Innoterra is a Swiss-Indian food and tech company with a strong commercial footprint in 14 countries. Its purpose is to transform the food ecosystem to sustainably provide people with safe, high-quality, healthy food products. In an exclusive interview with Mohd Mustaquim, Innoterra’s Co-founder & Deputy CEO, Pablo Erat and Nitin Puri, Head, e-Marketplace Ventures, spoke about the company’s journey, vision, operations and future plans…
Mustaquim: Amid threats of climate change, feeding the growing population is likely to be a big challenge. Keeping this in mind, kindly throw some light on the importance of sustainable food production.
Pablo: Climate change is one of the most fundamental challenges that we need to address. Agriculture is a significant contributor to greenhouse emissions. So, when it comes to sustainability, it is imperative that we strive towards lowering emissions. We are actively supporting the farmers in crops cultivation as well as dairy production. In order to minimise the environmental impact of both these avenues, we are trying to educate the farmers through both physical and digital modes, on the benefits of sustainability – better yields, soil quality as well as reducing costs. For dairy, there are two elements that are related directly to global warming, one is to improve the cattle feed by developing new formulations which reduce the carbon emissions coming out of cows, and the second element is to improve the productivity of cattle.
Nitin: Pablo has shared some deep insights on supply side issues. Similarly, some measures can be taken for demand side as well. For example, when food products travel thousands of miles to reach a customer, an incredibly large amount of carbon footprint is generated. Over the last decade, disruptive technologies have enabled the conversion of large-scale macro industrial set ups into micro industries for fruits, vegetables and dairy. When it comes to accessing markets, here also we can replicate the same systems, process, food safety compliance of large-scale systems to micro set ups. These micro set ups or aggregators supply products to consumers within a smaller radius of that geography rather than food travelling thousands of kilometers. So that’s another dimension as to how you can democratise through technology, the entire process of market access for farmers, and especially the small farmers, which constitute more than 90 percent of total farmers in India.
Mustaquim: Kindly tell us about Innoterra? What solutions does it offer for sustainable food production?
Pablo: We have built Innoterra from scratch across different food categories. The true significance of our platforms lies in the numbers – we are physically working with 15,000 farmers while 100,000 farmers are benefitting off our digital services. Our supply chain interventions and optimisations are centered completely towards farmer needs. We have initiated a new module for affordable financing. Another module is for digital education. We want to achieve a situation where we can educate, train, and facilitate knowledge sharing between farmers through digital means and reach as many farmers as possible in India to help them upgrade their practices. Another important element is market access for both input as well as output markets. So, access to commercial markets to ensure yield off-take is a core element to the entire platform because ultimately the platform needs to cover not only the production side, but also the demand side of the universe.
Nitin: We have created a robust business model for the farmer and most of the farmers happen to be smaller ones. We have blended brick and mortar businesses and technology. And when you say technology, it includes FinTech. It includes financing, it includes capacity building and access to markets. We have created a seamless system. What we could not do in the last 70 years is now being done. So once you replicate the system’s processes of large scale setups, for smaller producers, aggregators, FPOs, FPCs, collectives and cooperatives, it is time to bring in elements of food safety, transparency, compliance to the right systems, modernisation, nutrition, and then give a platform that people are actually able to have access to the right kind of markets is something which never existed in the in the past. So, our entire thought processes are to how to marry the high-tech and high touch. We are transforming now from a largely “incubator” kind of company to a business company.
Mustaquim: How are you building your brand and what strategies are you adopting for marketing?
Pablo: We are working together with aggregators, who already have thousands and thousands of farmers that are being provided with loans at very disruptive rates, and at the same time ensuring an offtake of what they produce. That in itself as part of the business model has tremendous expansion dynamics built into it. It is also the best form of marketing for us. And also, network effects, of course. We are not really investing a lot in old school rural marketing, but we try to drive the expansion by creating such a significant value to the farmers through their own interest – join, join the platform, and until now, through digital modes.
Mustaquim: How does data intelligence help create a sustainable food ecosystem?
