Challenges in the fruit and vegetable category and opportunity for agro-tech players
Fresh produce requires separate processing lines, timed operations, and traditional inventory models can never support the fresh produce industry at a scalable level. Therein lies the problem and also the opportunity for agro-tech companies to take advantage of it.
I still remember the day Mrs. Reddy approached me and casually told me that “add to cart” was her favorite pastime these days. The pandemic has changed the way we buy everything, especially basic consumables. Like her, there are dozens of men and women who have contributed greatly to the digital landscape in India with their frequency of online shopping. There has been a boom in digital penetration in India as the internet user base is on a growth trajectory. According to Economic Times & Business Standard reports, India has around 826 million internet subscribers and over 600 million smartphone users.
Countries like the UK import 40% of its fresh produce from agrarian countries around the world and China now has most of it. But India is poised to soon carve out the lion’s share of the global fresh produce industry, thanks to the commendable work being done by agri-tech startups to boost innovation and agricultural productivity among our farmers.
Although the Indian economy has been experiencing a slowdown until recently, the demand for raw materials and fresh produce is constant. Moreover, the category has health benefits associated with it and there are the benefits of “home” cooking offered by fresh produce. Consumption of fast food and eating out may not have declined post-Covid-19, but there has been a drastic awareness of the importance of having a healthy immune system and doing healthier food choices.
Consumer trends for the purchase of fruits and vegetables
Consumers have increasingly started using virtual or online methods to purchase groceries and fresh produce. Food delivery apps and e-commerce platforms continue to be on the rise – and may be here to stay. This raises the vital question of whether agriculture is India’s new IT, leading the global economy onto a healthier growth trajectory.
There has been a shift in consumer trends towards buying fresh produce. Fresh produce (F&V) mandis will no longer be an offline experience in the coming future, much like how our offline bookstores have become a nostalgic experience. People have started relying heavily on online fruit and vegetable apps following the implications of Covid-19-19. In addition, shoppers have more choice online and can have it delivered comfortably to their home. Last-mile delivery is formalizing faster with door-to-door delivery, more self-service kiosks are being set up, and various types of mobile vans and agricultural supermarkets are being introduced, at least in Tier I and Tier II cities.
However, contrary to traditional thinking, fresh produce has a unique problem and opportunity: it’s conveniently hidden under the grocery category when in reality it’s not. Fresh produce requires separate processing lines, timed operations, and traditional inventory models can never support the fresh produce industry at a scalable level. It is the opposite of FMCG products, but the way conventional online and offline players deal with fresh produce has yet to bring innovation. Therein lies the problem and also the opportunity for agro-tech companies to take advantage of it.
Consumer suspicions and concerns about online gamblers’ food safety and traceability track records have diminished over time. Although the minds of urban and educated consumers are too sensitive to food safety issues, they have not only started looking for fruits and vegetables online, but also started looking for reliable delivery channels. Thus, there has been a shift from localized cart vendors to modern retail format curated stores and online shopping models through apps. Food safety and traceability are some of the causes of emerging changes in fresh produce purchases.
Vegetables and fruits in demand
The demand for immunity boosting foods like ginger, garlic, turmeric, papaya, oranges and amla has increased due to the pandemic over the past couple of years. The demand for high-value fruits and vegetables, such as strawberries, bok choy, basil, iceberg lettuce, etc., has also increased significantly. Demand is also increasing for citrus fruits, kiwis, pears, avocados, cherries and a host of other new fruits. The demand for many meat alternatives or vegan alternatives like soy and jackfruit is also increasing.
At the same time, the demand for organic food is also increasing. Demand for organic items was sluggish for a few years, but is now booming again. The cumulative addition of customers to the consumption of organic products increased by 50%. Consumers are looking for long-term immune results and many cancer patients have definitely turned to eating organic foods. Organic vegetable washes and fruit and vegetable cleaners have been introduced during the pandemic to promote fruit and vegetable hygiene.
The new category is ripe for agri-tech disruption
Several agricultural start-ups have sprung up during the pandemic. India currently has over 1000 start-ups in the agri-tech space. Agri-tech companies had initially co-existed with the traditional agricultural ecosystem, but the pandemic has helped alter their operations across the broader agricultural economy. From conventional, non-formal and analog markets, these start-ups have become more creative, formal and digital, reaching a wider audience.
The biggest challenge in the process of producing and selling fruit and vegetables is product quality and freshness, which includes timely delivery. Fruit and vegetable quality includes the removal of unwanted substances such as chemicals, pesticides, bacteria, and other materials used during the growing and harvesting process. To ensure this quality of agri-food products, many standards have been formulated and used at the national level. All these legislations guarantee the safety and quality of fruit and vegetables and are taken into account by companies in this sector.
Second, the time it takes for these products to travel from the place of production to the actual consumer’s plate plays a vital role in maintaining the nutritional benefits of these fruits and vegetables. From a logistical point of view of a fruit and vegetable company or producer, a big problem has always been to quickly bring perishable products to the consumer in a timely manner, without compromising the quality of the products. Few companies take adequate measures to ensure that fresh produce is delivered to consumers as soon as it is harvested.
The Department of Agriculture has set up a call center service to reduce agri-logistics troubles, including interstate movement of perishable fruits and vegetables. Many of these changes are likely to endure and create opportunities and alternatives as middlemen are removed. The E-NAM or Electronic National Agriculture Market, which is a pan-India e-commerce forum for farmers, is widely used for agricultural knowledge and services regarding produce inputs, quality, price and payments in line directly to farmers’ accounts.
Therefore, increased digital penetration, increase in digital literacy, outbreak of the pandemic, proliferation of agri-tech start-ups, revolution in farming techniques and substantial government regulations and policies in this area have together brought about this robust paradigm shift in fruit and vegetable shopping in India. However, the bottom line is that only technology can solve the inefficiencies of the fragmented agricultural sector, to put it on par with the world. Agriculture in India needs the adoption of technology at every stage for it to turn into an industry.
(The author is the founder and CEO of Atomaday, a company working to modernize agricultural commerce by democratizing consumer access to all farmers)