus the null hypothesis is

accepted.

In the light of the above it is imperative to see the opinion of the traders of

different experience levels, in this respect. Table 4.9 gives the details.

Table 4.9

Difficulty in marketing the collected spices -Experience-wise

Total -


j

(16.7)

- Chi - Square Value DF Level of significance Table Value Significant or not

1 Experience

10 (76.9)

18 (72) 38

(73) 66

Less than 5

1 (4)

Above 15 7 (13.5)

.004 1 5% 3.841 Not significant

Note:- Cells merged appropriately to calculate x value.

Sometimes Always

13 (1 4.4)

25 (27.8)

52 (57.8)

90

2 (15.4)

6 (24)

7 (13.5)


(73.3)

The table shows that 7.7 percent of the least experienced category 'always' face

Never

Total 9 1 15 (100) 1

difficulties in marketing the collected spices, 15.4 percent 'sometimes' and 76.9 percent

'never'. Similarly, 4 percent of the medium experience group 'always' has the marketing

problem while 24 percenr 'sometimes' and the majority, 73 percent 'never'. At the same 252

time, 13.5 percent of the well-experienced category responded 'always' another 13.5

percent s 'sometimes' and 73 percent 'never'.

The Chi-square value .004 indicates that the difference is insignificant at 5

percent level because the caiculated value is less than the corresponding table value. Thus

it can be presumed tnat spices traders of various experience levels do not differ in this

respect. Therefore the null hypothesis is accepted.

The above analysis also reveals that marketing the collected spices is not at all a

problem to majority of the traders.

The basic reason for such a situation is that the domestic traders are acting as

agencies of large scale exporters or dealers who are always ready to purchase any

quantity of spices collected by the local traders.

4.6. Value addition

Majority of the producers sell the spices without any kind of processing or value

addition(Table4.10). In the case of pepper and cardamom, the traders perform even the

processes of cleaning and grading. However, there are traders who sell the produces

collected by them without making any such processes. For example, the traders who

collect spices with informal trade agreements with the exporters or very big domestic

dealers are not at all bothered about value additions or further processing. (Source-

S w e y data)

Tables given below show the extent of further processing or value additions done

by the traders.

Table 4.10 Value additions - Scale-wise

I Scale of operation I No value I Cleaning and 1 Furlher

Smdl

Total

Medium

Large

Note: - Fibrures in brackets represent percentages to total.

Addition 5

Total

It is evident that only 4.4 percent of the total respondents make actual value

(41.7) 4

(23.5) I5

additions in the form of further processing whle 68.9 percent of them perform the normal

G a d k g 7

Source: - Survey data.

(24.5) 24

(26.7)

cleaning and grading processes only. At the same time, 26.7 percent sell the produces

(58.3) 13

(76.5) 42

without any processing at all. It can be M e r observed that only the large-scale traders

Processing -

(68.9) 62

(68.9)

are making value additions to the spices collected. Moreover majority of the medium

12

-

4

scale traders (76.5%) sell after cleaning and grading while 23.5 percent make no value

(1 3.3) 17

(1 8.9) 6 1.

(6.6) 4

(4-4)

additions. Of the small-scale traders, 41.7 percent do not make any value additions while

(67.8) 90

(1 00)

58.3 percent perform the normal cleaning and grading only.

Figure 4.3 Value additions by tbe spices traders - Scale-wise

Smll Medium Large

processing

Cleaning and grading

No value addition

From the figure it can be observed that in majority of the cases the traders

perform cleaning and grading. This indirectly indicates that the spices supplied by the

farmers are not clean or graded.

In the light of the above observations it is imperative to see the practices among

the spices traders of different experience levels in making value additions. Table 4.1 1

shows the details.

Table 4.11

Value additions-Experience-wise

The table 4.1 1 shows that the majority of the least experienced category (69.2%)

No value Addition

Less than 5 4 (30.8)

9 (36)

Above 15 I I (2 1.2)

24 (26.7)

do the cleaning and grading processes only while 30.8 percent of them do not perform

even such processes. Similarly, 36 percent of the average experience category does no

Source : - Survey data Note : - Figures in brackets represent percentages to total.

Cleaning and Grading

9 (69.2)

pp

value additions while 64 percent do the normal cleaning and grading before selling the

spices collected.

