SUMMARY
Ninjacart moves over 1400 tonnes of fresh produce per day and has doubled its volumes in the last 4 months.
The food supply chain company claims to have helped farmers boost agricultural income by up to 20%
Agritech startups received $248 Mn funding in H1 2019, a 300% surge as compared to 2018
Regardless of which part of India one lives in or the cuisine, fresh fruits and vegetables are an integral part of the Indian diet — even for those who can’t live without meat. It’s something every Indian household keeps a track of and no matter the frequency, each home will replenish its stock of fresh produce, whether that is a modern supermarket, the weekly farmer’s market, kirana stores, or in the case of many Indians, the ‘sabzi-wale bhaiya’. In cities and larger towns, veggies and fruits can easily be delivered to the doorstep these days using one of many online grocery platforms. But how often do customers wonder about the food supply chain that brings this fresh agricultural produce to the market?
The ease with which consumers can source the produce often makes them forget the meticulous planning, preparation, and hard work that goes into the production, distribution and food supply chain — from the farm to the fridge.
It’s particularly tough on farmers, who not only have to overcome natural calamities and climate to produce grains, fruits and vegetables, but also have to see their margins wither away at each stage of the supply chain thanks to payments to middlemen and agents.
In the end, farmers end up getting less than cost and have to rely on land-linked loans to survive. Factors such as limited connectivity, inadequate storage infrastructure and supply-demand mismatch also lead to post-harvest losses, thereby gravely impacting farmland income as well as morale. This cycle has pushed many Indian farmers to the brink of bankruptcy and some to suicide.
Bengaluru-based Ninjacart discovered a lucrative business opportunity in fixing this flawed supply chain. It leveraged technology to build a reliable and cost-effective supply chain to deliver quality produce directly from the farm to store, on a daily basis. This business model worked like a charm for the company which is now reportedly valued at over $320 Mn.
“We found a great business opportunity in leveraging technology to build a reliable and cost-effective supply chain from the farm to store, on a daily basis. We wanted to add value to farmers, retailers and end consumers in one go,” Thirukumaran Nagarajan, cofounder and CEO, NinjaCart.
According to an OECD report, among agricultural products, the highest post-harvest losses in India are registered for fruit and vegetables — ranging from 4% to 16% of total output in 2015, depending on the state.
On the other end, retailers also have to tackle their share of issues, ranging from exhausting procurement processes, poor quality management and hygiene, assortment, pricing, and lack of customer understanding. For something as indispensable as vegetables and fruits, the supply chain ought to be more streamlined and efficient.
The Ninjacart Pivot From B2C To B2B
Founded in 2015 by Thirukumaran, Kartheeswaran K K, Ashutosh Vikram, Sharath Loganathan and Vasudevan Chinnathambi, Ninjacart started as B2C hyperlocal grocery delivery platform where customers could order groceries and the company would deliver the order in less than 60 minutes.
But after just five months of operation, the team realised that this model is not a sustainable one and is plagued by structural challenges such as lack of practical technology solution to manage inventory, the wafer-thin margin for retailers and almost zero data-driven supply chain.
Plus, it relied heavily on expensive and erratic last-mile delivery fulfilment. This led to customers receiving only about 60% of the items they ordered. With little value in this, customers opted out which resulted in Ninjacart experimenting with delivery fees and zero discounts for 100% order fulfilment guarantees. This led to order volume drastically dipping by 70%.
That’s when Ninjacart realised it was solving a problem that did not exist and therefore its business model was unsustainable. As it shifted focus to just fruits and vegetables — a category that generated better margin — it soon found out that the supply side was broken.
It was a hassle for Ninjacart’s kirana partners as well, as the daily procurement was painstaking with haggling over quality, price, assortment and other details. That’s when Ninjacart decided to focus on the thing that was truly broken — the supply end — and this proved to be the Eureka moment for Ninjacart.
What Ninjacart and Thirukumaran realised was that FMCG companies managed the end-to-end supply and distribution for soaps, household essentials and other items such as biscuits and snacks. This considerably eased the burden on the retailers. But, there were no such companies doing the same for fruits and vegetables.
This realisation led to the discovery of significant inefficiencies in the fresh produce supply chain such as demand-supply mismatch, unfair market practices, unhygienic handling of food, the high quantum of food wastage and low income for farmers. Ninjacart pivoted from B2C to B2B to tap this lucrative business opportunity, and solve a real problem at the same time.
The Social Impact Of Ninjacart’s Food Supply Chain
With farmers being the source of their entire operation, Ninjacart works very closely with India’s agricultural community to ensure that farmers receive a fair price for their output, which is higher than the traditional income generated through the middlemen route.
Apart from the direct monetary benefits, the social impact of Ninjacart’s model cannot be understated, as it has removed a major source of debt for farmers. According to Thirukumaran, Ninjacart is able to offer a better price than the traditional markets to farmers by reducing the cost of supply chain and removing unnecessary middlemen.
In many villages, the company claims to have helped increase farmland income by 20%, and as a result, farmers are able to buy equipment and input materials more readily.
With its burgeoning base of customers, Ninjacart is able to deliver consistent demand to farmers, which helps them plan their harvests better. It also protects them against the risk of price volatility by doing the heavy lifting in many cases. For instance, the proximity of the Ninjacart’s collection centres to farmland have helped farmers save up to 6 to 8 hours that would otherwise be spent travelling to markets to sell produce.
