Agritech firms turn to private labels as sector grows harder to crack

Agrostar, which has carved a niche arsenic a marketplace for cultivation inputs specified arsenic seeds and fertilisers for farmers, gets astir 80% of its concern from its backstage labels, co-founder and CEO Shardul Sheth told Mint. The 11-year-old Pune-based institution introduced its archetypal marque successful 2020 and the publication of backstage labels to the topline has grown to 70% from 5%, Sheth said.

DeHaat, backed by Singapore’s Temasek and Belgian concern institution Sofina, gets astir 30% of its concern from its agri inputs private-label vertical, according to co-founder Shyam Sundar Singh. It started the Honest Farms marque to merchantability staples and grains crossed e-commerce platforms successful April.

The recalibration comes astatine a infinitesimal of reckoning for India’s agritech sector. Venture superior backing for Indian agritech and nutrient tech startups dropped 33% to $2.4 cardinal successful 2022, according to the AgriFoodTech Investment study by AgFunder and Omnivore past year. The assemblage continues to trust connected authorities support.

Valued astatine $24 billion, India’s agritech assemblage remains importantly untapped, with lone 1.5% penetration, according to a study by Ernst & Young.

None of the startups successful the assemblage has achieved unicorn presumption - a valuation of $1 cardinal oregon much - oregon has listed publicly. DeHaat, WayCool Foods, and Ninjacart are valued successful the scope of $650 cardinal to $800 million.

Margin game

Typically, agritech firms that tally their ain brands cater to some farmers and consumers. They connection high-quality seeds, pesticides, and farming instrumentality to farmers, portion consumers tin get farm-to-fork products specified arsenic rice, pulses, and condiments.

The biggest vantage of moving a location of brands is the precocious borderline owed to the lack of intermediaries. Usual organisation processes, particularly for fast-moving mundane essentials, impact aggregate changes of hands that effect successful higher last prices and permission small successful presumption of net for the producer.

“On the B2B (business-to-business) side, backstage labels tin connection large worth to farmers due to the fact that the cultivation inputs proviso concatenation is mostly unorganised. Margins successful this conception thin to beryllium astatine slightest 2-3 times much than non-branded items," said a erstwhile enforcement of the Flipkart-backed agritech steadfast Ninjacart, asking not to beryllium identified.

Also Read: The agelong hold for India’s archetypal agritech unicorn

DeHaat’s Singh said its web of 5 cardinal registered farmers benefits from the exertion assistance and competitory pricing. Being capable to power the proviso concatenation close from the farmers to the consumers besides helps physique a azygous level for a assortment of needs.

However, Singh noted that DeHaat continues to absorption connected its halfway concern of providing a marketplace for farmers and buyers.

According to Pratip Mazumdar, a spouse astatine early-stage task superior steadfast Inflexor Ventures, agritech companies are dilatory moving towards precocious gross borderline businesses simply due to the fact that the archetypal worth propositions whitethorn beryllium struggling to find a stronghold.

Ninjacart—one of the earliest startups successful the space—was acceptable up arsenic a caller nutrient proviso concatenation institution but it aboriginal pivoted to an online marketplace to nexus farmers, distributors and retailers.

Chennai-based Waycool, which is said to beryllium successful talks to rise wealth for moving superior needs, strategically focused connected becoming a location of brands implicit the past 2 years, managing manager Karthik Jayaraman told Mint.

“This absorption connected value-added and differentiated products volition stay our priority. Over the past 30 months, the stock of our ain brands successful wide revenues has accrued from 3% to 41%. In the adjacent 24 months, we expect this volition emergence to 75%, with a continued accent connected value-added and differentiated products alternatively than basal offerings," Jayaraman said.

Mint reported past week that Omnivore-backed agritech startup Reshamandi recovered itself successful a heavy fiscal crisis with frozen slope accounts, delayed indebtedness repayments, and mounting ineligible challenges threatening its survival.

Moreover, determination is capable contention from established FMCG brands specified arsenic Tata and ITC, which could marque it a hard abstraction to win, according to Inflexor’s Mazumdar.