RELIANCE FRESH

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So here it is - after a wait and watch that has been worth it - Mukesh Ambani's Farm to Fork revolution. What seemed like an impossible dream has finally come true, and by the looks of it, its here to stay. eleven Pilot stores in Hyderabad to start with. The company bigwigs were beaming when they revealed that they didn't need any celebrities to inaugurate their stores in Hyderabad this week - a customer cut the ribbon in each of the eleven outlets for other customers - they said. If that is the first step towards creating the farmer-consumer connect that Mukesh Ambani dreams of - then we have to applaud it as a significantly worthwhile step. And yes, the products on display were fresh, competitively priced, imaginatively displayed and the outlets had an international aura about them. If this is the frontend, and if the elaborate backend planned by Ambani starts falling into place as planned - India can really hope of setting up a profitable agro-export business - something that has been a long standing dream lost in the quagmire of unscrupulous middlemen. There were some talks a few years back about the need to preserve and analyze some of the best human body-specimens —Lata Mangeshkar’s throat and Sunil Gavaskar’s eyes, for instance —to see what gives them that peculiar winning edge and maybe replicate it for the overall enhancement of mankind. Perhaps the time is just right to add another new entrant to the list —Mukesh Ambani’s brain. From Petrochemicals to vegetables - what an idea? All poised to shatter the wholesaler-middleman nexus in Indian Agriculture and bring in a hint of hope to the real producers of the food. If farmers could be made partners in the supply chain and consumers get a value proposition in terms of quality and price —it becomes a win-win for both. And the journey has already begun —at Hyderabad, to start with. Reliance Fresh, the first brand-format of Reliance Retail, formally launched its first set of 11 pilot stores in Hyderabad this Friday. With it started another dream run of Mukesh Ambani — soon to have a pan-India footprint. Within the next two years, the chain aims to spread to the top 70 cities of India and finally expand to 784 urban centres and 6000 plus rural Mandi towns by 2010-11. During this time Reliance aims to spend around Rs. 25,000 crore on a variety of retail formats, the Fresh chain being just the beginning. And all of it in true Reliance style, expanding businesses by building linkages all over —by taking in groups and people who already have processed local domain knowledge and expertise. The outlets would store food items that the Indian households buy most frequently —and those they would like to have fresh. Each outlet will have two to three thousand square feet of floor space and a dedicated team to look after the needs of the customers, and give special offers et al; but that’s not what makes this a unique initiative. What makes it special is the consumer-farmer connect that it aims to achieve. Retail Business in India is already one of the largest in the world —with an average of 5.5 outlets per 1000 people. Will another chain work here? Reliance believes it will, provided the proposed partnerships with farmers reach the dimensions that they are hoping. And, going by the enthusiasm of the corporate team that presented the first ’Fresh’ chain to us in Hyderabad, its not just Mukesh Ambani’s ’dream’ that is working here —the initiative also makes keen business sense. But first, what are the components of this dream? Ambani’s dream is to work with farmers to enable them to increase their productivity and produce the right variety of products of the right quality. The quality clause makes even more sense, as it is done in view of the import standards overseas, even if it involves sizable technology investments. Couple this with an efficient distribution system, linked to supermarkets across the world. This will generate up to 1 million new jobs and make Reliance the largest private- sector employer in India. The dream doesn’t stop there. Making agriculture dynamic and progressive enhances the purchasing power of millions of people in the shortest possible time. This has a cyclic effect on employment - Indian agriculture is capable of employing at least 120 million people just by concentrating on developing 40 million hectares of wasteland. Once agriculture get modernized and life in the villages show even a hint of improvement, the present unending trend of rural-to-urban migration is bound to reverse. This will have a positive impact on the quality of the nation’s urban life. Reliance points out, and justifies it by statistics, that almost 40% of the agricultural food products of the nation get simply wasted due to lack of proper handling and storage facilities. So the idea is to come up with an efficient and systematic supply chain that improves each step of the process —and this wastage