Professional Documents
Culture Documents
FUTURES:
EMERGING
SOCIAL
ENTERPRISES
IN INDIA
Editors:
Ajit Kanitkar and C. Shambu Prasad
13
Linking Farmer Producers and Urban
Consumers for Pesticide Free and Safe food
Safe Harvest Private Limited
Safe Harvest Pvt. Ltd (SHPL), founded in 2009 as a social enterprise was
conceptualized by a group of eight grassroots NGOs with the twin objectives
to strengthen the non-pesticide management (NPM) of agriculture – by
enabling farmers shift to sustainable agriculture by creating a market for
their ‘pesticide-free’ produce – and offering consumers a safe and affordable
alternative to food produced through conventional farming. SHPL aims
to provide a remunerative market for the produce of one lakh small and
marginal farmers by reaching out to one million consumers by 2023.
After facing challenges both in procurement and sales in its initial years,
it is now in its turnaround phase, with annual sales improving from just
`25 lakh to nearly `16 crore. SHPL partners with about 25 organizations
comprising farmers’ collectives, with a membership base of about one lakh
farmers spread over 13 states. In 2018–19, it procured 50 commodities
under the five categories of cereals, millets, pulses, spices, and flavourings
worth more than `25 crore.
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1. Introduction
According to Rainfedindia.org, more than half of India’s gross cropped
area (55 per cent, 1,060 lakh hectares) is rainfed and 61 per cent of
our farmers rely on rainfed agriculture. Natural precipitation – mostly
rainwater received during monsoons – is the only source of irrigation
for crops in rainfed agriculture. A primary source of livelihood for 84
per cent of rural poor, rainfed agriculture is also a major contributor to
our food security by producing 40 per cent of the total rice, 89 per cent
of millets, 69 per cent of oilseeds, and 88 per cent of pulses respectively.
However, rainfed farming has been largely left out of mainstream
agricultural development in terms of public investments.
RI class irrigated
0 - 40
40 - 55
55 - 70
70 - 85
85 - 100
Source: www.rainfedindia.org
Note: RI class – percentage of land irrigated by rain
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Farming Futures: Emerging Social Enterprises in India
market link for 1,00,000 small and marginal farmers by reaching out to
10,00,000 urban consumers by 2023.
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Farming Futures: Emerging Social Enterprises in India
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Farming Futures: Emerging Social Enterprises in India
4. Business of SHPL
The organizational structure of SHPL is depicted in Figure 2.
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SHPL Board
CEO
4.1 Procurement
4.1.1. Sourcing
SHPL procures more than 50 pesticide-free commodities from about
25 partner organizations spread across 13 states. Since different
commodities are grown in different states and the same commodity is
harvested during different times of the year, procuring from different
geographies reduces the inventory and assures quality of the produce.
SHPL sources its products in three different ways:
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Farming Futures: Emerging Social Enterprises in India
SHPL procures in all three cropping seasons with kharif being the
most important. The aggregation season starts in October and peaks
during December and January when paddy is procured. SHPL (as of
September 2018) deals in 53 products and 76 stock keeping units
(SKU) across five categories – cereals, pulses, spices, flavourings, and
millets (Table 1).
Cereals Pulses
Sona Masuri 12M and brown Tur, mung (whole and split), urad and
rice, Red Samba parboiled rice, urad cota, chana, chana dal, Kabuli
Ponni boiled rice, wheat flour, chana, rajma (Himalayan, Chitra, and
white and red poha, sooji, puffed Kashmiri), red lobiya, horse gram, moth
rice, wheat daliya bean
Over the years, Safe Harvest has expanded its operations to include
a greater number of partners, products and farmers. Safe Harvest’s
expansion has resulted in an increase in both the quantity (Figure 3)
and value (Figure 4) of commodities procured.
