Good Businesses 2014

Sowing the way

eKutir’s farm-to-plate model is giving Odisha’s small farmers a new lease of life

It’s a sultry July evening and the upscale Patia Chandrasekharpur area near the KIIT campus in Bhubaneswar looks like any other residential neighbourhood -— people headed home after work, housewives out for grocery shopping and vegetable vendors doing brisk business. In this weekday bustle, it’s easy to miss the branded Veggie Kart by the side of the crowded road. Now partly shrouded in tarpaulin for the monsoon, and concealing some of its cheery graphics and slick branding, it has been silently transforming a daily chore in Odisha’s capital city — that of buying vegetables.

Arjyadhara Pradhan, an assistant professor of electrical engineering at KIIT, finds picking up cleaned and packaged vegetables at the cart a pleasant change from haggling with roadside vendors. “I find it a very convenient system for working women, though availability of different varieties of vegetables is sometimes an issue,” she says, adding, “Their vegetables stay longer in the fridge and tend to be uniform in quality.” The state horticulture department has its own Udyan Fresh chain of air-conditioned vegetable retail outlets but, says 28-year-old Pradhan, “They are often short of supply and we get leftover items after others have sorted through.”

It’s a welcome change for Pranab Kumar Swain, too. A former security guard with a leading agency, the 48-year-old has been operating the cart since last November. It was well worth the switch. He now makes up to ₹15,000 a month compared with a take-home pay of ₹7,500 in his previous job. Swain, like other entrepreneurs who have signed up for this innovative retail concept by shelling out a security deposit of ₹5,000 for the cart, earns 10% commission on sales. Fresh packets are delivered to him every morning, and left overs are collected by company representatives late in the evening, along with the day’s collections. Already Veggie Kart’s top seller in the city, Swain sells roughly ₹1.5 lakh worth of vegetables in a month, with a fair share of regular customers from neighbouring residential complexes. 

Going green

Veggie Kart is a 10-month-old joint venture between Bhubaneswar-based MGM Agriventures (from the MGM group of companies) and eKutir Rural Management Services, a social enterprise that was set up to support farmers with knowledge and tools to improve their crop productivity and incomes through direct sourcing. While it’s not the first to do so, Veggie Kart is the most recent addition to an ecosystem that eKutir’s founder, 55-year-old Krishna Chandra Mishra, has been building since 2009.

eKutir works with nearly 50,000 farmers across Odisha and Maharashtra, Bihar and parts of Andhra Pradesh to scientifically improve their yields and expand their cropping portfolio. Mishra, a former college lecturer, came with just the right understanding, having worked with Nabard for 23 years. Attending an intensive programme on agri-business management at the Graduate Institute of Cooperative Leadership at the University of Missouri in Columbia, US, in June 2007, made Mishra realise that a market-based and IT-led approach could be more effective than charity in solving developmental issues. Soon after, he resigned to set up a social enterprise focusing on small and marginal farmers, who constitute an estimated 78% of India’s agricultural community in terms of landholding. “I wanted to design a last-mile sustainable system for individual farmers to help them emerge out of poverty,” he says. 

Mishra joined hands with Grameen Intel Social Business, a Dhaka-based company formed by Intel Corporation and Grameen Bank of Bangladesh, to address social problems across the world through the application of IT tools. With software algorithms developed by Grameen Intel and inputs from agricultural experts across the world, eKutir’s 106 micro-entrepreneurs recommend the best practices for improving crop yields, which are based on the farmer’s landholding, soil nutrient composition and local weather conditions. Spurious seeds, for instance, are a major problem. “Even though seed manufacturers must guarantee a minimum germination rate (generally 75-80%), in practice, it is 30% due to spurious seeds. As a result, their productivity is poor and the farmer continues to suffer in a perpetual debt trap,” says Srinivas B Garudachar, director, strategic business development, for Grameen Intel in India.

A unique ID is created for every farmer based on land information such as size, soil profile and historical data on crops grown. Based on eKutir’s soil testing application, Mrittika, and its seed-selection tool, Ankur, the micro-entrepreneur then recommends crops, cropping patterns and good germination practices and, finally, forwards the requirement of seeds and fertiliser to the supplier company. eKutir has tied up with suppliers such as Bioseeds India, Nirmal Seeds, Namdhari Seeds, Paradeep Phosphates and Coromandel Fertilisers. “Seeds are provided at rates that are at least 10-15% lower than the market rate and fertilisers at 5% below market rates,” says Mishra. 

eKutir micro-entrepreneurs work on commissions on the value of transactions they provide, making 2-5% on fertiliser sales and 10% on seed sales. They are being provided with tablets and smartphones to take pictures when disease strikes a farmer’s crops. These are sent to agri-experts at the Orissa University of Agriculture and Technology (OUAT) in Bhubaneswar for advice and suggested course of remedial action.

