Recognizing that efficient terminal horticulture markets would stimulate productivity, raise quality standards, reduce losses and ensure consumer access to an increasing supply of fresh horticultural produce at reasonable prices, in 1998, the Department of Agriculture and Co-operation, Ministry of Agriculture, Government of India, requested the National Dairy Development Board (NDDB) to study and formulate a detailed implementable project for fruit and vegetable marketing.

Same year, a three member team from NDDB (me, a supply chain expert), were invited by Royal Cebeco Group Co-operative of the Netherlands, our partners in the project, to make a quick scan on this project. Cebeco wanted us to know if we were on the right track with the Project and to have a second opinion about the decisions already made.

Besides flower auction in Aalsmeer, near Amsterdam, we also visited ZON Verkoopdiensten BV, in Venlo, the Netherlands which was a fruit and vegetables auction founded in 1915 and was having a yearly turn over of 225 million Euro a year at that time. Apart from running a through academic study on the business processes and systems, I kept on recording my subjective observations on what is that that makes Dutch Clock Auctions tick. Today while looking for something else in my archives I chanced upon that note. Here’s the unedited version of my findings which I firmly believe would be still relevant if NAM has to succeed.

The principal function of an auction is to establish a price for the product. The Dutch Auction Clocks perform this function in a very subtle way by bringing buyers / sellers together at a place. The Auction houses provide best possible price to the growers and buyers. They also ensure timely supply of purchased produce to the buyers. The key factors that have made the horticultural trade in the Netherlands and the Dutch Auction Clock systems in particular, effective are:

COMMITMENT

• Commitment of producers to pour and pool their entire produces for common marketing through the auction systems.
• Commitment of buyers to purchase pooled produce of different producers.
• Commitment of producers and to pay a small percentage of their proceeds for a common cause.

TRUST

• For best possible prices and guaranteed payments, producers have trust in the system.
• For getting standardized produce even when many producers pool the produce, buyers trust the system.

FLEXIBILITY

• In spite of being a successful auctioning system, in a current scenario of supermarket monopoly requiring large quantities of consistent quality, emergence of key big buyers, liberalized imports, new political formations like European union and recent advances in infotech and electronic trade, the auction clocks are disappearing. They are either amalgamating into thicker organizations. Or in some cases the clocks have actually become obsolete and redundant For example: The number of Auction centers currently has come down to only 3 from 114 in late 70s’.
• Transparency, which was the hallmark of earlier system, is no longer desirable as there is cut throat competition between buyers to supply large quantities to a few major buyers. The growers are also getting benefited, as prices are not forced downwards.
• The cooperatives are encouraging small groups to work with the exporters / wholesalers to specialize in niche markets and have a system of negotiated prices and profit sharing between traders and small grower associations. However all such dealings are done through the Cooperatives system so that it retains its principal position. Producers continues to pay 4-5% commission to the Cooperative on his turnover and continues to receive a pooled produce price but is assured of his payments and cooperative’s support in case of any payment defaults.

SPECIALISATION

• The grower only produces and leaves the selling to the Auctions. Integration of wholesalers and exporters for trading is core competence of the Auction
• Retailing is best done by the retailers who are regarded as the cheapest employees for growers as they work around the clock as private entrepreneurs to earn their living and bear the risks and costs involved in retailing.
• There is no attempt to integrate all the marketing functions as each marketing unit uses the strengths of different functionaries and focus on its core competence.
• By virtue of being a specialized marketing requirements, fruits / vegetables / banana / potato / onion or for that matter processed produce, are traded differently by separate organizations.
• Specialists are handling logistics (transport and packaging systems etc.).

HISTORY

• The real growth of auction clocks occurred when a law regulated all members to sell through auctions in the post 2nd world war scenario.
• Growth in all round exports due to formation of the European Union boosted the growth of Auction Centers.
• The Board members of the Cooperatives were also historically the Board members for RABO bank (the cooperative bank) so they supported growers and the Auctions financially.
• The stories and myths around Clock Auctions have almost become part of the Dutch folklore. These stories are sustaining the popularity of clocks within and outside the country.
• There is even a DOS game available on clock auctions since long for fun and training.

