Just Stories from Some Farmer Producer Companies

Just Stories from some Farmer Producers Companies

Dinesh K Kapila

It’s been a long lazy day.  I had a rather long walk, found it most refreshing and idly watched the birds fly by ever so effortlessly across a blue sky. While walking (you must realise that walking can be boring, the mind has to focus on an issue) I just suddenly realised that the farmers, specially the section of astute leaders of farmer producer companies, we can or rather we do address them as directors are gradually but certainly  picking up the norms and various intricacies of the business end of the agriculture sector. There is a change in the offing, maybe slow, maybe scattered, maybe just evolving but on some fronts the changes are there and it is encouraging. Ofcourse I write with a limited exposure in terms of geography and interaction.   

I would not like to share names or locations but certain incidents which indicate the changes as above I plan to share today. I heard an interesting incident from two directors, both well-to-do progressive farmers, engaged in trade as also agriculture . They are engaged in the cultivation of multiple crops, with a focus on sugarcane. They grew baby corn and in a nice manner blamed me for their adventure and experience, which of course has now stabilised. Inspired by repeated advice to try marketing of their agricultural produce themselves, they loaded up baby corn in their pick up van and turned up at Chandigarh. They went to a major store in sector 17 with full confidence. Detailed explanations were attempted to be  given to the Manager  of a leading store about the quality of the produce, the distance they had come ( 125 km or so) and that the produce was really fresh from the farm. Leave alone negotiate the staff over there just about shooed them away and refused to even look at the quality of the produce or the  samples they taken to the store. They did feel humiliated and rather annoyed with themselves and their advisors they walked out and started smoking a cigarette setting on certain benches in the shopping plaza. A certain Sikh gentleman (they later came to know he owns a couple of hotels) who had been standing at the store just by chance and listened in on the entire conversation now walked out of the store and came over to them. He tried to chat up with them but they were too annoyed and feeling humiliated to talk with him. He came to the point and simply asked them if they had the samples with them, was a stock readily available and the quantity and quality of the produce and the district. The farmers asked him directly that whether he was even willing to buy or was it just a conversation because they were in no mood for a conversation. The gentleman indicated that he was certainly interested and had a look at the samples, he then asked what was the quantity and the price expected. Mr Singh, the director said he was feeling rather low in spirits and underconfident and quietly said Rs 80 a Kg for the 150 odd Kgs brought along by them. The buyer did not bargain further and simply advised an accompanying associate to arrange to pick up the lot, loaded it in a jeep and drove away. These two farmers were left totally amazed at what had happened. In the meantime the store people had watched what had happened as the bench was near the store and they came over and said they were willing to buy in case any stock was left over. They were first somewhat inclined to snub the store officers and did react a bit but then decided to remain friendly with them. Incidentally the relationship rather a business relationship prevails till now with both parties and they are regular suppliers to the original buyer. Later they reassessed the events and decided in future they would never be underconfident and have always approached commercial dealings from a certain confidence and knowledge of the markets and with a better professional approach including seeking a prior appointment. 

