Private sector intervention in Indian Fruit & Vegetable Sector for Increasing Rural Wealth: A Case Study Background: Indian

agriculture In the past decade, Indian agriculture’s contribution to the overall GDP has come down dramatically and it now stands at a mere 18%! While the contribution to GDP may be relatively small, agriculture still has a very significant impact on the well being of almost two-third of India’s population. The issues that impact Indian agriculture are fairly well known. On hand, our farmers have small land holdings (over 80% of farmers have less than 1 hectare of land holding) that are reducing year on year, on the other the farmers remain highly dependent on monsoon rains (annual cycle of rainfall) for their livelihood. Besides this, they face several challenges that impact their agricultural yields and earnings e.g. • • • • • Limited access to quality inputs & farming techniques Poor water & soil management High post harvest losses Lack of market information leading to difficulty with price discovery Multiple middlemen in the value chain providing costly credit

Given the above scenario, there is an urgent need to systemically address issues in agriculture in a sustainable manner so as to provide food security in the long run. Any sustainable solution should focus, amongst other things, on: 1. 2. 3. 4. 5. Creating local employment & enhancing farming income Resource utilization –focus on land (soil fertility) & water Improving crop productivity Lowering the cost of production and post harvest losses Building the market ‘connect’

India’s production of fruits and vegetables is second only to China. Its track record of fresh produce exports has been dismal. India’s share in global trade is less than 1% despite the fact that it produces over 150 varieties of fruits and vegetables! The reasons are not too difficult to fathom. In international markets the desired freshness (delivered shelf life for consumers) is typically seven days. The storage conditions in India at farm gate, at processing centers and at the exit point (whether it’s a sea port or airport) are grossly inadequate. Indian produce starts to deteriorate in quality within 24-48 hours of harvest. Most Indian entrepreneurs were attracted by the huge disparity between the international market price and the relatively low cost of cultivation in India. Some even made investments of up to $1 million to support the business to deliver quality fresh produce.

However, an incomplete cold chain, combined with poor compliance to international standards have led to losses (e.g. customer claims) that have made a serious dent on the balance sheet of these entrepreneurs. As a consequence they have had to make a hasty exit from the business! During the past decade, several leading Indian corporate houses have engaged with the Indian farming community in an attempt to ‘make a difference’ by helping the farmers better manage some of these challenges while contributing to improving rural incomes. FieldFresh Foods Pvt. Ltd. (www.fieldfreshfoods.in), established in August 2004 and headquartered in Delhi, India, is an equal joint venture between Bharti Enterprises (www.bharti.com) and Del Monte Pacific Ltd., Philippines (www.delmontepacific.com). For the past three years the company has been working with farmers in the states of Punjab and Maharashtra (see map) in a manner that is creating a ‘win-win’ for both the farmers and the company. The ensuing paragraphs briefly chart out the journey of FieldFresh Foods in its efforts to build a sustainable international business in vegetables; supplying fresh consumer packs of baby corn to highly demanding retailers in UK & Europe, while simultaneously delivering significant benefits to small farmers! Baby Corn FieldFresh Foods has been supplying fresh Baby Corn in consumer packs to the UK & EU markets for the past three years and has been able to successfully establish brand “India” with UK’s leading supermarkets like Sainsbury’s, ASDA, TESCO, etc.. In the process the company has become the largest Indian exporter of fresh baby corn by selling over 700 metric tons in 2009-10 (handling over 7,000 tons of raw materials). Every day the company air freights over 2,000 kilos or 12,000 consumer packs! Our supply share exceeds 10% of the UK retail market, competing directly with Thailand, the number one supplier in the world. This performance has only been made possible by delivering consistently on quality and on service standards, in line with the expectations of our international customers. Building trust through Public-Private-Partnership An activity of this dimension can only be embarked upon when the ethos of the organization is rooted into the farming community. “Rooted-ness” comes through building trust. It was imperative for a new entrant to establish a visible physical foothold. Accordingly, the company, with the support of Government of Punjab, established a crop development facility on a 300 acre site in Ladhowal, Punjab, India, with a total investment of $10 million (see layout). The facility, FieldFresh ACE (Agri Center of Excellence), has been developed to show case appropriate farming techniques, supported by post harvest infrastructure. FieldFresh ACE has an added benefit in that it is