CONCENTARATION

• Concentration of demand and supply. Auctions are successful in setting prices because demand (traders) and supply (producers) is concentrated (meet in one place). This requires that the arrivals and auction timings are synchronized and fixed for a particular commodity not only for an Auction but for all the auctions spread over the country.
• Similarly various suppliers (small, big, specialists, fruit ripeners and vegetable processors (salad shredders etc.) are all located at one place. (For example: wholesale market at the Hague or fruit terminal at Rotterdam)

STANDARDISATION

• The standards for produce as well as packing have evolved as per the market requirements and are ensured to the point that the buyers now usually bids without physically inspecting the produce.
• The system is able to guarantee the quality due to strict quality control. There is a third party involved to settle quality disputes. However, it is rarely used due to the fact that the sellers value their reputation greatly.

COOPERATIVE SPIRIT

• The spirit to cooperate and pool resources for a common goal is very much evident everywhere in the Netherlands. It is very much obvious in the clock auctions, canal systems and wind mills etc.
• Ownership of a cooperative is an investment for most of the farmers. They contribute part of their turnover each year (1 %) and get it back after 8 years with an interest (4%).

PARTICIPATION

• The members are obliged to market his entire output. Members between themselves strictly monitor this. This peer pressure put in built controls and monitoring in the system
• Auction Houses were owned and managed by the Growers. Auction centers are all cooperatives.

CREDIT MANAGEMENT

• Credit is very much a part of the system. Soft loans are provided to the Growers at interest rates as low as 4% by banks (low interests due to low inflation) mainly the RABO Bank. Auctions provide credit to buyers.
• It is the credit management that helps protect the growers’ interest. Credit limits of buyers are critically reviewed. Bank guarantees are provided by all. Wholesalers and retailers have sufficient assets to mortgage.

OPERATIONAL EFFICIENCY

• Efficient handling requires control on flow of products at various levels. For this reason, quality requirements, size of transactions, loading ratios, packaging are critically studied. Thus sample auctions or blind buying have evolved.
• Operating systems like ‘Tracking and Tracing’ offers location information on lots from point of entry to moment of delivery.

COMMUNICATION

• Communication strategy is to select small study groups (7 key people per group) that identify the problems for the group, solve them and inform others.
• These small groups also identify and communicate new ideas for a common cause and advocate acceptance.
• They take small steps with small groups rather than have a meeting of all members and announce decisions

INNOVATION

• From moving hands of the clocks by the hand to electronic bidding from the buyers offices in a small time frame is a perfect example of constant innovation

PROXIMITY

• Auction Houses were based in production belts and the growers were able to witness at close quarters the transparency in the system and also supervise the operations handled by professional management. This has resulted in absolute trust in the system and a very high degree of involvement of growers.
• In order to best identify with the system and players, most of the auction functionaries were consciously selected from the hinterlands.

TRANSPARENCY

• Information regarding arrivals is known to all, as well as the demand, thus resulting in complete transparency and market responsive pricing.

PROFFESIONAL MANAGEMENT

• The Auctions were managed by growers themselves till the 70’s after that due to market pressures a need to induct professional management in the system was felt by growers.
• Great care was taken to ensure that the professionals had roots among the growers and their interests in heart.
• The Board is extremely business oriented (cost and profit conscious) and the professional management is totally accountable to the Board for the profitability.

SAFETY OF GROWERS’ PAYMENT.

• When a grower supplies his produce to auction he is assured of best price and his payments
• In time of gluts, Product funds are created from revenues for a minimum price guarantee to growers.
• Even if a grower trade outside the system, as long as he pays service charges to auctions, his payments are almost guaranteed.

Stay tuned for more on what is needed to revamp wholesale F&V Markets in and for India.

Decades back, when I was taking strategic sourcing decisions for large corporate, I was often told by top managers that what’s the big deal about purchasing fruit and vegetables, even kids can do it. Housewives do it day in day out. I used to get offended by such caustic, casual and derogatory remarks, but I always kept my cool but did contemplate on the subject later on.