16 (64) 37

(71.2) 62

(68.9)

Further Processing

-

It should be specifically remarked that none of the traders belonging to the first

Total

13 (14.4)

two experience categories perform any further processing on the produces collected and

sold by them. The position of the well-experienced category is slightly different because

7.7 percent of them perform further processing while 71.2 percent do the cleaning and

255

grading processes. Only 21.2 percent of them are selling without doing any such

processes. The pictorial representation of the above data is given below.

Figure 4.4

Value additions by traders-Experience-wise

1 2 3

Low Medium High

6

Further processing

W Cleaning and gl.adb% No value addition

The above findings indicate the untapped possibilities of the spices traders in the

form of value additions of different types to make their business more profitable.

The above observations lead to the following conclusions.

1. Majority of the traders perform value additions including further processing on

the collected spices, though there is a minority (26.7%) who do not perform any

such activities at all.

2. Experienced spices traders sell their stock after cleaning, grading and hrther

processing when compared with the average and least experienced ones.

4.7. Stock velocity

The prices of pepper and cardamom are highly fluctuating. (Tables 2.3 and 2.4)

Hence it would be highly risky for the traders to stock the produces for long periods.

Financial constraints also compel them to sell the collected spices as early as possible.

The survey data reveals that the traders of different scale of operation prefer to dispose

the stock within a period of one month. Table 4.12 shows the normal time lag in between

the purchase and sale of spices.

Table 4.12

Stock velocity - Scale-wise

/ Scale of operation / Less than one I One to six I Above six I Total months months

As evident from the table 83.3 percent of the small scale traders dispose off the

Large

Total I

(84.5)

stock within a period of one month while 16.7 percent of them keep the stock for a

2

(23.5) 6

(9.8) 12

(76.5) 53

(86.9) 76

maximum period of six months. Similarly 76.5 percent of the medium scale producers

Source : - Survey data. Note : - Figures in brackets represent percentages to total.

(13.3)

sell within one month as against 23.5 percent selling within six months. It is worth noting

-

2 (3.3)

2

that none of the small or medium scale traders keep the stock beyond six months. At the

12

(18.9) 6 1

(67.8) 90

(2.2)

same time 86.9 percent of the large scale traders sell the sock within one month as against

(100)

23.5 percent selling within six months. Only 3.3 percent of them keep the stock beyond

six months of purchase.

257

Table 4.13 shows the practice followed by the spices traders of different

experience levels in disposing off the stock.

Table 4.13

Stock velocity - Experience-wise

Experience One to six months

Less than 5 11 2 (15.4)

2

Note : - Figures in brackets represent percentages to total.

(8) Above 15 8

(80.8) (15.4) 12

(84.5) (13.3)

It can be observed fiom the table that the traders irrespective of their experience

levels dispose off the spices without holding for long time. Of the new entrants 84.6

percent sell their stock wthin one month of collection while 15.4 percent of them keep

the stock up to six months. Of the average experience group 92 percent clear the stock

within one month while 8 percent sell within six months.

It is observed that none of the respondents belonging to the above two categories

keep the stock for more than six months. Of the well experienced category, 80.8 percent

well within one month of collection 15.4 percent within one to six months. However 3.8

percent of them keep the stock for more than six months.

The above data gives figure 4.5 which clearly shows the pattern of stock velocity

of spices.

Above six months

-

-

Total

13 (14.4)

25

Source : - Survey data.

2 (3.8)

2 (2.2)

(27.8) 52

(57.8) 90

(1 00)

Figure 4.5

Stock velocity of spices (months)

\I ~ e s s than one I

l o ~ b o v e six I

The overall stock velocity depicted in the figure shows that 85 percent of the total

traders dispose off their stock in less than one month while 13 percent hold up to six

months. There is a minority of 2 percent who stock spices for more than six months.

From the above analysis it concluded that the majority of the spices traders clear

their stock without waiting much for price hikes that might happen in future. In other

words, spices traders are reluctant to take risk by speculating on their stock.

4.8. Marketing channel

Figures 3.2 and 3.4 show that there are various channel options for the producers

and traders of spices. However, majority of the pepper traders are acting as connecting

links between exporters and large-scale domestic dealers. As for cardamom, there are

auction centres, which are highly u s e l l to the traders. Further, there are commodity

exchanges, processing industries etc helping the traders to get their stock sold. It will be

interesting to see the marketing channels generally followed by the traders of different

scale of operation and experience levels. Tables 4.14 and 4.15 show the details.

