Creating Market Linkages For Farmers
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Transcript of Creating Market Linkages For Farmers
CREATING MARKET
LINKAGES FOR FARMERS
THE EFARM STORY
VENKATA SUBRAMANIAN
FOUNDER, MD
IFAD CPMT meeting , Dec 6 2009, New Delhi
Introduction
Venkata Subramanian Founder & Managing Director, Matchbox Solutions &
eFarm, Chennai
Brief profile :MS (Computer Science), 2003,University at
Albany, NY ,
B.Arch , IIT Kharagpur ,1995 , India
12 years of experience in IT industry in both
technology & commercial roles (7+ years in US)
Head of key outsourcing & consulting accounts in
Insurance, Capital Markets & Banking
Introduction
• Srivalli , Co-Founder, CEO
MBA , B.Com Taxation
8 years experience in Sales, Marketing, &
Operations. Has run two start-ups and
organised fund raising for NGOs as part of
CSR programs.
Responsible for business development, finance
Currently Better known as ….
Hi-tech
Sabjeewallah
;-)
IT enabled
Annachee !!!
Weekend
beachside
Organic
Carbazaar
guy
The Farmers’ crisis : A Reality check
From crisis to concept : How we built the business model
What is eFarm ?
How does eFarm work ?
What are the key Benefit to Farmers ?
Lessons Learnt
IFAD & eFarm : Next steps
The story line
The Indian Agri Supply Chain Current State : Too Many Steps , Too Little Value Addition
Wholesalers to Retailers
Terminal markets to neighborhood wholesalers
Regional mandi to Terminal markets near
large cities
Harvesting of Vegetables
A local mandi auctioning
Local to Regional mandis for Auction
• Unorganized, unregulated, unprofessional &
unprofitable
• Lack of demand/supply data
• No reliable sales, distribution, marketing channels
• Poor logistics and storage
• A Middlemen’ dominated market
•No IT/ERP usage – decisions are adhoc and arbitrary
1
2
3
4
5
6
Retailers to Dining Table
7
Loss in transit
40%
Price hike
End to end
> 400%
So many solutions , but why still a crisis ?
Cold
chain Modern
retail &
logistics
Micro
finance &
Grants
Increase
yield
ICT
solutions
Export
market
R & D
Contract
farming
Only a crystal clear question yields a transparent answer
– Zen saying
Development of ModelStudy of existing supply chain
Visits to farms
across Tamilnadu
A Roadside farmers
auction in a village
Govt. farmers
direct sales market
,
Theni & Hosur
Developing the model
Discussions with
Agri experts ,
Supply chain
managers, existing
models , industry
veterans
Discussions with
NGOs
, Microfinance
, Rural banks & self
help group
members
(centre)
Forming pilot focus
group with
representative
members across the
chain
Farming in India : a Social activity or
business ?
Production (Farmer)
Sales & Marketing
HR & Training (Labour)
Logistics & Supply
chain(Transport)
Processing & QA (Post
Harvest techniques)
Finance & Accounting (Loans and
Grants)
IT/MIS (Market
info)
R&D (Agri research)
Marketing : The missing link ?
Other industries have differentiated
production from marketing/sales
Agriculture – Farmer handles both
roles
Brands have value !! Indian
products though superior have not
established a brand
What are the main end customer
segments and their needs?
Low Income Group
• > 40% in volume
• Buy from neighborhood markets (evening)
• Pay more for less quality
Middle Income Group
• ~ 20% in volume
• Buy from street vendors
• Price + Quality conscious
High Income Group
• ~5% in volume
• Buy from retail chains
• Quality & variety conscious
Hotels & caterers
• ~25% of volume
• Buy from wholesale mandi
Food & Drink processors
• ~5% of volume
• Product specific buyer
• Large volume + fixed price range
Export
• ~1% of volume
• Best quality / specific products only
What are the typical price points ?
