UNIVERSITY OF MINNESOTA
University of Cincinnati
Evan Baum Matthew Lamm Ben Koontz Prince Osemwengie
Ratee Apana, UC Rajan Kamath, UC
Shubham Arora Shashank Raj
Executive Summary 1 Background 2 Services 3 Customer and Indirect Value Proposition 4 Process 4 Key Resources Time Line 5 Implementation Market Analysis 6 Competitor Analysis 6 Operating Investments 7 Kratky Hydroponics Method Growth Medium and Chemical Solutions Future Developments 8 Appendices A Ideal City Profile 9 B Seedling Growth Procedure 9 C Educational Advertising 10 D Simple Ponics Facility Rendering 11 E User Profile 12 F Costs 14 G Revenues 16 H Break Even Analysis 18 I References 20
THE AGRARIAN CRISIS:
Our business model primarily addresses one contemporary crisis afflicting India today, the agrarian crisis. In India 119 million people make the agriculture industry India’s second largest work force. However, small to mid-level farmers are one the fastest declining professions in India with an estimated drop of approximately 2,000 farmers a day as an occupation. While the decline of farmers in India can be attributed to various economic and political reasons, the unstable and often times unpredictable weather in India also plays a large role in the destruction of agricultural land and crops. With over 60.89% of land allocated to agriculture in India, much of which is subject to drastic weather changes ranging from monsoon rains to arid weather, Indian farmers are an open target for crop disruption. Our business model will attempt to solve this crisis by, first and foremost, alleviating farmers from the absolute dependency on soil and irrigation conditions by introducing an alternative and more efficient methodology of farming at an affordable price. If our system is utilized correctly, farmers will be able to bypass intemperate weather that normally disrupts their crop yields. In addition, our system will be able to yield higher outputs of crops in a smaller surface area, cut crop growing time in half, as well as cut down water usage by 40%. The implementation of our business will begin with a marketing/community engagement program in a village of small and marginalized farmers. Our plan is to engage and educate the community by holding workshops to teach farmers and older women how to grow and maintain crops utilizing hydroponics in our facility using our 10 modular hydroponics systems. Our hydroponics systems are physically undemanding which would give the elderly and women living in rural areas the opportunity to, once again, find their
economic voice in agricultural production. Furthermore, the location of our facilities will be centralized to the village, to provide maximize means of accessibility and visibility to the village. Given that our systems is set to challenge the current status quo of farming we believe that by holding open workshops, where individuals can come learn and interact with each other, will help spread our business via word of mouth and by example. In addition, we hope that these community workshops will help foster community development and personal interactions as well. As part of phase two of our plan we hope to begin selling and/or renting hydroponic systems to workshop participants 4 months into our community building and marketing phase. Crops produced and harvested during our education and marketing phase will be sold and made available to the villagers at well below market value. Given that our marketing strategy is community inspired we hope that employing only local members will enable us to create a sustainable business lead by individuals in the community eager to serve their community at large.
WEATHER, TOPSOIL, DEBT
In correlation to India’s growing population of 1.121 billion people, nearly 30% of those inhabitants live below the line of poverty. Although there is no tangible data and statistics on how much of that percentage is comprised of farmers, social and economic trends indicate that the number is rather large. More specifically, in the last decade alone income from agriculture has fallen nearly 17.5%. Even more alarming, in parallel to the drop of income from agriculture, the suicidal rate of farmers has been increasing rapidly. In the year of 2011 alone, suicide amongst farmers ranked in 47% higher than the rest of the general population, thus indicating unrest and turmoil in the agriculture market is driving farmers to take their own lives. In conjunction to the fall of income in the agriculture market, drastic changes in weather patterns serve as another contributor to the decline of agriculture production in India. Maharashtra, an area in India that is supposed to get monsoons once every ten years, is now receiving up to four in one year, destroying farmers’ crops at an unprecedented rate. Furthermore, the soil itself is significantly losing its nutrient quality from 10,000 years of consistent farming. Farmers in the recent decades have turned to pesticides and chemicals to make up for the decrease in topsoil nutrients. As a result, natural microorganisms, fungi, algae, protozoa, and worm that normally help maintain topsoil nutrient quality are killed by these pesticides and fertilizers, resulting in further depletion of usable farmland. Oddly enough, the destruction of usable farmland by pesticides and fertilizers has only led to the usage of stronger fertilizers and pesticides to reinsert depleted soils. This current system of heavy pesticide and fertilizer usage not only proves to be environmentally inefficient, but financially inefficient as well. As the price of pesticides and fertilizers rise and crop
yields fall, farmers are finding themselves stuck in a vicious cycle of dependency, causing them to drive themselves deeper in debt with no foreseeable way out. As result, more and more farmers are opting to take their own lives to liberate themselves from closed loop cycle of debt. The agrarian crisis is becoming an unavoidable issue and it is becoming increasingly more evident that a new sustainable methodology for agriculture production that is economically, socially, and environmentally, efficient is crucial for the future of agriculture in India.
