Tatas form JV with Irish farm major ‘Total’ to attack the back-end of the value chain

The Tata Group, which for the past two days, has been in the limelight for its ‘Corus’ buy out, has entered into an an agreement through its chemical arm Tata Chemicals Ltd. to enter into a 50:50 JV with the US$ 205 billion, Ireland-based, Europe’s largest fresh farm produce company, Total Produce, reports DNA Daily.

“We will directly attack the back-end of the value chain.” “People will come to us to procure,” says Homi Khusrokhan, Managing Director, Tata Chemicals Ltd. “We will provide tremendous improvement in value by modernising the cold chain, properly grading and warehousing and carting the produce from farms to the shopping centres,” adds Khusrokhan. Carl McCann, chairman, Total Produce, is confident of India’s great potential for a large and successful fresh foods business.

While, this is a good news for consumers, farm food producers, and retailers, this move may over a period of time almost eliminate the ubiquitous middleman, who for centuries has dominated the agri-produce trade, as the joint venture proposes to procure fresh fruits and vegetables and sell them directly to the wholesalers, thereby, completely avoiding the middlemen.

It is no surprise that all big business houses interested in organised retailing are focusing on the agri-produce sector. Not only this sector accounts for more than 30% of all retail business but also offers greatest opportunities of bringing supply chain efficiency benefits to the consumer. It is believed that as much as 35 to 40% of all farm produce, particularly, horticulture produce, is wasted before reaching the consumer due to supply chain inefficiencies.

While, Reliance is going big on its own agri-farming plans, telecom major Bharti already has an equal joint venture for the same with the US-based Rothschilds. Tobacco, hospitality and foods major ITC , though not directly involved with farming except with tobacco, has for several years, been developing linkage with the farm sector through its ‘Chaupal’ initiative. Similarly, foreign cash & carry players like Metro AG are involved in developing procurement centers, building storage and cold chain facilities to cut wastages and eliminate middlemen.

There could be a synergy for Tata Chemicals, the producer of fertilisers, soda ash and other chemicals, through an extensive network of farmers ‘Tata Kisan Sansars’ set up by it to strengthen its fertiliser and other farm inputs distribution chain.

The JV will begin its operations by setting up two hubs, in the north and the east. In two years these will be ramped up to 40.
The Tata-Total Produce JV may at some stage consider entering into contract farming as well.

Source : IndiaRetailBiz