Successful entrepreneur Tamzid Siddiq Spondon shares the founding story of his most latest venture Neofarmers, talks about the steady rise of safe food in Bangladesh, the operational mechanics of Neofarmers, the state of Neofarmers business today, how it has invested in product development, growth and sustainable competitive advantage, the ambition of Neofarmers, and the challenges of safe food business in Bangladesh, reflects on his priorities for 2020, how he operates as an entrepreneur, defining trends of the new decade, how entrepreneurs should respond to the challenges of a trying time and much more.
Ruhul Kader: Thank you for agreeing to do an interview with us. Could you please give us an overview of Neofarmers?
Tamzid Siddiq Spondon: The origin of Neofarmers lies in an intimate personal experience and need. We all eat food - we can’t survive without food. While complaints regarding the state of food safety in Bangladesh have always been there, I never took them seriously until I had kids. When my two kids came along, I started paying greater attention to what they’re eating - quality, safety standard, and other aspects of food. It became a constant concern. That concern, you may say, was the first inspiration to start Neofarmers.
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 and they immediately identified with the challenge. Everyone felt the need and wanted to be a part of it. We discussed the idea, how we may address the challenge and eventually 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 land where we used to do small scale farming purely for our household consumption. We thought that we might use it for the purpose of the project.
But 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 will 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.
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.
We have many indigenous products in Bangladesh such as rice, turmeric, chilies, etc. If I ask you about rice you would at best be able to tell names of 5 varieties whereas we have hundreds of different varieties of rice in Bangladesh. This is something that I came to learn when I started to dig deeper into our indigenous products. I came to learn that we have many major varieties of rice in Bangladesh. And there are many sub-varieties of one single variety as well. This is the case with turmeric and many other products that are available in Bangladesh. Unfortunately, many of these products are now getting lost due to the rise of GMO products. But there are people who produce these products and there are consumers who would love to access these products. We thought it would be wonderful if we could connect these two groups of people - producers and consumers. We thought let’s find out these people who are still growing these local products and work with them. When we started the search we found out that there still are many products and producers in the business.
We realized that if we could build a brand that serves this gap in the market, it would certainly contribute to the development in the market. We have been working on branding and marketing for a long time. We realized that we would do well if we work in the space from the perspective of producers and work to make a connection between parties. We were confident, to begin with, in our capacity to tell good stories and establish a connection with customers using story as a vehicle.
We realized that there is a mismatch in the market. While farmers and growers produce high-quality crops and food products, often they don't get a good price for their extra investments. Which means often they don’t try to produce high-quality safe products because they have zero incentives to do so. If they could get a good price, they are likely to produce more of the same products. If we could bring and sell these products as premium products, it means they get a good price and hence become more encouraged to produce more of the good products.
All these thoughts culminated in the idea that we would build a brand that will collect all the pure products from across the country and bring them to people who want to buy these products but don’t know where to find them. In short, that is the main idea behind Neofarmers.
The second important distinction we wanted to bring to the brand is that we would not sell great products alone, we would sell stories. In fact, we wanted to put no less importance on stories than the products.
In a regular world, foods that we eat elicit little emotion in us. If you look at a product such as rice, oil, peanut butter, there is little to be emotional about these products outside of the fact that they are edible items and taste good or bad. You buy, cook, and eventually eat. If you ask my son, he would say that okay we buy these products and eat them. That’s all.
If you pay closer attention, these foods are more than mere edible items. These foods have stories attached to them. Someone has put in blood and sweat in producing these products. There were struggles and pleasant memories attached to each of these staples. When we don’t know these stories, it does not matter, but when we finally come to know them, it changes everything. When we come to know these stories, our outlook on these products and producers changes. We start to view these products differently. We take them more seriously and intimately. We begin to respect the humans behind them. For example, we bring bini-halud (a variety of local turmeric) from Bandarban. Local indigenous people grow these turmerics in a unique environment in one of the remotest places in Bangladesh. When we bring these products to our factory, we don’t bring the only turmeric, we bring stories and memories as well. When we process them, we process the stories as well. When we tell these stories to people, it becomes interesting. People become intrigued. When consuming these products, they find emotion in them. It elicits a deeper feeling inside ourselves.
From the beginning, we started to focus on this area - stories behind each of our products. Gradually, we begin to put the information and stories of growers on the packet. For example, we tell you that the coconut oil that you are using is produced by Rahima Banu of Khulna and this is her story.
