Output-side digital platforms
Output-side digital platforms
Business Model Description
B2B or B2C platforms for buying fresh produce from farmers (including meat products) and offering efficient delivery from farmgate to retailers/end consumers, with the objective to resolve the supply chain issues which affect Indian agriculture. Such models will also help in eliminating middle-men who seize farmers’ margins (without offering any value addition), thereby increasing farmers’ income. Farmers are also offered guidance and support on usage of digital tools.
Expected Impact
Improvement in farmers' income levels , reduction in crop wastage and bolster food security by enabling easy and ubiquitous access to digital platforms for selling farm produce.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- India: Countrywide
Sector Classification
Food and Beverage
Development need
As per the SDG India Index report by Niti Aayog (4.2), India’s progress on SDG 2 (Zero Hunger) is lagging with a cumulative score of 35 on 100, since the score of 20 states and 3 UTs is under 50 points. This is due to low gross value added (GVA) in agriculture per worker of ~68000, in comparison to the targeted GVA in agriculture per worker of 136,000 in accordance with UN SDG target 2.3. (4.2)
The government aims to double farmers’ incomes by 2022 (4.3). In order to achieve this target, farmers’ income, which increased at an annual growth rate of 3.31% during 1993-1994 to 2015-16, is required to grow at 10.4% in order for it to double between 2015-16 and 2022-23. (4.4)
In 2019, India ranked 72nd in 113 countries [in comparison to 76th in 2018 (4.5)], as assessed by The Global Food Security Index (GFSI) based on four parameters—affordability, availability and quality and safety (4.6). As per the Global Hunger Index, 2018, India was ranked 103rd out of 119 qualifying countries. (4.7)
Policy priority
The Public Distribution System has been revamped under the National Food Security Act (NFSA), 2013. Key features include:
- This system implements a paradigm shift in the approach towards the issue of food security at the household level, from welfare to a rights-based approach.
- This Act covers about two-thirds of the population with 75% of rural and 50% of urban population to receive subsidised food grains – rice, wheat, and coarse grains at affordable prices per kg.
- The Act has been implemented in all States/ UTs and has reached around 807 million people.
- Under the “Antyodaya Anna Yojana” (AAY), the poorest from amongst the Below Poverty Line families are entitled to 35 kg of food grains per month at more subsidised rates. (4.2)
The National Mission for Sustainable Agriculture, in tandem with other missions under the National Action Plan on Climate Change, addresses the climate change risks and aims to increase agriculture productivity especially in rainfed areas focusing on integrated farming, soil health management, and synergising resource conservation.
GOI has proposed the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 with the objective to transform Indian agriculture by offering farmers freedom to sell anywhere and to attract private investment in Indian agriculture. (4.10)
Gender inequalities and marginalization issues
While agriculture employs about half of India's workforce (58% of India’s population), it contributes less than 20% to GDP. There is, thus, a pressing need to increase agricultural productivity, and create alternative channels of employment so that many of those currently employed in agriculture can obtain better opportunities of work. (4.2)
As of 2018, 81.1 percent of the dairy and milk processing market was part of the unorganized sector and 71 percent of total participants in the sector are women. (15.1)
Investment opportunities introduction
The market size of agriculture and allied services in India stood at ~USD 283.68 billion in 2018 (4.1).
Food and Agriculture
Development need
India is among the largest producers of fruit and vegetables in the world, with an annual output of 260 million tonnes (4.8). Despite this, United Nations Food and Agriculture Organisation (UNFAO) estimates that more than 40% of food produced in India (i.e. ~USD14 billion worth of food every year) is wasted before it reaches the consumer. With such massive food wastage, ~194 million Indians go hungry every day.
Policy priority
The Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) focuses on improved water efficiency with the motto of “Har Khet Ko Paani” and “Per drop more crop” and provides end-to-end solutions in the irrigation supply chain, viz. water sources, distribution network, and farm-level applications. (4.2)
The Pradhan Mantri Fasal Bima Yojana (PMFBY) provides better insurance coverage and agricultural credit at a reduced rate of 4% per annum to farmers.
The increase of the minimum support prices for all kharif and rabi crops at least by 150% of the cost of production has contributed to an increase in farmers’ income.