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7000 6528
6000
5000
Quantity in MT
4008
4000
3000
2000
1274
1000 598
0
2015-16 2016-17 2017-18 2018-19
Year
Source: Company records
20
16.08
15
10
5.91
5 3.7
0
2015-16 2016-17 2017-18 2018-19
Year
Source: Company records
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Farming Futures: Emerging Social Enterprises in India
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Farming Futures: Emerging Social Enterprises in India
5000
4645
4500
4000
Quantity in MT
3500
3000
2500
2000
1500 1367
1000
500 291
0
2015-16 2016-17 2017-18
Year
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600
502
500
Value in lakh (`)
400
300
200
108
100
35
0
2015-16 2016-17 2017-18
Year
Source: Company records
Paddy is procured
from farmers in
January
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Farming Futures: Emerging Social Enterprises in India
4.2 Operations
Inventory is mostly managed by Safe Harvest, and in some cases by
the partners. Safe Harvest has obtained the requisite retail licences and
approvals and complies with various regulatory requirements including
those of FSSAI, legal metrology, GST, local municipality, trade, labour
and APMC. The external network of the procurement and operations
hub in Hyderabad is depicted in Figure 9.
A series of processes transpire between procurement from farmers
and marketing to consumers. They are as follows:
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Government/
regulatory
agencies
Customers
FPCs (farmers)
(wholesale
and traders
and retail)
Procurement
and
operations
Warehouse and
Transporters
cold storage
Banks and
financial
institutions
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Farming Futures: Emerging Social Enterprises in India
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Material received
(in hub or cold storage)
Production area
Buffer bulk (2-3 days stock) Flour mill and vibro machine
Packing
Buffer retail
Despatch
Transport to customer
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Farming Futures: Emerging Social Enterprises in India
retail partners of SHPL include Spencer’s, SPAR, and Aditya Birla Retail
Limited – ABRL (with whom a recent deal was cemented to place SHPL’s
products in 56 ‘More’ supermarkets across Bengaluru). Online retail
partners of SHPL include Big Basket, Grofers, Flipkart and Amazon. Safe
Harvest has also negotiated a co-branding deal with Metro Cash & Carry
(an international retail company) to introduce the pesticide-free range of
products under their own brand label ‘Fine Life Bio’. This is a significant
achievement and an important step towards the creation of a nation-
wide ‘pesticide-free’ food category. A similar agreement with Grofers, a
nationally recognized e-commerce market platform is under discussion.
The role of the 15-member sales team serving seven Modern Trade
(SPAR, Spencer’s, ABRL, etc.) and about 400 General Trade retailers
includes branding, developing an annual sales plan and increasing the
consumer base.
Although sales are spread round the year, the numbers plateau during
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the monsoons and spike during the festival season. The sales team
coordinates and plans with the hub operations and procurement teams
to account for these fluctuations, to prevent stock-outs and to review
the performance vis-à-vis their monthly sales projections. Furthermore,
the sales team conducts periodic surveys to gauge the market demand
for new products (e.g. ‘value-adds’ such as peanut butter, millet cookies,
etc.).
Safe Harvest’s three-member communications team is based at the
head office in Bengaluru and works closely with the sales team. Instead
of resorting to expensive advertising (such as newspaper advertisements
and billboards) the communications team relies on the use of social
media and participates regularly in direct consumer outreach events
to generate traction. Regional and language specific communication
material comprising brochures, leaflets, labels, display units, and social
media posts are developed in-house that gives Safe Harvest a significant
advantage over other brands.
The persistent efforts of the sales and marketing teams have resulted
in a steady increase in the dispatch volumes as can be seen in Figure
11. As can be seen in Table 3 (see page 362), SHPL has been recording
a healthy growth over the past five years.
200.0 203.1
187.1
161.6
150.0
143.0
108.1 97.3 116.0
100.0 106.7 100.6
93.2
97.6 85.1
50.0 60.2
40.2
0.0
Apr May Jun Jul Aug Sep Oct Nov
FY 18-19 FY 17-18
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Farming Futures: Emerging Social Enterprises in India
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‘Fortunately for SHPL, Ashish Kacholia, and other investors in the company
are more interested in viability of the company, rather than immediate
returns,’ says Rangu Rao. As there are no operational losses now, Rangu Rao
believes that SHPL will be able to report profits after tax by end of 2019.
The share capital increased from `1 lakh in 2009–10 to about `12.90
crore in January 2019, while the long-term debt has increased from `25
lakh in 2012–13 to more than `2 crore in January 2019.
