Understanding contract farming (Pepsico)

1. Potato Contract Farming
Win-Win Model for
Agro Processing

2. Introduction
• PepsiCo is a world leader in convenient foods and beverages, with 2006
revenues of more than USD 35.1 billion and 168,000 employees.
• PepsiCo India Snacks (Frito Lays) is one of the largest convenient foods
company in India. Entered in India in 1989
• Today PepsiCo India has 3 state of the art snack food plants in India
• PepsiCo beverages and snack operations directly employ more than 4600
people in India and indirectly 60,000
• PepsiCo partners with the different state governments to provide access to the
latest varieties and agronomic practices for the farming community in
multiple crops across the country

3. PepsiCo Snacks has three World Class
Food Processing Plants
Established in 1989
North
Region
Channo
Started in
October 2004
Kolkata
Established in 2001 East
Regiion
Pune
West &
South
Region
2700 Kms
2800
Kms

4. PepsiCo in India has a legacy of
supporting agriculture
and PAIC to cooperatively develop a comprehensive
Punjab farmers
contract farming and created backward & forward
storage, agronomy to increase farm productivity
Paddy & Barley
• Started with Investment and partnership with PAU
agro-technology program and crop solutions to
• Partnership with state governments; have pioneered
linkages for process grade potatoes
• Made investments in R&D in varietal introductions,
• PepsiCo India is focusing on Potato, Citrus, Corn,

5. Strong brands growing rapidly…
more than half of
business is
processed
potatoes

6. India is the 3rd largest producer
of Potato in the world
Potato Production (000 Tonnes)
70300
32,000
25000 21500
11500
China Russia India USA Poland
Year 2005
Source : Karvycomtrade (FAO Data)

7. Vicious cycle –
Conservative Farmers
Low investment
Minimize inputs vs. Maximize output
Limited choice
Role of the
Corporates
and,
government
for step jump
Low Earning Low Realization
Quality / Productivity
No Market Orientation
Meet customer Quality Expectations
Pay for performance

8. Pepsico’s Contact Farming Program

9. Contract Farming :
Growing Partnership with Farmers
All India
Qty Under contract (TON)
No. of Farmers
11000
57894
800
125
2001 2003 2005 2007
• Quantity under our Contact farming program has grown
almost five times since 2003
2002 2003 2004 2005 2007
Area Under contract (Acre)
•No of farmers directly benefited from our initiatives has
jumped from 800 in 2003 to almost 11000 in 2007 and
acreages from 2000 to 11000
10900
• Pepsico’s contract farmers have been getting significant
benefits over other farmers because of insurance, banks,
blight control packages and attractive buy back prices
2001 2003 2005 2007
6250
800 2000
31668
56%
17802
38%
11102
23%
2920
9% 22%
5500

10. PepsiCo – overcoming market challenges
BUILDING BLOCKS FOR A SUSTAINABLE CONTRACT FARMING PROGRAMME
Land preparation & planting,crop monitoring
during growing period harvesting & procurement,
transportation logistics prompt farmer payment system
Commercialization
The extension services team
-selection and training Farmer education program Field
trials at farmer fields
-multi-locational & crop timing
Technology Transfer
Evaluation of promising varieties and hybrids
Multi locational trials and short-listing - selection Blueprint
for agriculturalpractices after adapting to localconditions,to
suit intellectual & financial means of the farmer
Evaluation of farmer economics
model,Demonstration,farming
R & D Activities

11. Frito-Lay attempting to provide a win-win market
linked self sustaining contact farming model
Agri
Companie
s
Quality based fixed buyback
„Pay for Performance‟ systems to drive
quality and continuous supply
Program
support
Insurance
Govt
Locally evolved
Farmer’s Organization
Directly with the
Farmer
Farmer FRITOLAY
Banks
Seed
Companie
s
Input
Companie
s Provide technical support and extension
services for chip grade farm practices.
Advantaged
Seed
3P
Services
“Partners in Progress” Model

12. Align Indian agronomy to the industry
needs…
 Increase Farmer awareness about
consumer requirements.
Ware
Potato
Chilled
product
French
Fries
Potato
crisps
Quality Trait
Flakes
Boiling Type
Bruise resistance
Coulour of Flesh
Dry matter content
Frying colour
Shape of Tuber
Size
Store-ability
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 The needs of both modern potato
processors and export markets are
often very specific with regard to the
variety, tuber size, skin colour and flesh
colour.
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Source :Rabobank International
 Processors generally require a
consistent supply of high quality tubers

13. Challenges in Pre & Post Harvest
Technology in Potato ….
Seed
Management
Planting Bed
Management
Maturity
Management
Pre
Harvest
Management
Sampling & Lab
Test
Truck
Loading
Storage
Post
Harvest
Management

14. 21
Planting Bed Management
• Farm infrastructure to be improved for better field practices
and land Preparation
• Financial institutions/Banks for easy and cheap credit
• Develop irrigation systems
• Uninterrupted & Best Quality Fertilizer & pesticides

15. Simple Solutions : High Impact…
 Improving the geometry has a significant impact on the Potato Size and Quality
Traditional Geometry
Row to Row Spacing :18 inches
Plant to Plant Spacing : 4 inches
Improved Geometry
Row to Row Spacing :26 inches
Plant to Plant Spacing: 8 inches

16.  Irrigation : Shift from Traditional „Jhapta‟ irrigation to a simple flood irrigation method
Traditional Improved
Simple Solutions : High Impact…

17. Low grade automation in harvesting can
minimise the losses
Traditional form of earthing up using spades Simple power tiller can significantly improve
doesn‟t provide adequate soil cover the quality of ridges and soil cover

18. Traditional form of harvesting results in higher
mechanical damage to the Potato and lower
efficiency
Simple drum harvesters can improve
efficiency and reduce damages.
Low grade automation in harvesting can
minimise the losses

19. Inspection Sampling
Acceptance or Rejection based on Quality
Parameters
• Sampling Protocols
• Initial Inspection of samples
• Quality checking using potato receivables protocols
and sampling methods
• Pre Harvest & Post Harvest Cook Test
Infrastructural Investments
.. in Sampling Technologies
.. Quality Analysis & Testing lab
… Lab Equipments
…. Qualified Lab Technicians

20. Holistic approach to program development
with a national footprint
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Supply Chain efficiency. 
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Improving Farm productivity
Leveraging the traditional Vendors
system.
Village level Labs
Region specific / Advantaged
Technology
Productivity levels at par with World – 20t/h
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Focus on Farmer economics
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Strengthening the social fabric
Unique Insurance
Tie with input companies for timely
availability at discounted rates.
Awareness and Empowerment
Education program (HIV / AIDS)
Women empowerment

21. Thank you
Presented by:
Aakristi
Lalita
Sahil
For your patience