BigBasket is the first online supermarket to have established a proper value chain for organic fruits and vegetables with direct procurement, cold storages
About a decade ago, when farmers of Mahursa village in Uttar Pradesh started moving away from chemical-based agriculture, their agenda was clear. The village is located in Bulandshahr district along the Ganga, whose waters ensure irrigation and fertile soil. With organic farming, they could reduce the increasing input costs. Growing demand for organic produce could also open access to a new market.
Yet, these positives did not help the farmers realise real profit for their premium organic fruits and vegetables.
“At mandis, local buyers and intermediaries may offer slightly higher rates for organic produce, but only 10-12 per cent of the crops get sold at these prices,” said Abid Ali, who grows vegetables in his 5.1 hectares (ha) farm.
“We also have to account for mandi commissions, weight cuts, labour and transportation costs. In the end, we only have money to prepare for the next season,” added Ali.
But last year, online supermarket BigBasket entered the village for organic perishables. By selling his potato crop to BigBasket at a 15 per cent higher rate than in mandis and by saving on transportation and other costs, Ali’s income almost doubled.
Praveen Kumar, another farmer from the village who grows a variety of organic staples and vegetables in half of his 1.6 ha land, said he sold almost 300 kg of different varieties of gourd to BigBasket at R15 per kg, almost double of what he would get from the local mandi.
Like in Mahursa, some 3,300 farmers in five states benefit from BigBasket’s foray into the organic fruits and vegetables space.
Since the start of India’s push towards organic farming nearly two decades ago, the focus has largely been on staple crops such as wheat, paddy, pulses and millets.Neither the government nor private players are able to effectively introduce certified organic fruits and vegetables, as they are perishable and require expensive cold storage and transport infrastructure.
This is also why farmer-producer organisations (FPOs), cooperatives and other groups have been reluctant to procure fruits and vegetables on a large scale.
But just three years after being launched by five entrepreneurs in 2011, BigBasket recognised the potential in organic perishables.
The company, in which the Tata Group now holds a majority stake, is the first online supermarket to have established a proper value chain for organic perishables, which form 5 per cent of the 300 tonnes of the fruits and vegetables it sells.
To understand how the company manages purchase and supply of the perishable produce sustainably, researchers from Delhi-based non-profit Centre for Science and Environment (CSE) analysed its supply chain and marketing strategies.
They found that in the absence of farmer groups and federations to promote organic perishables, the company has tied up directly with farmers to procure organic perishables, providing cold storage and quick transportation.
First, to build the supply chain at the village level, BigBasket surveys regions and villages where organic fruits and vegetables are already being grown.
It then ropes in 20-30 farmers — this can extend up to 150 — to form a cluster of 20-29 ha. The journey of the produce from farmers to consumers is managed by a chain of centres, each of which is equipped with adequate cold storage facilities.
Each village has a collection centre that receives information about produce to be procured, decided by current and past demand and sales trends, and conveys the same to farmers. Before the harvest, officials from the collection centres also visit farms to check the quality of crops.
Post harvesting, farmers supply the organic crops to the centres at rates set each season; these are typically 10-15 per cent higher than those for conventional produce.
Bharat Singh, national head for potato sourcing at BigBasket, said the company tries to pay farmers within 72 hours of procurement.
He also claimed that the set rates do not dip if market prices drop, however, if there is an increase in the market rate, farmers are paid more accordingly.
From the collection centres, the harvested produce is sent to a mother distribution centre located in major cities, where it is sorted, graded, cleaned, packed, branded and stored until further distribution.
There are currently 40 mother distribution centres across the country, each of which can process an average of 100 tonnes of fruits and vegetables every day.
These centres receive the orders from consumers and send the products to a dark store (a facility from which products are delivered) nearest to the delivery location. From here, the produce reaches the customer. The entire process takes 24 hours, the company claims.
Some vegetables like potatoes have longer shelf-life and are stocked to be delivered across the country. Leafy vegetables and most fruits have a short lifespan of 24 hours, and so are sorted and delivered based on market demand. Such rotating inventory minimises waste to 5 per cent and cuts costs by about 3 per cent, says the company.
The company also offers organic staples procured from mills, processors, FPOs and federations that buy produce from farmers at higher rates and also give them a share of the profits.
Overall, organic products form 13-15 per cent of the BigBasket’s portfolio. Sales of organic perishables and staples have grown on an average of 42 per cent and 62 per cent, respectively, in 2016-22 and have helped BigBasket gain 300,000 customers.
Widespread adoption of organic farming is important to maintain consistent supplies. Keeping this in mind, BigBasket helps farmers shift to organic practices. It has launched a “farmer-connect” programme under which it appoints an agronomist at collection centres to provide hand-holding support and advise on crop management.
From 2015 to 2021, the company has held three major training sessions. It also shares information with farmers on preparing and using inputs in addition to monthly awareness campaigns. For farmers growing staples, trainings are imparted by FPOs and cooperatives.
The company helps cultivators, particularly small farmers with less than 0.4 ha, obtain organic certification. “It allows farmers to sell their produce during the process of certification so they do not incur losses,” said Seshu Kumar, national head, merch-andising at BigBasket.
The company mixes certified organic perishables with those under the certification process and sells it with the logo “PGS-Green”. PGS stands for the Participatory Guarantee System of certification.
Finally, to promote purchase, the company highlights major regional crops. For instance, southern states are major producers of organic turmeric, banana flowers and coconuts, so only these are available in the respective regions.
Despite its organic push, BigBasket’s high pricing, which is a common trend in the organic food industry, may prove a hindrance. With organic fruits and vegetables still a new category, maintaining the supply chain at reasonable rates is challenging. The company’s prices for organic products do not exceed conventional prices by more than 20 per cent, said Kumar.
CSE analysed prices of nine organic fruits and vegetables available on BigBasket’s platform. It found that their prices are lower than those in other platforms, and in comparison with conventional produce, rates of five organic products were higher by 20 per cent and those of two items were lower.
Similar analysis for organic cereals, pulses, oil, spices and dry fruits showed that their rates were lower than those of two other Indian brands, but higher than those of conventional items by 1-58 per cent.
During CSE’s visit to Mahursa, farmers claimed that the company procures limited produce so more of them are benefited. This affects farmers with surplus crops. BigBasket should invest more in capacity-building and increase its engagement with farmers for harvest and procurement, to ensure availability of perishable organic produce around the clock and build traceability.
(This is the last of a series of six articles on how better market access to non-chemical produce is key to success of regenerative agriculture)
This was first published in the 16-31 October, 2022 edition of Down To Earth magazine
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