Pune: Every tomato and cauliflower at ITC Ltd’s Choupal Fresh store here tells a tale and therein lies a larger tale—one about how modern retail initiatives are slowly but surely starting to transform India’s famously leaky farm-to-kitchen supply chain.
Most customers at ITC’s fruit and vegetable stores here seem to barely notice the small flyers, which talk of how the vegetables got there, but that’s fine by the company, better known as India’s largest cigarette maker.
What matters to ITC is the perception of freshness that it has been able to create and, more critically, how it has been able to improvise a system, at least locally, that allows the budding retailer to bring fresh produce at more attractive prices to customers even as farmers get better prices and much more certitude in their life.
Amid swirling and unanswered questions about the good and bad of organized retail in India and the impact it might have on existing systems of buying and selling, especially fruit and vegetables, many big industrial houses have jumped into food retailing.
Many of them have ambitious plans to either create their own supply chains or partner with others to dramatically cut down on what many believe is significant—up to one-third—wastage of fruit and vegetables in India today. Meanwhile, several industry estimates have food and grocery as the fastest growing among all segments of organized retail. Currently just 1% of all fruit and vegetables sold in India are estimated to be through modern retail.
Food for thought: An ITC Choupal Fresh outlet in Pune. (Hemant Patil / Mint)
While critics of organized retail have pointed to the lack of cold chains and other transportation infrastructure as evidence of modern retail only paying lip service to farmers, companies such as ITC are looking at creative local loops to develop more reliable—and profitable—ways to link farmers to their customers.
For the Choupal Fresh stores in this city, the story actually begins at Anil Kashith’s eight-acre farm in Yadgaon village, where the Kashith brothers grow vegetables and grapes.
Every morning, Kashith gets a phone call telling him which vegetables ITC needs that day and in what quantity. When the company truck rolls in at around 10am, he harvests exactly what was needed and loads the vegetables on to the truck.
The truck then does the rounds of some 300 similar farms and gets to the ITC’s collection centre at Manchar around noon.
Here, the final destination of the produce is clearly marked and the produce is weighed, sorted and stacked for each store. The farmers are paid and the produce moves on to the stores by 1pm.
By 3pm, Kashith’s vegetables are in Pune’s store shelves and billed as Today’s Harvest.
It is proving to be a draw, says S. Sivakumar, chief executive of ITC Agri Business.
“We tell people where the vegetables came from in part to improve the assessment of freshness that consumers make.”
A similar process is repeated in the evening—only this time the collected vegetables are stored in a warehouse and come on to the store shelves the next morning.
One winter morning, Kashith and other farmers here sell at least 650kg of vegetables. They got Rs5 for a kg of tomatoes, which will be sold at the ITC store for Rs7 a kg. Cauliflower that fetched them Rs3.75 a kg will retail at the store for Rs10 kg. Ladyfingers (okra) that they sold for Rs20 a kg will go for Rs29 a kg.
Kashith isn’t complaining. Indeed, he says if he sold his produce at Pune’s wholesale market that day, he would have only got Rs3 a kg for the cauliflower and would have ended up paying Re1 per kg as transportation costs and Rs2 per 10kg for loading and unloading, essentially incurring a loss.
It isn’t just about better prices at the end of the cycle.
ITC, along with the US Agency for International Development’s Growth-oriented Micro Entrepreneurship Development (GMED) project, tells Kashith what vegetables to grow at the start of every season, encouraging him to grow exotic, higher-margin vegetables. They also helps improve productivity through GMED’s farm experts.
They tell Kashith that thanks to family units getting smaller, the traditionally large bottle gourds are out of fashion. So, he harvests bottle gourds at 45 days, making them smaller but not unripe for ITC and at 55 days for the wholesale market. ITC also provides him with small plastic sheets to keep the bottle gourd in during transportation, so the surface remains unbruised and looks appealing.
They ask him to harvest ripe and red tomatoes as well green unripe ones so that customers can shop on weekends and cook them during the week.
And it is because of such advice that local farmer Balasaheb Gawde finds himself growing red capsicum and cherry tomatoes, peas and chillies under a green net-shed, saplings sprouting out of plastic sheets to control weeds as a locally made pre-cooling unit keeps the vegetables stay moist and fresh.
ITC does the same for some 300 farmers in three other clusters that tie up with Pune’s Choupal Fresh stores.
ITC has 14 such stores in Hyderabad, Pune and Chandigarh and plans to increase the number to 50 stores over the the next six months. All the stores are linked to local farmer clusters and offer the Today’s Harvest programme.
Inexpensive ideas, such as connecting stores to local farmers, giving market-based advice and tips on productivity will help modern retail, says ITC’s Sivakumar.
“Indian conditions are such that vegetables grow in the vicinity of big cities unlike the US,” says Sivakumar. “This allows us to save on the expense of a cold chain. Otherwise, the value gained by reducing layers will go in to overhead.”
Adds GMED’s Chandramohan Thapliyal: “Consumers are not ready to pay more for higher quality yet and farmers cannot take high risk, so we work to provide innovative, low-cost solutions.”
Even without fancy supply chain investments, those who are relying on the traditional ways of buying produce—through lots of middlemen—are finding they are already at a competitive disadvantage.
Just down the road from a Choupal Fresh in Pune, Krishna Mhase occupies a street corner from where he sells fruit and vegetables. He sells some vegetables cheaper or at the same price as Choupal Fresh. He sells okra for Rs24 a kg while Choupal Fresh sells it for Rs29 a kg while his brinjals sell for Rs12 against Choupal Fresh’s Rs13 kg.
“Their vegetables are not cheaper or better,” he says. “But, people feel they are better because they look better in the air-conditioning and bright lights,’ says Mhase, who admits business is down to half since Choupal Fresh came.
Mhase rubs his vegetables with a wet cloth to help them survive the fumes coming off the road and, for the moment, his vegetables do look firm and fresh as well. But they came in to these plastic buckets at 5am and were harvested 24 hours ago, unlike at Choupal Fresh, and are much more susceptible to fire sales as the day goes because they won’t last long.
Mhase’s friend Satish Koshti was a third-generation vegetable vendor, but Choupal and other grocery stores have already pushed him out of the business. He recently switched to a clothing store, called Sober.
Mhase buys his produce from the local wholesale market, called Gultekdi market yard, at around 5am each day. Farmers from several adjoining villages typically bring in produce late in the night, paying for transport, loading and selling to traders who, in turn, resell to small retailers such as Mhase starting early morning.
The Gultekdi market, however, is regulated by the Agriculture Produce Marketing Committee (APMC) Act, which means prices are set through an open auction.
Several states, including Maharashtra, have now amended the act, allowing retailers such as ITC to source directly from farmers rather than go through APMC.
Kashith also sells part of his vegetables to the APMC market, but says that having to bear the transport and loading cost discourages him from going there. He also claims his vegetables are sometimes weighed less than they actually are so he ends up getting paid less.