In addition, the Pradhan Mantri Kisan Scheme has been initiated to extend the payment of ~USD 79 per year to every farmer in the country, which provides a further boost to their income.
Gender inequalities and marginalization issues
While agriculture employs about half of India's workforce (58% of India’s population), it contributes less than 20% to GDP. There is, thus, a pressing need to increase agricultural productivity, and create alternative channels of employment so that many of those currently employed in agriculture can obtain better opportunities of work. (4.2)
Investment opportunities introduction
Since improved food availability is the basis for sustainable development, innovative initiatives are being introduced to modernise agriculture and reduce the negative impact of climate change.
Key bottlenecks introduction
What worked in one city, may not work in another city. The challenge is to replicate the model (systems and processes) in each new city, because each city has its own smaller nuances of supply network, customer profile, behaviour, logistics capability and quality. (13.3)
Agricultural Products
Pipeline Opportunity
Output-side digital platforms
B2B or B2C platforms for buying fresh produce from farmers (including meat products) and offering efficient delivery from farmgate to retailers/end consumers, with the objective to resolve the supply chain issues which affect Indian agriculture. Such models will also help in eliminating middle-men who seize farmers’ margins (without offering any value addition), thereby increasing farmers’ income. Farmers are also offered guidance and support on usage of digital tools.
Business Case
Market Size and Environment
> USD 1 billion
Agritech start-ups are operating in an attractive market with an estimated potential of USD 24 billion by 2025, wherein agritech segment supporting supply chain tech and output market linkages is estimated to reach a market potential of USD 12 billion by 2025. (12.9) The potential market for supply chain servicing online portals (like Ninjacart) is worth USD 250 billion. (13.8)
The Indian AgriTech sector is growing at a rate of 25% year-on-year and comprises more than 450 start-ups. As of June 2019, the sector has received more than USD 248 million in funding, which is a substantial surge of 300% as compared to the previous year. (13.3)
Indicative Return
Ninjacart’s revenue comes from the margins at which it sells the produce procured from the farmers to retailers, by eliminating intermediaries and streamlining the supply chain. (13.3) In 2019, Ninjacart grew nearly six times in volume and revenue. (13.5)
Crofarm, which acts as an intermediary between farmers and online and offline retailers has managed to grow its sales nearly 2.2X to a little over USD 3.2 million in FY20 from the sales of around USD 1.5 million it made during FY19.
Licious (online meat and seafood market) is currently present in Mumbai, Pune, Delhi-NCR, Hyderabad, Chennai, and Chandigarh, and processes more than 17,000 orders a day. It is aiming to reach a target of USD 140 million in revenues by 2023. (13.6)
FreshToHome (online meat and seafood market) claims to be seeing a 30% month-on-month growth and has expanded to Mumbai and Pune, and the UAE. With its last round of funding led by Iron Pillars, it plans to continue expanding its operations to newer areas. (13.7)
Investment Timeframe
Medium Term (5–10 years)
Such models are essentially demand-supply matching agents, and a platform can unlock its value only when network effects are achieved.
These businesses are asset light models and service-oriented businesses, which are currently investing in growth (growth happens above EBITDA level). Thus, they are likely to hit a profit as soon as they stabilise and stop investing further in expansion of business.
Investors also believe that newer players entering the market can re-use the learnings of existing players, and can potentially achieve scale at a faster rate, than their predecessors.
Ticket Size
PE and VC deal values in the food and beverage sector stood at USD 881 million, through 83 deals in 2019. (12.22)
Market Risks & Scale Obstacles
Market - Volatile
Capital - CapEx Intensive
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
With an annual output of 260 million tonnes, India is among the largest producers of fruits and vegetables in the world (13.1). Wastage of more than 40% of food produced in India (i.e. ~USD14 billion worth of food every year) before it reaches the end consumer can be attributed to supply chain inefficiencies (including limited connectivity, lack of transparency, spurious products, inadequate storage infrastructure and supply-demand mismatch), which result in post-harvest losses estimated at ~USD 7 billion per year (12.8). This results in ~194 million Indians going hungry every day. (13.2) Digital platforms that resolve these supply chain issues and enable farmers to sell their produce directly to customers, thereby eliminating the middlemen (who seize farmer’s margins) can not only help in eliminating such wastage of food products, but also help in increasing farmers’ income.
