Institute of Rural Management Anand

Course Name: Managing in the VUCA world amplified by COVID-19 Programme: PGDM-
RM40

Date: 06th April, 2021 Term – VI Roll No.________________

End Term Examination (Open Book)

Duration of Exam: 02Hrs 30Min Weightage: 40 percent Total Marks: _________

Instructions:
Please read the case in search of the startup… and analyze the case and based on case facts
prepare complete proposal (with your revenue model) for the startup, keeping in mind the
VUCA environment in which Vinith will be operating.

In search of a Startup Idea in a VUCA world1

Vinith's mind had wandered off as he was surfing the net. The placement
season has come and gone. Most students from his batch have secured
placement with some organization. Vinith did not participate in the placement
process. Since his graduation days at Amravati, he has been toying with this
idea of doing something independently. He had seen the movie 'Jobs', where
Steve Jobs's character says, "I cannot be employed by somebody else" the
dialogue had gotten stuck to him since then. However, he joined this
management course to explore the possibilities further. Halfway through the
course, he realized that the programme's whole objective is to create skilled
workers, great followers, and not entrepreneurs - the wealth creators. He never
wanted to be a minion. He had developed some distaste for the course. But to
make the best use of his time, he had started exploring specific ideas. It seemed
to him that he had come close to it. He surely wants to get into a scalable
business and have the opportunity to multiply by leveraging technology. He
knew that to grow, one needs to create and deliver something that can fulfil the
millions of latent needs. The market has to be very big but relatively new. He
was trained as a civil engineer but had worked in an electronic company for
three years selling consumer electronics. Finally, as his destiny would dictate -

1
This draft case is prepared by Prof. Saswata Narayan Biswas for Classroom use only. This is a test case. Not be
quoted.

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he secured admissions in a middle-ranking management institute's agribusiness
programme. Placements are not earth-shattering but gave a reasonably good
start to the professional career. In later years, many made significant marks in
their career. Vinith was thinking differently. All of a sudden, his eyes grazed
through a banner item, "India's online retail business is to cross USD 200 billion
by 2026." It made him think...

Before the pandemic, online shopping was limited to young professionals

and college-going students in India. The pandemic changed it all. Ordinary
citizens, locked inside their homes, looking for food and other supplies. The
group above forty who never dared to buy online were searching for food on
their mobile. The demonetization had kick-started the nascent online payment
system. The lockdown enlarged it. With the combination of internet accessibility
and online payment ease, the online retail business started growing. Big online
retailers like Flip kart, Big Basket, and Amazon have slowly earned the
customers' trust by containing price volatility during the pandemic and their
return policy. After-sales service for varieties of goods was more than
satisfactory for the average consumers. Therefore, there was an uptake of
ordering in both consumer durables and immediate consumption articles. The
food delivery chains established that Indians are not aversive to ordering. Vinith
knew it has to be some online business, but he had to dig deeper before
deciding. Because of his two year education in agribusiness, he had developed a
good understanding of the food sector and the possibilities that existed.

He knew that the growth in agriculture and allied sector post-pandemic

would be propelled by value addition through processing and marketing. There
have been a slow and steady shift of consumer preferences from commodities
(e.g., wheat) to processed, packaged and branded food items (i.e., branded Atta
or pasteurized packaged milk) items. Presently, there is enough evidence to
suggest that consumer preference is shifting from commodities to processed and
semi-processed food items. It is estimated that the world processing food
industry will reach USD 4.1 trillion by 20242. It is also envisaged that the Indian
industry will also grow and provide employment to about 9 million people by
20243. However, the shift has been relatively slow, partly explained by the lack
of trained human resources who can navigate the whole process of food
production seamlessly, procurement, packing, and promoting it to consumers.
Those who make an effort often forget that the proper output and smooth

2
Food Processing Market Report: Trends, Forecast and Competitive Analysis. ID: 4832757 Report August 2019
https://www.researchandmarkets.com/reports/4832757/food-processing-market-report-trends-forecast?
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Source: https://www.investindia.gov.in/sector/food-processing

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procurement functions depend on having a long-term interdependent
relationship with the farmer producers leading to trust and bonding.

