Cooperatives & Start-ups in India: Collaboration for a “unicorn” opportunity?

February 20, 2016 social sector 1 Comment

COOPERATIVES& STARTUPS

I have been fairly involved in the social sector and the commercial industry where there has been much talk about how corporate companies/ profitable start-ups and social enterprises/ non-profits can learn from each other. Indian start-ups & business (commercial sector) and Cooperatives (social sector) are good examples of each side. They can collaborate, work on “low-cost” versions of big ideas, share expertise and co-create. Given the primary DNA of these two types of organizations being very different, the on-ground co-creation is not happening, fractured in approach and no outcomes to talk about.

Yet we see a golden opportunity to collaborate without compromising their DNA, talent or operations but support each other. This can potentially unleash over a period of time, a billion dollar opportunity for growth, employing millions of Indian sustainably, innovate and catalyze the Indian economy reducing our dependency on global economies and intermediaries (such as IMF) to fuel our internal growth.

 

Cooperative movement: The giant ship

Cooperatives in India have been growing in numbers covering almost 97% of rural population in India. It employs millions of Indians through Self-Help Groups (SHG) or through registered societies under the cooperative. This document has briefly documented the overall cooperative sector in terms of types of cooperatives, catering to different sectors, privately owned, quasi-government or completely owned by the government. By 2010, the total number of cooperatives in India stood at approximately 610,000 and employed more than 250 million Indians. The government initiated organizations such as NCUI, NABARD, and farmer specific organizations such as IFFCO, Vrutti, NACOF are some of the key ecosystem players that support the cooperative movement in India.

The broad categories of cooperatives can span across agricultural products (cereals, pulses, vegetables, fruits) to allied products (coffee, tea, dairy products, fishery, meat, etc.) to weaving/ handloom cooperatives. Each of these cooperatives covers clusters of the region, state-wise and under product category they are state-wise organized in operation but also supported by the national bodies of the product category (National Fisheries, National Milk Cooperative Board, etc) monitored by the central government of India.

 

Cooperative sector strength:

Supply side of the market: Large scale of production and operation.

Employment to millions: Fairly organized, employs millions of Indian workforce (men and women)

Volume & Scale: Supplies in high volume, less than wholesale prices with quality products.

Cooperative sector weakness:

– Has limited access to direct retailers, no access to B2C urban market.

– Lack of infrastructure (storage, transportation) and access to technology

– Management inefficiencies (labour, leadership, operations, marketing)

– Caught between middlemen and brokers, unable to brand and market products to increase margins.

 

Start-up ecosystem: The efficient engine

The Indian start-up ecosystem has been booming, optimistic, bringing a landscape change from a traditional view of entrepreneurship to a technology aided boom of entrepreneurship. The growth drivers are disposable incomes, internet and smartphone penetration, increase in consumption patterns from metro to tier 2/ 3 cities, aspiration of living urban and global India lifestyle. The market is growing and the start-up wave is still at a nascent stage but the patterns of consumption by Indians are not predictable and the change will not be linear or singular. India and Indians are pluralistic in nature and behaviour, technology is blurring the time period of market revolution and many companies have to now move faster with the market dynamics. Apart from technology focused start-ups, a vast majority of start-ups are booming on the e-commerce space, hyper-local concepts of business through technology and customer-centric engagement. They are optimizing their costs by focusing on initial traction, then scaling fast through an online medium (investing very little in retail/ offline costs), engaging and retaining customers through digital marketing. And the next technology wave combining new ideas such as Robotics, Artificial intelligence (AI) and Internet of Things (IoT) will hit the Indian shores in no time.

In this entire roller coaster boom, agriculture and allied sectors can leverage technology to reduce the food crisis, remove poverty/ debt amongst farmers, inequality in access to resources and create thriving livelihood opportunities for millions in rural India. It is easy said than done but imperative to try the model out.

 

Start-up ecosystem strength:

– Demand side of the market: Thriving consumer market

– Access to technology and new innovations to catalyse

– Management and operation efficiency (scope to improve)

– Acquiring, engaging and retaining customers in B2C market through brand and marketing.

Start-up ecosystem weakness:

– The high cost of supply of product/ service (creation and production).

– Cannot offer a scale of jobs to millions (of Indians) because of technology.

– Cannot achieve market penetration without access to large infrastructure, MSME and large scale produce organisations.

 

Efficient Big Indian Ship

We can already see a few common overlaps between Cooperatives and Start-ups for collaboration without interfering in each other’s modus operandi. Here are a few ideas:

– The cooperatives can supply to start-ups the volume of products to meet the urban demand.

– The start-up and cooperative can meet mid-way to achieve higher margins in their respective businesses by cutting out the middlemen and sourcing directly.

– This can help cooperatives to create sustainable revenue models, improve its efficiency, hire quality talent and start-ups can focus on sustaining its market share, engaging customers and remain competitive.

– Start-ups can focus on product innovation and help cooperatives to upgrade with market changes, skill their workforce, raise incomes in poorer regions of India.

– Start-ups can also collaborate with cooperatives to export high-value products, unlock B2B and global markets to increase revenue. Export market globally is a great opportunity although scale and management of it will be key to success.

– A few examples would be grocery, local start-ups like Big Basket, Grofers can collaborate with farmer producer organizations of agriculture, dairy, and meat products. The textile and handloom cooperatives can work with B2B start-ups like GoCoop. There have been developments of such collaboration that demonstrates the potential (although at very nascent stage).

– Even government backed organizations such as IFFCO is keen to engage the start-up ecosystem.

 

Hopefully, this idea can be taken forward by more cooperatives and start-ups alike to double their growth, create sustainable jobs for millions and build a more thriving ecosystem of entrepreneurs in rural and urban India.