December 2012 | Nithin Rao

Pluses in a pulses play

Tata Chemicals and its subsidiary, Rallis India, have made a mark in the pulses business, and there is potential for further success in a segment dominated thus far by unbranded names

An Udipi restaurant in South India, a few months ago, ordered packets of Tata I-Shakti dals (pulses) to making food items such as idlis, dosas, sambhar and rasam. A few weeks later, however, one of the managers decided to revert to unbranded dals from the local grocery store to save a few rupees.

The following days saw customers visiting the restaurant ask why its idlis were not as fluffy as they were just a while earlier, and why the sambhar was not as tasty. It did not take much time for the management to realise what had happened: the restaurant’s regular customers had got used to the all-natural, farm-fresh, nutritious and unpolished Tata I-Shakti dals. The eatery went back to ordering packets of the Tata brand and its contented patrons were happy once again.

With Tata I-Shakti dals, Tata Chemicals became the first national-level player in the branded pulses business, and it is steadily making an impact in a category dominated mostly by unorganised, unbranded players. The product range has five dal variants — toor (pigeonpea), chana (chickpea), masoor (red lentils), urad (black gram) and moong (green gram).

Tata I-Shakti pulses are sold by Tata Chemicals in an operational tie-up with Rallis India, its agri-chemical subsidiary. While Rallis brings the high-yielding seeds to the farmers, also instructing them in best usage — not only of seeds but also pesticides, which it manufactures — Tata Chemicals buys the produce and markets them.

Ashvini Hiran, chief operating officer for the consumer products business at Tata Chemicals, explains that the distribution model for Tata I-Shakti dals is based on the company’s extensive reach. “The pulses are distributed through the same distribution channel as Tata Salt and our other consumer products,” he says. “The business leverages the synergies of our pan-India network.”

The I-Shakti saga
The story behind the launch of India’s first brand name in pulses is one involving a handful of Tata companies, thousands of farmers across several states, agricultural scientists and government officials, who were initially involved in rolling out the programme in the Indian states of Tamil Nadu and Maharashtra.

Says R Gopalakrishnan, chairman at Rallis India and vice chairman at Tata Chemicals: “The Tata Chemicals-Rallis model offers the farmer a four-fold advantage: high-yielding seeds, fertilisers and pesticides to boost production, advisory services, and marketing support. It’s a winning situation; not only does the four-pronged model help develop a market for the partners’ services and products, it also gives them the advantage of direct contact with farmers.”

Sales of Tata I-Shakti dals — launched nationally in November 2010 — are almost double the 8,000 tonnes sold last year, fetching the company revenues of Rs500 million. Tata Chemicals expects to sell about 15,000 tonnes of pulses in 2012, but considering the huge demand for dals in India, the potential for Tata I-Shakti sales could cross even a million tonnes a year.

Though pulses are a crucial part of the Indian diet, cultivation suffered during the years of the ‘green revolution’, which focused principally on boosting wheat production. “I was struck by the fact that production of pulses in India had stagnated for more than a quarter of a century at around 15 million tonnes per annum,” says Mr Gopalakrishnan, “even though the crop offers high nutrition values, crucial in a largely vegetarian country, where a majority depend on pulses for protein intake.”

From the farmer’s perspective, pulses are a risky proposition. Pests, much like humans, love the protein-rich pulses. Consequently, for most farmers, they became a side crop, especially as the minimum support price offered by the government was not attractive. “Pulses became the neglected child in India,” says Mr Gopalakrishnan.

Demand-supply gap

Rallis on ‘hybrid chilli’ highway
Metahelix, the biotechnology company that Rallis India acquired in 2010, has developed a hybrid chilli that is uniformly long and a deep red in colour. As with pulses, pests love chillies, which means there is scope for Rallis to provide pesticides and farm-management expertise to farmers.

“The farmer is like an investor,” remarks R Gopalakrishnan, the chairman of Rallis India and Tata Chemicals’ vice chairman. “He doesn’t want to take part only in equity or debt; he wants a mix of the two. He will take a risk on a crop where the margins are good, but wants some buyback. Our teams are studying the possibility of launching chillies. Rallis can supply the farm-management practices and Tata Chemicals can buy the chillies and then package and market them under the I-Shakti brand.”

With pulses production remaining stagnant for several decades and per capita consumption declining even as the population grew rapidly, there was a huge demand-supply gap, and this was addressed through imports.