adjoining the famous Punjab Agriculture University (PAU), in Ludhiana, Punjab. The relationship with a world class agriculture university serves as a platform to build a continuous cycle of research and development focusing on delivering marketable results. As part of the long term collaboration with Punjab Agriculture University, the company annually sponsors the academic program of four students who are pursuing post graduate level study programs in vegetables. This, we believe, will equip the students with marketable skills and also ensure a steady pipeline of high caliber talent for scaling up of business. Starting in Punjab, in August 2005, a dedicated group of crop scientist conducted cultivation trials on baby corn at FieldFresh ACE. These trials, spread over 24 months, brought out the most appropriate farming techniques for the identified areas in Punjab on baby corn cultivation. Along with crop trials the team started to work towards understanding the quality & certification requirements of global retailers. The technical team diligently worked to gain Global GAP (Good Agriculture Practices) certification for FieldFresh ACE facility. Indian laws do not allow corporate farming or corporate ownership of agriculture land. In order to build large scale farming led business an organization has to work with many hundreds of small individual farmers. To take this forward the company engaged with PAU to develop an energetic team of crop advisors to embark on the long and rewarding journey of gaining farmer trust! Building Farmer Connect FieldFresh Foods has invested significant time and monies in training farmers to meet the international standards of quality and compliance. Our farmers are provided exposure to the appropriate farming practices at our FieldFresh ACE farm, and through our crop advisory team, sensitized towards optimum use of resources like water and minimizing the use of chemical fertilizers & pesticides. Crop rotation and other progressive agricultural practices like inter-cropping with sugar cane, mint etc., are being promoted to enhance the absolute money earned per acre to the farmer. Many of our farmers primarily earn livelihood from supplying milk to the dairy industry. The fodder from baby corn crop is now proven to deliver 5% to 10% better milk yield – both in terms of volume and fat content! In times of lower rainfall, the availability of baby corn fodder has become the lifeline for many a farmers! This has helped in continuously reducing overall farming costs (which now compare well with the benchmark costs from Thailand). As a result, farmer incomes have gone up on average by 20% per year as compared to alternate crops.

Availability of quality water at the right time is critical to success in agriculture. The state of Punjab has seen a steady decline in the water table due to intensive farming of rice and wheat. The vagaries of monsoon have further added to depletion of the ground water resources. The company is actively engaged in guiding the farmers to sustainable water management in its farming operations. Columbia Water Forum (CWF), a part of The Earth Institute of Columbia University (New York, USA), has partnered with Punjab Agriculture University, FieldFresh Foods Pvt. Ltd, and leading Indian agriculture companies to launch the India Water Forum focusing on the reduction in water usage in agriculture to ensure sustainable supply for nation’s water requirement. The company is helping over 100 farmers to shift from water intensive crops like rice to cash crops like vegetables. The company also demonstrates the benefits of using water as a nutrient and not treat it is a free resource. The farmers are encouraged, through use of appropriate equipment like tensiometers, soil moisture probes, to gauge the precise level of moisture in their soil before they irrigate so that the fields are watered only when the soil needs it. Presently, farmers work by sight and flood the field whenever it appears dry to the naked eye. Two of the biggest uncertainties faced by farmers are – weather and market access for the crop. In partnership with leading insurance companies in the government and private sector, FieldFresh Foods has launched weather index based insurance products that will support the farmer in the event the weather pattern changes. The product has been designed after several rounds of consultations with farmers and other experts. The farmer does not have to go through any lengthy paperwork or take help of insurance surveyors. The claim automatically accrues once the weather conditions as recorded by the local weather station are outside the agreed parameters for our crop. Our farmers are very positive about this development and they have embraced it whole heartedly. In the case of perishable products, the risk of market becomes more pronounced with time. The prime advantage of a contractual agreement between FieldFresh and partner farmers is that the company provides a guarantee to purchase all the produce grown, within specified quality and quantity parameters. The relationship also provides farmers with free of charge access to a wide range of managerial, technical and extension services. The price along with the specifications is indicated in writing in advance. Our operations team has relentlessly worked with farmers to demonstrate the appropriate practices developed at our farms. FieldFresh Foods, along with its partner farmers, became one of the very few Indian companies to obtain Global GAP certification for vegetables. A process driven approach with measurable outcomes has brought about higher level of certainty in the farmers mind. The farmer is incentivized to enhance income by delivering better quality produce. Most importantly, the revenue from