Pablo: Data only becomes intelligent when you have enough of it. Our entire architecture for the platform is an open architecture. And it’s a fully integrated architecture, where we have a tech stack and a data lake that is fully unified. And we invite all data parties to join this journey and share that data with them as well, to maximise the collection of data and then transform that into intelligence. For the platform, from the farmers with whom we work together, we collect 150 data points every month. And these data points, allow us today to anticipate the development on a specific farm, probably two to three months before the actual event happens. It’s significant, because then we can proactively start to provide exactly the kind of services that will help the farmers to get through this situation or even to capture an opportunity that the farmer might have. This is how data starts to become truly valuable.
Mustaquim: How is e-Marketplace bringing transformation in the food supply chain and how is it benefitting farmers and consumers?
Nitin: Marketplaces, in last 15-20 years, have seen a lot of interventions and a lot of trials and errors that have been done in the context of the Indian agriculture scenario. So, there are two perspectives-operational and regulatory- to it. So, on the regulatory bit, the government has been pushing over the last many years. And as you know, agriculture is a state subject. Setting up a private mandi-yard or a marketplace, where physically people would come in, buy and sell has historically been an extremely bureaucratic and difficult task.
What we are doing is building a system where the farmer is going to get a larger, wider choice to be able to sell to a larger number of consumers. And if we can curate that system in such a way that it is standardised and meets all regulatory and consumers’ requirements, we will able to create a new ecosystem. Retrofit solutions would not work. Each and every person- farmer, aggregator, retailer, and consumer- in the system needs to gain from a new ecosystem. Agri infrastructure needs scale, technology, and digitalisation, and eventually, it’s about the farmer getting a larger pie of the consumer wallet. It can be achieved with better trade fulfillment, platforms, quality testing, payments, formalisation of the economy, modernisation of systems, processors and trade transaction platforms. And that is something that we are trying to achieve through the platforms that we are in the process of creating.
Mustaquim: Farmers are protesting in India against newly made farm laws. How these three farm laws are going to impact the e-marketplace of food supply chain?
Nitin: If you look at three laws separately, especially the third one, which is about marketplaces, is very significant because more than anything else, it’s not that you could not buy or sell directly from farmers before these laws came. But the process and the system were so long drawn, was so bureaucratic. Now we need to change with time and then there is an element of digitalisation, mobile, internet, where access to information is now easy. There has been a paradigm shift in the way things have evolved. So, it’s now possible to replicate the same system process of price discovery of and transaction which was earlier happening in a centralised Mandi kind of setup, in a more decentralised kind of approach. Now it’s a matter of choice for a person who has five options to sell to, as to where he or she wants to sell to, depending on the best deal, best terms of trade and best price. It’s going to be a fantastic opportunity.
Mustaquim: You talked about price discovery that a farmer can discover the price anywhere in the world. Today, in this case, logistics become a very crucial thing. So, where we are right now, in terms of logistics and supply chain?
Nitin: Logistics sector has seen a lot of improvements. In the perishables space, over the last 10 years, infrastructure has evolved with higher capex investments within the cold chain scheme. For example, Ministry of Food Processing Industries successfully runs a scheme on Integrated Cold Chains. There must be nearly Rs 4,000 to 4,500 crore (USD 750-800 million) worth of capex that has come up in the cold chain scheme through the facilitation and incentivisation by one ministry alone. There are a lot of frugal technologies that have come now wherein you can have a place where you don’t have electricity or a diesel generator. A lot of start-ups have come up with very good product innovations. I think, the ecosystem is poised for stellar growth.
Pablo: In our case, we have always wanted to go with a localised system as much as possible. So today, we have more than 120 collection centers across India, in the local villages, often operated by a village level entrepreneur. We are bringing in the infrastructure and they run it. Similarly, for milk, we have bulk cooler operators in the villages ensuring that the quality is much higher, because the time taken to cool milk is less than 40 minutes. And the same applies also for our fresh produce, be it exotic fruits or vegetables, where we have the collection centers in the villages, making it very easy for the farmers to bring their produce.
Mustaquim: How many farmers are getting benefitted from Innoterra’s services and in what geographical areas in India and overseas?
