 "Ashok Sharma")
There is much work to be done, from converting the consumer to favour a 'branded fruit' to managing the supply chain to suit the business' unique needs, Ashok Sharma tells Masoom Gupte
You've recently launched Saboro, a branded fruit product. Any consumer insights to share?
When we conducted our research to understand who our consumer is and where his aspirations lie, it clearly emerged that the SEC A consumer, belonging to the upper middle class, is very keen to have such a product. We also found that though this consumer is willing to have such a product, he is clear that a fruit is a fruit and anything beyond the 10 per cent price premium is unacceptable. The other important point that our research highlighted was that the consumer wants consistency. It has been reinforced by the feedback we've received from our Hyderabad retail outlets.
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The potential for such a product is huge. The Indian food market is worth about Rs 2 lakh crore. The target group which we are talking about is consuming at least 25-30 per cent of this pie, translating into a potential market size of Rs 40,000-Rs 50,000 crore.
What are the key challenges for the business?
In India, our supply chains are not well developed. And that puts a lot of pressure on us to ensure consistent supply. Let's take the example of apples. The fruit would typically come from Himachal or Kashmir. Once the fruit is harvested in these regions, you can put it in a cold chamber for six to 10 hours. Then from the cold chambers the fruit is transferred to Hyderabad (currently Saboro has been launched only in that city). It would take three-four days to reach the city. Once, the fruit reaches the city, it goes into cold storage. This is one way of managing the supply chain. The other way is to harvest and dispatch immediately to consuming markets. If we have to supply high quality fruits, there are a few pre-requisites. Firstly, as soon as you harvest the fruit, you should put it in the pre-cooling chambers with a couple of hours. This ensures that the fruit maintains its qualities. Today, there are no pre-cooling facilities in those parts of our country. Second, if you invest in these, the targeted price is bound to go up beyond the 10 per cent premium. We, therefore, need to look at sourcing strategies to manage this balance. Economies of scale, with enough pre-cooling chambers, refrigerated vans etc would of course help as well.
What about the front-end? On the basis of empirical evidence, one can say that modern trade is not handling perishables very well. How are you engaging with modern trade?
Primarily, we are trying not to push excessive stock into modern trade. We try to supply for just a day's requirement. We have a very agile distribution set up. Based on the current consumption, the next day's stock is replenished. Of course, the acceptable shelf time varies from product to product. For instance, apples can stay on the shelf for three to four days without deteriorating in quality. It would naturally be different for grapes, bananas etc. If the product stays on the shelf for longer than the stipulated time period, we have a policy of pulling the stock and selling it in the open market without the Saboro branding. Different qualities sell at different price points in wholesale markets. Even in the wholesale market we would like to maintain a certain minimum quality level. In the absence of which it makes sense to take the branding off.
Fresh fruits is a very dynamic market. It is not one where you can wait for a few months and then take decisions. Our team has to keep a tab on a daily basis, what the consumer wants, what's the condition of the products. It is important for us to be able to take the right decisions. We have, therefore, decentralised our decision making. Even at the operating level, the policies are very clear. At the operating level, they can take decisions on a commercial basis. It can't work the normal way in this business where if an officer wants to give a discount, he'll write a mail, await a response. The products might be completely damaged by the time he gets a go-ahead.
How has Mahindra leveraged its tractors business for the agri business?
Our top 150 dealers in India serve today as our service centres as well. We sell our agri inputs via these service centres. Through some of these centres we are also facilitating buybacks, that is, buying products confirming to our set standards at a fixed price. The biggest strength we have are the three million Mahindra and Swaraj tractor owners in India. Our ability to connect with these farmers is very high. We use this database to connect with them for all our agri products as well as use it for sourcing.
We also need on-ground facilities like pack houses, ripening centres, cold storage etc. In some cases, our dealers are willing to diversify. There are several opportunities to leverage the existing eco-system.
Fragmented land holdings is a challenge for any agri-business in India. How are you addressing this?
We have been working with thousands of farmers, mainly in Nashik, Sangli and Latur. These are individual farmers with two, four, and six acres. We typically require at least two acres and need the farmers to be willing to adopt modern farming techniques. Where the farmers are unconvinced about the benefits of modern farming techniques, we introduce them to others who have experienced success. We manage this by having enough people in the field and taking care of the last mile connection. Our executives, each look after eight to 12 farmers, depending on the size and location of course. Our growth strategy for small and medium farmers is, in fact, linked to our manpower strategy. We won't bring 50 farmers into our fold and not add the requisite manpower from our end. If we ascertain a farmer to executive ratio, we stick to that.
We are also using technology to connect better with this group of farmers. We have recently launched a mobile app for the farmers. Using the app, they can keep track of the activities they need to complete. For instance, say on the tenth day he needs to sow seeds, on the 20th use pesticide. The app will give him updates.
THE FIELD MAN
- Ashok Sharma is an old Mahindra & Mahindra hand. Having joined the company's farm equipment sector around 16 years ago in 1998, he has steadily risen through the ranks to head the group's agri and allied business
- Prior to joining M&M, Sharma's stints took him from Godrej & Boyce to Videocon International to Daewoo Electronics mostly in the areas of sales and marketing
- He has played a key role in expanding and growing Mahindra's Powerol and Agri businesses. His current responsibilities include strategy and business excellence for the auto and farm businesses, agribusiness, engine application business and the spares business unit
- With his academic qualifications in the fields of engineering and management, mixed with his professional background, Sharma has contributed to areas related to quality management, strategic planning and business excellence
