Current economic conditions dictate that many impoverished farmers are extremely vulnerable to price risk and low margins. Often, their crops are highly perishable; whatever price is offered, they must sell. For example, according to an Infrastructure Leasing & Financial Services (IL&FS) study, tomatoes sold for between 1.5 and 12 rupees per kg in 2010 in Nashik, Maharashtra (near our pilot site). The same study showed farmers earned only 25% of the end price to consumer whereas international benchmarks are closer to 40-50%.
Our immediate focus is on developing products for existing farmer-owned food processing units and then sourcing these products from the units and selling them under the Krishi Star brand. Many farmer-owned food processing units, such as the mango processing unit with which we have done our initial manufacturing, are producing under capacity due to difficult marketing products. After identifying such units, we first conduct market research to identify products that can be produced by the unit and profitably sold through our marketing channels. Next we guide the unit in producing these products and finally, we bring the products to market under the Krishi Star brand. In this way, we increase profitability for the farmer-owned units and build a secure supply chain. We also open up marketing channels that will drive the demand necessary to later expand the network of farmer-owned food processing units.
Farmers benefit from our model in two main ways. First, they receive higher than market price for their crops in return for small changes in their harvesting that achieve higher quality. Second, as co-owners of the processing unit, they receive a profit share. For example, with only our initial tomato product, this translates into an overall financial impact per farmer of over 220% increase in income. We monitor three main metrics on our impact – number of farmers, profit generated for farmer-owned units, and inputs procured from farmers.