An engineering degree from IIT Kanpur, a few years as software engineer, an MBA from IIM Kolkata and a few years at McKinsey and consulting – that’s how Pankaj Khandelwal’s bio read in 2009. So while agri and agri-tech are cool today, it was an unlikely choice back then when he started horticulture company InI Farms with wife Purnima. She too came into the space from another domain (engineering) with an educational background in economics and business administration. But she also brought with her an entrepreneurial approach, being from a business family.
“Purnima and I started InI Farms in 2009. Prior to that we were running a consulting company. As part of that we got a chance to work in the agriculture space, more specifically horticulture. Through that process we got convinced that this is what we want to do in our life. This was fascinating, for multiple reasons.
“In terms of opportunity size, it was very obvious that the space was very large. But we also saw the problems that were there with the broken supply chain – and therefore what fundamentally could be done in the space. This required us to take a vertically integrated solutions approach. What was also very important and insightful for us, was that this naturally led to massive social impact, just by doing the job properly,” explains Khandelwal, the company’s Chairman and Managing Director.
The intent was to bring in the management competencies of the founders, who had worked across multiple businesses through their consulting work. The time seemed right, because things were starting to improve on both technology and the physical infrastructure like roads.
“It was still early. From a start-up perspective, agri-tech as a sector has become relatively more interesting in the last four to five years. In that sense, we were a little early. We could sense it; it was obvious that it would be a very long-drawn approach. This is not a sector which is organised; you have paucity of talent. Most people who used to go to study agriculture, were people who couldn’t do any other thing. That’s how it used to be. So, we were kind of prepared for the long haul,” recalls the founder.
He adds, “Finding investors in this space was again a tough one (initially). So while a lot of things were difficult, we were quite convinced internally. It was very much a call of passion for both of us. The opportunity was big, the environment was improving, but it wasn’t the hottest sector to be in back then.”
“FINDING INVESTORS IN THIS SPACE WAS AGAIN A TOUGH ONE (INITIALLY). SO WHILE A LOT OF THINGS WERE DIFFICULT, WE WERE QUITE CONVINCED INTERNALLY. IT WAS VERY MUCH A CALL OF PASSION FOR BOTH OF US. THE OPPORTUNITY WAS BIG, THE ENVIRONMENT WAS IMPROVING, BUT IT WASN’T THE HOTTEST SECTOR TO BE IN BACK THEN.”
The Gap
The core learning or idea for the start-up then was that the broken supply chain needed to be fixed, to improve the quality of fruit. The quality that a consumer ends up seeing depends on the weakest link in the chain – wherever that quality deterioration was taking place.
“Let’s say, if I put in all the hard work and improve the quality at the farm gate, but if my logistics is not right, by the time it reaches (say) Delhi from Maharashtra, all the value-add is gone,” explains Khandelwal.
They needed to work with farmers, which meant getting deeply engaged with the production process. Identifying key factors to ensuring quality and working on every element of the supply chain was what the team set out to do.
Quality of produce, says Khandelwal, can only be improved at the farm, the production site. From there on, it is about protecting that quality, unless one got into processing.
“What vertical integration meant was, we couldn’t go very wide – we couldn’t do 50 different products,” he adds. That would have meant a wide geographic spread across the country, besides an understanding of each fruit in order to be able to make a difference to the life of the farmer. A wide portfolio was not on InI Farms’ agenda, making a difference was. They decided to prioritise a couple of fruits and ‘own’ them end to end. These were bananas and pomegranate.
The founders also realised that despite the quality produce they would offer, the Indian market was not ready to pay the attendant premium back then. They had to look overseas until the Indian market was ready.
It had to be a differentiated product, it had to be branded. The brand thus born was ‘Kimaye,’ which means ‘divine’ in Sanskrit. The proof of a quality product is when a consumer is willing to pay a premium for it, reasons Khandelwal.
“It was a long-term branded play for us. We had to get the consistency of products right. Branding would come later. Till the time the consumer sees a consistently good quality fruit, there is no point talking about brand,” he explains.
The Basics
Choosing to produce only two fruits meant that to justify the infrastructure, one had to choose fruits that were available through the year. Bananas and pomegranates were chosen because they fit that bill. That meant staying away from fruits like mangoes, which India is known for.
“When we started this, India was the largest producer of bananas but there was no export. Fruits like grapes and mangoes were exported, but banana wasn’t. But the opportunity was humongous. We were the largest producer, but the quality had to be improved at the farm gate,” says the founder.
Today, he says InI is the largest or second largest exporter from India in each of the products it deals in. The product line includes ‘Fresh-Cut’ arils and coconut, with packaging that reveals that the produce is naturally cultivated and enables traceability. For the western consumer, it makes the job of eating a pomegranate easy. For the evolved consumer, the sourcing label is now hygiene. The product is also devoid of preservatives, so technology and packaging were key to maximise shelf life. Factors like temperature and oxygen control were critical.