COMMUNITY ENGAGEMENT: LEARNING FROM SUICIDE PREVENTION STUDIES AND SUSTAINABLE COMMUNITY PRACTICES Amongst one of the most pressing social issues concerning farmers in rural areas is the high rate of suicides. Regardless of the direct primary causes surrounding the suicide itself; professional psychological studies have proven time after time amongst one of the most positive trusted ways to prevent suicide amongst individuals is by creating social environments and networks where individuals talk, learn, and interact with each other. Every 30 minutes, a farmer in India commits suicide. We strongly believe that addressing the economic reasons for this is only part of the solution. By increasing social interaction and community engagement, we hope to address the social isolation and feelings of helplessness also. While we can’t single handily squash the direct causes of farmers opting to commit suicide in India, we believe we can use our workshops to create a community atmosphere that helps facilitates community interaction, and empower individuals suffering from high levels stress.
While we can’t single handling squash the direct causes of farmers opting to commit suicide in India. We believe at the very least we can use our workshops at the very least to create a community atmosphere that helps facilitates community interaction, empower and ease individuals suffering from high levels stress. Given that in any given day, every 30 minutes a farmer commits suicide in India. We believe that in conjunction to providing alternative sustainable methodologies to agriculture
production for economic purpose is critical. Just as equally important we believe that in facilitating community building and development activities and providing a network system of support can potentially help curb the high levels of stress amongst farmers seeking suicide as the answer.
o o o o
Improve quality of life for farmers and their families Supplement their diet with increase in crop output Increase citizens’ acceptance of new technology that may aid them in the future Allow the Indian soil to recover it’s nutrients
SERVICES - Our company recognizes that the agrarian crisis is a complex system of many issues that have been growing in force and complexity over hundreds of years. Indian farmers must face volatile price shifts, growing population, unpredictable weather, job and food insecurity, and water scarcity on a daily basis. We believe our business model approaches this problem at a leverage point that will have a positive effect all of these issues. Our company is an educational and empowering system of hydroponics education that results in small and marginalized Indian farmers integrating this new technology into their existing farms. We will be providing a community garden
type space to learn a cheap and incredibly efficient form of hydroponics that doesn’t require electricity, harsh chemicals, soils, or intensive water management. Once sufficiently educated, the farmers will be able to buy these systems for their own farms and homes. Our role to these “graduated” farmers will shift from educational community garden to maintenance and supply wholesale. Our proposed system will foster community engagement and empowerment among Indian farmers. The current system is full of dependencies that we believe we can address.
Manufactured Growth Medium
Customer Value Proposition Introduce and implement a new farming system that is both affordable and beneficial to marginalized and small farmers, aiming to provide food and job security to an otherwise volatile and unsteady market. Customer Value o o o o o
Produce crops at a much quicker yield Greatly reduce dependency on weather conditions Improved job security with a stable crop output Guided education through a new technology Affordable through lease-toown model
Nutrient Rich Solution
1 Year Timeline
PROCESS - - - - -
Land will be bought, building constructed, 10 (4’x8’x8”) will be constructed, hired villagers will be instructed on the usage of hydroponics. Advertising campaign and example pods will spread awareness among small and marginalized farmers. Farmers will buy, through a lease-to-own system, a pod that will stay at our community garden, where they will be taught how to use hydroponics. Upon “graduation”, farmers will be able to buy, through a lease-to-own system, pods for their own homes/farms. (small scale will be for supplementing their diet, but we will encourage farmers to start integrating larger scale hydroponics into their fields.) Farmers will continue to buy pods, nutrient rich solution, growth medium, and seedlings from our company.