With the middle class's growth, rising urbanization, and the emergence of
the dual-income nuclear family, Indians have slowly moved away from grain-
based diets to diets like milk, eggs, meat, fruits, and vegetables. With the
growth in discretionary income, the chances are high that families will still move
up the food chain. Instead of liquid milk, the demand for cheese, butter, curd,
flavoured milk will grow much faster. In fact, in recent years, the processed milk
industry has seen a consistent growth of over 14% between 2016-20204. Thus,
value-added food product has caught the fancy of the middle and upper-middle
class. There is a high potential for the growth of the food processing industry
compared to a developed nation. Evidence points out that the food processing
industry can reduce the chain of intermediaries between the growers and the
consumer and benefit the rural producers by adding value to the product. The
food processing industry will give a fillip to the demand and act as a factor in
reducing price volatility in the agriculture sector. Andhra Pradesh has the highest
concentration (14.21%) of food processing industries in the country5. The
modern-day food processing industry has become capital intensive and may
increase employment substantially and indirectly benefit farming families and
increase farmers' income. The technologically sophisticated food processing
industries will require more trained managers for managing these organizations.
A recent study highlighted that while workers share in food processing industries
was reduced to 52.55% from 60.80%, the share of supervisory and managerial
workers rose from 16.54% to 30.29%. The processed food industry is expected
to grow at 14.6% among all sectors, surpassing most manufacturing and service
industries.

During recent times, the Government of India has made considerable

efforts through agencies like Small Farmer Agri-Business Consortium (SFAC),
National Bank for Agriculture and Rural Development (NABARD), National
Commodities and Derivatives Exchange and various other Non-Government
Organizations to establish a new form of the collective enterprise known as the
Farmer Producer Organizations (FPOs). In many states, these FPOs are
underway and in the process of being established. It is envisaged that by the
next decade, about 15,000 Farmer Producer Organizations will be established in

4
Gandhi K., Sharma R., Gautam P.B., Mann B. (2020) Introduction. In: Chemical Quality Assurance of Milk and
Milk Products. Springer, Singapore. https://doi.org/10.1007/978-981-15-4167-4_1
5
Nithyashree, M. L., & Pal, S. (2020). Rising Capital Intensity and Employment Potential of Indian Food
Processing Industry. INDIAN JOURNAL OF AGRICULTURAL ECONOMICS, 75(4), 518-533.

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the country. It is envisaged that the FPOs will provide a variety of specialized
services to farmers in rural areas, such as financial services, input supply
services, procurement and packaging services, and marketing services. The
services provided by the FPOs will not only reduce the transaction costs of the
farmers but, through value addition, a process is likely to increase the returns on
their produce. These FPOs will range from different agriculture commodities
through milk, fisheries, poultry, and other allied sectors. These organizations will
undoubtedly require trained rural managers who have rigorous training in
livelihoods, rural production systems, and the supply chain of rural produce.

He noticed that horticulture (fruits and vegetables) are growing at a

steady pace (see Exhibit 1) and is almost evenly spread across states (see
Exhibit 2). However, vegetables occupy the lion's share of the country's
horticulture produce (see exhibit 3). The dampening factor is that a large
proportion of the fruits and vegetables grown in the country never reach the
consumer's plate; they become waste because of lack of preservation. He knew
that the infrastructure required for the transportation and storage of horticulture
produce is very inadequate because creating this infrastructure requires
enormous investments. The post-harvest wastage of all horticulture produce is
about 16%. However, horticulture production is growing over the years and has
now surpassed food grains production (see Exhibit 4). Some of the horticultural
produce show marked volatility. For example, vegetables that are part of the
regular diet of most Indians (i.e., Potato, Onion, and tomato) show price
volatility of about 2.5 times within four months (see Exhibits 5, 6, and 7). The
main issue is that the farmers do not profit from this. Most farmers receive the
lowest price of the year for such produce.

Horticulture, like any other agricultural produce, is subject to a wide

variety of uncertainties. These uncertainties result from the changes in weather
condition. Most agricultural operation in India is rain-fed. Even if it is irrigated
through groundwater irrigation, it is subject to vagaries of nature, such as
unexpected rainfall or cyclone at different growth stages. Because of the under-
regulated pesticide and insecticide market, there is uncertainty about its efficacy
and health implications for farmers and the end consumers. Horticulture produce
also suffer from uncertainty related to quality. There is a vast quality difference
across the produce. For example, there are two different types of pineapples (a)
the table variety and the (b) processing variety with high juice content. The
farmers prefer to grow the table variety because there is a robust local market,
but the processing industry does not find it useful, apart from other quality

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differences. Uncertainty at the farmers' end is also related to access to the
market. Thus, the market for horticulture produce is highly uncertain.