InI is a 200-people organisation today, engaging 5,000 farmers across eight Indian States. It exports to over 35 countries across America, Europe, Asia and even Australia-New Zealand. Offices have been opened in Netherlands and Dubai, to handle business development as well as logistics.
Farm To Retail
While InI works with farmers on one end, at the other are retailers. “We are probably the first company in the fruits space from India to get onto retail shelves (abroad) in a branded form,” notes Khandelwal. Kimaye is available in retail stores in the US, Europe and the Middle East.
“We were able to solve the problem at the back-end. That allowed us to deliver a superior quality product consistently. We were then confident that we could sign round-the-year contracts,” reveals the founder.
This marked a shift from the commodity exports on commission basis from India that was the norm when InI started operations. The founders felt that more than the commercial aspect, the ‘commission basis’ transaction mode was disrespectful towards the product. It was. The buyer would deduct his/her commission and costs, and pass on the remaInIng money from the sale to the Indian exporter.
“You did not even know the price at which you were selling your product. That happened because there was no respect for fruits and vegetables coming out of India,” says Khandelwal. Lack of consistency of product and hence lack of credibility contributed to this situation, he reasons. With that credibility earned, Kimaye was able to get onto store shelves in the West and command its rightful price. But the early days were a struggle on this front, admits the spokesperson.
The Indian Market
After establishing its presence internationally, InI Farms started looking at the Indian market in 2014-’15. The focus was on four cities to start with – Delhi, Bengaluru, Hyderabad and Mumbai. In terms of revenue, 85 percent still comes from exports, with the Middle East contributing 60 percent and Europe 20 percent. But the Indian consumer was evolving, giving InI Farms enough reason to be on Indian store shelves. From a country share perspective, India’s 15 percent contribution is significant, points out Khandelwal.
“We were very clear that it (India) was always going to be a huge opportunity. We have a strategy and we see India growing at a faster rate. For us, it was never in doubt that the opportunity India presents is humongous,” he adds.
InI Farms has been working with most modern trade players in India, says Khandelwal, and also online players like BigBasket, in the four cities it is present in.
In Andhra Pradesh, a PPP project was kicked off in 2016 as a JV with Future Group. The retail giant would have first right over produce from the project, through which the Andhra Pradesh Government sought to improve the earning of farmers.
InI Farms’ pomegranates sell at a premium of approximately 10 percent. Its bananas sell at roughly a 70 percent premium, albeit on a lower cost base, providing proof that consumers are starting to value the premium. In the case of bananas, the product from InI Farms looks visually more appealing, Khandelwal explains.
A segment of discerning customers always existed, but it has now reached a critical mass large enough to build a business out of. Factors like traceability are a necessity in Europe, but India is waking up to it. InI has the systems in place to trace the chain back to the farmer who produced the fruit.
In the next wave of expansion in India, branding will be in focus. Over and above the traceability, a QR code will allow buyers to say hello to the farmer. The play will be in the direct-to-consumer space. Now that everything is firmly in place, the CMD is confident that it is ready for this leap in August 2020.
“A lot of development has happened in the last mile delivery, with players like Dunzo, Swiggy and Zomato. So we decided we don’t need to do it ourselves. We are already present in these four cities, and the distribution to consumer is also there now,” he explains.
With distribution available, it is now about the brand and why a consumer should choose to order it. For the next two years, the focus will be on deeper penetration in the four metros it already addresses. From the logistics and market-readiness standpoints, that makes sense.
“The nature of the product is such that we have to get it right 100 percent of the time. It’s not like we can afford to get it right 90 percent of the time,” underlines Khandelwal.
Last year, InI Farms shipped 40,000 tonnes of fruits, domestic sales and exports combined. The focus remains on quality and consistency. Even with the direct-to-consumer foray, there will be no compromise on that for the sake of scaling fast, emphasises the founder-CMD. Investors in InI include Aavishkaar, Unilazer Ventures and Aspada Investment.
He surmises, “We were very clear that it is a long haul. All the investors who are with us understand that very, very well. They have seen the quality of work that we have done and are very supportive. Growth is important and it has to show in the numbers. But that does not force us to make wrong choices. It is to the credit of investors that they understand what we do and give us the long rope to do what we feel is right for the venture.”
The Blueberry Project
Towards the end of 2019, INI Farms inked a JV with US-based Munger Farms to grow blueberries. “Our research showed that berries is a massive and growing category. India practically does not grow berries. Munger Farms is the largest independent blueberry grower in the world, based in the US. They also had some Indian roots. We decided to get into a partnership,” explains the CMD.
The project was in the works when Covid19 struck, and travel came to a halt. Setting up the R&D plots, selection of farms and other work will continue post the pandemic restrictions. Khandelwal sees the project getting delayed by a year or more. It will play out across Middle East, South Asia and South East Asia, he informs. With production in India, Khandelwal estimates that the cost of blueberries, which is at Rs. 4,000 (approx.) a kilo now thanks to air freight and duties, will come down to Rs.1,500 a kilogram.
While that project has been delayed, the focus on the brand and growing it in India has been expedited with the Covid19 crisis, he observes.