Is f+v procurement job so easy and inconsequential? Time passed by, I got a lot wiser and experienced to understand and tackle the complexities encountered during wholesale procurement of fruit and vegetables. Believe me – Sourcing job is indeed far more tough and trickier than buying anything else. Yes, mark my word, ANYTHING! Why? I’ll elaborate on some other day.

The World has moved far since I donned my first sourcing hat. But the f+v trade, particularly in India and other developing economies, except for some bright spots here and there, has hardly changed. Hearing a live verification conversation between one of our bright Customer Service Executive and a prospective registered supplier of Mangoes from Telangana for our online portal http://vegfru.com, was all it took me pen down these musings on the subject. There was a DIY manual bursting out of my head on the whole subject but let’s put out the first things first.

Sourcing fruit and vegetables in wholesale for your business is always a challenge and an opportunity. It’s a challenge, of course, because a steady and reliable source of products that conforms to quantity, quality, packing, delivery and price demanded by your buyers is what makes your business tick and sing along. It is your opportunity as well, because you’ll like to find yourself surrounded every day with produce that you and your buyers care about and can sell proudly and profitably.

There is no doubt that sourcing require a great deal of time and effort, but finding the right products to build your business can bring you great satisfaction and reward. Nothing builds your own business quite like the efforts you’ll put into place for the purpose of stocking your and your buyers’ shelves. Whether you find the products you need to sell or resell in your neighborhood market or discover them on the other side of the globe, the stuff you choose will become central to your life. You’ll ultimately immerse yourself in those products and gain expertise in their various aspects, right from production to marketing.

During my times, sourcing f+vs, particularly from remote locations was extremely difficult. My favorite advice to young recruits initiated into the wonderful world of sourcing of f+vs was – Local market (Mandi) is the fountainhead of all information to get you on board of sourcing train. So visit markets during the trading time. However, what I found that even with all the information available on sourcing locations, seasonality and even supplier’s names on rare occasions, getting the products to our warehouse and retail outlets was still difficult. If I’m to point out a single reason for this difficulty, it was the lack of trust between the new prospective suppliers and the companies we represented.

Today, thanks to the Internet in general and more specifically to websites like http://vegfru.com, your sourcing opportunities have never been more abundant or varied. Once sourcing from far away production clusters was viewed as the province of only biggest and most experienced enterprises like NDDB, Mother Dairy, ITC, Reliance Retail or Aditya Birla Retail etc, now your supplies from remove suppliers is possible, no matter how small business or inexperienced you may feel. Now anyone with a bare Internet connectivity can search the remote suppliers in production belts, get in touch with them and request for quotes and subsequently arrange supplies.

Is it that easy as it sounds? A big NO. But the fact that it is possible and so many businessmen (read suppliers and buyers) have already done it over internet successfully should give anyone enough confidence to go forward.

Internet is so full of promise, so inviting, that by just reading above lines and googling Vegfru, one may be tempted to jump in. We understand and appreciate that. Who will not like to add a dash of growth and profitability in his or her business? But just as a child has to first learn ABC before starting to read a book, you will have to take some small yet very important steps to establish yourself before you embark upon your sourcing journey.

Please appreciate, you are no Tata, Birla, Ambani and Late Dr. Kurian or the organisations they represent or represented. You and are a small or medium business. Any supplier you approach has a right to ask you to prove that you are a legitimate business and valid prospective customer. After all, you are strangers to each other. Don’t be surprised that while you are doing a background check on your potential suppliers, your buyers are also doing the same checking on you. In nutshell, you must be prepared to present yourself as a bonafide business.

Traditional markets, instead of relying on trust building behaviors relied on instruments like advances or part payments which in f+v trade remained counterproductive because of the nature of products and trade. Simply put – it was and still is both expensive and time consuming. By the time cash advances are exchanged between parties, the nature of the product and the market behavior (prices specifically) changes because products have very short life cycles and markets have liquidity constraints because of the perishable nature of products. So what were the consequences – Limited number of buyers and suppliers who had gained initial trust with advances or were related to reach other, remained wedded to each other for generations. New relationships were very rare. Stagnation is the only word I can think of to describe this situation. THIS IS THE NAKED FACT.