Solving Fresh Produce Supply Chain
Ninjacart’s renewed focus on solving problems in the supply chain, was backed by its desire to use tech and data science to simplify the infrastructure and logistics network. Last year, Ninjacart was recognised as one of the 42 most innovative Indian startups of 2018 by Inc42’s 42Next list.
Here’s how the entire Ninjacart process works, right from the weekly forecasting to the procurement of fresh produce from farmers, and ultimately the timely delivery of items to the retailers.
An integral link in the company’s logistics chain is reverse logistics. At the end of the delivery routes, the delivery vehicles are allowed to rest and proceed to plan for the return and recovery, which is a very crucial aspect of any supply chain. Here, the company’s delivery agents inspect the quality of the fresh produce returned and pick up the crates that were delivered on the same morning along with the remaining crates from the previous night.
The transportation and distribution process of farm produce is highly time-sensitive as these are perishable goods. According to Nagarajan, the team ensures that the produce reaches the store in less than 12 hours from the time of the harvest.
“We have set up a high-speed active supply chain infrastructure, which includes collection centres in villages to collect the produce from farmers, fulfilment centres in the outskirts of the city to consolidate produce from multiple collection centres, distribution centres within the city to take the produce to retailers faster at low cost,” he added.
Additionally, the company assembled a responsive and real-time logistics network to manage inventory, reduce processing time and improve efficiency and forecasting models, which goes a long way towards reducing food wastage or shortage.
Hurdles Overcome; Alliances Forged
Thirukumaran claimed that Ninjacart has partnered with over 25K farmers across India and is delivering produce to over 70K retailers across seven cities. The company claims to be moving over 1400 tonnes of fresh produce every day, a volume that has doubled over the last four months.
Ninjacart’s revenue comes from the margin at which it sells the produce procured from the farmers to retailers. The margin comes from eliminating intermediary and streamlining the supply chain. The company is looking at crossing the INR 1000 Cr (over $140 Mn) mark in FY 2019-20.g
The founders conceived Ninjacart by pooling together a little over $42,000 (INR 30 Lakh) back in 2015. Earlier this year in April, the startup raised $100 Mn from Tiger Global, taking its post-money valuation to around $350 Mn. Apart from Walmart and Tiger Global, Ninjacart is also backed by investors such as Accel India, Nandan Nilekani, Qualcomm Ventures, Trifecta Capital and others.
This growth, however, didn’t come easy and the team had to overcome immense hurdles to reach where they currently are, as evident from the pivots and experimentation during the B2C phase.
Gaining the domain knowledge, building a novel supply chain from scratch, while also standardising the quality of the fresh produce to a certain extent, has helped Ninjacart make a name for itself among greengrocers and retailers. It also helped ease apprehension over technology adoption in the supply chain, particularly among the less tech-savvy groups of farmers, drivers, labourers and smaller retailers.
With a clear business model in place, Ninjacart was able to overcome many of these hurdles, but one thing it still has to figure out is expanding into new cities and markets.
“What works in one city, does not work in another city. The challenge is to replicate the model (systems and processes) in each new city, because each city has its own smaller nuances of supply network, customer profile, behavior, logistics capability and quality.”
Thirukumaran added that currently, the company is in learning mode for every new city it considers. It helps when there is a big customer base to cater to, which gives the company confidence about venturing into new markets beyond Bengaluru, Chennai, Hyderabad, Mumbai, Delhi, Pune and Ahmedabad.
While it may seem like a unique solution to solve the farming income crisis, the fact is that fresh produce or food supply chain is becoming a crowded market, simply because of the sheer size of the Indian territory, which makes scaling up a huge challenge.
Ninjacart competes with the likes of Farm Taaza, Kamatan, Gobasco and WayCool, but Thirukumaran believes its tech backend is what sets the company apart from its competitors. He was also quick to point out that the sheer volume of the fresh produce Ninjacart deals with is more than the cumulative volume of its competitors.
The Growing Indian Agritech Market
According to a recent Nasscom report titled “Agritech in India – Emerging Trends in 2019”, the Indian agritech sector is growing at a rate of 25% year-on-year and comprises of more than 450 startups. The report also states that as of June 2019, the sector has received more than $248 Mn in funding, which is a substantial surge of 300% as compared to the previous year.
Although agriculture has been around the country since millennia, it has vastly remained untouched by technology and innovation even in the 21st century. But with the advent of drones, deeper penetration of smartphones with cheaper 4G data, IoT, automation and supply chain efficiencies, agritech is slowly but steadily taking root as a prominent sector in India.
“Two core structural problems in agri-output monetisation is information asymmetry of supply and demand and distribution inefficiency. This leads to a majority of uncertainty and lower-income for farmers. We believe technology and data can solve these core problems, hence agritech is one of the key initiatives to solve one of the toughest problems of our country,” Thirukumaran added.
According to him, farmers will have a “say” in the trade and fairness and transparency will increase across the supply chain.
“We will see innovations solving food wastage, food safety, farmer income, quality and other inefficiencies in the value chain. In the long term, the supply-demand asymmetry will decrease and certainty will prevail in Indian agriculture and farmer earnings,” he added.
Update: October 3, 2019 | 21:52
An earlier version of this story mentioned Walmart as one of Ninjacart’s investors. We regret the error and have updated the article to reflect the changed.