The summary of key performance indicators based on the audited
financial statements of SHPL from 2009–10 to January 2019 is shown
in Table 5 (see page 364) and in Figures 12–17.
1200
1000
813.6826
` (in lakh)
800
600
355.1466
400
220.194
165.194
200
61
1 1 1
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Year
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Table 5: Summary of financial statements of
SHPL (2009–10 to January 2019)
Year 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17 2017–18 Till Jan 2019
Equity
Share capital
(`) 1,00,000 1,00,000 1,00,000 6,10,0000 1,65,19,400 2,20,19,400 3,55,14,660 8,13,68,260 12,90,58,260 12,90,58,260
Reserves (`) 2,46,246 1,15,560 -2,98,6181 -34,42,772 -23,50,987 -48,16,554 -2,09,03,361 -4,46,26,664 -9,51,63,715 -12,69,85,419
Long term
364
(`) 25,00,000 50,00,000 43,66,637 2,44,39,842 3,31,72,392 2,02,36,288 2,02,36,288
Inventory (`) 5,17,379 38,64,221 31,55,716 65,82,780 61,04,186 79,65,607 2,16,76,272 3,09,63,482 6,46,97,328 8,53,03,115
Revenue (`) 7,88,324 2,50,711 67,83,751 86,05,155 1,69,37,411 2,76,13,363 3,22,33,508 5,22,51,405 10,11,45,671 16,68,57,763
Net profit (`) 2,36,321 -1,30,686 -31,01,741 -4,56,591 -40,03,735 -1,24,65,567 -1,60,86,807 -2,37,23,303 -5,05,37,052 -3,18,21,703
Accumulated
profit/loss
(`) 2,36,321 1,05,635 -29,96,106 -34,52,697 -74,56,432 -1,99,21,999 -3,60,08,806 -5,97,32,109 -11,02,59,235 -14,20,80,939
Source: Audited annual balance sheets and profit and loss statements of SHPL
Farming Futures: Emerging Social Enterprises in India
Safe Harvest
1400
1200
1000
` (in lakh)
800
600
400
200
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Year
Share capital LT debt
1400
1200
1000
` (in lakh)
800
600
400
200
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Year
Share capital LT debt Total
Source: Audited annual balance sheets of SHPL
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Farming Futures: Emerging Social Enterprises in India
2000
1789
1800
1600
1400
1200
1050
` (in lakh)
1000
800
600 523
400 276 322
169
200
25 66 57
0
1
19
-1
-1
-1
-1
-1
-1
-1
-1
20
10
11
12
13
14
15
16
17
n
20
20
20
20
20
20
20
20
-Ja
18
20
Year
Figure 16: Net loss and profit, SHPL, (2009–10 to January 2019)
Year
100
0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Jan-19
-100
` (in lakh)
-200
-300
-400
-500
-600
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0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
-200
` (in lakh)
-400
-600
-800
-1000
-1200
6. Impact of SHPL
Safe Harvest is the first brand in the country to retail food grown
without the use of synthetic chemical pesticides.
The value proposition of SHPL is:
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Farming Futures: Emerging Social Enterprises in India
17
15
10
0
2015-16 2016-17 2017-18 2018-19
Year
Source: Company records
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Safe Harvest
20000 19000
18000
16000
14000
12000 11000
Number
10000
8000 1710
6000
8000
2000 1500
0
2015-16 2016-17 2017-18 2018-19
Year
Source: Company records
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Farming Futures: Emerging Social Enterprises in India
Rangu Rao
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Safe Harvest
qualified personnel can be resolved if FPCs work at scale and are able
to move up the value chain.
Ganesan Balachander
Balachander, like Rangu, feels that the availability of capital is not the
only constraint for social enterprises. They need to have sound business
plans, have committed people on the Board with domain knowledge
and experience, and should be able to demonstrate performance metrics
to prospective investors.
Balachander calls for a shift in macro policy to provide incentives
based on metrics. These could be measures such as reduced interest
rates for those who have repaid their loans, support for NPM type
initiatives, and setting up of incubators for handholding.
