This article is part of a series by Aric Olson, President of Jain Irrigation, Inc., on how Jain Irrigation built its global AgTech platform in a short period of 5 years. Read Part I: Acquisitions are Integral to Strategy here. Look out for the finale Part III releasing in coming weeks.
“What we found with our investments in Ag Tech is that it is far easier for a large multi-national company to make “bolt-on” acquisitions to an existing footprint. In many cases there is no need for duplicate G&A staff, buildings and locations. These savings alone along with some minor market-place pricing adjustments and focus on selling the value are enough to take cash-burning startups into a breakeven situation. The “bolt-on” acquisitions also obtain benefits of a more secure future with a stabilized and larger entity. The agriculture and irrigation technology customers also get a sense of security in their large investments knowing that the company has a better chance of existing for support in years to come.”
Jain Irrigation Systems Limited (“JISL”) has a globally integrated work force across India, Israel, Australia, and the United States, to name a few countries.
R&D is focused on the development of agronomic applications with product management out of India, United States, Australia, and Israel and software development out of India, Ukraine, United States, and Australia. This unique talent pool helped in dealing with the initial challenges of integrating all of the technologies, different programming languages, different interfaces and so on that we had acquired from around the world into a common platform.
Once the integration was complete and we proceeded to commercialize our technology offering, we learned of new challenges in selling and servicing growers. Growers in the United States and other countries have struggled to extract the full benefits of technologies offered by most market participants. Small startups entering the market promising major technological breakthroughs or massive yield gains for farmers have largely under-delivered and/or have run out of cash before reaching scalability.
With regards to sales and pricing, we found that even when a technology/idea is relatively proven in the sector, there can be large pricing swings and demand elasticity for the technology/idea. We learned the importance of the sales teams to market and develop a value proposition for more accepted technologies/ideas and for management teams to ensure margins can be sustained in the product / service being sold. The difficulties experienced in the industry have made growers skeptical and hesitant towards readily adopting new technology.
We found that it takes local and committed field support and distribution to be able to grow sales and the incentives offered to the sales and distribution network have to be greater than usual to ensure the product is pushed. Through our experiences we have explored direct models, dealer models and hybrids to arrive at the right combination.
It is clear that in order for larger scale and rapid growth, one needs a strong and committed dealer network. As a result, we recently invested in the two largest micro-irrigation dealers in California to get closer to the grower, to be able to sell and deploy technologies through their sales and marketing teams and to build an entry point as all of their new construction projects could put in monitoring and automation starter kits and be designed in such a way that technology upgrades sales would be much easier to make and provide value at a much lower cost of ownership for the grower. For JISL, there were other added benefits with the investment in distribution.
Now with an amazing technology platform that includes the the ability to provide all irrigation components after the pump (and solar pumps for some projects), our own distribution in California and one of the industry’s best global supply chains (where the best and highest quality irrigation products that come from India at a low cost/high value), our competitive future looks bright.
We can confidently say that we have an unrivalled irrigation and technology platform and are best placed to expand on the opportunities we have created.
In Part III of this series, we explore the opportunities that lie ahead for the AgTech industry.
Mandala Capital is a private equity firm focused on long term and sustainable investments across the food value chain in India and South East Asia. We partner with visionary promoters and management by providing complete financial and operational support to increase the companies’ value and help companies achieve sustained leadership in their sectors.