Another interesting incident was related to me by another group. You know jaggery (see Gud and Shakkar on Wikipedia)  is made from sugar cane and is rather lumpy and normally sold as such. A particular group of farmers were finding it difficult it difficult to sell it at a remunerative price in markets including the local market and at markets at Delhi and Gurgaon and for that matter Panchkula and Chandigarh. Ultimately they decided why not try to break it into smaller pieces of bite-size and then also wrap it up in something akin to what toffees  and sweets are. As an experiment they quoted double the rate in the market and to the their astonishment the products started selling. And along the way they have also picked up  using terms such as organic, chemical free, fresh from the farms of Haryana or saying in negotiations that as farmers they don’t know business but certainly would like to sell it atleast at a price to cover costs.  They said it works and works quite well now, though the quantity is small. At a rather well known fair they were generally standing around trying to sell the jaggery and shakkar (again from sugarcane and by the same process as jaggery, it is more powdery), they observed a strange phenomenon.  When their children were standing by and trying to sell or even the better looking and better dressed farmers, the sales were on the lower side. Next they substituted people who looked rougher or tougher or not that well dressed or maybe in a typical farmer’s clothes. To their astonishment the products started selling. It seems the customers rather the more sophisticated and maybe the better off segment were more taken in by the rustic demeanour and trusted such farmers rather than the more urbane farmers. Coming to what we call Shakkar, they found it was not really selling. In the next round they started sieving it and put it in attractive jars and then went around the fair, observed the value of labels, so they next labelled the jars (all in varied sizes). Then they kept two products side by side,  the slightly lumpy shakkar and the well sieved shakkar. They guffawed as they told me both products were from the same basic source, the same process and batch, yet the sieved product flew off the shelves at a nearly 30% markup over the slightly lumpy produce. (Just an aside, in Chandigarh, there is a weekend market for organic and exotic produce, the sellers are sophisticated, so are the buyers, it’s all very different and rarefied and seems happening, so what works or may not work, can depend).

Incidents and episodes such as above have given many Directors of FPCs tremendous insights into customer orientation and thinking. That’s what leads me to feel a commercial orientation is slowly emerging and they are thinking on these lines. They are observing the traders, they are even observing the competing farmers producer companies, they are realising the need to know margins and when to even walk away. This may not be broad based but atleast it is spreading. As I was discussing with some farmers in a  sugar cane belt, in Haryana, I found that farmers were saying in Hindi exactly what they say in Punjabi in Punjab. They don’t say they’re selling the sugar cane to the Sugar Mill but rather that they are going to the sugar factory to drop off the sugar cane. This they said has slowly started changing and the more commercial minded ones have certainly started expressing an interest  in using commercial terminology and at least developing a commercial point of thought. Another interesting sidelight is that many of them now realise the value of exposure, that a trader’s son moves around much more, learns the ropes so to say. Many now are accepting their children have to follow the same route and should know the ropes intimately.

Another trick of the trade which is there and has been told to me with great laughter came from a group of vegetable farmers. They were selling organic or other chemical free vegetables in Panchkula. They found that the cleaned up and actually superior cauliflower was selling less than the cauliflower which was equally fresh but of a lower quality, it had also not been washed and cleaned. It was priced lower too. Many customers took the lower in quality but the dirtier cauliflower as being more evident of being farm fresh and organic or chemical free than the farmers assuring that the neatly packed and washed  cauliflower was certainly better. So in their next trip they started charging a premium  for the lower quality cauliflower and they do so till date. The farmers certainly state that these processes have been giving them great insights into how the mind works of a customer as also how markets function.

The Government agencies and organisations are certainly appreciated for their guidance but their limitations are also acknowledged. They observe it’s not that the government does not want to help but certain limitations as intrinsic are there. An incident related to them was of a dynamic store manager of a government organisation at Delhi. He not only came forward to buy their cucumbers and vegetables as soon as it was delivered but also opened the store early At around 530 am to 6 am to buy the produce. The supply vehicle used to reach the market yard between 10 PM to 11 pm or so at night. But ultimately the store manager had to give up buying early because his own staff was motivated negatively by nearby traders that they were wasting their time as government servants by reaching early and buying the produce. This they said was a big barrier in buying at Government Agencies as the pricing was impacted by the extended waiting time and impact on quality. But then once they understood that every issue could not go the senior levels, they have, atleast this group has evolved it’s own mode of resolution of operational issues. But they do acknowledge readily that there are officials at multiple levels across many government organisations and departments who have not only motivated them but also given them a real leg up in their endeavours.

Then I know of a farmer producer company engaged in milk collection and it’s value addition. Doing very well they have even turned around a bank loan in time and scaled up gradually. They benchmark their  price against the price given by the government cooperative on any given day. Then they give a mark up of between Rs.3 to Rs.5 per litre on the benchmarked price in a transparent manner and this has built-up a level of trust  between their members and themselves. Confidence has gradually seeped in as payments have been regular and the farmers have realised that they are gaining. And the company is making profits and generates a reasonable surplus, though it’s operating on a lower scale. Actually efficiency and productivity are quite evident in their operations.