crop sale is directly transferred into the farmer’s bank account within 10 days of delivery of the produce, thus building further trust and transparency in the relationship To provide adequate support to the large scale efforts with farmers, the company has invested in world class post harvest facility (pack house) at FieldFresh ACE. This facility has all the requisite temperature storage rooms, automated and conveyor driven material handling equipment and a fully equipped microbiological laboratory. The pack house has been certified as BRC compliant (British Retail Consortium). FieldFresh Foods has been able to achieve and ensure year round availability of fresh baby corn to the UK supermarkets in an extremely short span of time. The quality track record of the company and the farmers stands at above 99% pack out of all the produce exported! Up-scaling operations: developing rural micro & small enterprises In a country where most of the farming is done by small farmers, scaling up of operations requires developing a variety of capabilities. Over the past 18 months the company has embarked on capacity building exercise of a different kind. In the state of Maharashtra, we have invested (financially and managerial time) in lead farmers who have been trained to manage a large part of the value chain. These lead farmers are our Agri Entrepreneurs. They are our partners in building a sustainable value chain. In order to qualify to be an Agri Entrepreneur, a person must fulfill 3 criteria – 1. Be a local farmer of good repute 2. Have a quality orientation 3. Desire to build a long term business based on core farming activities Depending on the capacity of the Agri Entrepreneurs the company has provided short term funding up to $200,000. Besides their own farming activities, the Agri Entrepreneurs provide several core services – 1. Manage crop demonstration plots 2. Recruit & mange a large group of farmers, including managing the commercial relationship. 3. Provide crop advisory services, 4. Co-invest and manage post harvest infrastructure 5. Provide logistics support Each of the Agri Entrepreneurs have built a small organization, recruiting 1020 rural youth, that provides services to the farmers to support in building the farmer-connect program. This organization is supported by a dedicated

team from FieldFresh Foods. Today, FieldFresh Foods works with over 3500 small (average landholding of less than 1 ha) farmers, growing baby corn on nearly 4000 acres through the contract farming. Of this, more than 85% farmers are managed by Agri Entrepreneurs! The business activities of each of the entrepreneurs have led to increase in farmer incomes by up to 20%. The work has also generated significant local employment opportunity for local women who are employed both at the farms and in the post harvest operations (pack house). Lessons learned & Challenges ahead Farmers are trusting and are very willing to learn. However the method of learning has to be built on the back of small scale pilots conducted in the vicinity of the growing locations. Farmers need to see the proof of concept and only then they will take forward the cultivation program. It is inadequate to have only one facility like FieldFresh ACE, that too located in Punjab.. Now the FieldFresh team continually invests with progressive farmers to build demonstration plots. The farming practices followed on these plots is driven by what is locally available and the best practices observed in other locations. The risk of output from the demonstration plots is borne by the company. It is absolutely critical that the organizations dealing with farming community are seen to be demonstrating highest level of integrity – whether it is in sharing knowledge or in accepting mistakes. FieldFresh, in its journey to build a national footprint, has staffed the on ground teams with people from the local area. These employees are coached on a ongoing basis. The company’s leadership –from shareholders downwards make it a point to participate in farm related activities. Every event is a cause for celebration with our farmers. Farmers have come to accept that our company is working for improving the long term and changes will come in small bytes. The concept of trust, while easily understood, is difficult to spread in a uniform way, especially when network size increases. This is a key challenge for the employees. For our program to be successful it is absolutely necessary that all partners (Agri Entrepreneurs, universities, banks etc) demonstrate the same level of confidence to the farmers. In order to bring this uniformity, the company has branded its services to the farmer. We believe that over a period of time combined with transparency and through a set of positive experiences the farmer will recognize the reliability of our brand (services) and also the services of our partners.

Simultaneously, we are constantly working towards a transparent organization of people within FieldFresh. The teams are encouraged to share and have access to everybody in the organization. The incentive programs are designed to reward the team and not the individual. Training, both locally and internationally allows each individual to develop his skill base. Pride in everything that we do is a very key aspect of the daily routine of our teams. The international market for our product basket is limited. Hence there is now an urgent need to expand the range and/or find new markets. Indian market for quality fresh produce still remains under serviced. The growing Indian consumer base and rising income levels are creating a large unmet demand. However, the slow pace of development of modern retail in India has made it difficult to reach out to this consumer base. We believe that this will take 3-5 years to evolve. Our pace of activity with the farmers will need to be moderated to reflect that development. At the early stage of business build evolution, the company has consciously not engaged with local government organization. This has been done to ensure that the core focus of building a viable business model remains intact. In the next stage FieldFresh will actively engage with various governmental and non-governmental organizations to bring the benefits of their services to its farmer network. This will be a key lever in delivering higher value added to the entire network while leveraging the existing infrastructure of these organizations. Our chosen model of building linkages with small farmers is scalable. Many small clusters are being identified and developed on the same lines. Human intervention will continue to be in activities that engender trust in every transaction. The skill base will grow as small entrepreneurs invest in local youth. Small farmers will hopefully see long term benefit and will stay with farming as an occupation and not sell the land to developers. Throughout this process the focus of the company will remain two fold – develop market linkages for crop and build strong connectivity in the farming network to ensure that the desired change and pace of change are speeded up. Summary What commenced as a vision of ‘Linking Indian Fields to the World’ has indeed become a reality for FieldFresh Foods. This year, which is the fourth year of our contract farming program, we will strive to grow our business by 50% thereby exporting nearly 1,100 metric tons of baby corn from India to the most competitive, demanding and quality conscious markets in Europe. Most importantly we will be building a solid foundation for the future, with over 5000 partner farmers in two of India’s most progressive agricultural

