- July 31, 2019
- 605 Views
Urmatt’s Narula: “We are now the benchmark”
Long before the advent of impact investing, Urmatt, the largest producer of organic Jasmine rice in the world, exemplifies how a business can combine profit and purpose and stay ahead of the competition.
Urmatt is Thailand’s largest and most integrated organic crops and foods group dedicated to inclusive business that empowers economically challenged farming communities.
Founded by Chairman Arvind Narula in 1982, organic operations began in 1999 with produce shipped to all major regions of the world. Two decades later, it has become the largest producer of organic Jasmine rice in the world.
Long before the advent and mainstreaming of official impact investing, Narula developed a moral platform and wanted to work with like-minded people to find opportunities no one else was doing for profit. After visiting farmers, he realised they can also benefit using the same platform.
“Our company has to be profitable, otherwise you are putting businesses at risk, and can lose families. Profitable is the only way for it to be sustainable and long lasting,” Narula shared.
Narula explained how he uses this simple formula to make money: choose a crop with more demand than supply then sell it for a higher price as there won’t be enough of it.
With sales growth greater than 20% per annum, Narula self-funded the projects until 2014 before accepting funds from impact investors, to help scale up the business and help even more people. There were around 3,000 farmers who joined the rice project and they earned at least 20% higher than those who were not in the project.
Getting the consumer to be part of the value chain also helps ensure that the farmer is not at a disadvantage since the consumer pays a fair price. “Consumer is the starting point,” said Narula.
Setting the benchmark to ensure sustainability
With the intense price competition, supermarkets are notorious for squeezing suppliers, but according to Narula, they can’t push you if you are selling the only product available.
Narula added, “We need to exceed all standards, i.e. fair trade, not just tick the box. We were doing it before the competition. We work in a way that is ethical, transparent and traceable.”
Urmatt works to ensure that the highest standards involves an ethical production and consistently growing organic produce. With their own seed production, all operations including storage, processing and packing are in-house. Only the packing material is outsourced.
“The farmers actually know more. We just help wherever we can. For example, we provide satellite information, weather information and other educative processes that can add value and increase yields and quality,” Narula explained.
Urmatt is moving aggressively to remove plastics wherever possible in production and has even developed a rice husk-based packaging, which is compostable and organic and are. The group has also diversified into organic seed production of multiple crops which are sold to garden stores, enabling Urmatt to pay farmers involved in this activity with even higher incomes.
“We work with global partners. When we ship to Germany for example, our customers there have other options, but they can see the safety and the traceability of our produce. Nobody else has the entire package. We are now the benchmark. So when others come into the market, they can’t compete with our traceable story,” proudly claims Chairman Narula.
However, after several changes in consumer trends over the last few decades, there is now prevalence of fair trade and organic products increasing competition.
“We cut out the middle man and intermediaries. We already have the market so that’s how we know it will work. The whole system is totally integrated, including the packing material. Everything is optimised and people centred. We only work with friends,” Narula stated.
Urmatt operates a contract farming scheme which works with the poorest farmers and guarantees them training, education and a better return. Narula explained that they seldom have farmers who quit and have farmers who are on the waiting list as their purchasing guarantees takes away the speculation.
“The contracts are agreed upon season by season, where we say to famers: ‘Here are the expectations. Here is what you will make if you are in the project. Here is what you will make if you don’t work with us.’ We agree on a price before and it’s always above the market price.”
“It has gotten easier, although people before didn’t have mobile phones. It’s now easier to be deceived. Traders will get to them easier and buy things, sell their lands. We tell them ‘Don’t sell your land! Your children will be rich. You’re stealing from your kids, you’re not educating,” disclosed Narula.
Urmatt believes that local knowledge is critical and has gone beyond simply farming by setting up funds for each village that they work in. A member of the staff serves as one of the governors on each fund to ensure that no corruption will occur in using the funds while 17 agronomists are on the ground advising the farmers.
The village leaders delegate the funds and spreads the news throughout the local communities. This serves to foster a sense of competition between the villages to ensure that the funds are used for development purposes.
“All these funds and banks want to invest from their desks. That’s not how to make an impact,” Narula said.
Urmatt also provides other kinds of support to communities at no cost, which includes solar lighting to villages with no electricity, water pumps, temple repairs and equipment. Unfortunately, not all of the group’s projects ended on a positive note.
Narula regrets that they could not do more for other areas. “We had good projects in Cambodia and Sierra lone that failed due to certain complexities. In Sierra Leonne, Ebola ruined a great project we started there.”
Reaching the remote hilltop tribes and creating sustainable livelihoods
One touching example of Narula’s leadership in the field is the business partnership to produce eggs with the remote hilltop tribes. The idea behind this is to produce organic food in a way that is good for the land and the families by working with rural farmers in underdeveloped areas. The partnership also ensures that the land is farmed in a respectful and sustainable manner while the rural farmers receive their fair share in the sales.
“In the hills and villages, the people have nothing. We went to these guys and said ‘All you have to do is have a little bit of land and we will give you free food for the chickens and in return we will buy your organic eggs’,” shared Narula.
By transferring knowledge of organic agriculture and growing the skill sets of the farmers and their families, The Hilltop Tribe project aims to at least double family income and create real and lasting social change and development within the tribes.
“Indeed some of them thought it was fraud. But after working with us, they have now tripled their incomes. Now top restaurants and hotels in Thailand use these eggs and farmers can make 3-4 times what they were making before,” added Narula.
The project has been audited by the HEC University of Paris and it received high ratings. The MBA students lived with the farmers for several weeks to fully understand the impact.
“It gives me huge pride and a sense of accomplishment. The proudest moments of my life was visiting a hilltop tribe and talking to a man who told me that now his daughter doesn’t have to work at the city at night,” tells Narula.