Corporate investment in agricultural infrastructure has not exceeded 2% of total investment going into agriculture sector.
Factors such as limited connectivity, inadequate storage infrastructure and supply-demand mismatch also lead to post-harvest losses, thereby gravely impacting farmland income as well as morale. (13.3)
There exists a large gap between farm harvest prices (FHP) and retail prices. Prices also tend to fall below the minimum support prices in a good production year, leading to agrarian distress. Mechanisms need to be developed to ensure remunerative prices to farmers, in both ‘good’ and ‘bad’ monsoon years.
As per expert consultations, technology can help in matching demand and supply, especially in the case of fresh produce, by obtaining essential information regarding what is grown and when would it be available for sale.
Usually, companies operating output-side digital platforms (such as Ninjacart, Crofarm and KrishiHub) convince farmers to join their network by assuring them prices that are 15-20% higher than what local agents would pay, with the elimination of commission. (13.1)
Gender & Marginalisation
While agriculture employs about half of India's workforce (58% of India’s population), it contributes less than 20% to GDP. There is, thus, a pressing need to increase agricultural productivity, and create alternative channels of employment so that many of those currently employed in agriculture can obtain better opportunities of work. (4.2) As of 2018, 81.1 percent of the dairy and milk processing market was part of the unorganized sector and 71 percent of total participants in the sector are women. (15.1)
Expected Development Outcome
Business models under this IOA have the potential to reduce demand-supply mismatch especially in the case of fresh produce (fruits, vegetables and meat), by providing essential information about what is being grown and when it will be available for sale/at what price.
Business models under this IOA have the potential to improve prices for farmers through B2B and B2C platforms which provide a single point of sale to farmers and reduce middlemen. For instance, Ninjacart (B2B fresh produce supply chain) claims to have helped farmers boost agricultural income by up to 20%. (13.3)
Improve efficiency of the agri supply chain by timely and efficient transportation of farm produce from farm gate to collection centres, at no additional cost to the farmer.
Gender & Marginalisation
Primary SDGs addressed
2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.a.1 The agriculture orientation index for government expenditures
2.c.1 Indicator of food price anomalies
12.3.1 (a) Food loss index and (b) food waste index
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Outcome Risks
Low awareness levels and lack of knowledge, especially among the farming community is the biggest challenge in the Agri-tech industry.
With a huge rural population involved in this industry, farmers do not have the means of educating themselves to use Agri-tech methods. (13.20)
Unless farmers are educated about the benefits of selling through these platforms, farmers will continue to follow their old methods of selling through middlemen.
Impact Classification
What
Resolving supply chain issues in Indian agriculture can help in doubling farmers' income, reducing food wastage and helping India move towards its zero-hunger target.
Who
Farmers will benefit from improved supply chain management and reduced wastage of their produce.
Risk
Unless farmers are educated about the benefits of selling through these platforms, they will continue to follow their old methods of selling through middlemen.
Impact Thesis
Improvement in farmers' income levels , reduction in crop wastage and bolster food security by enabling easy and ubiquitous access to digital platforms for selling farm produce.
Enabling Environment
Policy Environment
The Pradhan Mantri Kisan Sampada Yojna offers a comprehensive package to create modern infrastructure with efficient supply chain management from farm to retail outlet. (13.11)
Krishi Udaan will be launched by the Ministry of Civil Aviation to transport agri-products to national as well international destinations. (13.12)
The Electronic National Agriculture Market (eNAM) was launched in April 2016 to create a unified national market for agricultural commodities by networking existing Agriculture Produce Marketing Committees (APMCs). (13.13)
Financial Environment
Financial incentives: The Government of India has allowed 100% FDI in marketing of food products and in food product E-commerce under the automatic route. (12.11) A financing facility of USD 13.24 billion will be provided for funding agriculture infrastructure projects at farm-gate and aggregation point, to develop affordable and financially viable post-harvest management infrastructure. (13.11)
Other incentives: GOI has set up USD 13.3 billion fund for farm-gate infrastructure for farmers. (13.15) Supply of warehousing is expected to rise from 211 million sq. ft in 2019 to 379 million sq. ft in 2023 with the introduction of the National Logistics Policy and setting up of warehouses under PPP models. (13.16) The Indian government has embarked on an ambitious USD 936.38 billion project called Sampada, a national scheme to develop an integrated supply cold chain for agricultural products. (13.2 and 12.11) The Finance Minister announced the extension of ‘Operation Green’ —a scheme for integrated development of tomato, onion and potato (TOP) value chain, with an allocation of USD 66 million — to all fruits and vegetables. This will be a pilot project and will have a 50% subsidy on transportation from surplus to deficient markets and 50% subsidy on storage, including cold storage. (13.17)
Regulatory Environment
The Ministry of Agriculture and Farmers' Welfare (formerly Ministry of Agriculture), a branch of the Government of India, is the apex body for formulation and administration of the rules and regulations and laws related to agriculture in India. The three broad areas of scope for the Ministry are agriculture, food processing and cooperation.
