Manish More used to grow sugarcane and onions on his four-acre farm in Shiroli-Khurd village, 80 km from Pune, until a few years ago. But with sugarcane yields falling from 100 tonnes an acre to 40 tonnes, he, Ganesh Hande, Pravin More, and a dozen other farmers formed an informal group in 2014 and switched to more remunerative organic vegetables only to realise that taking their crop to market was a hard row to hoe.
"Government officials will tell you to go organic but they won't show you how. And the problem was we had no idea where to sell and how to value-add", says Manish. Till a chance encounter in 2015, agritech player FarmLink changed their fortunes.
Now each week, their 30-strong group supplies two-to-four tonnes of organic fruits and vegetables such as onions and beetroot to FarmLink's distribution centre at Vashi in Navi Mumbai, from where the latter supplies to customers like Amazon Now, Vista and Star Bazaar.
"FarmLink has given us a plan to sow our crops. We allot one-two crops per farmer and they farm in a chain so we can supply the vegetable all year-round," says Ganesh, who gets the produce sorted, graded, and packed on his farm, while Pravin transports it to Vashi. More importantly, their incomes have nearly quadrupled in the last two years. So, Manish, who is the lead farmer-aggregator, has bought five cows while Pravin has a new pick-up and Ganesh is considering schooling his daughter in Pune.
Cut to MRC Nagar village near Coonoor in Tamil Nadu, where 27-year-old Santhosh Kumar grows exotic vegetables like broccoli on his 10-acre farm. Until 18 months ago, Santhosh would rely on a relative to take his produce to the mandi in Ooty with little transparency on the price and quantity sold. But after tying up with Chennai-based WayCool Foods and Products, field officers grade and weigh his produce at his farm and a truck from its Ooty collection centre collects it on a sourcing run covering 500-odd farmers along the way.
And while earlier, Santhosh would worry about finding enough wholesalers as exotics sell in small quantities, now his offtake is assured. Also, unlike in the mandi where the trader dictated terms, Santhosh negotiates his price after checking rates on sites like Big Basket. "WayCool gives me a better price and pays me weekly so I don't have to worry now," he says. His income has gone up 10-20 per cent.
Marginal farmers like Manish and Santhosh may be in a minuscule minority amidst the overwhelming sea of farm distress enveloping the country today. But a host of new agritech players along with online and retail companies are reaching out to them by modernising and building new fruits and vegetables (F&V) supply chains.
From FarmLink in Mumbai and WayCool in Chennai to NinjaCart in Bangalore and Kisan Network and Crofarm in the national capital region (NCR) to online and offline grocers like Big Basket and Big Bazaar, they're all eager to tap the opportunity presented by the Indian F&V market. In the process, they're linking farmers to the market and disintermediating the traditional supply chain.
The opportunity is massive. After all, India is the second-largest producer of F&V in the world after China, and the 300-million-tonne Indian F&V market is estimated at over `4 lakh crore. Moreover, nearly 95 per cent of this is in the unorganised general trade, operating through local vegetable vendors sourcing from traditional mandis and multiple intermediaries.
"We believe there is potential to transform the value chain of all fresh-produce crops," says Akshaya Kamath, Director, Pioneering Ventures, the Swiss-headquartered incubator and investment fund that has founded FarmLink - and other agriculture-focussed ventures - in India.
That's because if productivity is an input-side issue in the Indian farm sector and has received attention from input companies, on the output side, "there's a massive challenge of wastage and inefficiencies because of multiple handling", says Kamath, a former managing director of Syngenta India. Incidentally, Syngenta is the anchor investor in FarmLink.
According to various government reports, wastage levels in F&V range from 15 per cent to 40 per cent in India. And farmers get barely one-third of the retail price paid by consumers.
Undoubtedly, as Vipul Mittal, National Category Head, F&V, Big Basket, points out: disintermediating the supply chain isn't a new concept as Mother Dairy showed with its Safal shops in the 1980s. In the early 2000s, agri-marketing firms like Desai Fruits and Vegetables - it was Pioneering Ventures' first investment in India, and it pioneered banana exports - did the same. Modern retail led by Future Retail also integrated backward. But now, the new agritech players are emerging as dedicated F&V marketing and supply chain players. Even Big Basket, which set up its F&V supply chain three years ago, is extending it to serve B2B customers.
The players are building end-to-end supply chains to get, as Kamath says, "The right quality and quantity of fresh produce to the market in the most efficient way without wastage". The idea is to compress the time from harvest to shop, improve farmer incomes, and reduce the retailers' procurement costs.