belts in Punjab & Maharashtra. This successful partnership has demonstrated that indeed both the farming community and the corporate sector can gain by working together and that more and more farmers can be brought into the fold as the scale of the business increases multifold in the coming years. Like they say – ‘the proof of the pudding is in the eating’ - for both the farmers who have evidenced reliability & profitability along with trust & transparency in this relationship as well as for the company which sees a solid and scalable long term partnership building up with the farming community.

FieldFresh Agri Centre of Excellence (ACE) : Platform for Appropriate Innovation

State of the Art Crop Development Centre

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Environment Friendly Sustainable Agriculture

World Class Training Centre

Post Harvest Technology Expertise

Best Practices in Farm Management

Our Growing Locations in Punjab & Maharashtra

200 KM

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435 KM

Profile of the organization FieldFresh Foods Private Limited (www.fieldfreshfoods.in) incorporated in August 2004, is a joint venture between Bharti Enterprises and DMPL India Ltd., which offers fresh fruits & vegetables and processed foods and beverages in the Indan as well as global markets. FieldFresh Foods Pvt Ltd., in the fresh foods category is the largest Indian exporter of Baby corn and is also engaged in providing safe, fresh and hygienic fruits and vegetables in convenient formats to food service and modern retail segments in the Indian market under the FieldFresh brand. The company has recently entered in the processed foods category by launching Del Monte brand in India with a promise to offer the consumers innovative products in foods and beverages - combining great taste and goodness of health. Our Vision is to be the most trusted and innovative provider of branded fresh fruits & vegetables and processed food products. Bharti Enterprises, (www.bharti.com) founded in 1976, by Sunil Bharti Mittal, Bharti has grown from being a manufacturer of bicycle parts to one of the largest and most respected business groups in India. With its entrepreneurial spirit and passion to undertake business projects that are transformational in nature, Bharti has created world-class businesses in telecom, financial services, retail, and foods. Bharti started its telecom services business by launching mobile services in Delhi (India) in 1995. Bharti Airtel, the group's' flagship company, has emerged as one of top telecom companies in the world and is amongst the top five wireless operators in the world. Over the past few years, the group has diversified into emerging business areas in the fast expanding Indian economy. The group has forayed into the retail sector by opening retail stores in multiple formats - small and medium - as well establishing large scale cash & carry stores to serve institutional customers and other retailers. The group offers a complete portfolio of financial services - life insurance, general insurance and asset management - to customers across India. Bharti also serves customers through its fresh and processed foods business. The group has growing interests in other areas such as telecom software, real estate, training and capacity building, and distribution of telecom/IT products. At Bharti, there is one underlying philosophy – to create businesses that are transformational and have a deep impact on society.

Del Monte Pacific Limited (DMPL) (www.delmontepacific.com) is a group of companies that caters to today’s consumer needs for premium quality, healthy food and beverage products. It innovates, produces, markets and distributes its products worldwide. The DMPL Group owns the Del Monte brand in the Philippines and enjoys leading market shares for canned pineapple juice and juice drinks, canned pineapple and tropical mixed fruits, tomato sauce, spaghetti sauce and tomato ketchup. With its 20,000-hectare contiguous pineapple plantation in the Philippines, 700,000-ton processing capacity and a port beside its cannery, Del Monte Pacific operates the world’s largest fully-integrated pineapple operation. It is proud of its long heritage of more than 80 years of pineapple growing and processing. It has long-term supply agreements with other Del Monte trademark owners and licensees around the world. Del Monte Pacific and its subsidiaries are not affiliated with other Del Monte companies in the world such as Del Monte Foods Co, Fresh Del Monte Produce Inc, Del Monte Asia Pte Ltd and these companies’ parents and subsidiaries. Over the past 80 years, the company has pioneered programmes that gave us the opportunity to share our values, expertise and resources with our surrounding communities. As our business grows, we have touched the lives of many people as we bring change and development to rural communities. Del Monte Foundation, Inc., a non-stock and non-profit organization, spearheads our efforts to help build healthy communities that work together for sustainable development. Through a broad-range programme of assistance, we encourage our host communities to learn self-sufficiency and contribute to nation-building.