Business Rx: Can Veggie Cool cut the cost of produce in India?

April 27, 2011
The entrepreneurs

In the United States, most consumers don’t think about the complex supply chain that ensures a consistent flow of fresh fruits and vegetables to grocery stores. While not a perfect system, it is leaps above the current fresh produce supply chain in India. According to some estimates, more than 40 percent of fresh produce in India goes to waste because of a lack of refrigerated storage facilities, poor transportation and a culture of farmers leery of multiple layers of middlemen. Vegetables and fruits can be marked up almost 500 percent between the farm and retailer because of the inefficient system.

Halfway around the world, four University of Maryland MBA students with firsthand knowledge of the Indian market — Pradeep Suthram, Swaroop Simha Kolli, Seejo Sebastine and Caitlin Sachdev — have hatched a business plan they claim could double revenues for farmers and have retailers paying lower wholesale prices. They call their company Veggie Cool.

The pitch

Pradeep Suthram

“Veggie Cool will become the single connector between farmers and retailers in a specific region of South India leveraging the advantage of the team’s personal network and market familiarity. We’ll cut out the five to six layers of middlemen currently involved in getting produce from farm to market by purchasing fresh produce from farmers, cleaning and packaging and storing it, and shipping it directly to mid-size retailers.

“Right now, our biggest advantage is the personal relationships we have with farmers in a specific region of South India.”

Swaroop Simha Kolli

“There is a lot of trust between this community and my family. We have been part of the farming community for generations and have employed many farming families, provided them with medical care and educational assistance. Others have tried to pull off similar businesses to our model in other parts of India in the past, but they have failed because they just don’t have these relationships. Farmers are at the base of pyramid in India and have been ripped off by everybody.”

“The only way to make this business successful is to get the trust of the farmers, and that’s what we have right now. It is much easier to build relationships with retailers because they only look at numbers and price. We can supply them with produce at a lower price, so we won’t have problems building those relationships.”

Seejo Sebastine

“Our challenge right now is to test our assumptions. Working here in the Washington region, we have to gear up for business operations that will ultimately take place on the other side of the world. We need to test this integrated model before scaling up.”

The feedback

J. Robert Baum, associate professor of entrepreneurship

“You have very specialized knowledge that can really make this happen. Because of Swaroop’s relationships with farmers, you are perfectly poised to create a great experiment—a small-step market entry.

“Eventually you could scale up, potentially to a system similar to the co-ops that work so well in California. There, a few large organizations purchase from farmers and ship and sell produce all over the country at prices that work for all parties — farmers, retailers and consumers. This success can likely be replicated in India.

“From Washington, you can continue to network and find out everything you can about the way the produce market works here. Continue your great work together as a team, applying the functional skills you’re learning in your MBA program, and you’ll have a solid base on which to build your business. But to really make this business work, you’ll have to go to India and test your model.

“To ramp up, your first step is to start small. Buy a truck. Work the network you have established in India. Make purchase agreements with five to six farms and forge a relationship with one retailer. After you have this in place, you can really evaluate how things are working. Look at this ‘experiment’ as an investment and not necessarily the ultimate cost-structure for your business.”

Next steps

Swaroop Simha Kolli

“I’m going to India this summer for a few weeks to talk with potential clients. I’ll work with the farming community to get a basic understanding of how the logistics of our model will work best and to get them on board with the idea. I am also meeting with some of the retailers to better understand some of their pain points. As soon as we gauge initial interest and determine how quickly these clients will be able to adopt our method, the next step will be raising money from investors to implement the business. We’ve already received a lot of investor interest. The major challenge is to actually implement this at the ground level in India. We should have no problem doing a small market entry, but our challenges could be scaling up. We’ll have to rely on our success and word-of-mouth to gain the trust of more farm communities.”

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