"We want to ensure that farmers get 15-20 per cent more than what they're getting from the market and that the retailer pays 5-10 per cent less than what he pays to the mandi," says Thirukumuran Nagarajan, Co-founder and CEO, NinjaCart, which began operations in Bangalore in 2016. NinjaCart moves 200 tonnes of fresh produce a day, sourced from 4,500 small farmers, to 2,400 neighbourhood vegetable retailers in Bangalore, and it has entered Chennai now.
Adds Aditya Agarwalla, Co-founder, Kisan Network: "We want to set up a national platform for farmers. It's about making the connection between the farmer and buyer and doing it real time so that the farmer doesn't have to leave the farm and the buyer doesn't leave the city."
Big Basket's Mittal says: "E-commerce by nature disintermediates on the customer side. At the same time, we were clear that once we got a certain level of volumes, we had to extend the chain to the back-end to bring in all the advantages of disintermediation."
An Open Field
The players are bringing in diverse abilities to address these inefficiencies. In Chennai, WayCool is leveraging its experience of managing manufacturing supply chains. "We're from the automotive industry and know how large supply chains are managed and how you can cut costs and reduce working capital. We realised that these skill sets can be applied to the unorganised agriculture and logistics space to bring in efficiencies," says Karthik Jayaraman, Co-founder, WayCool.
So, the former McKinsey consultant and head of business transformation at Ashok Leyland co-founded WayCool along with Sanjay Dasari, who wanted to set up a Whole Foods-like venture after studying in the US, in July 2015. WayCool began with a mobile outlet under its SunnyBee retail brand in Chennai's IT corridor to understand the customer's requirements and build scale. Within nine months, it had six outlets and enough volumes to engage directly with farmers and target its primary customer base, the Horeca or hotels, restaurants and canteens segment.
Today, WayCool sources 60 tonnes fresh produce a day from 1,000 farmers and farmer producer organisations (FPOs) - it has access to over 25,000 farmers - and traditional intermediaries. It supplies to 1,100 institutional and modern retail customers and kiraana stores across Tamil Nadu and in Bangalore, including its 12 SunnyBee stores in Chennai. And it has annual revenues of `100 crore.
Meanwhile, serial entrepreneurs Varun Khurana and Prashant Jain, Co-founders, Crofarm, are leveraging their grocery retail experience. Khurana, a techie, and Jain, who worked with Subhiksha, had co-founded grocery delivery start-up - Mygreenbox.com, before selling it to Grofers in 2015. So for their next venture, they chose the agri-marketing play.
"Farmers don't have incentives to grow quality in terms of higher price at the mandi, while in the city, customers are always looking for freshness. We're trying to build a quality-focussed supply chain via technology," says Khurana, CEO, Crofarm. The company sources from farmers in five states and sells only to kiraana shops - it has 250 customers - in the NCR.
NinjaCart, which began as an online grocer before switching track, is also focussed on the kiraana segment alone. "The retailer faces huge problems, he has to go to the mandi early in the morning, buy the produce and bring it to his shop and sell all day. We wanted to help the retailer but soon realised the farmers also face huge problems," says Nagarajan. Now, NinjaCart is exploring the possibility of opening its own and franchisee F&V stores in Karnataka.
On the other hand, Aditya, 22, conceived Kisan Network for a thesis project as a computer science undergraduate at Columbia University in 2015. His father, Sanjay Agarwalla, was a GIS consultant who had helped FMCG and telecoms companies to expand to rural India.
"The farmers were the buyers of FMCG and telecoms products. But nothing existed in the other direction, from the farmer to the rest of India. So, he said what if we flip the model and make the farmer the seller," says Aditya. He adds: "The farmer is a spectator to the selling process in the mandi and has no say. We felt you needed a tech-enabled solution to improve this process."
The Agarwallas launched Kisan Network as an online marketplace in January 2016. Along the way, Aditya got selected for American seed accelerator Y Combinator's start-up programme and won the two-year $12,000 Thiel Fellowship, quitting college to run the venture. They began with a pilot with 2,000 potato farmers near Indore and sold to traders in that city.
Once Kisan Network onboards a farmer, its team posts information about his land holding, crops, harvest calendar, and quality. The farmer contacts the marketplace via a toll-free number or WhatsApp at harvest time and the platform shares his crop details with buyers or matches buyers with farmers. The parties negotiate the price and Kisan Network executes the order. The entire process is paperless.
"The farmer knows his price, packaging, and transportation costs and what the buyer pays, which includes our fee. On average, we give 10 per cent more than the local price," says Aditya. Kisan Network has over 1,000 buyers, mostly wholesalers, food processors and modern retail, and 20,000 farmers on its platform currently.