We are trying to package the stories. We are not trying to sell the products alone, we are trying to sell the stories. That’s the second important idea. When you are selling a high-quality product, your stories become equally important.
After much thought and preparation, we started working with a small number of products between 2017-2018. We officially launched our digital operation in November 2018.
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.
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 jar 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.
In the case of reusable bottles, our customers can return the bottles. In fact, our concept of business heavily relies on the community. We aim to build a community of users who are safety conscious and care about the environment. We encourage our users to return the bottles and thus we seek to build meaningful connections with them. These are glass bottles and we can use them hundreds of times. We try to use reusable materials in our packaging.
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 not calling ourselves organic because there is no certification for organic in Bangladesh. The definition of organic is different. Organic has a lot of conditions that are hard to meet. It is almost impossible to meet these conditions in many areas in Bangladesh. So our focus has not been there.
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.
Many companies tout the fact that their foods are made without the touch of hands. We are the opposite. We are saying everything is handmade. We don't have big machinery. In fact, as I mentioned, we mostly follow natural processing. For example, we don't refine oil in machines. It is an all-natural refinement. After making the oil, we put it in a container and keep it there for 15 days or so. The dirt gradually falls to the bottom of the jar. We collect the oil and package it.
I understand that this is costly compared to machine refinement. Machine refinement is more efficient. You can do it at scale but the overall quality gets hurt. We are the opposite. We are 100% handmade and we have no plan to forego that in the near future.
Since we are handmade and produced with intense care for the quality and packaging, we are more expensive than general mass-manufactured products. Using machines has scale benefits and you don’t need storage for refinement. This is not the case for us.
For example, in order to refine oil, we require a certain amount of time which makes the entire process expensive. For example, when we bring red chilies, we put them outside for 15 days in the sun to get rid of the fungus. We have also put dehumidifiers in our warehouse to ensure a certain level of humidity in the product. Our products do have moisture but it is within a certain level. In fact, we have only 30% moisture in our products which would be about 70% if you keep it outside without measures. This means our quality is far superior.
We have a warehouse in Kalyanpur of 3000 square feet. We have taken huge care to ensure that it is a good place to keep the products. We pay attention to small things because small things matter. A lot of products lose quality standards and get wasted during processing. For example, in one KG chilies, 40% are pedicels/shafts. Almost no producer separates pedicel from chili before processing. We do. We carefully separate the shafts and chilies and then process the spice, as a result, we are sacrificing 40% of our products right there for the sake of quality.
These are small things but they make a lot of difference. It is not enough to grow naturally. You have to process and pack honestly as well. We follow these two things religiously.
Ruhul: That’s a fascinating story. If I go a little back, you came up with the idea, shared it with your friends, they agreed to try and you got started. What was the size of your initial investment?
Spondon: We have a piece of land in Savar which has to be included in the investment. So far, we have so far invested somewhere around BDT 2 crore. We have not taken any external investment as yet. We have been investing from our own pockets.
How many partners are you now?
We are five partners. I'm the Managing Director and others are on the board.
How big is your team?
We are a team of almost 35 people. We have people who work on the processing side of things and then we have people who manage online orders and operations.
Our team is likely to grow dramatically in the coming days. Until now, our operation has been quite small - mostly operating online. That’s going to change. We have been seeing rapid growth. And we are getting into the retail big time in the coming days.
Truth is that we have never been in the consumer products business before. While we have almost 20 years of experience in service and B2B business, which is the same for all Neofarmers partners, we are novices when it comes to a consumer product business. This is our first consumer product business initiative. As a result, we are learning new things every day. I have been going through a fascinating learning curve. I've been reading a lot about technology and different aspects of the business. I'm enjoying it.
You work with growers and farmers across the country. How many farmers do you work with currently? How does your relationship with farmers work?
We so far work with 250+ farmers.
There are some products that we source directly such as rice, flour, etc. There are some products that we collect the raw materials and process it ourselves such as all types of oil, peanut butter, ghee, etc. 50% of our products are sourced and 50% of our products are processed. We don't grow, we collect the raw materials and then process.
We don’t have contracts or any formal arrangements with the farmers as yet. We maintain a friendly relationship with them. We will eventually go into the contract. We are not doing it right now because many farmers view the contract as something imposing. We want to work with them as friends and build a relationship of trust. We try to make sure that they are using pesticides and other chemicals in the right manner and maintaining the safety and quality standard. We have been able to build a great understanding of the growers we work with.