Eg: Ooty Carrots (As of 29th June
2009)
5/kg
20/kg
28/kg32/kg
Farmer’s market
(In Ooty/
Kothagiri)
Metro Terminal
Market
(Chennai)
Kirana
stores, Pu
sh carts
Branded Retailers
500 % Price hike
Over 500% Price hike on average to customer , but no value addition
Changes hands several times: 40-50% is wasted – which adds to the costs
Prices set at each intermediate point arbitrarily by brokers/agents without any
planned demand/supply data
Farmer typically operates at 25% loss , End retailer less than 5% net margin
Regional
mandi
(Mettupala
yam)
12/k
g
Neighbourhoodm
arket
(Thiruvanmiyur
Chennai)
24/kg22/kg
End
customer
price
Premium Grade
(Export)
42/kg
Source : Ooty market traders, Chennai traders, indg.in
Wholesale terminal markets
Traders
Street vendors
Non brand local shops
Neighbourhood
market
Institutional Buyers
Branded retailers
Hotels & caterers
Food processors
Exporters
Current sales/distribution channels ?
Farmers
The ‘sabjeewallahs’ –
Unsung heroes of the
supply chain
99% of the
distribution is through
unorganized players
How to reduce wastage in distribution ?
Wastage in transit = 40%
= 40,000 crore in LOST
REVENUE TO FARMERS
Key reasons :
Poor demand/supply
prediction
Poor logistics &
distribution chain
“Penny saved is penny
earned”
An efficient supply chain management
model suited for India ?
•IT Systems usage : NIL
•Management team : Illiterate and average age of 55
•Age of company : Over 150 years
•Customer Segment : From slum dwellers to crorepathis
•Operational efficiency : Six sigma !!!
The Mumbai Dubbawallahs !!!
•Highly decentralized operations – agile, flexible , scalable
•Use of low cost transport medium – trains
•Use of human power for last mile delivery – No Fuel related hikes
•Strong customer relationship – personal , localized
•Simple coding, routing, labelling system – operates even without
electricity !
•Delivery excellence – fixed time , professionalism
Why is agri industry in negative growth ?
Years of neglect & low growth figures of sector = EDUCATED YOUTH DO NOT WANT AN AGRI CAREER
High uncertainty and risks = VERY LOW INVESTOR INTEREST
Large scale conversion of agri land for industrial expansion = FARMERS FIND QUICK BUCK IN SELLING LAND THAN CULTIVATING
What technologies are most appropriate for
reaching BOP segment ?
ICT Technology and the BOP segment : Challenges
• High illiteracy
• Even amongst educated – Mostly local language skills only
• Low computer skills , Low internet penetration
Technology Adoption amongst BOP segment
• Highest and fastest penetration : The mobile phone
• Self taught the phone interfaces , usage
• Pay full price for new models , talk time
Interface points
• Voice call centres / BPOs (local language )
• Natural language IVRS ( 2 way –automated messages)
• SMS
How do we start small, yet scale BIG?
Often large organizations fail in rapid
expansion phase – too fast , too soon
Create 1 fully functional, fully sustainable
unit (eg could be a collection centre , or a
distribution centre or even a store)
Replicate the successful model into two
Ensure continued viability of this expanded
unit
Continue to ‘divide and expand’
In case of any issues, we only need to take
one step back to prior state and rebuild
At a given time, number of units would be
a measure of 2n where n is time taken to
replicate 1 step
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1 -> 2 -> 4 -> 8 -> 16
…
A PVT LTD company registered in Chennai
One stop Agri business enabler
Sourcing + Marketing + Consulting + IT
What is eFarm ?
What is eFarm ? : The Big PictureConnecting the dots
Farmers
Cooperatives
Collection centers
Village ICT kiosks
Phone booths
Mobile operators
Storage
Warehouses
Value added resellers
Sorting , Grading , Processing, Packing
Small Independent transporters
Intra-city small tempos
Kiranas
Self Help
Groups
Hawkers
Bulk buyers
Exporters
Logistics Fleet
operators
Benefit to FarmersUnlock revenue potential across the value chain
Farmers
Rural Produce
Collection Centres
Quality
Inspection/ Grading
Cleaning / Packing
Routing
Long haul
Transportation
Urban area
Distribution centre
Small retailersLocal vendors
Food Processing
units
Exports
Bulk buyers
(Hotels / Caterers /
Retailers)
Compost/Manure
from waste
eFarm Common Services
Planning &
CoordinationResearch
Call centre /
CommunicationTechnology
Training &
Support
Local
Distribution
The eFarm Solution
Create a network of farmers, intermediaries, logistics providers, distributors and retailers
‘Organize’ the ‘un-organized’ rural to urban supply chain to create sustainable prices for the rural members of the chain
Create a shared sourcing/marketing/distribution/retailing platform which is a combination of offline delivery mechanism with online IT systems :
IT based B2B order matching/fulfillment system (e.g. Amazon, eBay)
+
Low cost-efficient, ‘Indianised’ logistics & delivery mechanism (e.g. AMUL, Dubbawallahs)
+
People driven Direct To Consumer Marketing / Retailing channel (e.g. HLL’s Shakti, Amway)
+
Bottom Up Entrepreneur driven model to reach all customer segments
(Self help groups, Micro finance)
Our goal
• Build a nationwide agri-supply chain network platform - Enable fair, efficient & reliable business across the community
• Make agriculture self sustaining and curtail erratic fluctuations in price/quality
• Generate job opportunities in BOP socio-economic strata in rural and urban areas
Setting up the piloteFarm office
and godown
at Mylapore
, Chennai
Upgraded
vending carts
, standardised
weights and
measures
Distribution
centre at
Chennai
(godown)
Organizing the Unorganised .. To create
a low cost, scalable distribution chain
Fix the process first
And THEN
Implement
technology
Otherwise will be
a failure …..