Table 4.14

Marketing channels followed - Scalewise


As depicted in the table 91.7 percent of the small-scale spices traders are selling

their stock to wholesalers while the remaining 8.3 percent sell to others including spices

powdering units, agencies, hotels etc. Of the medium scale traders, 17.6 percent sell to

wholesalers, 58.8 percent to exporters. 11.8 percent to auction centres while 11.8 percent

to 'others'. It is also seen that the majority of the large-scale traders are selling to the

exporters or to the auctlon centres in the case of cardamom. The rest is sold through

wholesalers and others.

Figure 4.6 presented below gives a better view of the marketing channels

followed by the domestic spices traders of different scale of operation.

Figure 4.6

Marketing channels followed -- Scale-wise

&all Medium Large I W b o M c dealas a Exportas Auction centres 0th-

It is also important to observe the marketing channels followed by the traders of

different experience levels, which will help to find out the differences if m y between new

entrants and experienced traders in the matter of marketing channels. Table 4.15 gives

the detai1.s

Table 4.15

Marketing channels followed - Experience-wise

Experience (years)

Less than 5

5- 15

Above I5

Total


Wholesale dealers

8 (61.5)

1 (4) 12

(23.1) 2 1

(23.3)

Exporters

4 (30.8)

17 (68) 25

(48.1) 46

(51.1)

Total

13 (1 4.4)

25 (27.8)

52 (57.8)

90 (1 00)

Auction centres

-

6 (24)

8 (1 5 -4)

14 (1 5.6)

Others

I (7-7)

I (4) 7

(1 3.5) 9

(10)

Figure 4.7

Marketing channels followed - Experience-wise

I

0% Y Less than 5 5to 15 Abo

From table 4.15 and figure 4.7 it can be observed that majority (61.5%) of the

spices traders belonging to less than 5 years experience category are selling their stock to

the wholesalers and 30.8 percent of them directly to the exporters. Only negligible

percentage is selling through other marketing sources. Of the average experience group,

only 4 percent is selling to the wholesalers, while majority hand over the produces to the

exporters directly. Among them 24 percent sells through the auction centres, which must:

be cardamom, because auction centres are hnctioning exclusively for cardamom

marketing. 23.1 percent of the experienced spices traders are selling to wholesalers,

48.1% to the exporters while 1 5.4 through the auction centres and 1 3.5 percent to others

It is very clear from that the tnders having experience of more than five years

resort the exporters as the prime channel for selling the spices collected by them. It is also

evident that the second prominence goes in favor of wholesalers.

4.9. Operating expenses

Operating expenses including packing, loading and unloading charges,

transportation costs etc cause much drain to the profitability of spices trading. Since such

expenditure show upward trends only, spices traders find it very difficult to manage

during times of price falls. Table 4.16 shows the summary of the opinion of spices traders

belonging to different scale of operation about the operating expenditure in spices

trading.

Table 4.16

Operating expenditure - Scale-wise

Chi - Square test result --


Total

12 (13.3)

17 (18.9)

61 (67.8)

90 (100)

6.39 '. 7 5% 5.991 Significant Note:- Cells merged appropriately to calculate x value.


Very high

3 (25)

2 (1 1.8)

24 (39.3)

29 (32.2)

(41.7) Medium 4

(23.5)

(13.1) 17

(18.9)

As depicted in the table, 41.7 percent of the small-scale traders consider the

High

4 (33.3)

11 (64.7)

29 (47.5)

44 (48.9)

operating expenses as 'low', 33.3 percent as 'high' and 25 percent as 'very high'. Among

the medium scale traders 23.5 percent responded 'low', 64.7 percent 'high' and 11.8

percent 'very high'. At the same time, only 13.1 percent of the large-scale traders opined

that the operating expenses are 'low' while 47.5 percent consider the expenditure as

'high' and 39.3 percent as 'very high'. Of the total, 18.9 percent responded 'low', 48.9

percent 'high' and 32.2 percent 'very high'.

Thus it can be inferred that the operating expenses incurred by the small-scale

traders are low when compared with that of medium and large-scale traders. The Chi-

square test rejects the null hypothesis and proves that the spices traders differ scale-wise

in the matter of operating expenses because the calculated x value 6.39 is higher than

the corresponding table value at 5 percent level.

