Harvard Business School recently released a comprehensive case study on Jain Irrigation, analysing the long-term growth strategy adopted by the family business, fuelled by its mission of improving the living conditions of Indian farmers and creating a legacy in drip-irrigation technology.
Access the full case study to learn how Jain grew from a door-to-door kerosene business to the global Jain brand owning over 60 sub-companies in 2018.
Our recent c. $30 million investment in Keventer Agro and the subsequent launch of the first and largest UHT milk processing plant in East India has confirmed a few of our themes:
• There remain incredible growth opportunities in the food sector that can thrive with vision, leadership and capital • Billion-dollar market segments, such as East India dairy in the case of Keventer, remain largely untapped by investors and corporates alike for various reasons • Non-technology disruption is still possible in traditional business through pricing, packaging, quality and distribution strategies • Sustainable impact – one that can benefit all stakeholders and grow year on year - can be achieved through scale investments with quality partners • Alignment of interest between investors and management teams can create true value that is greater than the sum of its parts
East India today constitutes c. 30% of India’s UHT milk consumption and has been growing at CAGR of 23% for the last 5 years. Despite this, the major dairy processors have chosen to import milk from corners of India into the East. They have also priced their products as per national standards, not accounting for different per capita income in the east or taste differentials.
The Keventer Dream
The common theme has been that the East is milk deficient and GDP/capita is lower than the rest of the country – so the focus has always been on other areas. Keventer is designed FROM THE EAST, FOR THE EAST. The aim is to deliver higher quality local milk, fortified with vitamins and at the cheapest price possible.
Using decades of expertise and relationships with the combined teams of Keventer and Mandala, we have managed to construct a state of the art plant – the most efficient and highest quality in the country today – on budget and ahead of time. Our distribution network in the East is one of the best in the FMCG space with a distribution reach of 100,000 retailers. The net result is a “magic price” on 160 ml double toned (or skimmed) milk in a tetra pak for Rs. 10! This is the lowest price in India and one of the cheapest in the world. And all the while with a focus on the bottom line.
We akin this disruption to what Jio has done for the telecom space. We are not simply trying to take market share from competitors. We are bringing in non UHT milk users into the market due to our price point. Tea sellers – traditionally buyers of pouch milk – are now using Keventer Agro UHT milk for their daily needs. Similarly, we expect mothers to use the Rs. 10 pouch in their child’s lunchbox. All our milk is fortified, thus also addressing nutrition needs of the malnourished and increasing health and well-being across consumers of all income brackets.
Wealth Creation for All Stakeholders
Mandala Capital has contributed strongly to this vision in various forms ranging from roll-out strategy to corporate governance. The net result is a world class company which is a good corporate citizen.
The needs of all stakeholders are considered and we hope to create wealth not just for investors but also for our distributors and retailers as the brand grows in volumes. Best quality, employee welfare, stakeholder benefits, social impact, corporate governance and the bottom line are always on top of our minds at Board discussions.
It is worth touching on one of the other businesses under Keventer Agro, namely its banana business. We are now the largest branded banana business in India with a volume of 25,000 tons per year. As per our calculation, we are over 1% of Chiquita’s global business (spread across 70 countries) simply in one state in India! The potential for this business is very large and we must credit the teams working on this for transforming a commodity item like a banana into a branded play.
Impact on Lives
The company has dedicated itself to making a significant impact in improving the lives and livelihoods of the 15,000 banana farmers that it works with. Due to extremely small land-holdings (less than 0.3 acres on average), farmers in the state of West Bengal do not have access to the latest technology or knowledge required to improve yields and reduce mortality.
Keventer has started the “Keventer Assisted Farming program” wherein it provides farmers with multiple benefits – free agronomic advice, access to best agri-inputs in partnership with global leaders like Bayer and Syngenta, and most importantly guaranteed buy-back of their produce. The company is also collaborating with Govt. sponsored Farmer Producer Companies (FPCs) as well Clusters” at various locations.
Uday Garg is the founder of Mandala Capital and has since 2008 been exclusively focused on investments in the food value chain. Prior to Mandala Capital, he worked at Altima Partners focusing on private investments in global Emerging Markets across sectors (including agribusiness). He began his career in the Investment Banking division of Deutsche Bank (New York), followed by Portfolio Manager roles at Amaranth Advisors (Connecticut) and Duet Group (London).