Social Impact : BOP segmentMurugesan, c
oconut
farmer, with
graded
coconuts
Small
tempos for
local
deliveries –
powered by
eFarm
Only a
phone call
away … a
vegetable
vendor
enquiring
prices
Panjali picking up vegetables from our Mylapore centre
eFarm
mobile store
at an old
age home
DisABILITY : Working with their strengths
Cut
vegetables
Peeled
onions
and garlic
Agri waste
collection and
composting
Over 60% of our staff have some physical or mental disability
Sorting
Grading
&
Natural
Ripening
Of fruits
Advanced Planning
Hub & Spoke Distributed network
Technology backend
How does eFarm work ?
Stocking Plan
Purchase Orders
Sales & marketing
Sourcing
manager
Farmer
Purchase Order Confirmations
Strategic Forecast
Demand / Supply Forecasting and
aggregation
COLLABORATION FOR
PLANNING
COLLABORATION FOR
OPERATIONS
<Sample spreadsheet>
eFarm : Operations Overview
Small & mid sized farmers
Rural
Collection
Centres
Urban
Distribution
Centers
Retailers /
Mom & Pop stores
Bulk buyers
Exporters
Hub and Spoke Model For
Scalability and Organic Growth
… organic growth and
expansion
Cooperatives
Forward Logistics ( Fresh Produce)
Food Processors
Catering/Hotels
SHGs
Producer
Corporations
Reverse Logistics ( Manure , Farmer supplies)
Technology OverviewBehind the scenes
Open source
Tools &
technologies
AgriXML
As a dataXchange
format
Benefit to farmersWorld Class Technology tools backing the network
Collaboration and B2B trading
platform
•Content : Daily
pricelists, Schedules, Trends
, Buyers guides
•Order management
•Search / Track items
•Delivery tracking
•Agri specific social networking
Backoffice Systems
•Customer relationship
management
•Supply chain management
•Mobile/SMS gateway interface
•Voice based interface
•MIS & Data mart
ICT in Agri marketing :
Data collection from farmers
Production data
• Produce name, variety
• Grade
• Typical yield at harvest
• Harvest cycles
• Cost price at farm gate
Farmer information
• Name
• Address
• Contact number
• Preferred mode of payment
• Bank / Post office details
• Photo
• Attestation
ICT in Agri marketing :
Price determination through cost price
analysis - worksheets
Click to open ->
Tools and calculators to
assist farmers in
determining their
Sale price
AgriBusiness Consulting
Market Analysis and Decision Support
Koyambedu
nadu tomato (data courtesy : TNAU-INDG market
information portal)
Ottanchatram
nadu tomato
What to grow ?
How much to grow ?
When to harvest ?
Where to sell ?
At what price ?
