Mahindra War Room 2019 Design to Disrupt

“BUILDING A PREMIUM FRUIT BRAND IN INDIA”

LIVE CHALLENGE FROM AGRIBUSINESS

“You either disrupt your own company, or someone else will!”

Chapter 1: Empathize

Agriculture is one of the oldest human professions, with India being a pioneer.
Manuscripts dating back 6000 years serve as great treatises on agriculture even
today. In fact, India’s long run of prosperity was propelled by agriculture - Indigo
dyes, Cotton, Tea and Spices - all produced from the farm. Unfortunately, the
British rule left Indian agriculture in a near state of ruin. From an agriculture
surplus nation full of abundance, India went to food shortage crises, propelled by
the large scale shipping of food grains to feed Industrial revolution’s factory
canteens. As India became a newly independent nation in 1947, there were
frequent scares of large-scale food crisis with India importing 7% of her total food
requirement in 1960s. Mahindra Group’s iconic founders, whose raison-d-être
was to help India realize economic freedom, empathized with the cause of the
Indian farmer, and made it their mission to help establish food security and
beyond, for which mechanization of the farm was the key.

Chapter 2: Design & Ideate

Mahindra’s right to win in Agriculture was more than just a well intentioned
aspiration. As an 18-year old successful company, Mahindra had the experience
of building two successful businesses in steel-trading and Jeeps already then. In
building the Jeep business, Mahindra proved their capability in adapting global
designs to work in India, as well as running an efficient manufacturing operation
in the socialistic business environment of India then.

Chapter 3: Prototype & Test

American farm productivity was famed even in the mid 1900s, with tractors being
used extensively there since 1837. In some ways, America pioneered large-scale
agriculture - the average American farmer owns 170 acres of land compared to
the 14 acres of the European farmer and 2 acres of his Indian counterpart.
America was also realizing higher productivity per acre in her farms, owing to the

Broadvision Perspectives Confidential Page 1 of 6

Mahindra War Room 2019 Design to Disrupt

extensive use of tractors then. In 1960, Mahindra formed a joint venture with
International Harvester, a company with over 6 decades of successful experience
in making tractors for America. Mahindra forged a joint venture with International
Harvester and Voltas in 1963 to manufacture and market tractors to Indian
farmers. The Mahindra Tractor plant was set up in Mumbai and the first tractors
started to roll out in 1965.

Chapter 4: Scale Profitably

Mahindra Tractors played a significant role in enhancing farm productivity and

ushering in the great Indian Green Revolution. From having to import 7% of the
total food requirement in 1960s, India began exporting food grains again - this
time for cash though! India’s food grain production improved from 82 million
tonnes in 1960-61 to 124 million tonnes in 1980-81, and further to 173 million
tonnes in 1990-91 to about 280 million tonnes last year. This growth is due to
consistent efforts in expansion of irrigation coverage, increased provision of key
inputs, using high yielding varieties of crops, and improved farm mechanization,
among other factors. Mahindra Tractor sales grew consistently, attaining a 40%
market share in the mid 1980s, a position it has held unbroken till date.
Mahindra’s Farm business is renowned for its Total Quality Management
approach, being the first Indian company to win the Deming Prize and the Japan
Quality Medal. Since 1990, Mahindra started exporting Tractors worldwide,
ironically targeting America to begin with. Two assembly facilities in Texas and
Georgia were created with full service capabilities, helping Mahindra attain 3rd
position in the market, with sales of over USD. 600 Million. In 2005, Mahindra
expanded into Australia with assembly operations in Brisbane, and China through
a joint venture there. In 2007, Mahindra acquired Punjab Tractors Limited - the
maker of ‘Swaraj’ brand of tractors popular in North India - in a decision fraught
with risks. Though Punjab Tractors had created the successful Swaraj brand, the
company was caught in a web of management challenges and was eventually
put up for sale. The acquisition, integration and cultural transformation of Punjab
Tractors by Mahindra is often cited as an example of “the perfect M&A”.
Mahindra has sold over 2.2 million tractors to 1.5 million customers across 40
countries. To further expand offerings spanning the agri-value chain of land
preparation through harvesting through post-harvest processing, Mahindra also

Broadvision Perspectives Confidential Page 2 of 6

Mahindra War Room 2019 Design to Disrupt

diversified into other Farm Equipments, to help farmers increase efficiencies in all
steps of the value chain.