V. K. Madhavan
Madhavan feels that engaging with markets is a must, and that the
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Farming Futures: Emerging Social Enterprises in India
journey of SHPL provides useful learning for the NGOs, many of whom
are currently involved in extension and capacity building. Madhavan
believes that NGOs need to understand how to operate in a market-
based environment. He also opines that in the agri-commodity business,
value addition is the way forward for farmers to earn higher margins.1
R. K. Anil
Contact:
Safe Harvest Pvt. Ltd
No. 90/91, Sarakki Gate
Near JP Nagar Metro Station
Bengaluru, Karnataka – 560078
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Safe Harvest
Researcher’s Analysis
Many NGOs that work for the welfare of small and marginal farmers
(or other rural producers) struggle to crack the market and scale up
their operations. There are valuable lessons in SHPL’s journey for such
organizations when they plan to play the market to obtain sustainable
remunerative returns for their farmers.
The role of initial grant support to such start-ups (that are agri-based
but are new to the ‘market’ domain of sales and consumers) while
necessary, can also make them complacent at the early stage when the
learning curve is riddled with lots of hitherto unforeseen hurdles and
challenges. A clear demarcation of activities to be carried out by using
grant-funds and other funds (equity and debt) could be useful.
Although one gets the impression that the ‘type’ of institutional
framework is immaterial, the legal form of the enterprise should be
carefully thought through before registration, as it has long-term
implications for ownership, capital infusion, governance, and growth of
the enterprise.
The constitution of the governing board with suitable experts and
well-wishers will enable the enterprise to get the all-important domain
advice and also prevent it from drifting away from the organizational
mission because of short-term investor or market compulsions. The
extent of interpersonal trust between the board and promoter(s) also
determines the course of the enterprise.
The support provided by incubators appears to be crucial for a social
enterprise in its formative years, but SHPL didn’t receive any. There
are various issues related to a vision document and business plan of
the enterprise; how robust is the business plan, how participatory has
been its development, periodicity of its revision based on authentic
feedback from the field, etc. Apart from having a good business model,
the enterprise seems to benefit more if the promoters can leverage
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Farming Futures: Emerging Social Enterprises in India
their goodwill and social capital, while trying to raise funds and other
resources for their enterprise.
The quality of human resources (HR), their pay, job profile, and
the organizational culture (including an enabling and challenging
environment) seem to be inter-related to ensure attracting, hiring, and
retaining suitable HR for a social enterprise.
The switch from a not-for-profit to a for-profit mode for those social
enterprises in which the promoters have spent most of their working
lives in the former could be difficult. It not only requires a change in
their belief system but also needs a transition or a via media of an
intermediary such as CEO (or senior management) who is experienced
in the for-profit sector.
Unlike other social enterprises which comprise of twin entities (a for-
profit and a not-for-profit), SHPL has no such duality as it encompasses
both in a single organization. Although had NPMI (a not-for-profit
society for promotion and certification of NPM produce) been active,
the burden of SHPL would have been reduced (in building NPM-
related capacities of its partner organizations), it now has end-to-end
control and responsibility of all its functions.
Presently some of the services being provided by SHPL to its farmers
(through their FPCs) might be eating into the profits of its investors;
hence the challenge is to increase the financial stakes of the FPCs in
the enterprise so that SHPL doesn’t depend only on the magnanimity
of its angel investors for long.
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Safe Harvest
References
Apparaju, Dr Hyma and Prativa Sundaray (Eds) (2017), ‘Revitalising Rainfed Agriculture:
Experiences from the grassroot’, 12 December, Revitalising Rainfed Agriculture
Network, http://www.rainfedindia.org/wp-content/uploads/2019/01/Final-Case-Study-
Rainfed-Agriculture-December-12-2017.pdf
Audited Balance Sheets and Profit & Loss Statements of SHPL (2009–10 to 2017–18).
Promotional material and internal product presentations of SHPL.
Reddy, Suresh (2013) ‘Non-Pesticidal Management of Pests: Status, Issues and Prospects
– A Review’, RULNR Working Paper, November, Hyderabad: Centre for Economic
and Social Sciences.
www.rainfedindia.org
www.safeharvest.co.in
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