Thoughts on commodities

I recently returned from a two week trip to India. I visited high tech campuses that shimmered more brightly than their counterparts in California and villages where people relied on manual water pumps. The responsibility for feeding the billion-plus Indians (and billions more across Asia) falls primarily to one grain: rice.

There are hundreds of millions of Indian citizens who live in extreme poverty, although over the past decade, the middle class has grown considerably. Indian electoral politics being what they are, rice is heavily subsidized for poor people, even in fertile agricultural areas. This depresses rice production and milling, because the government pays less than market rates for the subsidized rice.

However, a variety of premium rice has taken hold, even among the poor, meaning that the government is having trouble unloading its lower-grade rice. (I wish I could remember the name of the variety, or provide a link, but Google News is not able to find the article. If anyone can help me out, leave a comment.) This rice variety apparently retains its shape and texture better than more common

Instead of paying approximately $0.25/pound for rice, people are sometimes willing to pay $0.30-$0.50/pound. In other words, even when you have one of the most basic commodities in the world, and you’re selling it to some of the poorest people in the world, differentiation and added value can still have a dramatic impact on perceived value and price realized. Why can’t you do the same thing in your market?

One Comment

  1. Runako

    Interesting to see manufacturers attempting to un-commoditize their products. The NYT had an article recently about a manufacturer trying to brand a hand-made high-end salt:

    I guess one way to survive in a commodity business is to de-commoditize it.

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