Neofarmers Gets into Physical Retail, Understanding Neofarmers’s Motivation
In an apparent sign of growth for alternative safe food products in Dhaka and strategic ambition to scale its business, Neofarmers, a Dhaka-based online safe food retailer, launched its first community retail store in Mohammadpur, Dhaka, last month. This expansion comes at a time when a host of new small scale boutique food companies delivering safe and healthy foods gain momentum in Dhaka. It means the market for safe food is growing and that Neofarmers seeks to dive head-on into the trend.
Neofarmers started as a digital retailer between 2017-2018 selling safe food through Facebook and then its own ecommerce website. The company officially launched in November 2018 as a digital-only retailer working with a small number of products. Over the past three years, the company has expanded in every area of its operation: the number of products it deals with has increased, it has expanded coverage and now has a physical presence, and has grown its consumer base meaningfully.
The origin of Neofarmers is inspired by the personal experience of its founders. In a 2020 interview with Future Startup, NeoFarmers’s co-founder and Managing Director Tamzid Siddiq Spondon shared the origin of Neofarmers and initial strategic decisions of the company:
“I wanted to ensure safe and healthy food for my kids. But when I started to explore the options, I came to see that the options for safe food remain limited in the market. That’s when I first came across the idea of creating a safe food brand.
I shared the idea with my friends, they immediately identified with the challenge. Everyone felt the need and wanted to be a part of it. We discussed the idea, how we might address the challenge and agreed to do something in the sector. We did not think of a business venture per se. We wanted to make it happen for our kids and loved ones. We had a small land where we used to do small scale farming for our household consumption. We thought that we might use it for the purpose of the project.
Then we realized that if we only do it on our land, it would not be scalable, which means, we are thinking only about our kids and our families and not about people around us such as our colleagues – we have some 200 people in 5 of our offices who would be left out if we only do it for ourselves.
That’s when we thought let’s do it in a more formal and scalable way. We probably will need a small team, a little bit of investment and will probably have to run it as a business, but it would be far more meaningful an endeavor.”
From the day one, Neofarmers did not want to be a mass-market consumer brand. Rather it wanted to start as a boutique brand and build a community around its brand. Community is where Neofarmers’s retail store comes in. The company, in fact, is calling these stores community stores. Mr. Spondon in the same interview:
“As a strategy, to begin with, we decided to run it as a business but not a pure mass-market consumer product where you aim to sell it to as many people as possible. We rather decided to do it in a boutique kind of way at first and then gradually scale without compromising on the vision we have started with. We also decided to work with producers and growers across the country instead of doing it all ourselves.”
Neofarmers have experienced excellent growth, a testament to the idea that there is a growing demand for safe food in the market built on the back of growing discontent and mistrust in available food product options. Again from Mr. Spondon:
“We have experienced steady growth. In the last 14 months, we have served over 13,000 customers, which we think is a really good number. It also indicates that there is a huge demand in the market. We have put a lot of thought into packaging and branding and designs. Apart from aesthetics, we have made a conscious effort to keep packaging plastic-free and environment friendly. I would not say we have been able to do it 100% but we have succeeded to a large extent. We mostly use reusable eco-friendly packaging materials for packaging such as paper, glass jars, and so on. Reusable packaging has been of particular attention to us. So far we have been able to do reusable packaging for 35% of products. Our goal is to gradually grow this percentage.
We currently have about 84 products. We use glass bottles or paper packaging for all the products. We have some plastics packaging where products are of low-cost nature. Since glass bottles are expensive, we can’t use glass bottles for these products. However, we are looking to find options within low-cost packaging for these products that are environmentally friendly. We are considering some biodegradable plastics packaging options such as plastics made out of jute and potato, etc. Our packaging policy is either reusable packaging or biodegradable packaging. [.....]
“We are calling ourselves safe food. Our tagline is naturally grown, honestly packed. It is not enough to grow the produce naturally, how your process is important, the packaging is important. For example, you have collected really good quality organic Ghee but you processed and packaged in an unhygienic way, it is not going to do any good. We pay equal attention to all these areas.