Recalls Mr Gopalakrishnan: “We had been through this earlier in the case of edible oil, where India was once the largest exporter in the world. But over half a century the country had become the largest importer. Now this is happening with tea, where we have started importing.”

Studies have revealed that India’s projected demand for pulses will be about 38 million tonnes by 2020. This will force the country, by today’s production rates to import at least half of its requirements. “Countries such as Australia and Canada, which have plenty of land, are actually growing pulses for us,” says Mr Gopalakrishnan. “I have had Australians coming and telling me about idlis, dosas and vadas. I realised that what we had done with software, they had done with pulses. India had outsourced pulses production to Australia, Canada and Myanmar.”

Productivity in the cultivation of pulses in India is quite low. As against a productivity of 1,600 to 1,800kg per acre in Canada, it is as low as 300kg in India. Says V Shankar, chief executive and managing director of Rallis India: “The group’s foray into pulses — through its ‘grow more pulses’ campaign — has resulted in sharp improvement in productivity, more than doubling the output in certain select areas.”

The sudden spurt in the price of pulses over the past two to three years has also made it an attractive alternative crop for farmers. “In the past, farmers took to pulses farming when rainfall was scant [most pulses don’t need a lot of water], or the soil was not good for other crops,” adds Mr Shankar. “But this has changed with the rise in the price of pulses.”

Rallis has tied up with HDFC Bank and State Bank of India to offer funds to farmers to buy seeds and nutrients. The company also ensures that the pulses it buys from farmers is of good quality.

Value for money
According to Amit Sridharan, head of the pulses business at Tata Chemicals, the company has been promoting the consumption of unpolished dals because they are far more nutritious and gives the consumer better value for money. “Unpolished dals are tastier, which is why they have been well received by consumers,” says Mr Sridharan, who worked with Mr Gopalakrishnan in 2008 and has been closely involved with Tata Chemicals’ pulses promotion campaign. “We have been able to get retail placements across markets.”

Tata Chemicals sources dals from three states: Tamil Nadu, Karnataka and Maharashtra. Other state governments, including those of Madhya Pradesh, Odisha and Bihar, are keen to tie up with the ‘grow more pulses’ campaign.

In Maharashtra alone, Tata Chemicals and Rallis will be working in close association with 17,000 farmers, who will raise pulses on 32,000 hectares of land. About 30 percent of pulses procured by Tata Chemicals from farmers is toor dal, followed by chana, masoor, urad and moong dals.

For decades — ever since the tradition of milling was introduced by the British in India — Indian consumers have been used to buying polished dals. Polished dals are washed in water or oil at mills to de-husk them, thereby depriving them of essential proteins.

Tata Chemicals recently roped in celebrity Indian chef Sanjeev Kapoor as its brand ambassador for Tata I-Shakti dals. One reason was to spread awareness about the health benefits of its unpolished dals.

“Consumers are often deluded by the shine of polished dals without realising the related disadvantages,” says Mr Kapoor. “Unpolished dals retain maximum proteins and are low on moisture, and hence facilitate faster cooking, lending superior taste to your dal recipes.” Coming from one of the country’s top food experts, it should indeed bring about a change in dal-buying habits.

For this and other nutritional reasons, there is a need to scale up fast. As Tata Chemical managing director R Mukundan says, competition will definitely come in. “Our long-term view is that as India becomes more urban, the need for branded and packaged produce, including dals, will increase,” he explains. “For consumers, branded and packaged products are a seal of quality. They will pay more and will not consider it as an additional cost, but as a value addition.”

Supply-chain risks
A major challenge here is the management of risks in the supply chain. Not only are there physical risks of contamination and moisture, requiring extreme rigour in storage, packaging and other physical maintenance standards, there is the risk of price fluctuations. Like other agriculture commodities, the prices of dals can change even on a weekly basis. The procurers at Tata Chemicals have to make sure that inventory management is geared to manage volatility in pricing as much as to control the headaches of logistics.

The focus at this stage for Tata Chemicals is to manage the entire supply chain with minimum risks to the company. “While the partners are making sure that the model is tweaked enough so that the risks are not high, it is important to fine-tune the operations before scaling up further,” says Mr Mukundan.

