Retailers take direct sourcing route

MUMBAI: Food retailers such as Nature’s Basket, More, Fresh and Spencer’s are taking the direct route to hinterland for propping up their margins and serving their customers freshest and the best of  products.

By cutting the middleman out from the supply chain and sourcing products directly from farmers, they are not only improving margins but also giving villagers a better deal .
Narayangaon district in Maharashtra, which is 90 km from Pune and about 200 km from Mumbai, is one of the major sourcing hubs for retailers.

Visit any of the dhabas dotting the road that connects Narayangaon and  chances are you will bump into managers, sales officers, category heads of these food and grocery retail chains discussing the market dynamics and bonding over a cup of tea.
All major retailers have set up collection centres at Narayangaon to source vegetables from the 20 neighbouring villages.

Aditya Birla Group’s food and grocery store More buys cauliflower for Rs 7 per kg at its collection centre in Narayangaon. The vegetables are trimmed and packed on the spot and sent off to its city stores. The cost on packaging and transport comes to about Rs 1.50 per kg. The same trimmed vegetable would have cost Rs 14 in Vashi Mandi after the middleman’s commission and the applied cess are added up.

So, what happens to the market dynamics of a nondescript village when retailers flock in?

Devinder Singh, agriculture category manager, Aadhaar Retail, said, corporate activities have made farmers progressive. “They are now cultivating cash crops. Now they know what price they would get at a far-off mandi and charge  us accordingly. Besides, we give them cash while the middleman works on an eight-day credit period.”

An employee at a More store in Manchar town said farmers are having a field time cashing in as they now have the option to sell to competing players. “So, sometimes there are price wars. But this belt (Narayangaon) has enough for all of us to survive together. The only difference lies in the quality of products and we pay a premium accordingly.”

Retailers say that with the hoondekari or the middleman now out of the picture, life has become much simpler for farmers as they are sure of finding a buyer for their produce. Moreover, they are getting better margins as they now have the choice to sell to any of the retailers. Even, transportation costs are not borne by the farmer anymore.

For brothers Anil and Amit, who grow cucumbers in their farms in Narayangaon, it’s also a matter of pride that big retailers come scurrying for their produce. They sell cucumbers to Godrej’s Nature Basket. Every morning, they diligently call up the collection centre to take an inventory of their requirement. And later in the day, a team comes to their farm to pick up the produce.“Life has become so much easier,” Amit said.

However some farmers say they are still not getting the best of the deals from retailers. They claim their actual profits come from the savings they make from the packaging and transportation costs. For a 30 kg carton, they save Rs 30 and Rs 10 on transportation costs.

“If the retailers are looking to develop long-term relationships with farmers, then bigger commitments are required,” said one of the farmers.

May be, ITC’s e-choupal and Godrej Aadhaar’s rural ventures are just the ideal models to follow if they want to make a difference at the grassroots.

s_tanvi@dnaindia.net