India - Big Retail's changing lives in small villages

MUMBAI; There’s definitely more than what meets the eye. At least that is what came out from an on-the-field endeavour by DNA Money to discover how the dynamics between farmers and retailers are changing as modern retail evolves in the country.

Hitherto, analysts, experts and the media have wasted much ink on recording only the changing dynamics of the rural economy as retailers delve deeper into the hinterland in search of new resources for their stocks. But what hasn’t been written about so far is how the evolution of modern retail is changing the very equation between farmers and retailers.

DNA Money discovers the nuances of a farmer-retailer relationship aided by a case study by Godrej Aadhaar and a stopover in those villages that served as sourcing hubs for the country’s top retailers.

Madhav Thorat, the 58-year-old farmer owns a 10-acre farmland in Ranjini village near Pune. For generations, his family cultivated grapes on this strip of land, but money was never very good and life utterly difficult.

“The labour costs were too high and I was running into losses by producing green grapes. That was when I decided to switch to vegetables. Now I grow bitter gourd, brinjals, corn and several other crops,” Thorat said.

But this switchover could not have happened without the help of Godrej Aadhar, a rural retail initiative by Godrej Agrovet Ltd,.

In 2003, Godrej Aadhaar Retail set up a camp in Thorat’s village to work with the farmers to improve crop productivity. While the retail outlets sold fertilisers, pesticides and provided labs for soil and water testing, the technical staff visited farmers in their fields and educated them regarding agriculture.

And now, Godrej Aadhaar sources premium quality vegetable for its upscale retail venture Nature’s Basket from this village. From selecting the vegetables for retailers to harvesting, grading, packaging and transporting, everything is now done by the retailer’s own staff.

“I don’t have to invest in packaging and transportation anymore. Everything is taken care of by Aadhaar. I’ve also learnt the benefits of drip irrigation, thanks to them,” Thorat says.

Interestingly, when DNA Money visited Thorat’s farm, he or his family was nowhere to be seen. Thorat says his relationship with the retailer is such that his presence is required only when his produce is weighed and his payment is given out. “They also take care of the harvesting part. They also seek my advice if there’s any crop disease,” Thorat said.
He now earns Rs1,000 per day, most of which comes from what he sells to Godrej right in his own farm.

Thorat is just one of the several examples. Godrej has been working with farmers in 20 villages in Narayangaon near Pune.

Every morning, farmers and technical staff representing the retailers meet at a central location in most of these villages. With much enthusiasm, they discuss problems regarding crops, soil and irrigation.

Narayangaon is a place where urban business merges with agriculture, directly benefiting the farmer, retailer as well as the end consumer (well, except the middlemen of course).

Godrej Aadhaar directly procures 10 tonnes of vegetables from the farmers in these villages. Godrej buys either directly from their fields or from collection centres where farmers come in the evening to sell their produce.

Devinder Singh, agriculture category manager, Aadhaar Retail, says 50% of the vegetables that is bought from these farmers goes to Nature’s Basket.

“One part goes to those retailers that we have partnerships with and the remaining is sold in the Vashi vegetable mandi. We have increased the yield of farmers by 20% in the last five of years,” he said.

Godrej says what started off as a rural venture to promote the company’s agri-business is now even shaping up its grocery venture.

“We plan to take the procurement up to 50,000 tonnes in the next few months. We will also now sell to traders and retailers in North India,” Singh said. Clearly there is a lot of margin waiting to be captured in this business.

“The biggest challenge here is to reach the farmers with information in a reliable way, something that the government has not really been able to do. We went with a wider motive of providing assistance as well as products rather than simply promoting our wares. And it is helping us now in directly procuring fruits and vegetables.”

By bypassing the middlemen and the dozen of taxes and commissions that is paid at the mandi level, Godrej makes more than what is required to cover the expenses incurred for transportation and packaging. Moreover, the company can now handpick the best of the products for its own use, of course it has to pay a premium to the farmers for the same.

Nature’s Basket is also changing its business model from being a mass supermarket to a premium category gourmet store. “This is in now at the test phase and the expansion drive will take off in three months,” Arvind Chaudhary, chief executive officer, Aadhaar Retailing Ltd, said.