How do you order and collect products from the growers?
There is not a uniform established process as yet. We pay in advance sometimes and they also provide us products when they have products. We have established good terms with the growers.
We are now getting into retail. We want to open 100 stores by 2020. We have already started working on the plan. Our plan is to open one store every two months.
How many orders do you serve monthly?
We started off in an organic manner - we created our website, a Facebook page. After the initial set-up, we started to make an effort to reach out to our target customers. Over the last 14 months, we have been able to build an excellent group of customers who buy from us regularly. Our retention rate has been great.
Currently, we serve some 160 orders per day. This is a number we did not expect that we would be able to achieve within this short time. Our expectation was much lower - between 30-40 orders after a year. We have been happy with the growth so far. Our basket size has also been growing consistently which we believe will continue to grow as more people trust us as a brand.
One of the things that helped us is data. From the beginning, we have been serious about data and using data to gain market insight and sustainable advantage. We have engaged a data analytics company to help us understand the data better. In today's world, without data business is tough. We are betting heavily on data analytics.
You are now available at Unimart and a few other retail outlets. How many retail points are you available now?
Not many. 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.
Have you applied for BSTI?
We have already applied for BSTI which we are hoping we would get in the next few days. We are looking to acquire a few more compliances and certifications. We want to make sure that nobody has an issue with our products. Among our 84 products only 6 need BSTI certification. But we want to go to retail with all our products.
You mentioned that you have seen great growth. What are some of the things that have contributed to your growth?
We have paid a lot of attention to service. People have a sense of mistrust when it comes to online channels. We have tried to overcome this perception. Trust is important on online platforms. If you focus on trust-building and eventually be able to gain the trust of people, growth becomes easier to achieve.
To that end, we have designed a substantial return and refund policy where we give you full-refund even after consumption of the product if you complain that you did not enjoy the product or the product was not good enough. This is rare in the online world. Apart from that, we do a lot of other small things with a view to gain trust from our consumers. These policies have helped us to build trust in the market.
We have also found some interesting facts about the market. For example, our refund policy is quite liberal and if people want they could cause unwarranted problems for us. But that has not happened as yet.
While the refund policy has boosted our credibility and helped us gain trust, people usually don't return after consuming a product. Product quality does suffer sometimes because these are handmade products. And when people complain that your ghee was not good this time and make sure your next lot is better. We then tell our customers that we will certainly give you the best product next time. At the same time, we are giving a replacement or a full refund for this product as well. This gives people a huge assurance.
How many orders did you serve in the first month of the launch?
About 70-80 orders in the entire first month. We have since experienced accelerated growth. Every month we are growing at a rate of 130%.
You have a great product, you ensure great service, and you have some excellent policies such as your no question asked refund policy, what are other things that you have done, activities-wise, that have helped you in growing?
We have been predominantly online-focused when it comes to marketing and communication. In fact, we have not done any offline campaign as yet. We have tried to use design as a tool to attract attention. Our designs are good. Copies are good. These things help to gain attention. People take you seriously.
Second, we have used testimonials of our existing customers - when people tell good things about us we highlight those things. We have found that testimonials work.
We are slowly moving to offline activations. We are about to do our first-meetup soon with our customers. In fact, we don’t call customers, we call community members. We have some interesting plans such as giving a full sponsored trip to 50 community members to our factory. They will get to see how things work. We will provide good food and bear all the expenses. This will be our first physical interaction.
Apart from that what else do you do? You do digital i.e. Facebook boosting and all that. Do you do anything else? Anything that stands out in terms of the growth strategy?
I would not say that we have done something hugely unique. It has always been regular things and trying to do regular things better. We have recently created some videos on the usage of each of our products and their health benefits. We have made some 6-7 videos on subjects like the benefits of black seed oil, how to use it and so on. To our surprise, people really liked them.
We don't know the benefits and usage of many products, we bring those things to our videos. We don't advertise our products or our quality in these videos per se. It is very much informational videos to help our users. This is something we are doing. This is a series that we have been doing for about 3 months now.
How does your marketing work?
We are predominantly on Facebook, almost 100% Facebook.
How much do you spend on Facebook?
We don’t spend a lot. We try to be effective and efficient. I don't know whether that’s a lot. We have largely relied on word of mouth. If you have good products, it helps. One person buys and tells others about it and so you grow.
