Indian start-ups brave low margins, short shelf lives in branded fruit business

Does the average Indian consumer ever think brands when it comes to buying a banana or a pomegranate? It's quite unlikely. The closest most of us go to a branded fruit is probably Washington Apple, which the street-side fruit seller has on offer along with the regular apples from Himachal Pradesh. Unless someone is really brand conscious and is willing to pay a premium for the Washington Apple, it is the good old Himachal apple that one invariably opts for. However, the last few years have seen a lot of effort by start-ups such as INI Farms and Fruit Box & Co to organise the highly unorganised fruit business in India.  

Globally, especially in the matured markets such as the US and the UK, consumers prefer branded fruits, not because they offer consistently tasty fruits, but due to their claims of using environment-friendly cultivation practices and making a positive impact on livelihoods. Some of the well-known fruit brands globally are Chiquita, Fyffes and Dole. In fact, all three of them are banana brands, but there is also a growing trend of branding berries, avocado and pomegranate. Cut to India, INI Farms launched its fruit brand, Kimaye, last year, under which it sells bananas and pomegranate. It also launched its e-commerce arm, Kimaye.com, in Mumbai, through which it directly delivers a variety of fruits directly from farms to consumers' homes.

The first mover in branded fruits is the Kolkata-headquartered Keventer Agro, which got into the business almost a decade ago as suppliers of banana for Reliance Retail and Metro Cash & Carry. The company has six ripening chambers in eastern India. The major challenge for the banana trade is the ripening process where the unorganised trade often uses harmful chemicals such as calcium carbide to the ripen the fruit.

"Though the FSSAI has banned the use of calcium carbide, it is still used. We saw a scope for corporate intervention as there was a need for proper ripening practices, there was also a possibility of branding the product, and having a proper supply chain in place," explains Sunil Kajaria, CEO (Banana and Dairy), Keventer Agro.  

Keventer not just supplies to organised retailers, it also distributes to the traditional customers, from where it gets over 95 per cent of its revenue.  Despite being priced at a 4-5 per cent premium, Kajaria claims that the company manages to sell 110 tonnes of bananas per day with the promise of offering bananas that have been healthily ripened.

India produces 30 million tonnes of bananas every year (almost 30 per cent of the global supply of bananas), but not a single producer has scale. Pankaj Khandelwal, Chairman & MD, INI Farms, says that the journey of branding fruits hasn't been particularly easy in India. He says India has practically no standards of food safety, neither is there a consistency in production technique.

"Norms such as levels of pesticide residues are basic requirements that need to be met in Europe or Middle East. We work with farmers to incorporate those standards. We educate them and tell them why it is good for them. It also has to translate into a commercial benefit for them. Branding comes only after these basic requirements are met with," he explains.

INI is currently working with 5,000 fruit farmers. "Our foremost priority is to give an extremely good product to our consumers. The most important fruit of this is the number of repeat orders we are getting, which is more than 50 per cent. However, it is too early to say that people are buying brand Kimaye. I would say people are buying Kimaye because of the quality of produce we are offering," says Khandelwal.

Over 85 per cent of INI Farm's revenues come from exports. It exports fruits to over 35 countries and generates an annual volume of 40,000 tonnes. Brand Kimaye clearly caters to a premium audience and going forward it will continue to maintain that positioning. In the next 18-24 months, Khandelwal plans to roll out Kimaye in Bangalore, Hyderabad and Delhi (where it is already working with fruit farmers to supply to the export market), but he first wants to get it absolutely right in Mumbai. "The systems and processes required are intense, considering that they are perishables," he says.

Despite being in the trade for 10 years, Keventer Agro's banana business is just Rs 75 crore. "It's difficult to create a large business. Banana doesn't travel very well, also, it is a low-cost fruit. To add to that, one has to set up local ripening centres and local teams. The economics makes sense only at a certain level of volumes, else, you end up losing money," explains Kajaria, adding that the margins are very tight too. "The fruit gets sold at Rs 5 a piece, the farmer gets Rs 2 per fruit, and there is a thin slice with which you have to manage the supply chain, ripening and distribution," he further explains.

Despite the low margins and low profitability, the branded fruit business is generating immense start-up interest.

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