What simple steps and behaviors demonstrate and build trust.

The first thing first here is to do some paperwork to ensure that your business is properly registered and authorized to do business within your jurisdiction. Suitable incorporation of your business be as partnership firm, a limited company, LLP or whatever may suits your needs, getting PAN, TIN, Aadhar, Service Tax no, your own website, even your credit rating scores etc are simple and cheap tools that would let you cross the first bridge.

We are going a step further. For a simple fee we are helping small businesses get a third party verification so that they can provide our trust seal to their prospective business partners. It is simply like providing your credit score when you shopping for a loan.

Watch out this space for more on sourcing f+vs.

It all began when selective TV shows for cooking on some channels started gaining popularity. Later on, dedicated TV channels for cooking turned out to be massive hits. A lot of related channels on Youtube have attained lakhs of subscribers and millions of video views. Ever wondered how would it be like to have a channel solely devoted to the cause of fruits and vegetables?

Let’s have a look at some of the interesting facts about fruits and vegetables, that majority of us might not be aware of:

1. Fruits and vegetables are equally nutritious in every state, may it be fresh, frozen or in juice form.

2. Apples which are rich in carbohydrate, vitamin, and mineral content, can re-energize you more than a coffee.

3. In most of the cases, the skin of the fruit or the vegetable is the most nutritious part. A lot of people usually peel this off and do not consume them.

4. Most of the commercial fruits that we get in the market are actually clones achieved by several genetic mutations.

5. You can avoid crying while cutting an onion if you hold a piece of bread in your mouth.

Although this list might be endless, it can be a good introspection for us to check out our limited knowledge about the most important ingredients of our diet. Our ignorance is due to lack of easily available and informative content related to fruits and vegetables.

A TV channel in this regards can act as a platform to increase awareness and knowledge about the various fruits and vegetables. It can also be coupled with tips to promote a healthy lifestyle by recommending  best possible intake proportions and routines. Also, the medium of television is still the dominant player having the largest massive outreach.

For adults who seek information, the content can be plainly simple like this https://youtu.be/pAWRa5FDbAw. There can be shows specifically targeted for Kids who are generally most repulsive towards fruits and vegetables, they can be shown something like this https://youtu.be/Tpmp7-B5pDY or https://youtu.be/u1sh_XGKJ-Q. It can really be a fun way to make them understand the benefits of fruits and vegetables, encourage them to increase the intake and ultimately make them healthier.

Coming to the business viability and commercial prospects from a TV channel perspective, it may sound a bit dicey to hear it for the first time. But, a recently launched TV channel named ‘Epic’ which focuses majorly on mythology and the historical stories/places has started gaining huge traction and top advertisers as well. Their Youtube channel Epified has very rapidly attained a huge number of subscribers and views.

A TV channel focussed on fruits and vegetables would provide advertisers a highly specific and targeted market for their business. It can be used to market and promote healthy products related to fruits and vegetables. The conversion rate for the marketers would be significantly higher as compared to the generic TV channels, ultimately giving them a better “Return on Investment”.

Also, thinking from the morality angle, such TV channel would gradually increase the consumption of fruits and vegetables enabling a healthier population for any country. There would be a decrease in the proportion of lifestyle-related diseases.  It would also give a boost to the agricultural sector, which still employs a larger section of our country and has a substantial share in the economy.

Any takers to start such a channel?

http://www.vegfru.com shall be bringing to you every fortnight similar interesting and topical content from the wonderful World of fruit and vegetables. Please send a one line email request for the topic of your own interest at enquiry@vegfru.com.

If you require custom insights, reports or research articles on any matter related to fruit and vegetable industry in India or don’t want to get this once in fortnight email anymore, please feel free to send a mail at enquiry@vegfru.com or tweet us @vegfru or call Pooja at +91-85272-67888

Feel like speaking to the Founder of Vegfru.com!

Please call Anil @ +91-98118-14559 or drop him a line at anil.chopra@vegfru.com