Asked about the learning from its foray into the branded pulses segment, Mr Mukundan says one of the key lessons has been to avoid building a capital-intensive model. “There should be tight control on the supply chain. Any looseness leads to leakages and losses and also to a building up of inventory. You will then lose the value in the process.”

With dals adding weight to the company’s consumer product portfolio, Tata Chemicals is again displaying the maturity of its ‘farm-to-fork’ strategy and extended value chain. As India shows growth, both in numbers and on different socioeconomic parameters, I-Shakti has all the promise and potential to become a strong and successful brand. Farmers as much as consumers would welcome that development for healthy reasons.

Dal deal: Where the farmer is a partner in the cause
The drive from Latur in Maharashtra’s backward Marathawada region to Limbala village passes through lush green farmland. The monsoon has been scanty and with dark clouds gathering on the horizon, farmers are eagerly hoping for more rain.

At Limbala, scores of farmers have gathered at the local temple as the ‘grow more pulses’ team, led by Ravinder Kumar, the Bengaluru-based executive of Rallis India, and Prashant Chavan, senior officer, agri-business, Rallis India, arrive for their regular interaction with them. The talk covers a host of issues concerning their crops — mainly toor dal — among them the use of pesticides, best agricultural practices and water conservation measures.

“We started these interactions with farmers in three districts of Marathawada — Latur, Osmanabad and Nanded — last year,” says Mr Kumar. “We have covered about 50,000 farmers in these three districts. And we have arranged similar interactions with 50,000 farmers in Karnataka [just across the border from Limbala] and 25,000 farmers each in Tamil Nadu and Madhya Pradesh.”

Members from the ‘grow more pulses’ campaign team, comprising executives and agriculture experts from Rallis India and Tata Chemicals, interact often with farmers in the four states. Mr Kumar says that the team addresses the farmers’ concerns about various crop-related issues: the use of pesticides, harvesting problems and so on. It procures pulses from them and ensures that they are paid immediately.

The campaign has now roped in State Bank of India and HDFC Bank to offer financial services to the farmers, who are encouraged to open zero-balance savings accounts with these banks. The proceeds from the sale of their pulses are transferred to their accounts.

On this particular morning, Mr Chavan is flooded with a variety of queries from the Limbala farmers. For one, they want to know how to use the debit cards they have received from HDFC Bank. An explanation about passwords follows and Mr Chavan patiently explains banking rules and the necessity of keeping them confidential.

The Tata team offers a package of best practices that the farmers are urged to follow to ensure good yields and better quality produce. For instance, farmers can get a better price for their produce if they separate the good quality pulses from the bad, and remove foreign materials and other substances. “We emphasise the importance of soil testing, the need for irrigation, the various methods of irrigation and the costs of and need for water harvesting,” says Mr Kumar.

The team members also advise farmers to form groups and approach government officials for subsidies. This kind of collective bargaining helps them get equipment, fertilisers, pesticides and other facilities at highly subsidised rates.

Farmer leaders are appointed in each village and groups are formed. They are encouraged to meet regularly, maintain a record of the proceedings and discuss their problems with the Tata executives. A project called Prerna has been set up and, under this, farmers who have had outstanding results in terms of improved yields or good crops are taken to other districts to contribute to similar farmer interactions.

Mr Chavan says that the farmers are receptive to new ideas and technologies. Productivity improvement in Latur, he adds, has been significant. Many farmers who used to get a yield of four quintals an acre now get about six quintals or more.

Later in the evening, another group of farmers awaits the arrival of the Tata team at Atola village in the Chakur area, also in Latur district. “Last year, just 25 farmers from this village came to attend our meetings,” says Mr Chavan. “But now 99 percent of the farmers in the village have joined our group.”

Says Sheikh Amin Mehboob Dhanure, a farmer with about eight acres of land: “Last year, most farmers were wary and reluctant to attend the meetings. But now that they have seen the gains recorded by the first batch of farmers, everyone wants to join the group.”

Another farmer, Madhavrao Dharne, who has a 20-acre holding, says that the Tata team offers them a fair deal, unlike many of the brokers and commission agents in the mandi (market): “In the mandi there are a lot of malpractices and nobody takes care of our produce. There is gross negligence while transporting and handling the dals, and this leads to plenty of wastage and loss.”

In fact, so happy are the Latur farmers with the ‘grow more pulses’ initiative that they ask advice on other crops and request executives from Tata Chemicals to buy other produce from them.