It would be appropriate to observe the opinion of the traders of various experience

levels about the operating expenses. Table 4.1 7 gives the details of their views.

Table 4.17

(68) (16) (27.8) Above 15 21 23 52

(15.4) (40.4) (44.2) (57.8) 4 4 29 90

(18.9) (48.9) (32.2) (1 00) Source : - Survey data. Note : - Figures in brackets represent percentages to total.

Operating expenses - Experience-wise


[ Experience

Chi - Square Value DF Level of significance Table Value Significant or not -


-

The table 4.17 shows that 38.5 percent of the least experienced traders incur 'low'

Low

operating expenses only while 46.2 percent remarked 'high' and 15.3 percent 'very high'.

264

High I Veryhigh I Total 1

Of the average experience group, 16 percent responded 'low', 68 percent, 'high' and 16

percent, 'very high'. At the same time, 15.4 percent of the highly experienced traders

opined that the operating expenditure is 'low' while 48.9 percent opined 'high' and 44.2

percent, 'very high'.

The Chi-square value 8.13 proves that the spices traders differ experience wise, in

the matter of operating expenses, because the corresponding table value at 5 percent level

is less than the calculated value. Hence the null hypothesis is rejected.

The following conclusions emerge from the analysis.

1. Spices traders ot different scale of operation differ in the matter of operating

expenses, traders of medium and large scale are incurring proportionately more

than the small scale traders.

2. Operating expenses are more for experienced spices traders than to the new

entrants. The major reason for such a situation is that majority of the large scale

traders belong to the experienced category and their operating expenses are

comparatively high

4.10. Sources of finance

Finance is the lifeblood of every business and spices t m k g has no exception.

Trading of spices needs large amount of working capital during the cropping seasons.

Producers, who sell directly to the traders, always prefer ready cash but at the same time

the traders need not get ready payment from the exporters or wholesale dealers. Such a

situation puts the local traders into deep financial troubles and hence they are forced to

265

borrow funds from various sources, generally in the form of short and medium term

loans. (Source - Survey data)

Table 4.1 8 shows the various sources of funds employed by the spices traders of

different scale of operation.

Table 4.18

Scale of Own funds Local Financiers

Small 2

Note : - Figures in brackets represent percentages to total

(16.7) Medium 3

(5.9) - 23

(13.1) (37.7) 28

(15.6) (31.1)

From the table it is evident that the highest number of traders (47.7 %) resorts to

Banks

2

banks for their financial requirements. Borrowings from the local financiers are quite

Source : - S w e v data

(16.7) 11

(64.7) 30

(49.2) 43

(47.7)

common because 3 1.1 percent of the traders mainly depend on them. There are exporters

Exporters

3

offering financial assistances to the traders but it is not common. Only 5.6 percent of

Total

12 (25)

2 (11.8)

-

5 (5.6)

the traders admitted that they enjoy the financial assistances by the exporters.

(13.3) 17

(1 8.9) 61

(67.8) 90

(100)

It can be further noticed from the table that the number of traders running their

business with the personal funds alone is very low (15.6%). Another interesting point is

that the percentage of traders employing personal funds is more among the small-scale

traders than the rest. Similarly, medium and large-scale traders mainly depend on banks

and other financial institutions to meet their fund requirements. It is further noticed that

the large-scale traders do not get any financial aisistances from the exporters while some

of the small and medium scale naders enjoy such a facility.

266

Figure 4.8 clearly depicts the sources of funds followed by the spices traders of

different scales of operation.

Figure 4.8

Sources of frnance - Scale-wise

1 2 3

Small Medium Large

Based on the above it is interesting to see the opinions of the spices traders of

different experience levels about the common sources of finance employed for spices

trading table 4.19 gives a general view of the situation.

Table 4.19

Financial sources - Experience-wise

Experience (years) Less than 5

Source : - Survey data.

5- 15

Above 15

Total


Own funds

5 (3 8.4)

6 (24)

3 ( 5 . 8 )

14

Local financiers

6 (46.2)

7 (28) 15

(28.8) 28

Banks

2 (1 5 -4)

11 (44) 3 0

(57.7) 43

Exporters

-

Total

13

1

(4) 4

(7.7) 5

(14.4) 25

(27.8) 52

(57.8) 90

Table 4.1 9 shows that the new entrants mainly resort to the local financiers for

their financial requirements. Of them, 38.4 percent employ own funds while 46.2 percent

resort the local financiers and 15.4 percent depend on banks. At the same time, 24 percent

of the medium experience category run their business with own sources, 28 percent

depend on local financiers, 44 percent on banks while 4 percent get the financial

assistances of the exporters or big dealers. Of the well experienced category, only 5.8

percent is using own funds, 28.8 percent depend on local financiers, 57.7 percent on

banks and 7.7 percent on exporters.

