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)