This comes at a time when venture capital-reliant agriculture technology startups are struggling to scale margins on mainstay business and have pared workforces to cut costs.
These companies are also playing over a demand uptick among consumers who are increasingly moving from unbranded commoditised staples to branded alternatives.
Patna-headquartered Dehaat has launched its products in modern trade, quick commerce and ecommerce platforms under the brand name Honest Farms, which includes 200 stock keeping units (SKU) in categories of pulses, rice and spices.
Launched about six months ago, the company operates at Rs 3 crore monthly revenue, growing 15-20% every month, founder and CEO Shashank Kumar told ET.
“Honest Farms is currently in a stealth mode… we are not going very bullish in terms of TV commercials and a lot of marketing spend, because at this point of time, the brand is very new,” said Kumar. “We are fully focused on having the first 100,000 consumers just because of the product, not because of any marketing.”
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Having raised $221 million in funding from investors including Temasek and Prosus Ventures, Dehaat’s mainstay output marketplace business involves buying staples and similar produce directly from farmers and selling the post-harvest to bulk buyers. It started working on Honest Farms in mid-2022 and went on to invest Rs 20 crore to create it.Some 5,000 of its network of 2 million farmers are registered on Honest Farms’ network and they grow only pesticide-free crops. A farmer generates 30-50% of the margin on these sales, while Dehaat commands about 10-15% at an enterprise level, Kumar said.
Hemendra Mathur, venture partner at Bharat Innovation Fund and a cofounder of an agri- and foodtech-focussed think tank ThinkAg, told ET that there is enough and more demand for sustainably grown staples in the market. He said a brand can also charge a bit of a premium if it can demonstrate a safe-to-consume nutritious and traceable product in the category.
“Staples is a product development game. This is not just a digital business. You need to build star products in each of the categories you service and need to be able to produce a consistent quality through the year despite different varieties, moisture content, physical and biochemical properties,” Mathur said.
Other founders in the broader market linkage services in the food and agritech space told ET that the private labels play helps their companies do better in margin while retaining their mainstay business.
SuperZop’s co-founder Prithwi Singh told ET that the staples market is about $350 billion in India and largely unorganised. In terms of product composition as well, there is only 10% branded goods penetration. The company that primarily procures farming produce for retailers operates a consumer staples brand Khetika.
“The market linkage DNA will have to remain for us to retain the value. Otherwise, we are no different from someone who labels the products. It is now high-margin, it’s sustainable, and this is just the right way to go,” WayCool co-founder Karthik Jayaraman told ET.
Jayaraman said WayCool makes 15-18% in weighted average margin across its brands such as Madhuram and Kitchenji. The brands account for Rs 60-70 crore in revenues of the company’s overall Rs 140-150 crore a month.
Shopkirana cofounder Sumit Ghorawat told ET that the company, which is backed by Info Edge Ventures, tracks about a 9% margin on its B2B procurement side for kirana stores, but on its branded private label play, it tracks about 20-25% of a margin.
“In a pure play private label, you can’t extend your margins. But when you work on the brand and product, you have the right to do it and charge premiums. That is how you disrupt the commoditised play in staples,” Ghorawat said.