01 Sep Farming the right idea
Though an agricultural economy, Indian harvesting and post harvesting technology is quite outdated. Aspada Investments-backed LEAF aims to correct this while simultaneously benefiting the farmers and the consumers.
Ooty-based Lawrencedale Agroprocessing (LEAF) provides end-to-end service, from harvesting to packaging, distribution and logistics while ensuring freshness, taste, texture, appearance and nutritional value to the customers of fruits and vegetables. A social venture, it also has developed a business model that benefits the farmer by providing them not only a better margin, but also access to best practices in agriculture from across the globe. Having successfully established a client base in large format retail and wholesale stores, LEAF now plans to reach out to the smaller retailers.
LEAF began as a casual conversation between a buyer and a seller of land in Ooty. K.P. Nair, a serial entrepreneur who co-founded ventures such as ETT Ventures, 24/7 Customer, Computer Point and Microland and has more than 30 years of experience in IT and ITeS industries, bought (along with his friends) eight acres of land in Ooty to build a gated community for themselves. He met property developer P. Vijayaraghavan, and over time, there sprang a friendship between these two; enough for Vijayaraghavan to propose that instead of building houses, Nair and his friends should consider starting a farm spread across 100 acres of land. His conviction, the research that he had already done about farming and the impact it could create on the lives of the farmers on the one hand and the consumers on the other, appealed to Nair and the idea for the creation of an agro-based company took shape.
One of the greatest strengths for LEAF was that we started delivering directly at the doorstep of our clients at the specified time. This is what won us the initial set of clients.
Four co-founders – Vijayaraghavan, Nair, R. Balakrishnan and L.K. Narayanan came together to form Lawrencedale in 2008. An NRI readily forwarded the money for the venture, but it had to be returned due to regulations about foreign investment in land. Fourteen of their friends made generous contributions to this venture knowing very well that they may never see any returns.
With Rs. 4 crore thus mustered the company bought 30 acres of tribal land in Tambetti village that had been left inactive. “We literally hopped from farm to farm getting each cleared,” says Balakrishnan. They also saw the plight of the farmers, who could only sell in a mandi in Mettupalayam at the price dictated by mandiwallah and also pay him a commission of 10 percent. The farmers also followed primitive methods of farming adding to which was the 25-30 percent returns that would also eat into their income.
One step at a time
Much groundwork was done by Vijayaraghavan about the best practices in the business globally before LEAF became fully functional. Just to get a feel of the market, LEAF started buying Ooty carrots from farmers and selling them in the Bengaluru market. Different buyers have different size requirements, so the carrots needed to be sorted, cleaned and transported.
“The cleaning was initially done in drum rollers,” says Balakrishnan. As there are better technologies available LEAF put up a plant in Palada near Ooty, where other washers were already present, in March 2011. It started delivering directly at the doorstep of its clients at the specified time, which was one of the greatest strengths for LEAF that won over the initial two to three clients. At this stage LEAF only handled four to five tonnes of carrot a day.
But the next problem was that the transportation in open trucks reduced the life of the carrots which would rot quickly due to the increase in temperatures as they were taken across from the cool landscape of Ooty’s hills to warmer climates. So in 2012, the company invested in cold storage at Ooty and Hosekote, Karnataka, as it also wanted to scale up. It also invested in packaging machines, imported from Italy, as packaging is critical for retaining freshness. It has six large and eight small trucks for transporting the vegetables all of which have temperature control mechanisms.
Growing ambitions can only be met by seeking out more and in this case, what was needed was close to Rs. 7 crore. “Since I was in the financial sector I knew enough investors. But for some of the investors I got in touch with, this was too small an amount for them to be interested,” recollects Balakrishnan.
Aspada Investments, backed by Soros Economic Development Fund, and which focusses on socially relevant ventures, invested Rs 10 crores, enabling LEAF to expand its reach. It started supplying 15 tonnes of carrots a day in Coimbatore, Bengaluru, Chennai, Hyderabad and some parts of Kerala. Retail and wholesale majors such as Wal-Mart, Big Bazaar, More, Reliance Fresh, Spar and Nilgiris became part of its customer network over time. “Getting the first one or two customers was difficult. But, because of the convenience we offered of delivering to the stores directly, the subsequent expansion was easier,” comments Balakrishnan.
Reaching all audiences
The first plant could deliver only 12-15 tonnes a day and was becoming a bottleneck as the market demand was for 100-150 tonnes of carrot a day. LEAF decided to set up a larger plant in Jadeyampalayam near Coimbatore. The plant, commissioned by the in-house team completely, can handle 100 tonnes a day and expects to achieve 50-60 tonnes by next March.
LEAF’s current plan for growth includes reaching out to the local retail vegetable markets. In addition, the company has started growing more varieties of exotic vegetables after experiments on their suitability to grow in Ooty’s climate.
The team has grown from 12 people in the first plant to 60 with the second and 30-40 indirect employees. “Only now people from the industry have started joining us,” says Balakrishnan, admitting that it has started seeing the numbers to justify the recruitment just now. The company registered a turnover of Rs 15-18 crore last year but is cautious about projecting future revenue figures. The company also wants to raise more funds, about Rs. 50-75 crores, after achieving 50 tonnes in the next one year.
The company plans to continue to strengthen its presence in the south and touch parts of western India. North India is still not on the cards but experiments are being carried out to source vegetables from there.
Friends of the farmer
At the core of this venture is the impact LEAF intends to create in the lives of the farmers and the farming community. It has initiated a community farming drive by connecting to 2,500 farmers in Nilgiris, Chikbellapur and Hyderabad, providing them with high quality seeds at lower costs, helping them right from the time of preparing the soil to selling post harvest. It has employed agriculture graduates and also employs agri-experts to provide farmers with access to best practices that can improve their yield.
“Initially, it was difficult to convince them to sell to us and so we paid cash up front, that really helped us win their trust,” recollects Balakrishnan. Now, LEAF has encouraged the farmers to open bank accounts so that they can receive cheques as well as for money transfers.
On its 30 acres of land LEAF practices organic farming. Greenhouses are being built to grow exotic varieties under controlled conditions. “ The world has advanced in agricultural technology while we are lagging behind. Our dream is to introduce new and efficient methods of farming right here,” says Balakrishnan.