However, while technology is an enabler, the players know this is primarily a feet-on-the-ground business. "I call this a contact sport as it can't be solved by digital intervention alone," says Jayaraman.
Aditya agrees: "Our platform is enabled by technology but you can't expect farmers to behave like sellers on Amazon. The technology helps them make the connection and become national producers, while we take care of the supply chain steps to complete the transaction."
The New Supply Chains
So, how do the new supply chains work? The players have disintermediated the chain by sourcing directly from farmers and setting up a hub-and-spoke of collection and distribution centres.
They address every aspect from training farmers on yield and quality to efficient transportation, post-harvest storage, and value-addition. "By focussing on the farmer and the value chain, we can bring in efficiencies, which results in cost-effectiveness and also better produce and reduced wastage," says Kamath.
Look at FarmLink's distribution centre at Vashi. The two-storey hub, which has a cold-storage room, is abuzz every night when trucks laden with F&V start arriving from midnight until 3 am. They come directly from farms, where FarmLink sets up temporary collection centres, or from its main collection centre at Manjarwadi in the Narayangaon vegetable belt.
"We're working on different models on the farm side to see what works best. We work with farmers and lead farmer aggregators. We also have contract farmers for crops like tomatoes," says Ravish Chavan, COO, FarmLink.
The F&V are harvested based on an order issued one-two days earlier, and sorted, graded, and crated at the farm or at Manjarwadi. On arrival at Vashi, they're consolidated and despatched to institutional customers like Star Bazaar and Vista Processed Foods from 5.30 am and to Amazon's collection centres in Mumbai as FarmLink has started selling packaged vegetables under its own Healthy Harvest brand on Amazon Now.
FarmLink sources low-volume vegetables - and fills any supply shortfalls - from the local APMC market. "We're currently focussing on sourcing the major vegetables, where we can buy huge quantities, directly from farmers. But for vegetables like broccoli, say, where we have small orders, we tie up with vendors who source from farmers. As volumes go up, we will build supply chains for more vegetables," says Chavan.
FarmLink operates in the West and South and has four collection centres, including one in Hosur. Mumbai is its biggest market followed by Bangalore. Apart from institutional clients, it is also doing two pilots with kiraana vendors in Mumbai and in the south.
Meanwhile, NinjaCart handles 70 vegetable varieties and has 30 collections centres in Karnataka, Andhra Pradesh, Tamil Nadu and Maharashtra, where farmers bring their produce after grading at the farm. It has different-sized and colour-coded crates to reduce touch points, and they're RFID-tagged for tracking and end-to-end traceability.
The vegetables are quality-checked and batched at the collection centre, and sent to fulfilment and distribution centres to be despatched. Meanwhile, kiraana shops place orders on the NinjaCart app. NinjaCart collects prices from 20 mandis to issue its purchase and selling price to farmers and vendors. It pays farmers within 24 hours.
WayCool handles 325 SKUs of F&V in its three distribution centres in Chennai, Bangalore, and Coimbatore, sourcing 70 per cent of these from farmers and FPOs and the rest from the mandi based on its master planning and scheduling team's consumption forecasts. It has also expanded its supply chain to source 100 varieties of staples and to distribute packaged dairy and confectionary products to meet the "full portfolio" needs of its Horeca customers. WayCool handles 100 tonnes a day, 60 per cent of which is fresh produce.
Big Basket, which handles 150 F&Vs, has built 25 collection centres across 10 states and tied up with 5,000 individual farmers in the last three years. The farmers bring the produce to these centres, from where it is despatched to 25 distribution centres nationwide to fulfil its online orders. And since its farmers produce different grades, Big Basket has extended the supply chain to sell lower grades to the Horeca and kiraana segments.
"There's complete transparency and farmers can check the price that customers pay. Plus, we provide visibility on what we buy so they can plan their sowing," says Mittal. Big Basket handles 7,000-8,000 tonnes of F&V a month, 70-80 per cent of which comes directly from farmers.
In contrast, Kisan Network has no collection centres and fulfils orders directly from the farm. It handles less than 10 vegetables focussing mainly on potatoes, onions and tomatoes, and operates in five locations like Indore, Kanpur, and Nashik.
By compressing the supply chain and reducing handling, the players have brought down wastage levels of just 1 per cent to 3 per cent besides raising farmers' incomes by 10-20 per cent. Although they source at the nearest mandi price, farmers benefit by saving on commissions and transportation costs and from shorter credit cycles.
"When you work continuously with them, farmers understand that prices fluctuate and that they may break even or incur a loss at times. But overall, if they make money on an annual basis without any payment-related concerns, it works out well for them", says Chavan.
