Wal-Mart Attempting to Transform India’s Agriculture

Two years after Wal-Mart came to India, it is trying to do to agriculture here what it has done to industries around the world:

change business models by using its hyper-efficient practices to improve productivity and speed the flow of goods.

Two years after Wal-Mart came to India, it is trying to do to agriculture here what it has done to industries around the world:

change business models by using its hyper-efficient practices to improve productivity and speed the flow of goods.

Two years after Wal-Mart came to India, it is trying to do to agriculture here what it has done to industries around the world:

change business models by using its hyper-efficient practices to improve productivity and speed the flow of goods.

Not everyone is happy about the company’s presence here.

Many Indian activists and policy makers abhor big-box retailing, fearing that it will drive India’s millions of shopkeepers out of business. [br]

Some legislators are suspicious of the company’s motives. The government still does not allow Wal-Mart Stores and other foreign companies to sell directly to consumers.

But Wal-Mart is persisting because its effort in India is critical to its global growth strategy.

Confronted with saturated markets in the United States and other developed countries,

the company needs to establish a bigger presence in emerging markets, like India, where modern stores make up just 5 percent of the country’s retail industry.

Establishing good relations with farmers is a centerpiece of the company’s plans, according to this article in the New York Times.

Though Wal-Mart is pushing many of its traditional products in India, like clothes, electronics and home goods, perhaps none is as essential as food.

Wal-Mart needs high-quality produce at low prices to draw customers in volume.

The challenges are significant. Buying and transporting produce are difficult tasks because India has millions of small-scale farmers and an agriculture system riddled with middlemen.[br]

Here in Haider Nagar, in the bread basket state of Punjab, farmers who supply vegetables to Wal-Mart say they like working with the company.

It typically pays them 5 to 7 percent more than they earn from local wholesale markets, they said. And they do not have to pay to transport produce because Wal-Mart picks it up from their fields.

Abdul Majid, who sells cucumbers to Wal-Mart, says his yields have risen about 25 percent since he started following farming advice about when to apply fertilizers and which kinds — more zinc, less potash — from the company and its partner, Bayer CropScience.

Mohammad Haneef, a farmer in a nearby village, said he had sold to two other companies before Wal-Mart, but one shut down and the other cheated him and paid him late.

Wal-Mart is much better, he said, but its buyers are picky, taking the best vegetables and leaving him with inferior ones that he still must truck to wholesale markets.

“You have to establish trust,” he said in Hindi. “Wal-Mart has been paying on time. We would just like them to buy more.”

For Wal-Mart, establishing an agricultural beachhead in India will not be easy.

Many Indian companies have abandoned or significantly scaled back efforts to run supermarkets. Some companies grew too quickly and flamed out.

But many others were undone by the numerous Gordian knots that hold back Indian agriculture:

laws limit who can buy farmers’ crops, 35 percent of fruits and vegetables are wasted because of inefficient transportation and farmers earn too little to invest in their marginal farms …

Wal-Mart is also limited by New Delhi’s ban on foreign-owned retail chains that prevent it from selling directly to Indian consumers.

“Not having access to our own retail stores through our own investments is a serious impediment,” said Raj Jain, who heads Wal-Mart’s Indian operation.

“How do you pay for that big back end if you are not going to have access to the front end?”