Editor’s note: This post is the result of a collaboration–we asked one Villgro Fellow and one Acumen Fund Fellow the same prompt: What are the challenges in and the unique approach you take to distribution, marketing, and/or doing dealings with the Base of the Pyramid (BoP) at your social enterprise? Interestingly, this resulted in a contrasting look at distribution and marketing in rural versus urban India, and how two very different business models can serve the rural BoP market in India.
Read Part 1 of the series, from Acumen Fund Fellow Andrea Griffin, here. Part 2, from Villgro Fellow Emily Paarmann, appears below.
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For anyone that has been keeping up with the Villgro Fellows Blog, you probably have a basic understanding of some of Villgro’s portfolio companies. Most of the organizations that Villgro works with directly address a specific need or challenge of India’s BoP by offering a product directly to the poor that improves efficiency at some level. In my last blog post, I discussed Under The Mango Tree’s mission of providing rural farmers with bee boxes in order to increase agricultural productivity and increase incomes through both the additional crops produced and by providing market access for the honey produced. Thus, there are two ways that UTMT reaches the BoP – 1) establishing a network of farmers that believe in the power of bees and are willing to accept the challenge, and 2) by being the marketing, branding, and distribution force driving sales of honey that is produced by small farmers. Regarding the first point, UTMT trains “Master Trainers” in beekeeping that can then disseminate their learning’s to others in the community. However, it is how well UTMT can deliver on the second point that will ultimately determine the success of the organization – and this is what my work in Mumbai largely consists of. So rather than discussing distribution and marketing directly to the BoP, I will be discussing what I have learned about distributing a premium product to India’s discerning customer, and how this ultimately impacts the BoP.
My job at Under The Mango Tree (UTMT) comes in once the honey has been packaged and has made its way to Mumbai. I am actually not in contact with the farmers to whom we are providing market access. My job is to understand the market in India for gourmet fast moving consumer goods, get the product on retail shelves, and develop marketing strategies. To be quite honest, this is certainly not what I imagined doing when I joined Villgro! I had an image that I would be in direct contact with the farmers at the BoP. However, my eyes have been opened to the importance of developing this market, and it has made me that much more aware of the connection between the top and bottom of the pyramid.
Under The Mango Tree has traditionally reached customers through direct contact – events, home deliveries, and establishing direct contacts with small retailers. With modern trade (large retailers or chains) gaining popularity in Mumbai, we have been finding that these types of outlets are more willing to take on innovative products more quickly than smaller shops or kiranas. In order to reach a maximum number of stores and lessen the sales burden on UTMT staff, a distributor is necessary. Part of my job is to meet with distributors, understand the models and terms on which they operate in India, and appoint several appropriate distributors who can most effectively help us bring our product to market in a sizable way. One of my biggest challenges has been understanding what consumers choose to purchase, how they make purchasing decisions, and where they shop. I had to spend my first few months merely navigating the basic markets for consumer goods, as a consumer myself, before I could make a meaningful sales contribution to Under The Mango Tree. Markets here, even in Mumbai, are much less formal than in the US – establishing relationships with retailers is a very important strategy to encourage them to market your product, and finding distributors and appropriate stores is largely a matter of asking people for introductions.
From the sourcing side, there are several ways that honey can be procured for sale within India. Some of the largest sellers of honey actually own their entire supply chain – they manufacture honey to their specifications and bring it to market. Others work with honey aggregators, which are sourcing from independent farmers and selling in the market. Often, the largest honey suppliers will procure honey from the cheapest source available, even if that means importing a low quality or adulterated product. Under The Mango Tree takes care to source from small farmers that produce a very high quality, unique, single flora honey. Through the market access that UTMT is creating, these farmers are able to decrease their selling costs by having a guaranteed buyer. By strengthening the links between these suppliers and the end consumer, producers are able to consistently sell more of their product at higher prices. In turn, producers are able to invest more in their product and improve quality and diversity.
Agriculture supply chains in India remain quite informal, as compared to those in Western markets. Small producers in India often need support in order to boost the competitiveness of their product. This is where Under The Mango Tree comes in. UTMT has helped de-commoditize the honey being procured through 1) packaging, 2) branding, and 3) building market awareness of single-flora honey (a huge differentiating factor of our product). One of the most important ways we have added value to the product is by working with IndoCert – an organic certification agency – to help our farms attain organic certification. This has added tremendous value to the product we are procuring, allowing producers to demand a higher price. In addition, since these farms are now certified organic, they are able to offer an entire range of organic certified products, including spices, oils, and pulses.
Of course, adding value to the product means nothing if small producers do not have the networks established to bring it to market. The demand for these high value products lies within major metropolitan areas, and these small farmers do not have easy access to these markets. The commodity markets are well established, with complex systems sourcing and bringing fresh fruits, vegetables, spices, etc directly to the markets lining the streets of Mumbai. However, de-commoditized and differentiated products offer greater growth opportunities to farmers. By building a brand of high quality, pure honey that is gaining a presence among the upper echelons of Mumbai society, we are able to start bridging this gap.
Emily Paarmann is a 2011 Villgro Fellow working on business development, sales, and marketing with Under The Mango Tree, an agriculture start-up that trains rural farmers in beekeeping and honey production to increase agricultural productivity. Emily has a degree in economics from the University of Virginia, and worked in the financial services in New York City prior to joining Villgro