In May 2020, Central Government announced its plans to amend the Essential Commodities Act to deregulate food items like cereals, pulses and onion besides bringing a new law to give marketing choice to farmers for enhancing their income (4.9). Benefits include: - This will help to make the agriculture sector more competitive and ensure better price realisation for farmers. (4.9) - By removing stock limits on all agri-commodities, the government is hoping that freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into agriculture sector and significantly drive up investment in cold storages and modernisation of food supply chain. (13.14)
GOI plans to frame a new law which will: (4.9) - provide adequate choices to farmers to sell their produce at an attractive price - enable interstate trade without restrictions - create a framework for electronic trading of farm products.
Marketplace Participants
Private Sector
Investors: Accel Partners US, QUALCOMM Ventures, M&S Partners (Singapore), Zop Smart, Syngeta Ventures, Accel India Neoplux, Trifecta Capital, Nexus Venture Partners, Kalaari Capital, Nandan Nilekani, Steadview Capital, Tiger Global, Walmart, Flipkart, Wingify Software, Omnivore, Vertex Growth Fund, 3one4 Capital, Bertelsmann India Investments, Vertex Ventures Southeast Asia and India, Sistema Asia Fund, Iron Pillar, CE Ventures, Massar International, Al Nassar Holdings, TTCER Partners, Sin Growth Partners.
Private Sector
Corporations: Ninjacart, Crofarm, KrishiHub, Udaan, Jumbotail Technologies, Farm Taaza, Kamatan, Gobasco, WayCool, Farmily, fresh2all, VegFru.com, Licious, Meatigo, FreshToHome. Models like Loop (pilot project in Bihar) offer a pooled ride sharing service for farmers to transport their produce from farms to market. (13.18) Since the pilot began in August 2015 and until mid-January 2016, nearly 1,492 farmers in 77 villages have used Loop to sell 2,672,553 Kgs of their produce. This project is operational in 2 districts, Samastipur and Muzaffarpur of Bihar. Transactions of ~USD 414692 have been carried out in 1,624 visits by the aggregators (village level agricultural extension workers, who purchase the produce from farmers) to 19 mandis in Bihar. (13.19) FrontalRain Technologies offers a supply chain software solution for agribusiness and food processing companies.
Non-Profit
The National Centre for Cold-chain Development (NCCD) has been established to promote and develop integrated cold chains in India for perishable agriculture and horticulture produce.