Emboldened by the dominant market position achieved in tractors and farm

equipment in early 2000s, Mahindra searched for a broader vision to inspire the
next big disruptive growth. The quest to do something beyond just selling tractors
and farm equipment led Mahindra to ‘Farm Tech Prosperity’ - doing everything
that makes Mahindra’s dear customer - the farmer - more prosperous. Enhancing
farm productivity by providing them with reliable Tractors and Farm Equipment
was only one way of making the farmer prosperous. The search for other
avenues led to the birth of Mahindra Agribusiness. For the Indian farmer, poor
productivity has always been a concern, arising from the lack of access to quality
“inputs” such as seeds, crop care and advanced irrigation practices. Pursuing
Farm-Tech prosperity, Mahindra assisted farmers by offering Crop-care, Seeds,
Micro-irrigation, and Agronomy, under the name of ‘Samriddhi’. Today, there are
over 300 fully functional Samriddhi Centres across India offering inputs. More
services, helping farmers to sell their output for a better return than they would
otherwise gain, by providing them market linkages for their produce, to increase
their returns and disposable income were offered under the “Shubhlabh”
business. “Output” driven businesses of farm produce spanning Dairy, Edible Oil,
Fresh Fruits, Pulses, Processed Foods and Basmati Rice are now in various
stages of evolution.

Mahindra’s play in the farm equipment sector thus includes tractors, farm
mechanization products, farm support services, seeds, crop protection, market
linkages & distribution, farm counseling and information services and digital
businesses such as MyAgriGuru and MeraKisan, offered through 27 businesses
spanning 9 distinct companies and 18 subsidiaries.

Chapter 5: Design to Disrupt

For several decades since inception, Nashik has been a main centre of action for
Mahindra Group in general and the Farm business in particular, with its
manufacturing and R&D bases there. Nashik is also the “Grape Capital of India”,
accounting for more than half of the total exports of Grapes, with its own
Geographical Indication status. It is but natural that Mahindra’s entrepreneurial

Broadvision Perspectives Confidential Page 3 of 6

Mahindra War Room 2019 Design to Disrupt

instincts pushed it in the direction of grape export business. The business started
in 2004 as Mahindra Shubhlaabh and commence exports in early 2005. The
positive impact of the Shubhlaabh business in helping farmers boost their income
was evident, further increasing Mahindra’s interest in not just grapes but the
global fruits business itself. Mahindra set its goal to be among the Top 3 global
grapes players, focusing on the USD. 20.5 Billion global grapes and citrus trade
(with USD. 10 Billion for Grapes and USD. 10.5 Billion for Oranges and
Mandarins.) Leveraging on strong relationships with over 1000 Indian growers,
Mahindra Agrisolutions provided agronomy advisory to improve productivity, while
also helping them meet the strict phytosanitary and maximum residue level of
pesticides (MRL) requirements of European nations, establishing a state-of-the-
art processing, packing and storage facility in Nashik. Mahindra also developed
further relationships with Egyptian growers for sourcing of grapes and citrus,
gaining a competitive edge with longer supply windows, owing to the non-
overlapping grape growing seasons of the two countries. The exports grew over
the years, with Mahindra becoming the largest exporter of grapes in India in
2016.

India is the world’s second largest producer of fresh fruits and vegetables, but
supply chain inefficiencies have made it one of the most expensive markets for
the produce. Realizing the need to improve supply chain efficiencies, Mahindra
formed a joint venture with the Belgium based Greenyard, one of the largest
suppliers of fruits and vegetables in the world, in 2014. Mahindra Greenyard Pvt
Ltd’s goal is to develop a world-class fresh fruit supply chain, to provide high
quality fruits that meet the needs of both domestic and international markets.
Additionally, the joint venture’s goal is to focus on modernizing the domestic fruit
supply chain, to improve yield and reduce wastage - enhancing grower
productivity and returns to farmers.

The fruits business today is highly commoditized and unorganized, with low retail
penetration. There is a strong demand for fruits and fruit-based products with
high quality standards, offering a ripe market for creating a differentiated value
proposition - going beyond the normal selling of fruits, to a strong personal
engagement platform. Mahindra’s strategy is to develop Saboro as a premium
Consumer brand that is able to stand out in the market. In F18, Mahindra

Broadvision Perspectives Confidential Page 4 of 6

Mahindra War Room 2019 Design to Disrupt

acquired OFD BV, a Netherlands based company, with fruit distribution network
in Europe and sourcing bases in Chile, Peru and South Africa.