Months 1-3 Begin advertising campaign alongside construction of educational pods and warehouse. Also training employees to become educators. Months 4-8 Walk local farmers through hydroponics system of growing while allowing them to take home the crops that they are growing at our community garden. Months 9-12 Allow “graduated” farmers to take home their plot and purchase additional systems as well as necessary materials for further growing.
Chemicals for the nutrient solution
The implementation of our goal is a 3 phase system that can be repeated in identified communities in India. The foundation of the operation involves constructing a small warehouse and the initial 10 hydroponics pods (4’x8’x8”). Phase one begins with growing previously imported crops (onions) in our garden and selling them at drastically cheaper prices. This market disruption alongside our education and advertising campaign will raise awareness to our company and its new technologies. With Phase 2, our company will shift from selling our crops to empowering farmers to grow and sell their own. Community farmers will be able to buy, through a lease-to-own program, a pod for themselves. In order to guarantee success, we will require that we walk them through the first 2 rotations of crops before it can be brought back to their home. Although the growing takes place on our garden, our commitment to a “You grow it, you own it,” program will ensure that farmers are realizing benefits and profits from this system by the end of their first crop. Once “graduated,” farmers
These chemicals can be bought in bulk and sold for much cheaper if we combine formulas at site in India. We can then also make specialized formulas for different crops depending on the data we analyze from crop yields.
Land o We will require land to create a small warehouse for storing materials as well as land for the community garden education pods. Labor o
We will need to train a couple local villagers in hydroponics construction and management. They will be able to use unclaimed educational pods as a food source to supplement their wages.
can enter Phase 3, which will allow them to micro-finance additional pods. A scaling approach allows farmers to keep their pods as a supplementary food source, or as a means to transition away from the current ineffective agriculture methods. Our company will always remain in the village for system maintenance and guidance, but mainly as the source to buy additional pods, nutrient solutions, growth mediums, and seedlings.
MARKETING AND COMPETITOR ANALYSIS Marketing Analysis Our initial target market are villages that are comprised of small or marginalized (1-2.5 ha) farmers that primarily grow vegetables. This market would be the easiest transition into hydroponics and would also benefit the communities most by having an increase in production and quality. Because they are at the bottom of the pyramid in a struggling industry, they will be more open to new technologies. In addition, aiding this particular market will foster community engagement and work towards a social sustainability as well as economic and ecological sustainability. After initial successes we will be looking at expanding and spreading this business model to larger farms that may produce different types of crops.
Competitor Analysis Our heaviest competition is the current farming method that has been in use for thousands of years. The current method, as we’ve noticed through data collected, is clearly failing and continuing its use is not a sustainable solution for the future of India. A second competitor is the hydroponics companies that are already in place in India. Because we’ve picked the cheapest form of hydroponics that doesn’t rely on electricity, grow lights, or greenhouses, we can make hydroponics an affordable option for farmers. We are also implementing a lease-to-own system of payment that is very accommodating to the farming communities. Current hydroponics centers utilize expensive forms of hydroponics and are also central, large-scale farms. This means that farmers pay a great deal of money for essentially just exposure. Our company will focus on education and implementation. The farmers will learn about a new technology and then immediately start seeing the benefits in their own farms.
OPERATING INVESTMENTS The hydroponics system that we have decided to use for our business follows the Kratky model. This will allow us to harness all the benefits of hydroponics while eliminating the need for electricity and continuous water flow. This will increase the efficiency of every drop of water, allow the top soil to rest, and, ultimately, give the Indian farmers more power over what they choose to grow.
KRATKY METHOD -
Hydroponic method that does not require energy to circulate the water.
Plants sit inside a growth medium with their roots submerged in the water/ nutrient rich solution.
GROWTH MEDIUM AND NUTRIENT SOLUTION
Material that keeps the plant stable while being porous enough to allow the roots to expand out the bottom and into the nutrient rich solution
The growth medium can be a variety of materials like rock wool or clay aggregate pellets.
Nutrient solution is added to the water in the system to give the plants the required nutrients that would normally be in soil.
Because there are no interfering plants or soil erosion, the nutrients are used incredibly efficiently.
IDEAL CITY PROFILE
Getting into different markets
Spreading to Other Villages
Because hydroponics systems are much less dependent on location, we will be able to grow a wide variety of crops in a wide variety of locations. The Indian culture frequently uses native flowers for religious ceremonies and we have identified this as a market that we will be able to help.
