Agricultural practices in India have a very deeply rooted meaning for most farmers. Changes in the existing practices will require a lot of time and awareness programs to enlighten the farmers about the benefits of technology integration. There are many apprehensions associated with the new practices. Still, over time, it is expected that techniques such as Hydroponics or controlled open field cultivation will become a significant part of the increasing demand. Many players are operating and delivering their products in the Cities such as Pune and Mumbai by using these modern techniques and targeting B2B and B2C customers.
In conversation with Mr. Sanket Mehta, CO- Founder and an Agri preneur at Nutrifresh, we attempted to seek his opinion and understand his side of story to the changing fortunes of the Agritech Industry and how are companies gearing up for it.
Q1. How did you plan to enter in the agritech market?
Before establishing Nutrifresh, I used to work as a credit manager in a Government Owned Bank in Pune, where most of the Proposals I received were in the Agriculture segment. I used to get many business Proposals in sectors like sugarcane, dairy, and poultry. It has generated an interest in me to work and expand the horizons of the agriculture segment.
When I was staying in Mumbai, the quality of the fruits, vegetables, and the dairy products that we used to receive at our household was not good in comparison to what we saw at the farm level. The difference was not just restricted to quality but quantity and availability as well. It gave us an idea if we go a little farther from the city, it might be possible that the parameters may even get worse. It was the time that we identified a huge gap in the agriculture supply chain.
Q2. What has been the journey for NutriFresh in the market?
Initially, we thought we would start as a fintech company, but eventually we entered into core agriculture. With the help of my friend we started Nutrifresh from a 4 Acre land by cultivating sugarcane. Farmers have many apprehensions for new agricultural practices, and we wanted to overcome this myth and prove that using technology can bring about some revolutionary change. By implementing our techniques, we managed to get 120 Tonnes/acre sugarcane compared to the usual production, which is 70-80 Tonnes/acre. This actually boosted our confidence, and we started expanding segments with expertise in floriculture and other verticals.
During this time, organic farming became very popular. Nutrifresh implemented the government initiatives to support organic farming with the help Maharashtra government by leasing 250 Acres of land for open field cultivation for 10 years. Since then, we kicked off cultivating Watermelon, Baby corn, Sweetcorn, Maize, Sugarcane, Brinjal, Chillies, Okra and more.
Q3.What were the government initiatives that supported your growth?
Hydroponics does not have any specific grants from the government, since it is a high capital investment technique. However, Controlled Environment Cultivation has many state-level subsidies for seeds, fertilizers, electricity, and more. For example, electricity in Mumbai and Pune is usually Rs 10-11 per unit but for agriculture, it is Rs. 3 per unit.
Q4. What has been a growth driver for your company?
Most of the agricultural land in India lacks tech support, technological literacy, and awareness. This has resulted in poor quality of the final product. This lack of technology became our growth driver. Our farms are well equipped and highly regulated with advanced technology.
Q5. What are the challenges faced by Nutrifresh?
Our operation is highly dependent upon the quality and production volume. This technique in a controlled environment is called Hydroponics. Hydroponics has many associated problems. Open field cultivation has to deal with many abiotic stresses such as varying climatic conditions followed by risks of pests and diseases from the nearby poorly maintained farms.
Seed, Nutrients, Labour, and Climatic condition are the four major components that support the yield for any type of crop. A balanced proportion and quantity of these components help in producing a good yield. Out of the above-mentioned components the least we could control was the climatic condition. This is where the tech integration helped us achieve scalable growth.
Q6. How are your operations different from other players in the market?
We produce 42 different SKUs which have given us ample depth in each product. Therefore, going further, depending on demand and supply, if Nutrifresh has to grow a single product at scale, it will be easier for Nutrifresh to expand because of the Knowledge bank it holds.
Q7. What are the geographies that you are covering? Considering the techniques are highly climate sensitive, why are we only operating in Maharashtra and Pune?
We are currently only operating in Pune and Maharashtra local market mandis. First reason is the logistic issue, since it costs ~40% of the overall operations. Secondly, target market should be near the farm area. It helps in controlling the logistic as well as wastage cost drastically. It also helps the provider to control the lowest selling prices and better margins.
We have selectively distributed to Ahmedabad, Chennai and Delhi as well.
Q8. How is technology playing a part in your current operations?
Nutrition has executed dosing, pumping, and similar techniques were a critical part of the cultivation process. We automated these practices with the help of previously recorded data. It helped us to reduce human intervention in the process and lower the chances of error. All the techniques were well understood and were selectively implemented in the hydroponic farm.