Target Locations
India: Countrywide
References
- (4.1 https://www.ibef.org/industry/agriculture-india/infographic 4.2 https://niti.gov.in/sites/default/files/2019-12/SDG-India-Index-2.0_27-Dec.pdf 4.3 https://asia.nikkei.com/Business/Startups/Indian-agritech-startup-targets-10m-users-in-nationwide-expansion#:~:text=Sheth%20said%20AgroStar%27s%20goal%20is,become%20more%20profitable%20and%20prosperous. 4.4 https://www.drishtiias.com/summary-of-important-reports/strategy-for-new-india-at-75 4.5 https://www.thehindubusinessline.com/economy/agri-business/agri-tech-platform-ninjacart-expands-operations-to-delhi-mumbai-pune-strengthens-headcount-by-600/article26600072.ece 4.6 https://foodsecurityindex.eiu.com/Country/Details#India 4.7 https://www.drishtiias.com/to-the-points/paper3/food-security-1 4.8 https://www.ibef.org/economy/union-budget-2020-21 4.9 https://www.hindustantimes.com/india-news/govt-to-announce-changes-in-essential-commodities-act-dismantling-of-apmc-sources/story-TOBYYq5XvLW2fNMz0mUIYL.html#:~:text=Amendments%20in%20the%20essential%20commodities,meeting%20on%20Monday%2C%20sources%20said. 4.10 https://indianexpress.com/article/explained/an-expert-explains-farm-acts-and-federalism-6622769/ 4.11 https://www.wbcsd.org/Overview/News-Insights/WBCSD-insights/Impact-of-COVID-19-on-smallholder-farmers-in-India#:~:text=Prices%20of%20sugar%20rose%20in,places%20due%20to%20over%2Dsupply.&text=However%2C%20the%20COVID%2D19%20induced,marginal%20farmers%20in%20the%20country.
- (13.1 https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/startups-are-deploying-tech-to-improve-farm-to-fork-supply-chain-and-offer-farmers-better-prices/articleshow/67808957.cms?from=mdr 13.2 https://timesofindia.indiatimes.com/business/india-business/agricultural-wastage-is-indias-problem-no-1-here-is-why/articleshow/70974705.cms 13.3 https://inc42.com/startups/ninjacart-fixing-india-flawed-fresh-produce-food-supply-chain-bring-cheer-to-farmers/ 13.4 https://www.business-standard.com/article/specials/food-processing-industry-growing-apace-despite-margins-coming-196091901078_1.html#:~:text=3%20per%20cent.,Rs%20331.6%20crore%20(%20Rs%20275.&text=Operating%20profits%20margins%20of%20the,cent%20(5.6%20per%20cent). 13.5 https://www.livemint.com/news/india/deal-with-walmart-flipkart-will-create-retail-supply-chain-synergy-efficiency-ninjacart-co-founder-11580186775510.html 13.6 https://techcrunch.com/2019/12/16/licious-raises-30m-to-grow-its-meat-and-seafood-e-commerce-platform-in-india/ 13.7 https://ironpillarfund.com/press-release/iron-pillar-announces-an-investment-in-freshtohome/ 13.8 http://www.businessworld.in/article/NinjaCart-A-Disruptor-In-The-Food-Supply-Chain/08-03-2019-167962/ 13.9 https://www.thehindubusinessline.com/economy/how-start-ups-are-making-the-cut-in-indias-30-b-meat-mart/article29107846.ece 13.10 https://ajuniorvc.com/licious-meat-consumer-brand-india-unicorn-startup/ 13.11 https://www.investindia.gov.in/siru/indian-food-processing-sector-untapped-growth-opportunity#:~:text=A%20strong%20and%20dynamic%20food,of%20employment%2C%20enhancing%20income%20of 13.12 https://www.businesstoday.in/union-budget-2020/news/budget-2020-fm-sitharaman-sets-agricredit-target-at-rs-15-lakh-crore-for-fy21/story/395195.html 13.13 https://www.ibef.org/industry/agriculture-presentation 13.14 https://swarajyamag.com/news-brief/sweeping-reforms-in-agriculture-cabinet-approves-ordinance-to-end-apmc-monopoly-amends-essential-commodities-act 13.15 https://niti.gov.in/sites/default/files/2020-07/26281VNR_2020_India_Report.pdf 13.16 https://www.businesstoday.in/union-budget-2020/decoding-the-budget/budget-2020-fm-pushes-for-building-warehousing-on-ppp-model/story/395231.html 13.17 https://www.thehindubusinessline.com/opinion/atmanirbhar-does-not-compensate-farmers-for-losses-incurred-during-lockdown/article31802118.ece# 13.18 https://edition.cnn.com/2019/10/21/tech/india-agriculture-tech-digital-green-plantix/index.html 13.19 https://www.digitalgreen.org/blogs/loop-mobile-app-makes-farm-to-market-linkages-easy/ 13.20 http://bwdisrupt.businessworld.in/article/Agri-Tech-Industry-Its-Advantages-Disadvantages-and-Future/14-12-2016-109730/