Greenyard has over 30 years of “Distribution Centre” (hereafter called DC)

business experience in Europe and boasts of a rich customer base including
Carrefour, Albert Heijn and other large modern retail chains. Mahindra’s goal in
the domestic fruits business is to disrupt the unorganized domestic fruit market
with the help of Greenyard’s Distribution Centre model. Through DCs, MGPL
aims to provide high-quality imported fruits and locally sourced fruits and
vegetables to the Modern trade customers, wholesalers and even small retailers.
With the technical know-how of Greenyard in DC space, MGPL has already
launched its first Distribution centre in New Delhi and plans to open new DCs in
all the Metros of India. The business is working towards its vision of becoming #1
B2B choice for fruits, with its investment in technology and people while keeping
the business model asset light and frugal.

With 97 million tonnes of fruits estimated to be produced in 2018-19, India is the

second largest producer of Fruits in the world. However, on the consumption
front, India still lags compared to the global average with only 120 grams of fruit
being consumed per capita compared to the WHO recommended average of 400
gms. Some of the top fruits being consumed by Indians include bananas,
mangoes, apples and citrus. Banana with its highest production and consumption
offers a huge potential for the industry players. The domestic fruits industry is
largely dependent on unorganized players who participate in the value chain as
aggregators, commission agents, 3PL providers, and traders. The value chain is
rife with inefficiencies and only a sliver of the final retail price reaches the
domestic producers. However, a few important trends are now reshaping and on
verge of disrupting the industry. The first of them is the rising import of fruits to
India. Indians are increasingly seeing fruits like Apples and citrus as a year-long
food rather than a seasonal delicacy. Further, new and exotic fruits like Kiwis,
passion fruit, rambutan etc are increasingly consumed by the metropolitan
consumer. Another important trend is the rise of start-ups with unique domestic
sourcing and supply models. Though nearly all of them are B2B, the day is not
far when some of them make the jump to B2C sales.

Broadvision Perspectives Confidential Page 5 of 6

Mahindra War Room 2019 Design to Disrupt

Worldwide, few fresh fruit companies have been able to create branded play as
the fruit business suffers from the same issues that grip any perishable
commodity. Fruits typically have a low shelf life, and ensuring quality, taste and
physical consistency for the end consumer becomes a tough task for the supply
chain stakeholders. Moreover, the fruit industry operates on thin margins which
necessitates that the brand should offer disproportionate value compared to the
investments made in building the brand. There are, however, some success
stories where fruit companies created strong brands, which eventually became
synonymous with the fruit itself.

One such is from the ‘almost cricket world champion’ New Zealand. In the early
20th century, Chinese Gooseberry, an exotic fruit from Eastern China, was
imported in New Zealand. Over the next decades, local growers began to
cultivate this delicious fruit for domestic consumption. During the World War, the
fruit caught the fancy of westerners, and eventually reached USA and became
popular as the “Kiwifruit”. The New Zealand growers dominated the trade of
Kiwifruits for nearly two decades, but faced heavy global competition in the early
1990s. Faced with financial distress and razor thin margins, the grower
association of Kiwifruits in New Zealand created a brand called ‘Zespri’. Over the
next 3 decades, Zespri gained wide recognition, commanded a premium and
eventually has become synonymous with the Kiwifruit itself. Even in India, a
nascent market for fruits, “Zespri” is the preferred brand for Kiwi fruit.

With Saboro, Mahindra Agri has been successful to some degree in creating a
brand outside of India in markets such as China and Malaysia where the brand
fetches significant premium over other Indian suppliers. With its proposition
towards assuring healthy, tasty and high-quality fruits backed by a safe, traceable
and ethical supply chain, Saboro has been able to gain grounds in these markets
for its exported grapes. However, with MGPL, Saboro is yet to make headways in
domestic market. 


Given this background, develop a disruptive strategy for Mahindra to

create a premium brand of fruits in India over the next 5 years, given the
challenges of operating in a low-margin, commoditized and unorganized
industry.

Broadvision Perspectives Confidential Page 6 of 6