Along the way, Mishra also discovered through research a strong correlation between sanitation practices and farm output. Tying up with World Toilet Organisation (WTO) founder Jack Sim in 2012 (Sim holds 18% equity in eKutir), he included toilets and sanitation as another objective. eKutir now works with WTO to implement its Sani Shop model in Odisha, where village-level entrepreneurs work with local masons to build toilets. The Sani Entrepreneurs are trained to provide design services and materials for the toilets for which they earn around ₹1,000, while eKutir makes ₹500 on each toilet. They also educate farmers in better hygiene and sanitation practices — open defecation in the fields, for instance, affects the quality and safety of vegetable crops. 

An independent toilet in a rural household costs around ₹10,000 on average, though prices start at ₹3,500. Farmers either pay for this directly or are funded through eKutir’s funding arm, One Acre Venture, and the loan adjusted against their supply of vegetables to Veggie Kart. Starting last year, hygiene has become a sourcing precondition. “We said we will not buy from a farmer who doesn’t have a toilet,” says Mishra. 

Launched with an initial investment of ₹10 lakh from Mishra’s own savings, last year, eKutir broke even on revenue of around ₹40 lakh from agri-services and the sanitation programme. It expects to cross the ₹1-crore mark in FY15. As on date, eKutir has 23 employees based out of Bhubaneswar in addition to micro-entrepreneurs across four states, who earn ₹6,000-7,000 a month. Mishra, like most social enterprises, also works with NGOs and CSR projects, which contribute substantially to business revenues.  

Cashing in

The big leap in Mishra’s model came only late last year, when he got into vegetable retailing with Veggie Kart Marketing. The retail venture has been set up as a separate company, whose ₹25 lakh equity capital is divided between Mishra (25%), MGM Agriventures director Pankaj Mohanty (40%) and two impact investors. MGM also extended the company an initial loan of ₹1.5 crore towards building its distribution centres and buying transport vehicles and retail carts. The debt will be converted into equity at a later stage. 

Now Veggie Kart taps, almost daily, into a network of over 500 farmers from places as far as Koraput (red, green and yellow peppers) and Kandhamal (French beans). These border districts of Odisha usually cater to vegetable demand for southern states, says Ananta Prasad Mishra, COO, Veggie Kart. “The farmer grows vegetables not knowing what price it will be sold at in the haat or mandi. We provide market intelligence, assure him of the right price, marketing and technical support.” 

Supplies arrive at various times of the day at Veggie Kart’s distribution centre, located on a one-acre plot of land very close to the KIIT campus. Of the 60 workers who operate in the 3,000 sq ft building in three shifts, 50 are women. “They are good at sorting and grading as it comes naturally to them,” says Ananta Mishra. The women, who come from the slums nearby, are paid wages in accordance with government laws — around ₹5,000 a month with PF and ESI benefits and eight hours’ work a day. For 28-year-old Pinky Bhoi, the work, pay and benefits are certainly better compared with her earlier stints at different factories and units, where the pay was delayed and meagre, and the hours long, leaving her with no time, she says, for household chores and her seven-year-old daughter. 

The centre has an assembly line feel, with workers busy sorting and cleaning vegetables and putting them into bins. The sorted vegetables are then packed into transparent and breathable packets of 250 gm, 500 gm or 1 kg and labelled with product information, weight and date of packing. These packed vegetables are then dispatched at different times of the day to various customer segments. There is also a 20-tonne cold storage unit that was recently installed and will be operational soon. 

Veggie Kart works through four retail channels. One is the e-commerce portal started in November 2013, aimed at internet-savvy working couples with limited time on hand. The numbers are small for now, with 25-30 transactions and daily revenues of ₹5,000 on average. Next are the 30-odd branded carts stationed at busy and high-traffic locations across the city. Another unique channel, Veggie Mart, enrolls neighborhood tea shops and kirana or grocery stores to sell its pre-packaged vegetables at their counters. There are over 28 of these already. Veggie Kart also supplies to institutions such as hotels, canteens and modern retailers. 

Vegetables that get left over after sorting, and from the day’s sales, go to yet another channel — the urban poor in Bhubaneswar’s slums. These sell for a third or fourth of the market rates under the Veggie Lite brand. 