Pablo: Nearly 100,000 farmers are being benefited by our services- digitally and physically. When it comes to physical interaction with the farmers, the exact number from the last year was 16,000 farmers. We are pretty much spread around India; I think that the only significant part of India where we do not have any representation at the moment is in North East. And I hope we can change that soon. But we are in the North, West, Central and South India. So really depending on which crop or which product we are producing, we have our collection and distribution centers, warehouses, silos, pretty much covering all parts of India, with the exception of north east.
Mustaquim: What future roadmap Innoterra has for the Indian market?
Pablo: For the long term, our vision is to create one of the world’s most impactful platforms. We are creating one with Nitin and a few other leaders in our organisation, including Francisco Fernandez. Francisco Fernandez is one of the most successful tech platform entrepreneurs in Europe. With their expertise, now, we will also deepen our presence in the export markets, which are mainly at the moment centered around Middle East countries and also China, supplying through the Philippines. We are also investing in attracting the best talent in India and abroad.
Mustaquim: There has been a rapid growth of agritech start-ups in India in the past few years, how do you see their growth in the future? How is it going to bring in disruption in farming practices, post-harvest management and food supply chain?
Nitin: Start-ups have come up in supply chain, market linkages, FinTech and so on. I think there were some 1500 start-ups and maybe about 5 percent or 6 percent of them are doing well. Some of them are offering only retrofit solutions. That has been the reason for the undoing of the AgriTech sector. Then, there are some promising innovators who actually understand the situation and then come out with a solution which is fitting rather than retrofitting. There are innumerable problems in India to be solved across the value chain, right from the farm to the fork literally. For example, think of storage. It is an area where we don’t have access to basic infrastructure. Also, in the electronic marketing system, whether it’s the B2B or B2C space, a lot of people are now coming up with frugal ways and means of doing quality testing in far flung areas, using digital tools, which are centrally controlled and monitored. Such measures really add value.
Mustaquim: Agri start-ups are getting flooded, But, raising funds has become a challenge. How do you see overcoming this and is there any plan to set up any start-up incubation centre?
Pablo: Going into innovation for the future, incubation will remain a very important part in our plans. We do not have an intention to formally create an incubation centre to invite start-up entrepreneurs as we have plenty of things on our own plate. As a part of our strategy we will be very selectively looking at acquisitions. We will make investments in supporting early stage companies. In India, we have invested USD 35 million last year, and we are planning to invest in additional USD 40 million this year. And a large part of funds in the past has actually come from the founding team and the core members of the of the leadership team. We are not like venture funds, but we are true entrepreneurs and we invest wherever necessary to accelerate our growth. InnoTerra now functions as a mother company and we now have a distinct advantage – all of the investors are allied with us at the very top, which makes our lives easier.
Mustaquim: Innoterra has incubated many successful agri start-ups in the past. What message would you like to give to the budding entrepreneurs?
Pablo: Passion is the purest form of energy that you can find. It’s much stronger than motivation. For an entrepreneur, the ride will be rough. I have never seen somebody who came up with this first idea and it was successful. So, it’s a lot of trial and error. It may be that a lot of people who don’t believe in you. And sometimes you have to knock at 1000 doors before the first investor comes in business. Believe in what you’re doing despite the fact that most people around you think you’re crazy. But if you have that passion, if you have that sustaining power, and you are ready to work extremely hard, day in and day out, for the next 10 years, then you probably are well- equipped to become an entrepreneur.
Mustaquim: Nitin, you have a multi-decade long expertise with commodity derivatives, retail, banking and finance, particularly in agribusiness sector. What is your roadmap for Innoterra?
Nitin: I come with a lot of experience both on the brick and mortar business side, working with ITC, Reliance Retail, commodity derivatives exchanges, commodity platforms, and of course, with a bank as well. I slowly started feeling along the way that perhaps as professionals, as humans, we tend to enjoy certainty. And we don’t tend to enjoy risk taking and don’t tend to enjoy the process of solving problems. And while I was looking out for potential people who are solving these problems, Pablo and Ron and the entire Innoterra team leadership came in retrofitted very well with my scheme of things in terms of the thought process, and the kind of vision we mutually share. Innoterra has been around for 15 years now. The intersection of brick and mortar businesses and digitalisation was the main challenge. We have a shared goal of democratising data and analytics for solving real life problems for consumers and producers. We are all set to disrupt the entire agricultural food space in India.
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