This startup is going nuts over niche farmers5 min read . Updated: 16 Aug 2020, 08:06 PM IST
Delhi-based Farmley has created a B2B marketplace for high-value, non-perishable food so farmers get their due
Bihar is known for makhana or fox nuts, the popped seeds of a prickly water lily that grows abundantly in eastern India. It’s popularly branded lotus seeds, but it is in fact a different species of water lily, Euryale ferox. Its flower does resemble the lotus, but the seeds are different.
The harvesting and popping of seeds from this prickly water lily plant’s leaves is a painstaking process that has evolved in the Mallah community of Bihar. The price of makhana has increased manifold in recent years as its appeal as a healthy, low-fat snack has grown around the world. But it’s the traders who gain from exports after they buy makhana in bulk.
Delhi-based startup Farmley, which raised $2 million seed funding earlier this year from Omnivore and others, is out to change that. It has a makhana collection centre in Bihar and has been teaching growers to segregate the nuts by size, colour, moisture and other parameters. This helps the growers get a better price for higher quality makhana. It makes them aware of the qualities in demand in the end market of retailers, exporters and food processing brands. Armed with knowledge about the demand as well as how to achieve those qualities, the growers fare better.
“Even after taking into account the expenses for segregating, grading and automation, growers are able to increase margins and profits, so it’s not just traders who make good money," says Akash Sharma, co-founder and CEO of Farmley.
Sharma and Abhishek Agarwal, both IIT grads, launched Farmley three years ago as a specialized B2B (business-to-business) marketplace for high-value, non-perishable food like nuts, seeds, dry fruits, spices and honey. Recently, it created a Farmley brand of such products, making them available in retail and ecommerce outlets.
Most of the agritech startup action around disintermediating food supply chains has been in perishables, with the likes of Ninjacart providing fruits and vegetables to retailers serving urban consumers. In non-perishables, staples like grains and pulses are more organized. There are greenfield areas like walnuts, makhana and cashew farming where a niche player like Farmley is breaking ground.
“Most of the farmer producer organizations (FPOs) and small and medium processors that we deal with have very limited understanding of the evolving quality parameters and manufacturing practices that can increase their incomes," says Sharma. “The price and supply chain arbitrage in these commodities is huge."
In perishables like vegetables, the focus has been on quick delivery to offer freshness and avoid spoilage, usually within a radius of 100-200km of a city. For items like cashew, it’s segregation, grading and automation that make a difference on returns. “We bring a manufacturing mindset," says Sharma.
This takes into account the rapid growth in demand on the processing side as a slew of snacks, confectionery and ice cream makers have cropped up to meet demand from urban consumers and export markets. “There has been a five-fold increase in demand in the commodities we deal with in the last five years," says Sharma. “But a proportional growth on the supply side is lacking. Consumers are ready to pay a premium for specific grades but supplies of that nature are not readily available."
Lack of standardisation leads to processors running their factories at half or even lower capacity, says Subhadeep Sanyal, partner at agritech VC Omnivore. “The challenge for a food processor arises when the item they order arrives late or does not match the required grade or quality."
This is where Farmley has been getting deeply involved with FPOs to help develop the infrastructure and practices that can meet the new demand. It also makes the startup’s value proposition hard to replicate for better-funded more horizontal food supply chain players. “It’s when you actually go and work on the supply side that your ability to distinguish yourself and withstand competition becomes stronger," says Sanyal. “We’ve seen this with other agritech startups in our portfolio as well."
Need for traceability
“Essentially, what we’re doing is bridging the gap between demand and supply due that has emerged from changing consumer behaviour," says Sharma. This has an added dimension with the increased focus on hygiene after the covid pandemic which has created a need for traceability.
While Sharma focuses on the demand side, Agarwal is hands-on in the supply side, travelling across the country from makhana ponds in Bihar to raisin farms in Sangli district of Maharashtra, cashew nut fields near Mangaluru in Karnataka and walnut groves in Jammu. This requires an understanding of different factors that come into play for each product. For example, changes in climate have an effect on the colour and texture of raisins which makes consistency a challenge.
Indigram Labs in Delhi, where Farmley was incubated, connected the startup with FPOs in Sangli. “We ran trials, taking supplies from FPOs and getting them repackaged by a processor according to our quality grades. We were able to get better rates for FPOs with our market linkages compared to what traders pay them. Our app gave them transparency on market prices of raisins," says Agarwal.
Now the startup is helping processors and FPOs deploy infrastructure in the form of conveyor belts and detectors to ensure hygiene and absence of harmful particles, which would qualify the raisins for FSSAI certification. This is a work in progress but Agarwal sees a 60-70% increase in returns to farmers from the same quantity of output. The startup is tying up with NBFCs to finance this.
This is a model Farmley is developing with variations for each commodity. In Bihar, it works with five vendors who procure and process makhana according to specifications set by Farmley, which in turn sells it to larger food processing companies or retailers. Two of the vendors work exclusively with Farmley. Agarwal expects the other three vendors to also become exclusive partners in due course. When makhana farmers contact Farmley, they get attached to one of the vendors, making it easier on the startup which doesn’t have to reach every farm.
Despite disruptions due to covid, Sharma says Farmley is procuring 300 metric tonnes of produce, which is twice as much as what it was doing at the start of the year. “It’s about having the right idea at the right time with the right people," he says about his startup journey so far.
“Niche food supply chains are coming up the world over in cash crops, especially those with geographic specificity and superfoods with health benefits," says Abhilash Sethi, principal at Omnivore. “Global examples are moringa, hemp, quinoa, avocado, seaweed and insect-based protein. In India, makhana, millets, mushrooms and artisanal coffee have come up."
What makes it an interesting problem to solve for agritech startups is that each commodity brings with it unique challenges.