Mishra has high ambitions for Veggie Kart, which delivers 6-8% margins, expecting it to break even once sales reach 10 tonne a day, from current 7 tonne. Daily sales have already crossed ₹1.5 lakh. With the core model (soil tests and input support) revenue linked to seasonality, Mishra admits it’s a long gestation game. Veggie Kart, on the other hand, has the potential to expand much faster. “Bhubaneswar requires 130 tonne of vegetables daily, but I don’t want to mess up by hurrying. We are still a small organisation,” he adds. 

The larger plan is to bring in refrigerated trucks and venture into sourcing and sale of fruits as well. Right now, Veggie Kart is expanding into neighbouring Cuttack and then to Rourkela, Jharsuguda and Berhampur. But when he speaks of taking the concept to Vishakhapatnam, Nagpur, Hyderabad and Chandigarh, Mishra appears to be biting off more than he could possibly chew. The challenges of scaling a model such as this, which depends on a carefully developed farming back-end, are only too evident. In Odisha, Veggie Kart has access to 200 acre of technologically advanced farm land owned by MGM, and another 50 acre from eKutir, in addition to around 500 acres of its farmer base. But such committed landholdings may not be easy to come by elsewhere. Mishra says he is aware of these challenges and is looking to tie up with agencies and entrepreneurs in other locations with an established producer base. 

Meanwhile, Veggie Lite will now expand faster, thanks to a ₹1.26-crore grant from the Bill & Melinda Gates Foundation and USAID as a winner of their Grand Challenge project for 2014. With four entrepreneurs in Bhubaneswar, it has a throughput of 6-7 quintals every day, across seven outlets. The entrepreneurs buy at ₹6 per kg and sell at ₹10 per kg, making ₹100-200 a day in profits. 

There’s also a thread of empathy that runs through the Veggie Lite model, Mishra claims. “A poor man understands the burden of a poor consumer.” he says. “When a farmer throws away vegetables that are not looking good, we tell them, ‘There is nutrition value in it, give it to us at a low price for selling to the urban poor.’ We keep 50 paise to ₹1 per kg as our margins.” Despite the low realisations, he’s confident Veggie Lite will outstrip the other channels when it scales up to cover nearly 60% of the city’s slum dwellers.  

Vibrant growth

Growing the sourcing base is crucial to the kind of expansion Mishra has in mind, and he’s tapping into organised farmer groups to accelerate his farm-to-plate business model. Among them is Grambhumi Vikash Parishad (GVP), a farm-focused social sector organisation that’s partnering with eKutir and Veggie Kart for expanding the producer base. Sukumar Dash, director, GVP, explains why switching from paddy cultivation to vegetables makes economic sense to the farmers. “They can get three cycles of vegetable crops in the time it takes for one cycle of paddy, which ranges from 115-150 days on average,” he says.

In Kotakusanga, a village with population of 1,050 in Nimapara block of Puri district, 62-year-old Narendra Biswal has been growing okra, potatoes, brinjals and cauliflower on his two-acre tract. After eKutir’s intervention, he says his output of okra has nearly tripled this time. Simple things such as timing of adding fertiliser and altering its dosage have made a difference. Kotakusanga’s farmers now prefer to sell to Veggie Kart instead of the Udyan Fresh collection counter, barely a kilometre away. “They [Udyan Fresh] are willing to take all our produce, including the bad ones, but give us a lower rate. Veggie Kart sorts and takes the good ones only, but also pays us ₹2-3 more per kg,” says Kalindi Charan Behera, a farmer and one of the two eKutir coordinators in the village. Introducing trust in a supply chain that is marked by uncertainty has been a key difference that farmers notice, says Pankaj Mohanty, director, MGM Agriventures: “They get a better and fair price through our transparent system of transferring money through bank accounts
or directly.” 

eKutir’s micro-entrepreneur model has helped it scale faster and tap into local knowledge and networks of the people it enrolls. Further, as an Ashoka Fellow, Mishra says he gets access to its networks and expertise from large corporations across the world. “An entrepreneur cannot do everything himself. We need to build networks and support to grow,” he agrees. But moving ahead will require additional funds — while eKutir has operating expenses of ₹7 lakh a month, Veggie Kart needs ₹10 lakh a month. “We are looking for ₹10 crore equity infusion six months from now,” he says. Mishra is clear that he doesn’t wish to dilute eKutir’s equity anymore. That’s where his vision was first seeded, after all.