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October 20, 2008

Making a success of Contract Farming

Businessworld profiles a few companies that have made a success of contract farming.
Most retail firms — from Reliance Retail through More (the Birlas’ chain) to Food Bazaar — have not been very successful in either building the infrastructure or integrating the supply chains. But a clutch of other firms that has focused on one end — contract farming as a method of sourcing produce — has found ways around the problem of supply-chain management, and let others handle the front end of the retail business. Some export, others sell to established retail chains, while others sell to captive buyers, and a few reach out to the McDonald’s and Subways of the world.

...KS Oils, an edible oils manufacturer in Morena in Madhya Pradesh, sources, processes and sells its own brand of mustard oil in the Indian market. Working with over 2,000 farmers, the group has consolidated 5,000 acres of farm land in the Chambal area of Madhya Pradesh. “This initiative of working with farmers is very recent,” says Sanjay Agarwal, managing director of KS Oils. “We give the seeds to them as an input for free, and buy back the produce.”

...While some have managed to address supply- chain issues, a few have attempted and, perhaps, succeeded in creating access. Trikaya Agriculture built its own cold store and processing units, and managed its own farms in Induri, Maharashtra. Samar Gupta, 45, managing director of Trikaya, says his clients include the McDonald’s and Subway chains in India; he also supplies exotics such as gherkins and iceberg lettuce to other retailers. “I work with 70 different exotics, and this is the future,” he says.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.