Once we have introduced and educated a village in the methods of hydroponics, we would shift gears towards maintenance and selling systems. This would free us up to move on to a different village that may have heard of the success already through our advertising campaigns. Hydroponics is less dependent on geography than regular farming, and so we would be able to spread to most villages that meet our criteria. Digital medium for crowd sourcing information Following the trend of wide spread smart phone usage; there is a key opportunity to introduce a digital aspect to our business model. A digital network of information could allow farmers to customize and order nutrient solutions from their farm. It would also allow farmers to communicate with each other, offer advice, and serve as a data collection and analysis tool to better understand Indian agriculture.
Town Specific Nutrient Solutions With more investment capital, we could be creating our own nutrient solution, which would both decrease the price to the farmer as well as produce higher yields. Recycled Growth Mediums We are currently looking into the possibility of creating a usable growth medium out of crushed glass. If we were able to master this craft, we could incentivize villagers to give us their glass by offering those discounts on growth mediums. This would allow our company to help address the rampant waste management issue, in addition to the agricultural crisis.
Cities we are looking to form agreements with for our pilot operations are those that host a large amount of small and marginalized farmers. These are the farmers who are being hit very hard by the agrarian crisis that India is facing and these are also the people that will be most willing to accept a new, innovative, and affordable technology.
SEEDLING GROWTH PROCEDURE We will use a part of the warehouse to grow seedlings to be transferred into the hydroponics systems. This process involves putting the seeds in damp paper towels and allowing them to grow for around a week.
Commercial Sized Hydroponics Depending on how intensely the farmers attempt to integrate hydroponics into their fields, we would be able to offer large scale hydroponics systems. If we find that the farmers are interested in investing their profits back into hydroponics, then we could sell them new systems utilizing better technology. These could include air pumps, vertical stacking, grow lights, or greenhouse structures.
ADVERTISING THE FIGHT
SIMPLE PONICS FACILITIES RENDERING
MEET NIRAJ Niraj has been farming his entire life but the market, climate, and system of agrarian farming in his rural village have produced low crop yields in recent years. He is currently facing issues with properly watering his crops due to poor infrastructure and localized droughts. Niraj has heard about Simple Ponics from an advertisement he saw around his home and is interested in finding out more about it.
One year later Niraj has successfully completed the Simple Ponics educational program, he owns 4 modular systems and works on site as a facilitator to new farmers interested in this system. Niraj has seen an increase in income, mood, and independence in the way that he lives his life.
HYDROPONIC TANK COSTS
Variable Costs Item Quantity Cost/Unit Total Cost Cost/Solution Yara Brand Calcium Nitrate Magnesium Sulphate Heptahydrate Potassium Nitrate Copper Sulfate Pentahydrate Potassium Monobasic Phosphate Manganese Sulfate Monohydrate Zinc Sulfate Dihydrate Sodium Molybdate (dihydrate) Boric Acid Iron EDTA (NaFeEDTA) Gallon Of Distilled Water
$29.95 $39.16 $69.00 $3.40 $82.50 $9.20 $3.90 $29.00 $25.00 $5.00 $1.20
1 1 1 1 1 1 1 1 1 1 2
$29.95 $39.16 $69.00 $3.40 $82.50 $9.20 $3.90 $29.00 $25.00 $5.00 $2.40
$0.57 $0.04 $0.44 $0.02 $0.96 $0.05 $0.02 $0.01 $0.03 $0.01 $2.40
Fixed Costs Item Quantity Cost/Unit Total Cost Cost/Solution Digital Scale .1g 1 $6.48 $6.48 Digital Scale .01g 1 $25.00 $25.00 Gallon Containers 2 $7.00 $14.00 Stirring Spoon 1 $2.00 $2.00 1 $7.00 $7.00 Graduated Cylinder
Variable Costs Item 0.15 mm-thick black polyethylene sheeting (20x100’) Pine Lumber (2”x6”x8’) OSB 7/16” (4’x8’ Sheet) 1 5/8” Screws - 5LB PACK Pine Lumber (4”x4”x8’) 1” Insulated Styrofoam (4’x8’ Sheet) Olympic Maximum Sealant 1 gallon
$72.98 $4.62 $9.75 $21.97 $6.97 $15.98 $36.98
Cost/Unit $7.30 $18.48 $4.88 N/A $27.88 $7.99 $9.25 $78.77
Fixed Costs Item Circular Saw Drills 2” Hole Saw 0.15 mm-thick black polyethylene sheeting (20’x100’) Pine Lumber (2”x6”x8’) OSB 7/16” (4’x8’) Sheet) 1 5/8” Screws - 5LB PACK Pine Lumber (4”x4”x8’) 1” Insulated Styrofoam (4’x8’ Sheet) Olympic Maximum Sealant 1 gallon
1 1 1 1
$119.00 $139.00 $15.48 $72.98
$119.00 $139.00 $15.48 $72.98
40 5 1 40 5 2.5
$4.62 $9.75 $21.97 $6.97 $15.98 $36.98
$184.80 $48.75 $21.97 $278.80 $79.90 $92.45
The cost of the chemicals is $298.51, but it only cost $4.50 to make 2 gallons of solution (1A + 1B). Hydroponics require 10ml of A+B for every liter of water, so for $4.50 we can produce 378 liters of water for hydroponics.