These are some of the stories I have been listening. At another place the government was kind enough to allot space for a shop to the farmer producer company to sell vegetables. However in due course the farmers realised the disadvantage of the location, it was  not only by being in a corner but also having a liquor vend nearby. Now they have moved on to another premises in the same locality and have realised how much impact the location and the presence of certain businesses can have on the trade. Their first shop was located in a relatively upmarket neighbourhood where ladies would walk across and do the shopping themselves. The presence of the liquor vend would discourage some from entering the store. Ever since they have changed the location they have found footfalls have increased as also the daily purchases.

Sometimes when we set up fairs and exhibitions, there is a tendency at times that do they really encourage the farmers or the company. Interacting with some of them I have realised a well-planned and publicised fair or exhibition certainly can be encouraging provided the people who mann the stall are able to explain and win over the trust of the customers. Will wheat flour mixed well with certain other healthy ingredients or Or marketed as being chemical free retail  well for example. I found that in two hours period a certain group of farmers sold out their entire produce worth Rs.52,000 in Chandigarh. To top it they sold the rest while going back in a bus after telling fellow passengers about their experience. So a well-planned initiative which is aimed at the proper target clientele can certainly yield use optimal results for the farmer producer companies. There are people now selling Ghee at Rs 900/- a Kg to even Rs 1200 /-  Kg, I met one who stated Rs 2000/- a kg even. Now this is confidence in the product and the ability to sell. But the caveat is this is all evolving, at fairly low levels in quantity.

The markets impart their own lessons too. Some FPCs are closely aligned with Agricultural Societies. In one case they acquired a Custom Hiring Centre for Farm Mechanisation, duly subsidised by the Government. However the actual financial assumptions are not working out as the private entrepreneurs have initiated their own ventures at some places and dropped their rates. Then there are operators who simply enhanced their rates. Another example they related was in fertilizers. As their subsidised stock ran out, the trader just across the road enhanced his rates immediately by Rs 50/- a bag.   Then sitting with input suppliers and companies has been tough as concepts such as advance payments, the cost of logistics, the reluctance to move away from the established chain are concerns at their end.  

Some FPCs are trying to negotiate among themselves or to study the cost of logistics. This is another interesting sidelight. One FPC offered to buy out the entire stock of tomatoes of another FPC in a slightly higher location. These farmers had a certain offer of Rs 14/- per Kg, this FPC Offered Rs 15/- a Kg. The sellers raised their price to sell to atleast Rs 17/- a Kg, The negotiations broke down but would resume again. In one FPC, the planning now is if a vehicle carries produce  to another state, it must return with a load of a produce to be sold at their end. The thought on these lines has atleast occurred. Moreover, many Directors state they have gradually understood the need to take time to understand margins, paying in instalments, the importance of honouring deals, negotiating with each layer or intermediary, building up relationships, the dynamics of retail costing etc. Margins as some now know and discounts are vital. Plus some companies, once they realise the FPC is stabilising, start imparting encouragement in concrete terms.

As regards Banking, this has been a new experience for many, understanding working capital or limits. Then scaling down their own expectations, being realistic on the quantum of bank loans, understanding security issues and documentation etc. They value capacity building, guidance and subsidies etc, but the actual learning by sitting in branches and with traders is more valuable in the long run as per them.  The actual process can be somewhat tough at times as per some I have met, but brings about realism in planning. Similarly, sitting with CA’s and understanding compliance and the filing of returns and the drawing up of accounts was absolutely not understood earlier but some have now started understanding the essence and the need to gain knowledge on this front.  

These are some of the stories I hear. It’s sporadic, it’s not occurring across on a greater scale but it is happening, even if the concept may take time to filter to all members. This bodes well for the future. And certainly gives hope.

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