We have made it a priority to put enough importance on ensuring a great processing standard. We don’t have a big factory. We don’t have a large setup for manufacturing. We have a small setup. We put a lot of importance on natural processing and everything is handmade.”
Neofarmers collaborates with growers across the country to source and manufacture safe food items and then sell them through its digital channels i.e. social media and website and now its a month old community retail outlet.
Neofarmers is among a small number of companies that has gained positively from the coronavirus pandemic. In the early days of the pandemic lockdown, the company struggled managing the operation due to logistical challenges as well as sudden rise in orders. It eventually managed to come out of it and take full-advantage of the rise in online grocery orders and more specifically, for products Neofarmers sell.
Neofarmers always wanted to get into physical retail. The company sees it as an essential part of its strategic growth and competitive moats. In the early days, it took a rather lean approach to get to product-market fit and grow to a certain level before getting into physical retail.
Mr. Spondon explains this strategy to FS in a 2020 interview: “We did not go for physical retail initially because logistical and compliance needs of physical retail are high. Digital is relatively easier and inexpensive to begin with. At the same time, it allows you to reach customers with minimum cost and then get feedback and improve gradually.”
But the company always wanted to get into retail. In the same interview Mr. Spondon explained:
“We are now getting into retail. We have already started working on the plan. Our plan is to open one store every two months.”
He then goes on to explain why online is critical for the strategic ambition of Neofarmers:
“We are now present in about 4 places. We have not explored modern trade that much as yet. We have a presence in Unimart, Gourmet Bazar, and Jatra Biroti. We don’t have plans to get into para-level retails. We will be at select modern trade outlets and our own shops. We are taking six more months to go full-on supershops because we have some licensing issues pending.
One interesting thing about us is that people usually come from offline to online. We are doing the opposite. We are going from online to offline.
Offline is important. There are products that are hard to do online such as vegetables and poultry. You can do it online but you have to have your own delivery channel.
Our vision is to feed the whole nation. We can’t not achieve that vision through an online-only model for many products. Second, we are trying to build a community and encourage our customers to return reusable bottles. We want our customers to return the bottles. In order for that to happen, we have to create points near our customers where they could come and return the bottles. Similarly, we plan to use these 100 points as our delivery hub for each location.”
Go deeper into Neofarmers: The Story of Neofarmers: An Interview With Tamzid Siddiq Spondon, Managing Director, Neofarmers
Pathao has introduced a new B2B service: transportation for businesses, where employers can pay or subsidise rides of their people using Pathao for business and track the usage.
While business riders will get service priority basis from Pathao, for example, in rush hour a business rider will get picked up before a regular user, this is not a dedicated fleet service for businesses.
What Pathao has done is that it has created a dedicated on-demand ride-hailing service, created a dashboard for businesses to set things up i.e. subsidy, timing, weekly dates, etc, and built technology internally to manage the demand and created a process for businesses to manage on-demand ride-hailing facilities for employees.
The company writes in the product announcement: “Pathao For Business is a product through which employees of a certain organization can take business rides through Pathao and the organization will subsidize a partial/full amount of the fare of that ride.” The company then goes on to explain: “Pathao for Business is a comprehensive corporate and business travel management system that lets you get an overview of how your teams are traveling. Ensures cost savings and better on-demand travel experience for your employees.”
Two things have happened over the past one and a half years: the coronavirus pandemic has transformed how our society operates -- as we discussed in the pandemic as a setting, and ride-hailing has become a hyper competitive and an utterly difficult market. Pathao has responded to these changes in the market through a number of initiatives such as making changes in its existing products and getting into new verticals such as shopping, delivery, and healthcare.
Pathao getting into the business travel segment can be viewed from a number of perspectives. There certainly is a demand for business travel services. But in most instances, companies look for dedicated fleet support instead of on-demand ride-hailing support. That does not mean companies would not be willing to try on-demand ride-hailing. Many would. On-demand ride-hailing offers a number of benefits in-terms of cost, flexibility, and customization.
Similarly, there are challenges as well. For many businesses, it is simply not an option to commission on-demand ride-hailing transportation for employees. To that end, it could become a scaling challenge for Pathao with only on-demand transportation or the company can choose to simply offer a fleet solution as well. We have to wait to see how it turns out.