Figure 4.9

Financial sources - Experience-wise

100% 90% 80% 70% 60% 50% 40% 30% Local fhamiers 20% 1m 0%

1 2 3

Low Medium High

The survey data also reveals that there are plenty of traders resorting more than

one sources of finance and some of them resort all the sources during market seasons. It

is also noticed that scarcity of funds is not a severe problem to the traders since the funds

are available from various sources.

The following major conclusions emerge from the above observations.

1. Banks are the major sources of funds for medium and large scale spices traders

while the small scale traders depend more on own funds, local financiers and

exporters for financial requirements.

2. The volume of own fund employed is inversely proportional to the experience of

the traders while the volume of funds taken from banks increases along with

experience levels.

4.1 1. Availing warehousing facilities

Warehousing offers an alternative solution for solving the working capital

problems of businesses f m s . Spices traders can very well utilize the facilities of

warehousing. Dunng the periods of low demand, they can keep the produces in

warehouses and secure funds from hanks on the support of warehouse receipt. This would

help them in two way5 Firstly, they are relieved of the problems due to deficient

working capital and secondly, they can offset the risks and uncertainties of price

fluctuations.

Considering the significance and benefits of warehousing to the producers and

traders of spices. The Kerala State Warehousing Corporation is currently providing

warehousing facility m major spices producing and trading centres like Kattappana,

Vandenmedu etc.

In spite of the advantages noted above, the number of traders utilizing the

warehousing facility is comparatively low. Table 4.20 substantiates the observation.

It can be observed kom the table that the large-scale traders are utilizing the

warehousing facility more, than the rest. Because, 42.6 percent of them have availed the

facility as against 35.3 percent of the medium scale traders. At the same time, it can be

noted that the majorit). in both the cases, are not availing the warehousing facility.

Further, none of the small-scale traders is availing the warehousing facility. Of the total

respondents, 35.6 percent make use of warehouses while 64.4 percent do not

Table 4.20

Availing warehousing facility - Scale-wise

It is really paradoxical that even the experienced spices traders are hesitant to

avail the opportunities provided by the warehouses. Table 4.21 gives the proportion of

the spices traders of different experience levels, availing the warehousing facilities.

Total

12 (13.3)

17 (18.9)

61 (67.8)

90 (100)

Scale of operation Availing

Medium 6 (35.3)

26 (42.6)

32 (35.6)


Not availing

12 (100)

11 (64.7)

35 (57.4)

58 (64.4)

Table 421

The table shows that the experienced spices traders are availing the warehousing

facilities more than the rest. Among the new entrants, only 18.2 percent are using the

Availing warehousing facility - Experience-wise

warehouses while 8 1.8 percent are not. Of the average experience category 40 percent are

making use of warehouses as against 60 percent not availing the opportunity. Among the

Total

13 (14.4)

25 (27.8)

52 (57.8)

90 (100)

Availing

2 - (1 8.2)

10

(40) 22

(42.3) 32

(35.6)

well-experienced traders, 42.3 percent are utilizing the senices while 57.7 percent are not

interested in it. Of the total. only 35.6 percent depend on warehouses.

Source : - Survey data. Note : - Figures m brackets represent percentages to total.

Not availing

11 (81.8)

15 (60) 30

(57.7) 58

(64.4)

It can be concluded from the above that

1. The large-scale traders are utilizing the warehouses more, than the

medium and small scale spices traders.

2. Majority of spices traders are not utilizing warehousing facilities.

4.12. Spices board and its activities

Being the prime governmental agency for the development of the spices, Spices

Board has the responsibility of doing every thing possible for the growth of the spices

sector. Hence the board has to protect to the interests of the domestic traders as well.