The fruits and vegetable markets are highly complex. The complexity
arises from the trade channel arrangements that exist at present. The farmer
often sells the produce to a commission agent with whom the farmer may have a
long-standing business relationship. The commission agent's sole objective is to
get the product at the lowest cost. So the commission agent finds ways and
means to exploit the vulnerability of the farmer. The farmers vulnerability arises
because of two factors (a) high perishability of the produce and lack of access to
infrastructure to store the produce. The commission agent arranges to pick up
vegetables directly from the farm gate to deliver at the wholesaler's stockyard.
However, the total cost of transport and delivery is on the farmer's account. The
wholesalers then sell it to semi-wholesalers or retailers. The end-users usually
buy the vegetables and fruits from the retailers. The chain is long, and at each
stage, a percentage of consumer's money gets diverted through the
intermediaries rarely add any substantial value to the product except grading
and providing the access while retaining about sixty to seventy per cent of the
consumers' money. The trading channels are highly complex because it is
layered and the all forward transactions are opaque, and there is very little
chance to calculate the actual costs.

The Indian food market, mainly the horticulture produce market, is a

commodity market. Branding is rarely done because most of the fruits and
vegetables are sold unprocessed and unbranded. There is a lot of ambiguity
related to government policies concerning the food processing industry. The
processed food market is an emerging market, and no standard yardstick is
available. The ready to eat processed food market has remained stagnant over
the years. It seems the Indian palate is not as standardized as the Western
palate; here, each district has its flavour, so most people want food to be cooked
as per their taste buds. Secondly, cooking food at home is considered to be good
and healthy.

The other day, Vinith discussed with one of his college seniors, Ankush,
who has had worked in the food sector for over half a decade. Ankush drew his
attention to specific reports which said that the dehydrated food demand would

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grow in India6. Dehydrated vegetables packed properly can stay up to ten years.
However, it all depends on how you are drying it, said Ankush. Ready to cook
chopped vegetables with about 30% of moisture content can have a longer shelf
life and save the person a lot of labour at the end of the day. Studies show that
it is not the cooking time that counts; it is the preparation time that matters. It
is a lot of labour. Maybe it will have an added attraction because it can be
cooked to one's taste. The Processed Food industry is growing (See Exhibit 9).

The startup has to be an actual startup and not a "me too" outfit that
copies others because it has to be enduring, meeting a real need and most
importantly, a sustainable trendsetter in the industry. Vinith was wondering
about the readiness of technology. Is the technology in place? Does it fit into his
vision of sustainability and functionality? Who are the competitors? Will he be
competing with Big Basket or Zomato or the neighbourhood vegetable seller
coming on a wheelbarrow, or he will be competing with the commission agents?
He did not have a ready answer to this. Is there a ready-made label for the
industry about which he is contemplating entering? What are the opportunities in
this (un)known territory? Does he have any clarity on purpose, the path, the
product, and the partners he needs to enter this new world? How can he be
agile? What are the drawbacks of being agile?

Vinith kept on thinking… Now he has to prepare a complete proposal

maybe for the potential funders. He has worked out in his mind the following
steps. To successfully maintain a successful long term relationship with the
farmers, he has to cut down on the intermediaries. Lesser the intermediaries
higher the chances of sustaining it and better for the balance sheet. It is a win-
win situation for both farmers and the organization. However, he has to figure it
out how to do it, which can go into his proposal. Efficiency in operations - should
he be agile and use the existing small scale food processing facilities on a
contract that exist presently or create a chain of small processing units. Agility
has its trade-offs. How is he going to leverage technology? Oh! He has to do all
this and also prepare for the end-term examination. He was eagerly looking
forward to ending this formal education to embrace the education
wholeheartedly that life will teach him.

6
Dehydrated vegetables in huge demand.
http://timesofindia.indiatimes.com/articleshow/65465436.cms?utm_source=contentofinterest&utm_medium
=text&utm_campaign=cppst

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Exhibit 1

Exhibit 2

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Exhibit 3

Exhibit 4

8
Exhibit 5

Exhibit 6

9
 Exhibit 7

Exhibit 8
By 2024, the Food Processing industry will potentially attract $33 bn investments and
generate employment for 9 million people
By 2025, India’s food processing sector is expected to be worth over half a trillion dollars
By 2030, Indian annual household consumption to treble, making India 5th largest
consumer

https://www.investindia.gov.in/sector/food-processing

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