Polyhouse farms have a very controlled setup. The temperature, humidity, and other factors outside will be automatically adjusted. If the temperature is inappropriate, the automated water system will be used to balance 25 degrees Celsius temperature, which is conducive to the plant growth. Similarly, all other parameters are IoT-dependent and have a very controlled supply system.
Q9. Do you think hydroponics will become the future of Indian Farming?
Yes, previously the production was highly dependent on the climatic condition of a particular region. Now, since we have control over the most critical parameter, it may help us achieve seasonal crop benefits.
For example, coriander which is required 365 days but cannot be grown during the rainy or peak summer season due to varying temperature and climatic conditions. To combat the current demand, hydroponic holds a very promising future in India.
Q10. Is there any demand pattern that you observed during the course of your business?
The hydroponic technique can help you grow any kind of crop, but the products that give high commercial benefits are the exotic vegetables and not the normal crops. Any other Tech induced Agri player or farmer is still controlling 60% of the climate while we are controlling almost 90%, which comes with more capital expenditure. Considering this, we only have commercially viable crops. The exotic product category has 50-60 products out of which Nutrifresh started with 42 different varieties. Considering the deep research on the growth, distribution, demand, marketing and sales these products were selected.
Q11. How do you source and supply your products in the market? Do you have any specific partnerships?
Nutrifresh is indulged in industry partnerships for the input supplies for regular goods production. Some of the commodities are highly demand-driven or contractual based for example beefsteak tomato. If Beefsteak Tomato has a contractual demand for 100 Tonnes, then we would grow 200 Tonnes. 100 tones are directly moved to the contracted party, for the remaining 100 Tonnes we identify the market and move the product.
For local supply, we have our tempos and cars to deliver these products. For the last mile delivery to B2C consumers and certain B2B clients, we have appointed Porters and Dunzo. If the product has to be delivered to other parts of the country it is done via rail or bus transportation. We generally prefer to move our items during the overnight journey.
Q12. How do you identify your addressable market and what is the value proposition of Nutrifresh? Are we also targeting giant food processors for bulk supply?
Addressable market are mostly the ladies across Pune and Mumbai market. However, the demand is very much fluctuated during different seasons. In winters we only cater to people who are into high value income groups because they want consistency in the quality but during the summers and rainy season it is mostly all the people looking for food which is ~3.4 Cr people. Even if we consider catering to 10% of the overall population, the area required under cultivation is going to be huge. For eg. we have to consider that a 10 acre production can only address 15,000 people at once. This is self-explanatory that the market opportunity is huge in Pune and Maharashtra. Our USP for the B2C audience is the consistency.
To identify B2B audience we look for other hydroponic players whose portfolio has limited commodities. Value proposition for B2B players is the “bulk quantity purchase from one place”. The problem of getting connected to a large scale food processor is the limit of production. Retail chains such as McDonald’s have a requirement of 3 Tonnes of Tomato/day for this >40 acres of land will be used to produce one type of commodity. Farmers with the land area of 10 acres, will not be entertained by these giant companies because the sourcing would become critical and unmanageable for them.
Q13. How do you manage your waste? Do you have a provision to park both grade A and Grade B products?
We have industry partnerships to support the supply of both types of food quality produce. We are currently supplying grade A products to big food retail chains such as Mcdonald's however, the entire Horeca industry purchases Grade B products. In B2B business we are connected to local aggregators.
Q14. How has COVID impacted your company?
COVID helped us accelerate the growth. Earlier, our model planned to target only the Horeca industry. We had agreements with JW Mariott, Taj Hotels, Big Bazaar, and more. After the advent of COVID, all these agreements got cancelled under the “act of god” agreement clause. Initially, we saw tonnes of vegetables getting wasted. After this, we realized, we need to reach out to other B2B clients, and other aggregators and also cater to B2C consumers to sustain this downfall. The change in the existing business model turned out to be very beneficial for us.
Q15. What do you think is the future for Nutrifresh in the Market?
Nutrifresh wants to overcome the price war and benefit from the 100% dependency after a few years. We will gradually use skimmed pricing policy for our high-quality products. We are planning to expand our model by firstly building a knowledge platform for the 42 crops we are well versed with and secondly, owning and developing agricultural lands and growing and selling the produces across.
We are planning to capture at least 40% market share in the coming 5 years. After this, we might look upon expanding to other geographies such as Surat and Ahmedabad.
For any queries or feedback, reach out to the author at Namit@kenresearch.com
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