Startup Saturday: Hydroponic entrepreneurs farming for the future
Hydroponics is no the buzzword when speaking about the “future” of farming. A growing population, shrinking land base and water resources suggest a reinvention of the agrarian process is more than needed.
In India, hydroponics meets less than 1% of the total food basket.
Israel is the hydroponics leader when it comes to feeding its people, but India still has enough land... for now.
What role can hydroponic startups play in a market that is dominated by traditional agriculture? Are people willing to buy hydroponically grown fruits and vegetables?
FarmingV2, set up in 2018
Founder: Rohit Nagdewani
Indoor and outdoor hydroponic farms.
Our food is full of harmful chemicals. Besides, I am a big foodie and a home-cook and was finding it impossible to source high quality produce in the market. I began researching a small kitchen garden and heard about hydroponics. With its major USP being the ability to grow anything, anywhere, it didn’t take a lot of time for me to venture into it commercially.
Setting it up
I started experimenting with small imported setups but couldn’t scale due to the lack of information and equipment. A lot of research and calls later, I found two companies that help set up hydroponic farms – Urban Farmer and Valens Arbor in Mumbai. With their help I set up my first commercial farm. The challenge for hydroponic farmers like me is the fact that the technology is at a very nascent stage, so getting access to the right people, equipment and process is not easy. No government permissions were needed.
I started with a small 300 sqft indoor farm that cost me Rs 4 lakh. Now I have expanded to a 6,600 sqft indoor farm and one 6,000 sqft outdoor farm. All this cost me Rs 45 lakh.
Both the capex and the opex of a hydroponic farm is higher than soil grown produce, which results in a higher selling price. In the case of commodity crops like wheat and rice, the price will be four times more that soil-grown crops.
I saw the opportunity in the greens business. Last year India grew 15 crors tonnes of greens. There is a market for it and producing greens costs marginally more than traditional crops, about 2-3%. With the nutritional benefits there are people who will pay more. I have 500 customers who are subscribers and a few restaurants who buy regularly. (Rohit does not wish to share his turnover.)
It is impossible to even think about growing hydroponically at the scale at which traditional farmers do. Currently it is not viable for commodity crops. But yes, once we deplete our fresh water sources and arable land in a couple of decades, the shift towards hydroponics would be much more apparent.
Education! If we are able to educate people about the availability of such chemical free, healthy produce, the product will sell itself. Since the capex of setting up a hydroponic farm is high, funds are also an issue, but we are already witnessing a global focus on such indoor farms (Softbank invested $200m in a vertical farm called Plenty).
Salad Growers, set up June 2019
Founder: Yash Patel
Grows variety of greens and herbs; sells by monthly subscription
The demand for exotic greens and gourmet salads is at an all-time high and unfortunately, with our horrible weather conditions, it is impossible to get consistent quality greens and herbs all-year round. With hydroponics we are able to grow exotic greens and herbs all-year round, and with consistent quality always.
Setting it up
We had a great idea and we were certain that we wanted to execute it at some point in time. The question was - would it be possible to run an actual business? I did a lot of research and even zeroed in on one international firm that specialises in vertical farms, but their estimate was about 10 times the cost I finally paid to a domestic company.
Extensive market research revealed that people don’t like to eat salads everyday, but prefer it twice or thrice a week. With the rising trend of veganism, people like their salads to be vegetarian. We on-boarded a chef and a nutritionist and developed gourmet salad recipes that we are currently testing in the market. We intend to have a subscription model and aim to sell our salads at Rs 300 a plate (400gms). Once I reach 100 subscribers I will break even.
I invested Rs 15 lakh to set up a 500 sqft farm and that changed the game for me. Today, my farm can churn our 1,500 plates of salad per week. I am also planning to set up another farm of 4000 sqft.
Our primary challenge is to educate our potential customers on the benefits of our product. This topic is gaining momentum on social media and more people are aware of the benefits of eating hydroponic food.
Our product – greens and herbs - is something that traditional farmers do not grow or rather cannot grow due to the weather conditions, so there is no issue with that at all. We only grow varieties that you don’t usually get at the local farmers’ market.
We are in the final stages of validating our product and have planned on expanding to a farm that is almost 10 times the current size next year. Our marketing strategy is also in place, but we are waiting to execute everything at the right time as we don’t want a bandwidth we are not able to manage.
The big picture
Shyam Agarwal, Perusal Global (Financial research and advisory)
MarketsandMarkets, a market research company, the global hydroponics market is estimated to grow from $8.1 billion in 2019 to $16.0 billion by 2025, registering a CAGR of 12.1%. The primary drivers for this handsome growth include growing population and the need to ensure food security through alternative high-yield farming techniques as arable land and water have been depleting.
Hydroponics globally has grown because of the high yield (20-25%) and 2-5 times productivity. This system eliminates the use of artificial ripening agents and pesticides creating nutritionally superior vegetables. That said. India’s overall fruit and vegetables (F&V) market was estimated at around Rs 5,00,000 crore in 2015. Even if we assume a meagre 0.5% of this overall market, it translates into a humongous opportunity of around Rs 2,500 crore for hydroponic produce, which may take at least five years to materialise. Renowned business groups such as DS Group and Patanjali are also considering hydroponics on a commercial scale.
A growing awareness and the focus on healthier lifestyles amongst people in India should help hydroponic producers reap benefits in the long term. Moreover, an evolving demand of produce not grown in India such as swiss chard, kale, parsley, oregano and cilantro, provides the necessary tail winds to hydroponics producers.
What to watch for?
The lack of tax cuts and incentives is a key factor that hinders the growth of hydroponics in developing regions, as the high set-up costs and running costs can often render operations difficult to sustain. The founders of hydroponic farms should first identify the market/distribution channel to sell its produce. Since hydroponics involves high cost of production, it is imperative for hydroponics growers to keep a check on the competition arising from the local produce in the price-sensitive Indian market. The founders should then work backwards to decide whether the project provides the desired ROI, which is in sync with invested capital and efforts.
Another issue which is a major hinderance to hydroponic farmers is the threat of waterborne diseases. Considering that the nutrient-enriched water is recirculated throughout the system, any kind of waterborne disease that enters the nutrient reservoir often affects the whole crop. As a result, growers often keep their plants spaced out to prevent crowding, which is often how pathogens enter the system.