Business Today

On the farm trail

There has been an unprecedented rise in rural prosperity over the past two decades and new technologies have come in to partly offset poor infrastructure. Companies in agri-business are finally catching the pulse of the farmlands. Shalini S. Dagar goes into the details.

Shalini S. Dagar | Print Edition: April 5, 2009

With corporate India in the grip of a recession, no CEO can afford to take a break in the countryside. For, there he faces the last frontier for big business: the food chain. The hurdles are big—poor consumers, spread over 6 lakh badly-connected villages, often without electricity, government policies that discourage companies from engaging with farmers, and fickle weather gods. Millions of marginal and small farmers operating in less than two hectares each, all vulnerable to production and price shocks. In conjunction with the emergence of retail chain, the situation then becomes what Ashok Gulati, Director (Asia), International Food Policy Research Institute (IFPRI), calls the “consolidating top and the fragmenting bottom” of Indian agriculture.

Yet, rural India is bursting with potential. Less than 1 per cent of the food produced is processed against about half in the US and one-fourths of the fruits and vegetables harvest rots before it reaches the table. There has been an unprecedented rise in rural prosperity over the past two decades and new technologies have come in to partly offset poor infrastructure. Changing food consumption patterns have created new demand, which is supplemented by export demand.

Small and marginal farmers need help to access inputs, credit and insurance. Rural business hubs that integrate these services are good options for small farmers, as ITC pioneered with its e-Choupal. For those wanting to pick agri-produce, interestingly, the advice from YES Bank’s head of agri-business, Kalyan Chakravarthy, is the same—think small.

The farm sector needs policy fixes. Yet, inadvertently, Indian companies addressing different pieces of the “farm-to-fork” chain are creating conditions conducive for change. Gulati points out that in Gujarat, agriculture is growing at 12 per cent per annum. One possible factor: dedicated power for agriculture.

The who’s who of corporate India have ventured and ventured big into rural India. BT revisited four such ventures—they aren’t the only ones who have achieved some success, but they have the presence and experience to share.

DCM Shriram Consolidated
Lots in Store for Farmer

Ajay Shriram
 Approach: Leveraging its core business of urea, hybrid seeds and sugar, DCM Shriram Consolidated (DSCL) started a chain of retail stores in July 2002. Today, the number of stores has gone up to 282 across eight states. The company has plans to touch 500 stores in 2-3 years. Called Hariyali Kisaan Bazaar, each store sells several products ranging from multi-brand farm inputs, like fertilisers and seeds, to consumer items, such as cookware and apparel. Functioning like a large format retail store, each HKB centre also provides free agronomic advice to farmers. In some cases, it also procures the produce from the farmers. A typical centre caters to agricultural land of about 50,000-70,000 acres and covering around 15,000 farmers.

Plans: More stores in more states and also more services. One related area that sounds intuitive would be back-end integration of fresh fruit and vegetable supplies for the retailers, but the company finds it a mixed experience. “As of now, we are not interested in becoming backend partners. There are many more interesting things to do on our own,” says Ajay Shriram, Chairman and Senior Managing Director, DCM Shriram Consolidated. However, Hariyali has been procuring select items at its centres from the farmers.

In future, it plans to take up the milk collection business to consolidate the produce for milk processors. In its attempt to become a full-scale service provider to the rural areas, the company is also exploring medical and educational offerings. “We are also talking to microfinance institutions to figure out what business models can work,” says Shriram.

Learnings: Start small, grow steadily in the areas that you know well. HKB started by operating in the catchment area of its core business. Agronomists at HKB help farmers make the right choices when they visit HKB stores, which reinforces the relationship.

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