Sunday, January 8, 2012

Aggregation model for marketing of vegetables

Scope for aggregation:

There is a huge scope for aggregation of vegetables for marketing. There are very few successful models existing across Andhra Pradesh and of late few entrepreneurs are coming with these models.  Currently these aggregators are dealing with approximately 100 tons/day (this includes aggregation done by retail markets) and reaching few hundreds of vegetable growers from less than 50 villages.

Investment:

 Investment is required Transport vehicle, crates, grading table etc.  Approximately Rs.25 to 30 lakhs investment is required, and this excludes land.

Key components in aggregation:

Identifying producers and buyers:

 The first step for establishing an aggregation model is identifying buyers and producers. Connecting to potential buyers and getting orders is crucial for success, further building confidence among the producers is even more critical as the producers are connected to merchants in the market for a long period. Confidence building measures like giving advances, credit, seeds, prompt payments and  transparency in weighing etc are required to build confidence among the producers.

Collection centre:

 Collection center is the nerve center for aggregation. Currently there are two types of collection centers i.e  farmers bring their produce to one centre place from there the produce goes to warehouses like in Vontimamidi and the other one is farmer’s produce will bring to one place for grading and sorting like fresco.  Collection center requires infrastructure support like transport vehicle, weighing machine, crates etc. Fresco is doing grading at collection center and then t goes to customers.

Distribution center:

Distribution center is required if scale of operations is increased and if the produce reaches from different places. Distribution center process the orders and distribute the products to customers.

Key factors for success:

Trusted suppliers:

 Aggregation agency should have trusted customers to ensure regular supply and who is willing to change their cropping pattern to meet the demand from customers.

Price fixation:

Agency should have robust market intelligence to fix price. Even though entire marketing activity and price revolves around “Bionapally market” getting right price at right time is critical as the prices fluctuates from time to time.  As a thumb rule all the agencies paying 10% less than the bionpally market.  

Payment mechanism:

Prompt payment is one of the confidence building measures. Different agencies adopt different payment schedules. For regular suppliers they are adopting weekly payment and online money transfers. Spot payment is also done for occasional suppliers. Transparency and uniformity in payments will attract more suppliers.

Production plan:

Demand from buyers is for about forty commodities, meeting this demand is a big challenge as farmers in any given area grows almost same varieties. To meet this challenge agency should develop a production pan and should ensure different farmers grow different crops in the required area. Further this production plan should fetch maximum price i.e farmers should harvest their produce when price is maximum in the market.  

Coping in lean season:

 Supplying required quantities in lean season is very critical to maintain the buyers. The agency may require investing or supporting farmers to grow crops in lean season i.e summer

 Reducing wastage:

 5-10% of wastage is common while handling vegetables. Anything more than this leads to losses. To avoid wastage agency should focus on transport, grading and moving the produce to customers as quickly as possible. More the number of handling points more is the wastage, so one should reduce handling points.

Professional support:

The agency should have professional support in key areas like price fixation, grading, getting orders from buyers, developing production plans, building relationships with farmers etc.

 Risks:

 A.      Breaks in supply
 B.      Cancelation of orders by buyers
 C.      Price fluctuations






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