Large Corporations Engaging Small Producers—Fruits and Vegetables in India and China
Live Case prepared and presented by Nancy Barry, President of NBA Enterprise Solutions toPoverty at the Harvard Business School Forum on the Future of Market Capitalism, October 9and 10, 2009S. Sivakumar (Shiv), CEO Agribusiness of ITC, was intrigued to see what he could learn froma week in rural China. Shiv had built the Agribusiness Group of ITC to US$1 billion in revenues,with sourcing and input distribution in over 40,000 villages through his world famous eChoupalsystem. ITC was already purchasing cereals directly from over 3 million small farmers, havingintroduced pricing based on quality, rather that the traditional weight-based pricing frommiddlemen.Over the last two years, through Enterprise Solutions to Poverty (ESP) Innovation Group forAgribusiness in India, which Shiv helped create, Shiv had been working with agribusiness CEOsof five other Indian giants. Together, they were building a major fruit and vegetable initiative withsmall farmers in India. Leaders of these companies were now traveling to China to see majorfruit and vegetable companies of China, also engaged in ESP. Shiv knew that each ofagribusiness leaders and their companies brought different experience, company cultures andstrengths to the challenges ahead: Traveling with him were executives from:
Tata Chemicals Ltd
is a subsidiary of the US$62.5 million Tata Group, one of India’slargest and most respected conglomerates. TCL’s revenues approach US$3 billion, largely infertilizers and inorganic chemicals. TCL has built a successful agricultural input distributionsystem using its fertilizer output as the core. In 2007, Tata Chemicals entered into a 50:50 jointventure with Total Produce PLC, one of Europe’s largest fresh produce providers. The jointventure, Khet-Se Agriproduce, is geared to leveraging TCL’s relationship with farmers andpresence in rural communities to create a state of the art supply chain and wholesale operation infresh fruits and vegetables. TCL is focused on building solid production in bananas for domesticand export sales, in building out value chain operations with small vegetable producers fordomestic wholesale, with a focus on building productivity, quality and earnings of smallholderfarmers As an international joint venture, Tata Khet-Se is precluded from retail sales and ispursuing measures to mobilize push cart venders as a formal-informal sector alliance, building onthe traditional mode of retail purchase in India.
Mahindra and Mahindra
, with US$6.8 billion in annual revenues, mainly from tractors andother automotive established MSSL as its agribusiness arm in 2000 with an initial focus on grapeexports. Mahindra had built a successful collaboration and co-branding strategy with Capespan,to become India’s leading grape exporter with US$5.3 million in export sales, with MSSL the firstto receive GLOBALGAP certification. Mahindra is using its tractor financing company to build outbroad-based rural finance. At the same time, Mahindra had closed down its capital intensive huband spoke agricultural input operations. Mahindra management was uncertain on how much of itsresources to commit to agribusiness. MSSL is now focusing on pomegranates and seed potatooperations.
, with its US$1.3 billion in revenues coming largely from having become India’s largestmobile phone provider, is a new entrant to fruits and vegetables. Bharti is pursuing local andexport sales of fresh and processed fruits and vegetables under a joint venture with Del Monteand is the Indian partner of Wal-Mart. As an international joint venture, Bharti-Wal-Mart ispursuing wholesale, with a separate company, Bharti Field Fresh, opening domestic retail stores.The CEO of Bharti is pushing to reach US$1 billion in revenues from fruits and vegetables in tenyears.