Is the corporate romance with fresh farm produce handling over? Well, it would seem so.

About two months back, Tata Chemicals ‘suspended' the operations of Khet-Se Agriproduce India, a 50:50 tie-up with Total Produce of Ireland for sourcing, packaging and distribution of fresh fruits & vegetables (F&V).

The joint venture had, in 2008, established a state-of-the-art distribution centre at Malerkotla in Punjab to sort, grade and pack produce procured directly from the fields. This centre — with 250 tonnes cold storage capacity and four ripening chambers of 10 tonnes each — supplied bananas, potatoes, tomatoes, cauliflowers and other horticulture products to retailers and institutional customers.

The decision to wind up was attributed to “non-achievement of planned scale of operations”. This, even after the Punjab Government exempted it from payment of any mandi fee or rural development fund cess on farm purchases made. Khet-Se was also into procuring apples from Himachal Pradesh and bananas and grapes from Maharashtra.

It is not an isolated case, though.

Not so fresh

In 2004, Sunil Mittal's Bharti Enterprises forayed into horticulture through a 50:50 partnership with the Rothschild Group. Punjab again was the hub for the venture, FieldFresh Foods, which even set up a 300-acre R&D farm at Ladhowal, near Ludhiana, on land leased from the State Government.

Initially, the idea was to export mushroom, okra, Thompson seedless grapes, mangoes, pomegranates and lychees to niche markets in Europe and West Asia. By 2007, however, Rothschild had whittled down its stake to 10 per cent, even as the focus had shifted to supplying seasonal vegetables, bananas, apples, grapes and citrus fruits to the domestic market and limiting exports to just baby corn.

Also, the induction of the new 40 per cent partner — Del Monte Pacific of the Philippines — meant increased emphasis on processed foods and beverages, from canned fruit drinks and slices to ketchup and sauces. FieldFresh has since exited the fresh F&V segment: Out of its estimated Rs 100 crore sales, 60 per cent comes from processed foods and the balance from baby corn exports.

Incomplete fruition

Apart from Khet-Se and FieldFresh, we also have ITC. The cigarettes-to-hotels major, in 2006, unveiled plans to open 140 ‘Choupal Fresh' stores for retailing F&V across 54 cities in three years — only to call it off in 2010.

That leaves the likes of Reliance Retail (its 650-odd outlets hawk roughly 600 tonnes of fresh produce daily), Kishore Biyani's Future Group (350 tonnes), Aditya Birla Retail's ‘More' (250 tonnes), Bharti Retail's ‘easyday' (50 tonnes) and the National Dairy Development Board-owned Mother Dairy/‘Safal' (350 tonnes). At an average Rs 20/kg realisation, even Reliance Fresh wouldn't be grossing more than Rs 450 crore.

Besides, there are corporates exclusively engaged in ‘backend' F&V procurement and distribution. Adani Agri Fresh handles some 18,000 tonnes of apples annually worth Rs 150 crore, while the Railways' subsidiary, Container Corporation of India, similarly does about 12,000 tonnes for Rs 100-120 crore.

More recently, Deepak Fertilisers and Petrochemicals acquired control in Desai Fruits & Vegetables, a firm based out of Navsari (Gujarat), specialising in contract cultivation of bananas. Its current annual volumes of 25,000-30,000 tonnes, valued at Rs 50-60 crore, are largely for exports to West Asia.

What all these details reveal is a simple fact: The grand corporate farm-to-fork vision of creating a huge business from linking Indian fields to consumers, both in overseas and domestic markets, has not particularly fructified on the ground. If after all these years, the biggest of them has not managed to achieve sales of Rs 500 crore, there is something clearly wrong somewhere.

Trying and erring

Not that they did not try. There has been no dearth of effort on their part to build supply chains to source produce, either by contracting directly with growers or through primary intermediaries, including bigger lead farmers who could liaison with others in the neighbourhood. They have also invested considerable sums in automatic sorter-grader lines, controlled atmosphere storage units, ripening chambers and other backend logistics infrastructure.

Neither were these corporates wrong in their basic assessment about India being the world's No.2 F&V producer behind China or its growing consumption demand spurred by rising incomes and urbanisation. That, in turn, presented vast opportunities to consolidate a business characterised by fragmented value chains and sizable post-harvest losses. If organised procurement and distribution had met with reasonable success in milk, why couldn't it be replicated in other perishable produce?

Where they got it wrong, though, was in assuming the horticulture business to be part of a diversification strategy – something auxiliary to the ‘core' activity of the group. That approach certainly does not work in sectors that demand high degree of promoter involvement, monetarily as well the amount of time devoted.

It is nobody's case here that a Mukesh Ambani or Sunil Mittal have been found lacking in basic commitment or passion for F&V retailing. It's just that it is too small a business, compared to petrochemicals or telecom, to engage their undivided attention.

But in food — even more so for perishables, where stocks have to be constantly rotated and replaced, while keeping unsold waste to a minimum — the need for personal involvement is paramount. It means keeping close track of purchases and arrivals, besides having tight control on costs.

Being right there

It is this day-to-day promoter participation in the running of their firms that perhaps accounts for the success of food chains such as Saravana Bhavan and Haldiram or even lesser-known retailers like Saravana Stores and Shri Kannan Departmental Stores (SKDS). These are all family owned and managed enterprises, with core interest in that particular business or operations confined to a region.

Take SKDS, having a turnover of Rs 600 crore from 33 stores in Erode, Coimbatore, Tirupur, Pollachi, Karur and other western Tamil Nadu towns. Or Kay Bee Exports at Thane (Maharashtra), which happens to be India's largest exporter of okra, bitter gourd and other high-value vegetables to the European market.

Equally interesting is Kovai Pazhamudir Nilayam, a Coimbatore-based concern that supplies Rs 100 crore worth of F&V all over Tamil Nadu. While the purchases are centralised at Coimbatore, the outlets themselves are run by family members and trusted acquaintances, making for a personalised and compact management structure.

The big corporates have sought to overcome the promoter attention problem by roping in professional CEOs and managers at fancy salaries.

But that's not enough for a business requiring lot of patient nurturing and a hands-on approach – even after which it might not grow to a size befitting the stature of a large conglomerate.

In the meantime, the venture also starts to bleed, as overheads mount and the CEOs move on. We have seen this happen too often by now. The solution: Make the CEO an owner. Even better is to become CEO yourself. If not, make your nephew.

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