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India: Ooty-based agri firm bridging farmer-retailer gap
On the face of it, what Ooty-based Lawrencedale Agro does appears to be pretty simple: buy carrots from farmers, wash and grade them and supply to retailers in cities. But hidden in the simplicity are some unique features that seem to escape the naked eye.
Everybody knows that if you give farmers timely advice on matters such as soil health and type of crops to cultivate, among other related issues, agriculture will blossom.
Hence, almost all large-scale retailers (Reliance Fresh, Heritage, More) have tried their hand at interfacing with farmers directly, with clear and obvious benefits to both parties.
But the problem with direct interaction with farmers is it is neither their core business, nor easily scaleable.
In 2008, four people with varied backgrounds — KP Nair, P Vijayaraghavan, R Balakrishnan and LK Narayanan — joined hands to set up an ‘end-to-end agri value chain’ company, Lawrencedale Estate and Farms, or LEAF.
It was the brainchild of KP Nair, a serial entrepreneur, who founded Microland, Computer Point and ETT Ventures. He teamed up with P Vijayaraghavan, an Ooty-based engineer. Together they roped in R Balakrishnan, one of the founders of CRISIL. Soon, another investor, LK Narayanan, joined them.
Since then, through its subsidiary Lawrencedale Agro Processing (India) Pvt Ltd., which has received private equity funding, LEAF has been supplying Ooty carrots to a phalanx of retailers, including Reliance Fresh, Big Bazaar, Big Basket, Heritage and Wal Mart.
Buying, with a difference
LEAF assures a base-price plus a mark-up if the market prices are good. The company’s CEO, P Vijayaraghavan, recalls that two years ago, LEAF paid farmers ₹15 a kg, while the mandi prices were ₹8. Payments are made into the farmers’ bank accounts within 24 hours, he says.
Secondly, while retailers pick up only the best grades, LEAF buys all the farmer brings, and pays them the same price for all grades. While it grades the carrots and sells the top grades to retailers, the mutilated and out-of-shape carrots go to the HORECA market-hotels, restaurants and caterers.
With its own fleet of trucks, the company can also keep logistics costs under check.
The company plans to set up a new processing plant. But will things be the same after scale-up? Vijayaraghavan is confident of pulling it off.
Publication date: 5/5/2015
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