In India, the supply chain for ag inputs is extremely fragmented. There are over 80,000 firms — ranging from small family businesses to major corporates like UPL — selling $50 billion in seeds, fertilizers, and other inputs in the country each year, according to Agrim co-founder Mukul Garg.
Then there are about 1 million middlemen, including formal and informal vendors, linking these input manufacturers and importers with the end consumer – in this case, farmers.
Making things even more complex is the fact that the majority of India’s estimated 130 million-plus farmers are smallholders, typically working on less than a hectare of land – further complicating the logistics of actually getting the products to the people and places which want them.
“For the local manufacturers it’s very difficult to connect to last-mile partners. It’s a three or four-tier distribution system, where the manufacturer goes to the retailer, the retailer goes to the local store, who goes to the farmer – and this is a highly seasonal business,” Garg tells AFN, illustrating the difficulties faced by input makers, vendors, and users alike.
The result, more often than not, is that retailers and their farmer customers are left with a limited and inconsistent assortment of goods, of spurious quality and with opaque pricing. This, in turn, leads to a high cost of working capital for the retailers.
These are the pain points in the value chain that Agrim — the company that Garg founded along with Nomura alum and serial entrepreneur Avi Jain last year — is aiming to cure.
“My dad has been in this agri-inputs business for the last 25 years. I have seen him struggling with the distribution, the logistics,” Garg says.
“But [input sellers] can come onto our platform, and we take care of delivery, we take care of payments.”
$2 million seed round
Earlier this month, Agrim came out of stealth with $2 million in seed funding from local VC firms Omnivore and India Quotient, as well as Accion Venture Lab – an early-stage investment arm of US nonprofit Accion. Also participating in the round were Rahul Jaimini, co-founder of restaurant delivery app Swiggy, and Rajesh Yabaji, CEO of ‘Uber for trucks’ platform Blackbuck – where Garg previously served as head of growth.
Agrim is building an online B2B marketplace which connects input manufacturers directly with rural input retailers all over India. It’s also planning to offer a variety of value-add services to these stakeholders, such as distribution, marketing, and logistics.
According to Garg, the seed capital will be used to build out the Gurgaon-based startup’s product and marketing teams — its headcount currently stands at close to 90 — and to onboard more retailers and manufacturers.
“What [an inputs maker] essentially needs to do is simply come on the platform and start listing their products,” he says.
“As for retailers, [we help them] to make money, to drive customer retention, [and stock] the right selection in their shop – and at the right price. They need to work with about 10 to 15 suppliers to secure the right inventory.”
Farther down the line, Agrim is also keen to introduce financial products to assist retailers so they can ensure they remain optimally stocked.
“As we get deeper with the retailer, we can extend credit,” Garg says. “We, as a platform, collect a lot of information about retailers. The idea is, we actually become a financing platform for these retailers and enable third-party financing – extend a bill-to-bill credit line to them.”
Retailer-centric, not farmer-centric
According to Garg, competition for Agrim will mainly come from agribusiness marketplaces such as Agrostar, DeHaat, and Gramophone. [Disclosure: DeHaat has received investment from AgFunder, which is AFN‘s parent company. Read more here.]
“They are not direct competitors, but are playing into same arena. But their approach is quite different to ours,” he says.
“For them, it’s about advisory-led sales to farmers, whereas we are optimizing the value chain to the retailer. [Or they] are focussed primarily on agri-outputs, and want to create market linkages for the farmers, more on the output side. The majority are more farmer-centric, whereas we are retailer-centric.”
“There’s a more solid concentration to our business,” he adds.
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Agrim’s founders figured that India’s agrifood supply chain is so vast and so fragmented — with so many different stakeholders — that it would make sense to zoom in on one subsection of the value chain and focus on improving that, rather than attempting to make the entire ecosystem more efficient.
“In any value chain, if you want to make a dent, you need to start owning a critical mass of that value chain. We can do that faster than any other player in the market,” Garg claims.
“With the speed we are adding retailers onto our platform, almost 25% [of the national total] will be on our platform within one year.”
‘You need to build a business that is sustainable in itself’
Another reason for following this specialized approach is the business case. While other ag marketplace startups are busy onboarding individual farmers and cooperatives, Agrim is focussed on signing up the retailers that serve anywhere between a few hundred to several hundreds of thousands of those same farmers.
This means it can indirectly get more farmers into its network with less legwork than rival platforms, according to Garg. He claims that, over the last seven or eight months, the number of farmers Agrim has served through its retailers is higher than all other marketplace platforms in India.
“Serving each and every individual farmer in India is an expensive affair. You need to build a business that is sustainable in itself,” he says.
“Every [ag marketplace] serving farmers directly will bleed money for sure, and the acquisition cost is high – they’re doing everything from hyperlocal last-mile logistics to making sure the right advisory is provided for farmers.”
“They’re trying to solve 10, 20 different problems. We are just solving one problem – we’re not doing ancillary focus, so we can scale faster. Supply will always go to a platform where there is concentration, and if I tell suppliers I have 25% of retailers on my platform, that’s a very solid proposition compared to, say, 5% of farmers.”
Agrim is “100% clear” that it won’t move into providing solutions directly to farmers – either in upstream terms, linking them to its already-onboarded retailers, or downstream to help them sell produce.
“Everything becomes way more easy to execute [if] we pick up one problem, and try to solve that as efficiently as possible,” Garg says.
“It’s like [the agtech ecosystem is] cooking a four-course meal, and we’re concentrating on making one of those dishes as good as it can be.”