•Head to head comparisons across
•Markets
•Insight - Support level prices and
inflection points
•High / Low variations
•Identifying ‘hoarding’ and ‘cartelisation’
Example – Nendran banana
0
10
20
30
40
50
60
08/06/2009 08/07/2009
NENDRUM IN COIMBATORE MARKET
0102030405060
NENDRUM IN CHENNAI MARKET
0102030405060
Nendram in Bangalore market
Customer : A major chips manufacturer In
chennai
Problem : Nendran variety availability & quality
was poor and price was very high
Identified alternate markets for viable bulk
sourcing from alternate markets
AgriBusiness Consulting
MIS / Data Analysis
Drill down to
details
Dashboard summary
For senior management
Highlight
potential
problems
and issues for
immediate
action
Insights into customer’s procurement patterns
and identifying cost saving opportunities
ICT in Agri marketing :
Farmer’s Social Network/Portal
Agri India – LinkedIn Group ( > Link )
•Operational since Jan 2009
•connecting farmers, buyers , social agencies, agri professionals
, academicians , press reporters & students
•Leads on key demands , info about agri expos/conferences , trade news , job
announcements , new ideas , discussions …
•Articles on key topics :
•Agri business & entrepreneurship
•Organic farming
•Video clippings on key technologies & processes
•Buyer’s guide to various fresh produce (for e.g. detecting carbide
mangoes, health benefits of keerai , selecting brinjal without insects etc)
Benefit to Farmers Joining a growing, large network of Clients / Suppliers/ Partners
Customers
• VGP resorts
• Savera hotel
• Veggibazaar.com
• NH47 / OVG caterers
• Pizzaguy
• J’s Organo store, neelangarai
• Voluntary Health Services Hospital, taramani
• Kalyani hospital, Mylapore
• Venkateshwara hospital , Nandanam
• Bharani hotel, Thiruvanmiyur
• Picnic plaza, Mylapore
• Rayar mess , Mylapore
• SS Annamalai staff canteen
• Hamilton bridge area vegetable & fruit vendors association
• Thiruvanmiyur market traders association
• VAREWA
• ….etc
Major Suppliers / Farmers
• Green earth, Nilgiris
• Earth trust , Ooty
• Raj varadarajan farms , padalam
• Ecoville – organic produce
• Banana farmers association, TN
• Satguna Agro , Thanjavur
• Dept. of Horticulture & Agri marketing, TN government
• SMILE , Nellore
• Nalamagal Trust, Dharapuram
• Future agro, calicut
• Major Collection regions• Around Chennai /kancheepuram
• Karur, Namakkal
• Thanjavur
• Ooty/Mettupalayam
• Krishnagiri, Hosur
• Nellore, AP
• Theni/Cumbum
Consultants / Collaborators
• MOP Vaishnava Women’s college – Dept. of Food Science & technology
• Tamilnadu Agri University –Agri Business Incubation
• ICRISAT, Hyderabad
• PSG College of Tech – Business school
• Hospiexchange
• RASA – School for Special Children
• Nandini – Voice for Deprived
• Indian Bank – Microsate II
• IFMR
• Yes Bank / WageneganUniversity
• Microsoft
• SMS integra mobile gateway
• Silicon house hosting
• Samanvaya
• Ichiban consulting
• Exnora
As of August 2009
Access to wide range of customer base
From the domestic to export houses across
economic pyramid!
Tap a wide range of expertise and support
structure to promote agribusiness
Spreading the messageWorkshops, Training, Agri business entrepreneurship development
eFarm office and
godown at
Mylapore , Chennai
Upgraded vending
carts , standardised
weights and
measures
(centre)
Setting shop - Our
home became the
godown & store.
Innovations in
agriculture retailing
Talk at MOP
Vaishnava womens’s
college, Chennai
Conferences and
trade shows
Tie ups with Agri
research and Agri
business incubation
centres
(ICRISAT)
Talks in
management
schools and
institutions
(IFMR , IBS)
Field trips to villages and address
Farmers gathering
eFarm in the news•TATA NEN Hottest startup 2009 nominee
•IIM Kozhikode Whiteknight 2009 Business
Plan contest winner
•IIM Ahmedabad Leverage 2009 Showcase
shortlisted startup
•In the press •Entrepreneur , Sep 09
•The Hindu magazine’s Ergo tabloid (Mar
2009)
•Times of India , May 2009
•NDTV News , June 2009
•Featured in leading e-zines –
yourstory.in, startups.in
•Featured in Tamil press- Kumudham
, Dinakaran
•Outlook Money , June 2009
•JADE , June 2009
•Academic•Faculty for Food SCM course, MOP
Vaishnava college
•Key note speaker – TNAU conferences
IFAD & eFarm
Training and Consulting for farmers and NGOs
Marketing of produce
Scale up eFarm model and replicate in other
regions
Agri IT implementation partner (Agri
SRM/CRM/ERP/SCM/MIS)