Astonishingly it is noticed from the survey data that the Spices Board is not having any

scheme intended to assist the domestic spices traders in their marketing process because,

100 percent of the domestic traders responded negatively when asked about the schemes

of the Board intended for them. (Source- survey data)

4.13. Government attitude and policies

Favorable attitude and policies of the government are highly important for the

growth of the spices sector. Because, spices are export oriented produces capable of

procuring foreign exchange to the exchequer. On the other hand, levies imposed by the

state government in the form of indirect taxes are causing many difficulties to the

domestic traders. (Source- survey data)

Thus, the general attitude and policies of the Government towards the spices

producers can be assessed only by comparing the incentives as well as levies imposed by

the government. Table 4.22 gives a summary of the opinions of the spices traders of

different scale of operation about the Government attitude towards them.

Table 4.22


Government attitude towards the spices traders - Scale-wise

Chi - Square Value 5 Level of significance Table Value Significant or not

4.05 2 5% 5.991 Not significant


Total

12 (13.3)

17 (1 8.9)

61 (67.8)

90 (100)

Majority of the small-scale traders (58.3 %) observe 'unfavorable' attitude of the


Unfavorable

7 (58.3)

10 (58.8)

23 (37.7)

40 (44.4)

Scale of operation

Small

Medium

Large

Total

government towards them while 25 percent responded 'neutral'. However, 16.7 percent

of them argue that the government attitude is 'favorable'. The medium scale traders also

Favorable

2 (16.7)

2 (11.8)

20 (32.8)

24 - (26.7)

have similar views because 58.8 percent of them opined 'unfavorable', 29.4 percent

Neutral

3 (25)

5 (29.4)

18 (29.5)

26 (28.9)

'neutral' and 11.8 percent 'favorable' attitude of the Government. Of the large scale

traders, 32.8 percent remarked the governmental policies as 'favourable' and 58.3 percent

as 'unfavourable'. .4t the same time, 29.5 percent of them observe a 'neutral' attitude of

the Government towards them

Altogether. 44.4 percent observe 'unfavorable' policies of the government while

28.9 percent responded 'neutral'. However, 26.7 percent argue that the governmental

policies are 'favorable' Since the majority (73.3%) observe either 'unfavorable' or

'neutral' attitude, it can be concluded that the present policies of the government are not

friendly to the spices traders

The Chi-square value 4.05 indicates that there is no significant difference

between spices trades of different scale of operation in this respect because the

corresponding table value at 5% level of significance is more than the calculated value.

Therefore the null hypothesis is accepted.

On the basis of the above observations it is imperative to see the views of the

spices traders of different experience levels, about the government attitude and policies

relating to the spices sector. Table 4.23 gives the details.

Table 4.23

Government attitude towards the spices traders - Experience-wise

/ Experience / Favorable I Neutral I Unfavorable I Total (years) Less than 5

5- 15


+ "' (26.7)

Chi - Square Value Level of significance Table Value Significant or not

4 - (30.8)

8

1.21 2 5% 5.991 Not significant



(32.7) 26

(28.9)

Of the traders belonging to the least experienced category, 30.8 percent consider

5 (38.4)

4

the Government attitude and policies as 'favorable', 38.4 percent as 'neutral' and 30.8

274

(44.2) 40

(44.4)

4 (30.8)

13

(57.8) 90

(1 00)

13 (14.4)

25

percenk 'unfavorable'. Similarly, 32 percent of the average experience group responded

'favorable', 16 percent 'neutral' and 52 percent 'unfavorable'. At the same time, 23.1

percent of the highly experienced category observe 'favorable', 32.7 percent 'neutral' and

44.2 percent 'unfavorable' attitude of the Government.

The Chi-square test result proves that the spices traders do not differ experience

wise in their view on governmental approach towards them. Because, the x value 1.21

is less than the corresponding table value at Spercent level of significance. Hence the null

hypothesis is accepted.

It can be observed that. in all the categories, majority is against the approaches of

the government towards them. The major reason for such an opinion is that the present

sales tax, turnover tax and income tax rules are causing much harassment to the spices

traders. It has also been complained that there is no standard method for classification

and the government. treats all of them alike, irrespective of the scale of operation, which

causes much harm to the small-scale traders.

The following major conclusions derive fiom the above.

1. Spices Board 1s not playing any meaningful role exclusively for the growth of

domestic spices trading.

2. The domestic spices traders are not satisfied over the policies and attitude of

the Government towards them, the small and medium scale traders are more

dissatisfied than the large scale traders.

3. The highly experienced and average experience category observes neutral or

unfavorable approach of the Government than that of the least experienced

category.