These are products that would not go viral if you spend on marketing alone. You have to gain trust. Once they trust you, customers will bring more customers. That's where we are focusing. We are not looking for rapid growth. We don't want to grow fast. We want to grow steadily. We want people to consume our products, tell us if they like it and then tell other people about it. Similarly, we have room for improvement. Once people buy and consume our products, they give us feedback and we want to improve based on our user feedback.
We are investing every day in making our product better. That's where our marketing expenses are going. For example, the mustard seed we use now is far better in quality than what it used to be a few months ago. We are looking to find better quality products every day. As a consumer, you would not realize these improvements suddenly but we are making these improvements.
None of our 84 products contain preservatives. As a result, many of our products come with a limited shelf life. For example, for products like peanut butter, it is only 6 months. That's why we have to discard a lot of products when shelflife is expired but even if we use edible preservatives we can extend the shelf-life of these products by 3 years. But we don't do that. Our quality standard is simple: would I feed it to my kids. If we are confident about it that I would happily give these to my kids, only then I would sell it.
Our ambition is not to get rich from this business. We want to establish that safe food is a right of every consumer. We believe that it is possible to offer safe food and still build a profitable and sustainable business.
Over the past year, I have grown a strong conviction that there is a huge demand and people do want safe food. People want to spend money on safe food. We are not that expensive really. We are probably 20-25% more expensive than other regular choices. Some products are more expensive than others. There are products that are not expensive at all. Our hypothesis is that I would rather consume 25% less but whatever I consume, it has to be of good quality.
Do you see it as a challenge that these products are beyond the reach of a large group of regular consumers due to price? There is a group that can afford and they would happily pay extra and it is possible to build a decent business by only serving them. But don’t you think these products remain out of reach to a large group of regular consumers? How do you plan to address this challenge? Or do you want to address that at all?
Of course.
We do want to address this challenge but I don't think we can address that at this moment. Because we don't have any way to reduce our price because our cost of production is higher.
Can you reduce the price at scale?
We can reduce at scale for some products but probably not all products. There are some products that would take a long time to scale. There are a few products that are hard to scale such as Bini rice. But the ones we can scale, with the scale we will be able to bring down the cost thus price by 10-15%.
Today, our scale is quite minuscule. If we grow that dramatically, we can reduce the cost dramatically. If we could do that these products would be accessible to a lot more people. It is not that we only have rich people buying our products. We have a large number of middle-class people buying our products. Many people sometimes complain about the price but that is not a prominent trend.
We are spending more in manufacturing these products and ensuring the quality, and that's something that we can’t change. If we want to reduce the price, we would have to compromise in quality which we would never do. Instead, we want people to eat less but eat safe food. We believe that this is a change that would eventually happen.
It is not that there is no demand. There is pent-up demand in the market for safe food. You would see that people are complaining about food quality all the time. Compared to that the options that they could access and afford remain limited.
Our current market size is no more than 15-20 lakhs households. This is a big number for me as well.
That's for sure. If you could get into groceries, all of it, that's a huge market to build a really large business.
We will slowly cover the whole cycle. We will get into meat and poultry and vegetables.
Have you thought of any subscription service? Do you already have one?
Yes. We have not done it yet. We will do it after growing our product range a bit. Sourcing is a big thing when it comes to scaling. Once our sourcing is strong, we will get into the subscription.
You can launch a subscription for milk and similar products.
Yes, that's feasible. We also plan to do weekly vegetable packs and so on.
You mentioned about building a community, which is really interesting. Do you already have anything related to building a community?
We are starting it out. We don't have anything as yet. We have an online group, which is not that active though. Since we are investing a lot in product development, we are not doing enough on the side of market development. Once we have a sizable number of products, we will go more forcefully into these areas. At this point in time, we are paying more attention to finding better sourcing options.
What do you think about the competition in this space? There already are a handful of players in the space. And as the vertical grow, it is likely that big food giants will eventually move into the vertical?
One aspect is that the market is big. We are in the early days of the safe food trend in Bangladesh. We can accommodate more competition. In fact, more players in the early days mean it helps to build awareness in the market.
Second, competition is always good. It forces you to improve and get better. Our goal is to offer the best product. Competition means we will be challenged and we will try to provide even better products. If we provide the best products, consumers will eventually buy from us. Competitors mean consumers have more choices and they could compare.
What are the major challenges now? How are you addressing these challenges?
Sourcing remains the biggest challenge and I think there will always be challenges around sourcing.
