Colour of money
Despite the appalling gaps in the delivery mechanics—cold chains, warehousing, processing centres and logistics—there is enough today to make entrepreneurs tackle specific projects in the farm-to-the table value chain. Entrepreneurs and investors are making most of the business opportunities that abound in the farm-to-fork value chain. Shamni Pande reports.
With manufacturing plants idling and export markets dying, investors are crowding back into basics like food. Consumers may shrink away from that new car or Plasma TV, but everybody has to eat. “Many sectors have fallen out of favour with investors, but food is one area that has shown resilience and is counter-cyclical,” says Rajesh Srivastava, Chairman & Managing Director, Rabo Equity Advisors.
Rajesh Srivastava
Indeed, this promise of a take-with manufacturing plants idling and export markets dying, investors are crowding back into basics like food. Consumers may shrink away from that new car or Plasma TV, but everybody has to eat. “Many sectors have fallen out of favour with investors, but food is one area that has shown resilience and is counter-cyclical,” says Rajesh Srivastava, Chairman & Managing Director, Rabo Equity Advisors.
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Srivastava should know: he’s now in charge of the $100-million India Agri Business Fund, which will look exclusively at India’s agricultural sector. One of Srivastava’s first investments: Hyderabad-based Sri Biotech Laboratories India, which makes biological and bioorganic products for crop improvement and protection. “We find post-harvest to be a very interesting area. Usually, for investors to get interested, there has to be a certain depth in scale of operation, and this is now visible. There are more players today, who have businesses of over Rs 20 crore that make them attractive,” he says.
This goes to show that despite the appalling gaps in the delivery mechanics—cold chains, warehousing, processing centres and logistics—there is enough today to make entrepreneurs tackle specific projects in the farm-to-thetable value chain. Kalyan Chakravarthy G.K.D., Country Head (Food & Agri Strategic Advisory Research), YES Bank, concurs: “Today, it is clear that demand is not an issue, it is the supply side that has not been sufficiently worked upon by any player at the national level… there are efforts concentrated in specific regions and for specific food items.” The food sector has seen various players actually deliver a bounty: Global Green, part of the $3-billion Avantha Group of Gautam Thapar, has already become the third-largest gherkins player in the world, while Bharti Del Monte India, a joint venture between Bharti Enterprises and Del Monte Pacific subsidiary DMPL India, has become the largest exporter of fresh baby corn. These are just two examples.
Indeed, this promise of a takeoff trajectory is making even people like Abhiram Seth, a former Executive Director of Pepsi Foods, try his luck as an entrepreneur. He has set up Aquagri Processing to tap opportunities in sea plant agriculture—a venture that he started with PepsiCo and eventually bought. Seth aims to grow a particular variety of seaweed used to make carrageenan, an edible jelly-like ingredient used in foods, cosmetics, pet food and toothpastes. He has already organised 800 small farmers for this.
At the other end of the spectrum are seasoned agri-specialists such as Gokul Patnaik, Chairman, Global AgriSystem, who has discovered that in addition to his consulting practice, there is much profit to be made by actually getting his hands into the soil. “We are working with 400-500 small farmers in Bulandshahar to produce European carrots for the domestic market. I am also foraying into potatoes and onions,” he says. Patnaik, in addition to catering to domestic consumption, has also bagged orders to export pomegranates, mangoes and grapes. He is investing Rs 30 crore in building eight- pack houses that will take care of the specialised storage requirements of these items. In fact, the demand for fruits and certain varieties of vegetables has just exploded. “Not surprising—we are after all the second-largest producer of fruits in world, but until 2004, when we allowed imports, Indians were unused to quality. People used to actually pay a premium for a spotted banana variety called Chittri whose spots come from a fungus infection! After apples, bananas have been the next big area for technology partnerships that have led to uniformly ripened fruits,” says Patnaik. Here, apart from private players, even Safal from Mother Dairy is setting up a plant to sort, ripen and package bananas.
Seeds players have always tended to do well and now several local players such as Namdhari Seeds, Vibha Seeds, Krishidhan Seeds, Shriram Bioseeds and Rasi Seeds, among others, have emerged on the scene. “Either some players have attracted funds or are being actively vetted by others for a merger or tie-up,” says an industry observer.
Hot off the plate
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Sumit Saran, of the SCS Group, which helps foreign food companies suss out opportunities in India, says: “The market for imported food is worth $1.4 billion. Several players are importing fresh and dry fruits, olive oil, processed food, beverages and pasta, among others.”
So, where does all this add up to actually improve the life of the farmer and, therefore, rural resurgence? PepsiCo, which pioneered contract farming in India almost 20 years ago, undertook a survey through ACNielsen, which has thrown up some interesting facts: “It showed that thanks to contract farming with PepsiCo, the employment opportunities increased, with about 53 per cent of farmers employing more labour and about 89 per cent willing to employ more. This, according to the farmers, is because PepsiCo technology is more employment-intensive during harvesting season,” says Vivek Bharati, Executive Director (Agri & External Affairs), PepsiCo India.
Since it launched its initiative in 1999 with 800 farmers in one state, PepsiCo has been able to reach out to more than 20,000 farmers in eight states. In fact, Pepsi’s success has demolished fears that farmers will be taken for a ride by companies, who will force them to grow things and then dump them for better bargains. “We, on the contrary, offer weather insurance and guarantees to the farmers to buy back at an assured price, which insures a regular income to them,” says Bharati.
So is the case with others. Global Green is working with 25,000 farmers in Karnataka, Tamil Nadu and Andhra Pradesh, providing them with seeds, fertilisers, pesticides, technology and a fixed price for the output. “Our farmers typically earn more than the competing crops,” says Vineet Chhabra, Managing Director & CEO, Global Green.
The good news is that players like Global Green are raring to go: “We have grown through acquisitions and are keen to establish more partnerships and mergers,” admits Chhabra. In effect, there is likely to be no turning back. All these initiatives are bound to rev up the rural economy. “New technology is going to collapse the supply chain (earlier, there were up to seven intermediaries between the farmer and the actual buyer). This is a win-win for consumers and the farmers. Indians are willing to pay a premium for quality, but they do not have to as the process gets streamlined with such small initiatives that will acquire larger proportions,” says Patnaik.
The Gravy Train
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