could be minimized. This means more value for the Indian farmers, because they are directly involved with the process. As Sanjeev Asthana, Head of Reliance Agro Businesses pointed out, “The target is to build a winning partnership with farmers. Indian farmers will earn more money when they deal with Reliance.” Sounds too good to be true —does it? Considering the conditions of our food-producers at the grassroots level —even if this initiative makes life a wee bit easier for them, its a significant step forward. What are these conditions? Until recently, our farmers were forced by law to sell their produce at the ’mandi’, a network of local markets. These local mandis were originally visualized to protect poor farmers from exploitation but now they are taken over by cartels of traders, petty bureaucrats, and moneylenders. Here, our farmers are paid the official minimum price or even less for their produce, but no one ever tells them which of their vegetable varieties were in peak demand or what should be their quality specifications. From there, the produce is taken over by intermediaries, and embarks on a long, slow and often hot journey towards our kitchens. Ask for cold storages and refrigerated packing centers —it isn’t there. Ask about regional distribution networks —more often than not it’s a makeshift arrangement. And what to say about the inefficient fleet of trucks which carry most of this produce...with infrastructure like this, can we hope to sustain even a profitable domestic vegetables trade —let alone start an export business? What Mukesh Ambani wants to do is to bridge this gap between the farm and the fork. This direct involvement of farmers also means less dependence on the middlemen, and so less possibilities of hoarding and subsequent forced hike of prices. Reliance, however, doesn’t admit that the inspiration behind all this is to minimize the clouts of middlemen and wholesalers. Sanjeev Asthana, Head of Agro Business vehemently denies —“Cutting down the middleman is not our objective —we want them to be more efficient, through their partnerships with Reliance. The intermediaries will become our partners.” But will the ’Fresh’ chain be able to match the prices of the neighbourhood subzi mandi or kinara shops? Raghu Pillai, Head of Retail, doesn’t give a direct answer to that. He says, in a roundabout manner —“Price is only one of the proposition when it comes to food. Quality, freshness, hygiene —all these factors have to work together and the most important issue here is to set up an efficient supply chain.” But does that mean that Reliance Fresh products would have a prohibitive cost. Not likely —the customers we met in the outlets looked reasonably satisfied with the range. “The pricing will be customer driven. We will definitely offer the customers the best possible competitive prices.” Mr. Pillai asserts. Jolly well they should, because in an out and out price sensitive market like India, the concept of ’quality’ and ’freshness’ of agricultural food products is likely to settle down with the masses only if they come at an affordable price tag. Hyderabad, ok —where to next? Gurinder Kapoor, Head of Food Business, keeps his options open - “That depends on a variety of factors —a whole infrastructure needs to be in place before we start the stores. It’s difficult to understand by the looks of the stores here how much work and strategy goes behind getting those products to these shelves. And it’s all interlinked —so we have to see which city gives us the best opportunity. Only thing that I could say at this stage is that we are planning to expand very fast.” So far so good. Side by side, they are cautious about expanding too fast too soon in a market that has always shown some amount of resistance to organized retail. The most likely next step should be coming up with another pilot format in some other location and give the “Fresh” initiative a long, hard look —see if it works, and then go ahead. The amount of planning and infrastructure that one needs to invest on a project like this —building farmer connects, organizing contract farming and similar regularized production deals, storage, transport and in-city distribution, sorting and arranging of products, maintaining expiry dates and connects with nationwide locations from where the food arrives —it’s not likely that Reliance will involve itself into excesses without testing the waters carefully. Nevertheless, this caution doesn’t undermine the dream of Mukesh Ambani. The series of Fresh Stores in Hyderabad are just the front-face of a remarkable backend process already falling in place. Farms of several thousand acres in Punjab, West Bengal, Maharashtra, and elsewhere, are getting linked by a distribution-production network. Rural centers are already providing goods for farmers and handling their produce. One can be sure, Reliance has a well planned supply chain ready for Hyderabad —and that chain will further down to other parts