Agriculture Cooperatives & Food/ Grocery Startups: A Unicorn Opportunity?

March 22, 2016 Featured 0 Comments

cooperativ& startup-food

 

In my previous article on Designing Impact blog, we talked about how cooperatives and start-ups in India can collaborate to explore a billion dollar opportunity.

There are strengths and weaknesses on both sides but we can leverage it for a win-win. But here we could try to “re:imagine” this specifically for cooperatives supplying agricultural & allied activity produce (cereals, pulses, fruits, vegetables, milk & milk products)  and grocery/ agro – focused start-ups.

 

Challenges:

 

– Rural Infrastructure and Cultivation inputs

One of the biggest challenges on the supply side is the lack of rural infrastructure for farmers. Storage, farmers support for crop insurance, the supply of agricultural inputs at subsidized, resources for agriculture cultivation processes and ground infrastructure of water/ power supply consistently are some of the rural infrastructure challenges. This has also been part of larger challenges in the agricultural sector in India.

Solution approach: Cooperatives can be strong lobbyists who are self-organized with region/ cluster focus that can monitor and push the local government bodies or state government to execute the schemes effectively. NABARD and other agricultural organizations that focus on infrastructure can collaborate with cooperatives to monitor the effective implementation of agro-infrastructure programs in target regions. NABARD and government bodies can also support transport related companies that can support the supply of agro produce.

 

– Distribution, supply chain network, and market prices

Every region/ state has its own constraints of the “mandi” system, processing systems, middle-men, supply chain logistics and how market prices are governed in these regions where farmers and cooperatives that are not connected to bigger markets are exploited. There are challenges on the processing, supply chain, and distribution of agro products and services.

Solution approach: There is a good opportunity for supply chain companies (SME’s in each region) to tap on to local opportunities. There are also quality social enterprises, start-ups and SME’s that are acting as a bridge between rural agro product suppliers and urban markets.

 

– Urban Infrastructure

Tapping into a high demand of agro produce in urban markets, urban infrastructure is becoming expensive for local retailers and start-ups. They need to invest in warehouse, distribution, transportation, packaging, delivery logistics which are high cost. Big basket is already investing heavily in warehouse, logistics, and infrastructure. Grocery start-ups need to scale this effort to further growth opportunities.

Solution approach: State governments can lease out their warehouses to start-ups for supply and can be a sustainable model. Cooperatives or start-ups can take institutional support (NABARD, IFFCO, etc.) for getting warehouse and infrastructure on city outskirts for lower costs, creating employment opportunities and integrate skill development initiatives which can get support from NSDC.

 

– Modernization of Cooperative

The majority of cooperatives are not sustainable or unable to scale beyond a point due to lack of modernizations of its operations, no management or organization structure that functions like an enterprise or nurturing of talent that also focus on marketing and business growth. If cooperatives can shift their mindset, bring changes to their operations and management, it could make cooperatives as efficient and even profitable as other urban enterprises.

 

Opportunities:

 

– Technology

Technology can be a great enabler to bridge gaps in access to information, improving agro-tech products or agricultural equipment, market information dissemination, mobilising resources, access to expert knowledge/ guidance/ support for agricultural cooperatives.  Technology can play a pivotal role in solving some of the above challenges and there are existing organizations addressing them in systemic approach and solution specific such as ATMA, Farmly (a tech platform),  Kheyti (a social enterprise) and this article has listed a set of tech innovators in the agricultural sector. Grocery start-ups need to leverage technology beyond the “app model” for customers, where the technology could look at back-end logistics, aggregating suppliers and vendors (Big basket has already brought few suppliers from the cooperative sector on board).

 

– Supply chain & distribution : Hub & Spoke

There are quite a few enterprises addressing the supply chain logistics, technology aided products/ service in monitoring stock, goods movement and tracking distribution. Although they are successful in certain geographies but need to achieve larger scale yet but this has big potential. A hub and spoke model for many other enterprises could work well to manage and scale such operations. This also works with companies working on end to end operations where the hubs are in urban market of tier 1 & 2 cities and spokes are a cluster of districts around the hub of the city/ town.

 

– Branding & marketing

This is one of the most undervalued and overlooked aspect of agricultural products and cooperatives leveraging the opportunity. Several cooperatives can come under a single umbrella brand name, register it, package and market their products more aggressively to achieve scale, better margins, and growth for the farmer’s livelihood opportunities. Branding and packaging are a one-time investment which can be funded by agriculture supportive organizations (NABARD, Vrutti), foundations and corporate with CSR budgets. The branding and marketing can help them to directly tap B2B markets, direct retail chains, niche retail stores. Social enterprises such as Milk Mantra have done a good job and Aarohan foods have excellent branding and design of packaging to make it niche and aspirational product range for urban and international markets. The products varieties (fruits, vegetables, tea, coffee, dry fruits, spices, meat & fish) found in India are wide and unique, this gives us a BIG opportunity to brand each product and market it like other mainstream retailers. Grocery start-ups such as Big Basket, Grofers, Ninja Cart have resources, exposure and can hire talent to brand and package its own private labels which can procure products from the cooperatives.

 

– Retail & exports

Grocery start-ups can have an omnichannel retail presence, create in-house brands with cooperatives supplied products and leverage their online retail business with logistics and delivery. Offline retail giants also can explore similar collaboration with cooperatives and expand their supply reach for a competitive price with a quality product. If Cooperatives consider strong branding, they can explore their own independent retail stores, channels and stock their products with other retailers across the country. Few Cooperatives have explored this opportunity such as Safe Harvest and Organic Mandya. The export market is a big opportunity for retailers, grocery start-ups and cooperatives with demand for quality or organic agriculture and allied products as I have mentioned in my previous paragraph.

 

There are several resources to look at these possible collaborations such as ISAP India and Smart Indian Agriculture (it is quite informative). Although a bit old, the 2014 report by Unitus Seed Fund was also very useful information for someone like me who is no expert to comment about the agriculture sector.

 

There have been few initiatives of collaboration but I wanted to stress upon the “unicorn opportunity” to create a bottom to top entrepreneurship opportunity for the food sector and sustainable or rather profitable livelihood for Indians. There are many international food retailers and food companies entering the Indian market and they will access the agricultural products in India to squeeze their prices (few Indian companies are currently facilitating it). This will not benefit the larger population of Indians or the Indian farmers (as trickle down effect) so we rather bring Indian food/ grocery start-ups and agricultural cooperatives to leverage this opportunity and scale the growth to have a competitive edge over foreign entrants.

The opportunity is immense within the agricultural cooperatives and grocery start-ups and retailers collaborating with each other to leverage the strengths of both sides. The product varieties are wide in India, the uniqueness and indigenous of the products (fruits, vegetables, tea, coffee, dry fruits, spices, meat & fish) found in India has massive consumption opportunity not only in India and but around the world.