Powered by Technology
Naturally, managing these supply chains and dealing with perishability, supply and price fluctuations and other issues is a complex task, but the agritech players are leveraging analytics and technology to do so.
NinjaCart, for instance, on-boards a farmer with his bank account and landholding details. A sourcing team publishes the farmers' weekly growth plan while an analytics team combines this with historical data and market conditions to prepare a weekly sales and procurement forecast for every vegetable. Based on this, the farmer gets a weekly indent. Two days before the delivery, the procurement forecast - and indent - are reconfirmed based on market conditions (supply and price fluctuations).
"How you handle perishability is a key factor in this business. We try to improve prediction rates and sell everything the same day," says Nagarajan.
Incoming stocks, inventories, orders, payments and logistics are all tracked on the system. "The system is trained to take day-to-day decisions. For instance, if a customer hasn't ordered in two days, the app prompts the sales team to visit him," says Nagarajan.
Similarly, WayCool's supply chain is built on an ERP backbone that tracks every commodity and transaction and that's plugged into its e-commerce ordering app for customers and its back-end app, which issues purchase orders to farmers.
The software also does predictive analysis. For instance, it tracks all festivals and can predict in which neighbourhoods demand will rise and in which, it will fall, as people will go on vacation. "We're also looking at developing automated pricing algorithms," says Jayaraman.
Agarwalla, too, says: "The lack of a structured repository of information about how the agri trade works at a granular level is a key challenge. Our proprietary supply chain is gathering thousands of relevant data points with each field activity, and with each step, is resulting in data-driven decision-making, which we believe should become the norm in the agri ecosystem."
FarmLink has even integrated its system to include traceability and will launch its FarmTrace app with modern retail partners shortly. "This is something that's completely lacking in India," says Kamath. With FarmTrace, consumers will know where the vegetable came from and what inputs and crop management protocols were applied to it. NinjaCart is also building a consumer app that will enable consumers to view the details of the farmers from whom the F&V is sourced.
Ploughing a Triple Field
Ensuring efficient transmission of F&Vs from farm to market is not enough, however. WayCool's Jayaraman says the players must address three challenges - transportation, information, and financing - simultaneously for efficient supply chains. "We need to build a physical network and add on it a layer of information and a layer of finance," he says.
For instance, the oft-repeated cycle of supply glut-and-low prices followed by low supply-high prices can be broken if farmers have information on how many other farmers are growing, say, onions or tomatoes and, therefore, the expected supply. This could help them regulate sowing. WayCool hopes to build this data eventually. Meanwhile, it is working with finance companies like Samunnati to fund the value chain.
NinjaCart's Nagarajan, too, hopes to use satellite imagery to source cultivation data in future. Meanwhile, he will soon provide financial services to farmers by leveraging NinjaCart's database on their landholding and yields, and also its data on price, supply and demand in 20 mandis in Karnataka, Andhra Pradesh, and Tamil Nadu. "Since we make payments in the farmers' bank accounts, we can use this income data for providing loans, for instance," he says.
FarmLink's parent Pioneering Ventures, too, will launch a financial services firm for agri-sector participants shortly.
Expanding Vistas
The supply chain players know this is a business of scale economies on the customer and farm end, so they're all expanding rapidly. Nagarajan is aiming at five-times growth at NinjaCart and expects volumes to increase to 500-600 tonne a day by the financial year-end.
WayCool's Jayaraman plans to expand its customer base five-six times in the next two years. "We are channel agnostic and want to be in all food categories and supply to all of southern and western India in the next five years," he says.
Agarwalla is consolidating Kisan Network's presence in its existing regions by increasing volumes and adding more crops. "In the longer term, we see our presence growing to more than 100 regions covering around a million farmers," he says.
Crofarm, too, expects to grow to 1,000 customers in the NCR in FY2018/19 and to enter Mumbai and Bangalore next year. And Big Basket is doubling F&V volumes each year.
At FarmLink, Kamath is targeting 4x-5x increase in volume and turnover a year. FarmLink will continue to focus on West and South India over the next two years and enter the north by third year and have an all-India presence by the fifth year. "Our objective is to create world-class ventures that just happen to be in India," says Kamath.
Naturally, there are huge challenges ahead. Apart from the usual weather and price fluctuations, these include logistical complexities as volumes expand and sustaining linkages with farmers.
A key growth driver will be the expansion in modern retail and e-commerce. Mittal says: "Just as the modernisation of the cold chain has piggybacked on modern retail, the back-end's growth will depend upon the rate at which modern and online retail grows".
Nevertheless, the market is huge and the players are confident there's room for lots of players - and rich harvests ahead.