Wednesday, August 24, 2016
The Man from Juhapura: How Ahmedabad’s supermarket king plans to transform agriculture
(When he started building supermarkets in Juhapura, the area bigots once called ‘mini Pakistan’ in Ahmedabad, few realised how successful Nadeem Jafri’s Hearty Marts would become. He now has 14 stores in towns and villages, 8 network companies and a turnover of Rs. 200 million ($3 million). He has even lectured at the Indian Institute of Management-Ahmedabad, the country’s best-known MBA college. In this interview, he tells Grin that his ambition now is to transform agriculture.)
1. How did you start thinking about a new way of farming?
This started few years back. Most of our village franchisees are owned by farmers. Apart from the supermarket, which they owned, they were heavily dependent on farming for their livelihood. And in our retail business we wanted to create private brands of food-grains and spices at economical cost to earn better margins. Thus we thought to integrate both the needs to create a win-win proposition and came up with the idea of ‘Hearty Mart farm services’ — a farm consultancy firm headed by an agro-scientist.
We did a small pilot project in one of the villages with few farmers. Here, the farmers were required to cultivate the crop under the guidance of the agro-scientist in one section of his farm. The result was good but we could not continue with this for long as we lacked the domain expertise of farming and we were dependent on the scientist who could not devote much time on this project because of his other commitments. Since then I was mulling with the idea of coming up with something similar at an appropriate time.
2. Are some of your ideas from the world of retail that you have built for many years?
Our learning of entering into an unexplored and under-developed Juhapura in Ahmedabad, provided us the insights and courage to target unexplored areas of rural Gujarat and empower aspiring entrepreneurs to take up organised retail as their business through our innovative franchisee model. With our franchise model we train the village entrepreneurs at our Juhapura super market and share with them insights and knowledge of organised retail and thus guide them to run their own franchise store at their respective villages.
In order to enter into the franchise contract with us, the aspiring village retailer has to firstly register a store in his own name. It can be a partnership or proprietorship shop. Under our guidance his store is developed and we help him with the inventory purchase. A one-time fee and a refundable deposit is taken from him to honour the contract. And at the end of every year he has to pay us a ½% royalty on annual sales of his store to remain a franchise.
We have created a ‘Franchise Development Cell (FDC)’ within Hearty Mart. The cell has many MBAs working with us to provide a dependable retail ecosystem to our franchisees and work as a guiding force for them. Creating retail entrepreneurs at rural level with our franchisee model and handhold and support them through Franchise Development Cell makes this franchisee model unique.
3. How big is your retail business at the moment?
Started in 2004 as a retail supermarket at Juhapura, Hearty Mart has evolved as a prominent name in the food and grocery sector today in Gujarat.
The retail business has soared since then and as on date it is a chain of 14 stores covering mostly small towns and villages of central and north Gujarat.
Hearty Mart isn’t only a retail company today. In 2008 it does bulk supplies of food and groceries to hotels, restaurants and caterers. This strengthened our negotiation power with the vendors as we gained access to the ‘economies of scale’ since now we were catering to 500 restaurants of Gujarat. With better negotiation power we purchased food-groceries at a better price and this strategy helped us in providing supplies to our franchisee at an economical pricing.
Later on we came up with a marketing logistics company, a tea company, a packaging company under Hearty Mart network. Thus as on date our group annual turnover is to the tune of Rs. 20 crores ($3 million) and we are network of eight companies.
4. What are your main ideas on transforming agriculture?
Farming has been modernised and in certain regions farmers are doing well. They are well informed and guided by the initiatives like e-choupal andhariyali bazaar; which is commendable. I have read a lot about contract farming as well which has helped farmers earn better returns. But I still feel that all these initiatives are buyer-centric. How about thinking of an idea which is more farmer-centric?
I think the idea of ‘customised farming’ would revolutionise the farming sector. My experience with farmers suggests that due to lack of dependable ecosystem they are averse to risk taking. They would cultivate a crop which they had been doing over the years. They follow the herd mentality and would not take a risk of cultivating an alternate crop which might fetch them better returns. Let me explain you with an example, suppose a farmer is cultivating crop ‘A’ which gives him decent returns per season, but his soil has a capacity to cultivate crop ‘B’ which can fetch him better returns. The case might be that he isn’t aware of this fact or he is scared to cultivate something which he hasn’t done since ages. This is where my concept might help him.
I would thus like to create an ecosystem for farmers which would guide and inform them in cultivating market oriented crops and market the farm -produce to ensure better returns for them. Corporates have done this in certain regions as mentioned earlier but entrepreneurs have not taken such an initiative. Imagine hundreds of entrepreneurs coming up with similar idea across India to bring in difference in the lives of farmers. Would not it be a great service to the nation, since farming is the lifeline of our country as our economy is dependent on it?
5. How are you planning to implement your ideas?
Being a retailer myself I want to create a retail initiative which works as linkage between a farmer and a market. While contract farming is more to do with the need of the one who has hired a farmer, in case of customised farming we want a farmer to cultivate a crop which his soil can do it in the best form and fetch him good returns as well.
This concept of customised farming is a backward integration for my business since we deal in the bulk supplies of food-groceries to hotels. As a pilot project I am thinking of opening one store in a catchment area of 25 villages catering to around 400–500 farmers. We would be hiring a panel of agro-scientists as advisers, they would work as our knowledge partners and we are in talks with couple of village entrepreneurs with a farming background to take up the project. They are educated with technical background and their main occupation is farming. If they join hands it would give us necessary domain expertise which we lacked last time when we came up with a similar idea.
The central idea of our store is to deliver turn-key projects of crop cultivation to farmers. In this case a farmer would be guided from selecting seeds to fertilisers to soil testing and final cultivation. The produce would be marketed by our store to ensure better returns to him. Apart from this it would work as a farmer-centric retail store selling agri-input products, equipment and even advice if needed by the farmers and few consumer products for their daily needs.
Similar to our rural retail supermarkets we intend to expand through a franchisee network in this case as well.