We are not facing this challenge now per se. I'm talking about when we become 10-15 times bigger, it will be a challenge then and I have to prepare for that now. Let me give you an example, we have a project in Munlai Para in Bandarban where we have cultivated about 300 Moringa trees. This is a long term project. By the time we get leaves from these trees, it will be many years. But we are here for the long term. We are planning to address these supply challenges with these large projects. We are working on sourcing this way. For example, when we begin to sell poultry, we would need hundreds of chickens every day. We are working on putting together sourcing in these areas. We have done some work. But a lot more work needs to be done.
You have built successful enterprise businesses. Now you are building a consumer business, what are some of the things that matter in consumer business that is different from enterprise businesses?
The biggest difference between consumer business and B2B is that in B2B personal relationship matters and in consumer business it does not. In a consumer business, you have to give good products. That's all. If you have good products, people will buy. You don't have to make anyone happy with your words or anything. That's the basic difference.
Anything that you found interesting or anything that you consider critical for doing well in consumer business?
Product is important in the consumer business. At the same time, it is no less important to connect with the right target group. You have to have a very good understanding of your product and your target segment in the consumer business.
Second, in B2B, branding is not that important. You could do well without understanding branding much. But in consumer business branding is a must. You can't go far without a proper understanding of branding. To illustrate the point, consider you are perhaps offering the same quality products as your competitors. What makes the difference is how you position your product in the market. I would say that both creating the right product and communicating the right message are critical in the consumer business.
What are some lessons you have learned in 2019?
One year is a long time. Every day I'm learning. I don't see things that way. I see every day as a learning opportunity. Not making the same mistake twice is the most important lesson I have learned.
What do you think about time since you mentioned you don’t essentially look at things as this year or that year?
One thing is that learning is not enough. You have to apply the lessons you have learned. The second thing is that time is the greatest healer. Every trouble and challenge resolves itself with time.
Third, everything has a time. No matter how hard you try, things would happen in their own time. There is a right to everything. If you are hardworking and keep working on your mission, things will happen at their own time. I don't think we can make things happen with mere force. You have to give time to things as long as they take.
This is a strong perspective that you have to wait for the right time. But what do you do when you are waiting?
The wait is only interesting when you have the conviction that this wait will ultimately bring good results. You have to believe that. If you don't have faith, it would be a terrible experience. But if you have the conviction and the faith that if I do pursue this, it would happen then wait is not a big deal.
What are the priorities for 2020?
I would not say priorities for 2020 but I have some general priorities from now on. I do a lot of things. Whatever I do I do it with passion. I've realized of late that I should be more careful about what I spend time on and focus more on strategic areas than the operational areas. I spend a lot of time in operation but I have realized that if I spend more time on strategy, my impact would be far greater. This is my personal ambition. I want to get out of operation as much as possible and elevate me to more strategic thinking and work.
I understand that this would not happen overnight. It is going to be a slow process and will take time. I have been working on a number of organizations. I have been able to bring almost all of them to a solid foundation. Now I want to make them big. Basecamp and Neofarmers, these organizations are new. I want these organizations to leapfrog. From now on I aim to delegate more and spend more time thinking.
Do you have any plan to take an external investor at Neofarmer?
No. Probably we will go for Bank investment. We are a fast-growing venture and our business fundamentals are strong. Bank loans should be perfect for us.
We have just entered a new decade. The world has been going through a host of substantial shifts. We are seeing the decline of old and dominant trends and the rise of new ones. What are some of the trends and insights that people need to look out for in the coming decade?
If you take the economic condition in Bangladesh, the days ahead are likely to get tough given the scenario in the Garments and Banking sector. This could become a challenge for small companies. Expected growth could be a challenge in the next few years. Entrepreneurs should prioritize sustainability.
I think people should focus on sustainability rather than focusing on growth. I'm talking about small companies. I would suggest saving more than spending more.
Any macro trends you see in our society today?
Millennials are more concerned about the quality of life than money or wealth. This is an opportunity when it comes to entrepreneurship. We have to create products and services for this group. Companies need to understand this and make changes accordingly. Things will be very different in the next 4-5 years.
Second, we are all connected and we are all disconnected. Today, we are living in a world where families and social fabrics are disintegrating. Communities are going to be very important in the coming years.
Third, I think we are entering the age of personalization. Mass-produced products will eventually decline and commerce will get much more personalized.
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The interview was conducted in February 2020.
