Venturing in Market, Going Bananas - Experiences of Kazhani Farmers Producers Company Limited
The Kazhani Farmer Producer Company, based in Gobichettipalayam, was started in 2016 by Myrada Krishi Vigyan Kendra (KVK). Gobichettipalayam is in Erode district of Tamilnadu, through which the river Bhavani flows. The major crops in the region are paddy, banana, and sugarcane. Kazhani FPC, built upon the foundation of strong SHGs and KVK promoted by Myrada has been able to become a financially viable and self-sustaining institution. The key to its success so far has been its bold experiments with various business models, especially banana exports.
A typical FPC’s business portfolio has a high share of input business and some share of output business (aggregation and trading) and a very small share of business in value added products. Kazhani’s business portfolio, in stark contrast, is 80% from trading and sale of value added products and only 20% from input sales. The low input sales must come as no surprise when we consider that Kazhani promotes organic farming and LEISA (Low external Input Sustainable Agriculture). Started in 2016, the company has been able to achieve steady growth in business turnover to about 1.4 Cr in the current year (2020-21).
Building efficient and direct marketing channels
Primary producers realize just about 30–35% value of their produce. Realising the need for a more efficient alternative marketing system controlled by farmers, Kazhani has been trying to provide alternatives to farmers who are otherwise trapped into the conventional marketing system controlled by middlemen. From having its own outlet for grocery items, to direct supply of vegetables to consumers, to export of Bananas to bulk sale of Millet based products, the Kazhani FPC has been actively working to find alternative channels for marketing its members produce.
Kazhani’s website (https://www.kazhani.co.in/) has an impressive list of products, including Rice, pulses & spices, Oils, Millets and Millets Value Added Products, Honey & Honey Value Added Products, Jaggery etc. Of these, the major products have been Millet flours and MIllet Value added products. These products are mainly sourced from Kazhani’s members and from other FPOs, but also from the open market when the FPC has orders but is unable to procure from its members.
Learning from examples and peers
One of the key initiatives undertaken by Myrada prior to Kazhani’s registration, was exposure visits to successful FPOs, to introduce the concept of FPOs to farmers in the region, and to understand the scope for value addition and marketing in the main commodities, especially banana, which is widely grown in the region. Exposure visits to FPCs in Theni, to Thottiyam banana FPC and APK Banana FPC were very useful to understand the various business opportunities and benefits to farmers through FPCs and helped develop a vision for the FPO, with its focus on banana business.
Kazhani’s entry into the banana business was in 2017, after a meeting with Waycool during an exhibition, Kazhani received an order for supply of Bananas to Chennai, as part of a one year CSR programme. The requirement was for cleaned and graded bananas of nearly 3 Tons per day for 5 days a week and the bananas were to be used for the mid day meal scheme for school children. Once the contract ended after one year, Kazhani tried to continue the banana business by selling in the local market.
Overcoming the challenge of local markets by going global
Unlike the earlier model of supplying to one institutional buyer, Kazhani found working with the local market very challenging. They faced issues in logistics and determining price, besides collecting payments, which traders could manage with their established network with buyers which Kazhani lacked. At the farmer level also, despite being an organization of farmers, Kazhani faced challenges in procuring, as the conventional practice is that traders pay an advance to farmers to book their standing banana plantation and harvest it when it is ready. Lacking capital to provide such advances to farmers, and faced with a competitive market and wafer thin margins in local market, Kazhani could not compete on price either, so had to opt for a different strategy for its banana business.
Kazhani continued its work on bananas boldly, through entry into the banana export business in Feb 2020. Since it didn't have knowledge or infrastructure needed for export, Kazhani initially tied up with Green Agro (Banana, Mango exporter), Cochin to supply bananas for export markets. The countries that were exported to were mainly Southeast Asian countries - Singapore, Malaysia, Maldives and European countries - Austria, Italy, UK, Germany.
No going back
To start with, Kazhani supplied four sample consignments of red bananas meant for the European Market through this arrangement. Each time, they received feedback and suggestions from the exporter on quality parameters and by the 3rd, 4th shipment, they were able to meet the stringent quality specifications of the European market and got a go ahead for Red Banana from the exporter based on trial marketing and feedback from customers. Likewise, Kazhani also has got export samples okayed for Nendran variety.
Following this, Kazhani has entered into a contract with Green Agro for the banana exports. In this arrangement, Kazhani’s role is to procure, clean, grade and pack the produce. The packaging material is supplied by Green Agro. All logistics after packaging, including transportation and custom clearances is handled by Green Agro. The supply has been by air, since regular container movement by ship has been disrupted due to COVID lockdown. While the red banana is procured from the farmers at the prevailing market price, for its role, Kazhani receives processing cost plus a service fee.
Disruptions and aspirations
While the company had worked with farmers and started demand based cultivation of Red Banana in 2020-21, the export order did not come through due to COVID disruptions. The Company did not have a back-up plan to sell locally and the farmers sold the produce on their own. But, Kazhani’s management and members are encouraged by the acceptance of the produce in export markets, and hopeful of a better season next time around and the Company and farmers are looking forward to it.
With an eye on the future, Kazhani is preparing to introduce and integrate its pilot initiatives such as supply of good quality inputs, traceability using blockchain technology, organic production practices and certification, financial services such as credit and crop insurance for export based banana cultivation once the export business stabilises. In the next 3-5 years’ time, Kazhani is looking to familiarize itself with different aspects of banana exports and banana export is likely to be the main business for Kazhani. This plan and shared vision is clear among all the stakeholders of Kazhani FPCL.
Gayatri is associated with MYRADA. Pallavi GL is an FPRM student at IRMA. Balakrishnan S is the CEO of Vrutti, and Parthasarathy T is the CEO of SkillGreen.