0.1 4 0.5 N/A 4 0.5 0.25
Total Total Cost
REVENUES FROM CROPS
Variable Costs Item
PHUp Solution PHDown Solution Calibration Solution Net Cups (100ct) Growing Medium Seeds Solution
1 1 1 1 1 1 10
$8.00 $8.00 $12.00 $21.00 $5.00 $2.55 $4.50
Fixed Costs Item
Spray Bottle Growing Dome PH Test Meter Land (1HA) Storage/Warehouse/Ofice 1st Grow Cost 1st Solution Cost Advertising Total
1 1 1
$0.80 $0.80 $1.20 $7.56 $5.00 $0.92 $4.50
$8.00 $8.00 $12.00 $75.60 $5.00 $9.20 $45.00
Grow Time (Months)
Number of Farmers
18 18 18
Training Solution Hydro Tank
$186.28 $4.53 $78.77
$196.28 $7.53 $98.7
$10.00 $3.00 $20.00
18 144 6
$180.00 $431.71 $120.00
36 36 36
Training Solution Hydro Tank
$186.28 $4.53 $78.77
$196.28 $7.53 $98.77
$10.00 $3.00 $20.00
36 540 54
$360.00 $1,618.93 $1,080.00
18 Total: 36 Total:
Cost $5.00 $36.00 $25.00 $6,000.00 $4,000.00 $162.80 $298.51 $400.00
REVENUES FROM FARMERS Quantity
$10,927.31 18 Farmers is based off 3 farmers/training session. Then 1/3 of those farmers buy an additional Hydroponics Tank.
Number of workers Wage
Hydroponics Tank PhUp Solution PhDown Solution Calibration Solution Net Cups Growing Medium Seeds Spray Bottle Growing Dome PH Test Meter Solution
$78.77 $8.00 $8.00 $12.00 $7.56 $0.50 $0.92 $5.00 $36.00 $25.00 $4.53
1 2 3 4 5 6 7 8 9 10
330 330 330 330 330 330 330 330 330 330
$990.00 $1,980.00 $2,970.00 $3,960.00 $4,950.00 $5,940.00 $6,930.00 $7,920.00 $8,910.00 $9,900.00
$3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00
Total Profits with Crops $1,163.42 $3,490.63
The 36 Farmers is based off 6 farmers/ training session. Then the average 1.5 additional tanks per farmer. Both of these do not take into account additional tanks farmers may purchase years after their training Reasoning: To show a potential investor a minimal interest break even and a high interest break even. Not the extremes, and does not account for farmers purchasing years after their training.
BREAK EVEN ANALYSIS Years Cost 18
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
$1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42 $1,163.42
$(12,034.92) $(8,544.29) $(5,053.66) $(1,563.03) $1,927.60 $5,418.23 $8,908.86 $12,399.50 $15,890.13 $19,380.76 $22,871.39 $26,362.02 $29,852.65 $33,343.28 $36,833.91
$3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63 $3,490.63
$(12,034.92) $(10,871.50) $(9,708.09) $(8,544.67) $(7,381.25) $(6,217.83) $(5,054.42) $(3,891.00) $(2,727.58) $(1,564.17) $(400.75) $762.67 $1,926.08 $3,089.50 $4,252.92
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