The summary of the hypothesis test results is given in table 4.24.

Table 4.24

Summary of hypotheses test results

7 I Sub hypothesis Accepted or Rejected / Variable

1. Supply

2. Competition

3. Marketability

4. Operating expenses

5. Government pol~cies

Based on the above results:

r Null hypothesis that the spices traders do not differ scale-wise, on major

marketing variabies is accepted because majority of the sub hypotheses are

accepted.

r Null hypothesis that the spices traders do not differ experience-wise, on major

marketing variabies is accepted because majority of the sub hypotheses are

accepted.

r Spices Board is not having any specific scheme for the growth and development

of spices marketing by the domestic traders.

276

Accepted

Accepted

Accepted

Rejected

Accepted

Accepted

Rejected

Accepted

Rejected

Accepted

4.14. Factor Analysis

As evident from the preceding observations domestic spices traders are facing so

many ptactical difficulties causing much drain to their profitability and making the

business unattractive. Being an unavoidable link in the channel of movement of spices, it

is highly important to keep the link strong enough to connect the producers and exporters.

Thus finding out the leading factors in the domestic spices trading will be highly useful to

device strategies suitable for them. Hence factor analysis is applied on the survey data

and the results are given below

Details of the analysis - - I Method Principal Components Analysis 1

1 Number of factors extracted 3

Kaiser normalization

Rotation

~ o t e : - Processed by version 6 of SPSS for windows. I

Varimax

Variables included for the analysis and their Eigen values, communality and

percentage of variance along with the cumulative percentage are give in table 4.25.

Table 4.25

Eien Values and Percentage of variance of factors

Value addition

Source :- Survey data

Based on the Eigen values and relative percentage of variance, three major factors

were extracted. The table also shows that the extracted factors together cause 51.6

percent of variance.

Factor matrix resulted from the analysis is presented in table 4.26

As evident kom the table competition, operating expenses, value addition, and

Table 4.26

Factor Matrix

sources of supply are the components constituting the 'Domestic Factor' while trading

channel and finance are the elements of the 'Trade Factor'. Similarly, governmental

policies, warehousing facilities and stock velocity are the components of the

Environmental Factor

.225 1 1

.42840

.I8652

-.43940

-.04359

.06002

.07669

-.72039

-69800

-

'Environmental Factor

Trade Factor

18300

.33022

.38836

.39751

.65202

.56585

-.42906

.3 1090

.25466

Vanable

1x1 order to observe the rotated view of the factors and their constituents, varimax

method of rotation is applied. The result obtained from the rotation is given in table 4.27

which helps to have a general view of the mutual impacts of each of the factor from a

different angle.

Domestic Factor

Competition 1 -.69705

o p e r a ~ g expenses

Value addition

Sources of supply

.69606

-38455 I

.48064

Trading channel 1 .OlllO

Flnance .00514

I Government pohcles

Warehousing

Stock velocity

-

,23319

,13445

-.04596

Table 4.27

1 Government policies I 1 -69116 1 .I4206

Rotated factor ma^

I 1 Warehousing I -.63716 1 .41265

Variable

Competition

Trading channel

Sources of supply

Finance

Domestic Factor

1 stock velocity

Trade Factor

Operating costs

Value addition

Factor

It is essential to see the relative influence of individual factor on other factors.

The factor transformat~on matrix obtained from the analysis given below serves the

purpose.

Table 4.28

Factor Transformation Matrix

Name of the factor Domestic factor

- Factor

Domestic factor -.78277 Trade Factor .07077 Environmental Factor ,61827

Trade Factor

.03066

,99669

-.07526

Environmental Factor

,62155

.03996

.78235

S i a r l y , the relative influence of each individual component on respective factor

is shown in the factor score coefficient matrix given below.

Table 439

Factor Score Coefficient Matrix

Name of the factor

Competition

Finance

Government policies

Operating costs

Stock velocity

Sources of suppl)

Value addition

Trading channel

Warehousing

From the tables given above, the following analytical results and inferences can be

drawn.

1. Domestic factor 1s the most decisive factor in the spices tradiig process.

Competition Operating costs, Value addition and Sources of supply are the major

elements of domestic factor.

2. Trade factor is the second important factor and it comprises trading channel and

financial constrants

3. Environmental factor has the third significance and it includes Government

policies, Warehousing facilities and Stock velocity.

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