Can the market work for Farmer Producer Organizations?

Dr. Ravind Pastor, CEO, e-Fasal

When we start any new business, we usually make some mistakes. The first mistake is that we are not able to identify the real problem. For example, we are forming a Farmer Producer Organization to find a solution to end poverty or make farming a profitable business. But the words poverty or unprofitability of farming are general words. These words have many aspects. This specificity is not the nature of the defined or identified aspect of the problem. Therefore, when we search for solutions without specifically defining the real problem, then they are only general solutions, such as without identifying which aspect of the problem we will solve by forming a Farmer Producer Organization. The second mistake is that we fall in love with the problem. For example, the word poverty is a generalization of the problem and not a specific problem, so getting stuck on an "incomplete idea" is a widespread problem that many potential founders face. Like earlier we used to think that rural problems can be solved by self-help groups, but after working for many years we realized that poverty cannot be eradicated by this model, so then we started making VOs at the village level, we formed cooperative societies and now we think that the problem can be easily solved with Farmer Producer Organizations (FPO). The third mistake is that we do not evaluate the idea. We are registering Farmer Producer Organizations on the basis of government targets. Whereas only through a Farmer Producer Organization registered under the Company Act, business can be done all over the world. The fourth mistake we make is to know whether we have a suitable strategy for the market. Does the team have the ability, experience and resources to work on this strategy? Therefore, we should choose a good idea for our team. In the fifth mistake, we do not ensure how big the market is. The sixth mistake is how serious is this problem for the people for whom we want to work. Do they also want to work on the proposed solution to the problem? The seventh mistake is that we do not see who our competition is with. Due to this we unknowingly start copying and implementing the trading model of our competitors even though we do not have the resources and opportunities like them. So we should adopt the opposite service model. In which we should ask our target group whether they want this. Do they want to do this without government support? Has this model become possible or necessary to implement recently? The eighth mistake is, is this an idea on which we would like to work for years without government support? And the tenth mistake is, is it a scalable and self-sustainable business? Because agriculture is not an attractive sector, the idea of FPO business is not an attractive idea, but can our team really make it good? Doing business has always been a difficult idea, so do we have a team that has the ability to work on an idea that is difficult to start, which is boring and which has a lot of competitors? In which results are seen after a very long period. You should never start a Farmer Producer Organization without discussing these questions.

An investor named Bill Gross, in a TED Talk, studied hundreds of successful and unsuccessful companies and concluded that the factors responsible for the success ratio are right timing 42%, team/execution 32%, idea “truth” outliers 28%, business model 24%, funding 14%. Boxer Mike Tyson says that everybody has a plan until they get punched in the face. There are four main barriers in starting a Farmer Producer Organization - 1. Psychological barrier 2. Farmer community problems like the law of succession - division of land - low quantity at both ends - Market challenges - large quantity, uniform quality, competitive price 3. Statutory compliance barrier - Company Act 2013, GST, Income Tax, Fertilizer Control Order, Seed Act, Insecticide Act, Mandi Act, etc. 4. Business community problems like the problem of taking dealership of producer companies, the problem of selling because they work on monopoly model in the market.

Businesses can never succeed on a prescriptive model. Similarly, the business strategy of all Farmer Producer Organizations cannot be the same because there is differences in the market of Farmer Producer Organization, the product-market fit will be different for them, and their MVP - Minimum Viable Product will be different so their Article of Association AOA and Memorandum of Association MOA should not be same but if we see the papers of currently registered Farmer Producer Organizations, they are almost same. Because no one reads this document. So if we want to make our Farmer Producer Organization successful, then every Farmer Producer Organization should work on the basis of crop specificity of the area. In which the selection of one crop, one variety of seed, a similar package of practice strategy should be developed and work should be done. Every Farmer Producer Organization's operation manual should be different. Their USP - unique selling proposition will be different, so their branding strategy should be different. The story of poverty cannot be a good story for marketing. No one in the market wants to do business with the poor, everyone can sympathize with the poor but Farmers do not want to do business. Many companies like Walmart, ITC, Reliance, IFFCO etc. are forming and supporting Farmer Producer Organizations but are not buying the produce of Farmer Producer Organizations. The government, despite being the biggest buyer in the market, does not buy the products produced by Farmer Producer Organizations. When Tata Company tried to sell the Nano car by creating a marketing story of it being the cheapest car for the poor, it failed. Therefore, the products of Farmer Producer Organizations can be sold only on the basis of utility and quality.

Farmer Producer Organizations have started the business of agricultural inputs but are unable to run it due to market challenges. The main challenges in this are availability and price. This challenge can be successfully faced by advance booking, advance lifting, advance stocking with farmers and buying in groups. If Farmer Producer Organizations have to reduce the long supply chain to sell their agricultural products, then they should adopt similar packaging of practices and solve the three basic conditions of the market - large quantity, similar quality and competitive price. For sales, it is important to know TAM (Total Saleable Market). Farmer Producer Organizations should determine its area of work based on this. There should be an understanding of concepts like CAC (Customer Acquisition Cost), MAU - Monthly Active Users, Attrition Rate, Customer Retention, Customer Lifetime Value, Average Order Size and MRR - Monthly Recurring Rate.

Farmer Producer Organizations will be able to run for a long time only by strictly adopting financial discipline. So, they will have to try to prepare a startup-like strategy to develop the ability to run without government grants, which includes Runway - Dry Powder, Burn Rate, Monthly Recurring Revenue, ARR - Annual Run Rate, GM Gross Margin, Net Profit, Financial Metrics, Break Even, Debt to Equity Ratio, ROI Return on Investment, P & L Profit and Loss Sheet should be prepared from the beginning every year and presented in the Board of Directors meeting.

KPI - The monitoring system developed by the Government of India needs to be adopted for continuous monitoring and evaluation. The most important thing is that the members of the Farmer Producer Organization are both producers and customers, so initially they should try to gain experience of selling their products in the local market and then move into the field of the urban market, future market, organized market, e-market and export.

Farmer Producer Organizations should work on the concept of one product one company and try to develop cooperation with other Farmer Producer Organizations rather than competing with them. There is a need for cooperation from agricultural input manufacturing companies to prepare a single package of group buying - group selling practices. E-Fasal is helping to develop a collaborative platform under which marketing executives are being trained. E-Harit Vyapar Kendra is being established with Farmer Producer Organizations and it is proposed that a maximum share of the profit and software, payment gateway, product portfolio, etc. be given. Farmer Producer Organization does not have to take any license, no investment, no inventory, no risk, only networking is required to start the business. E-Fasal FAQ is an initiative to provide a grading packing facility with certification, sample basis sales - warehousing, cold storage, credit on receipt - and online marketing linkage with national-level stockists, processors, and exporters. Because the market does not care who you are? The market respects only quantity so if we can come together, the market works for us otherwise each of us will have to keep struggling to get our share. So let's come together and make the market work for the Farmer Producer Organizations.