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Goodness has a value and a cost and consumers should understand this and be willing to pay extra because companies have to spend more when they follow good practices with a view to ensuring safety in the value chain of foods.
When the unorganized sector is not following those standards, not having proper equipments for maintaining proper temperature windows, still some consumers compare the price and don’t like to pay more in supermarkets who follow the best practices.
“Then, we can actually work for them and serve them,” said Sabbir Hasan Nasir, executive director of ACI Logistics Ltd, the operator of Shwapno in an interview with The Daily Star recently.
Since the beginning of the country’s biggest superstore chain in 2008, the ACI has opened 61 Shwapno outlets on its own and 67 franchisees, known as Shwapno Express, mostly in Dhaka and Chattogram.
The chain, apart from selling groceries, fresh food and fish, also caters various lifestyle products. Today, it serves more than 50,000 customers every day and projects to become a half-a-billion dollar company within five years from $120 million now.
Shwapno outlets serve more than 50,000 customers every day. Photo: Collected
In its efforts to meet the growing demand for safe food, the chain began to train farmers last year on safe application of pesticides on vegetables and waiting period before harvesting their crops.
Today, it directly collects vegetables from 150 growers, cutting out the middlemen in the value chain in the process.
“Experiences are very interesting. Farmers have become very happy,” said Nasir.
Shwapno buys 50-60 percent of its required vegetables and fish directly from farmers and the rest from wholesale markets.
The direct purchase by Shwapno increases productivity of growers as this saves time they would have otherwise needed going to markets selling the produce. It also eliminates the middlemen, who are responsible for 11-15 percent extra cost of prices of perishables.
Shwapno, Nasir said, transfers a portion of the extra cost to the farmers during the direct procurement.
On average, it buys 7-8 tonnes of vegetables and 2 tonnes of fish daily from producers mainly in Bogura, Jashore, Khulna, Satkhira, Bagerhat, Manikganj, Savar, Bhairab and Mymensingh.
“This has created a revolutionary impact although our volume is very low,” he said, adding that the positive impact for farmers would be massive if the chain could account for 10 percent of the $16 billion annual wholesale and retail trade.
Direct procurement from growers also establishes transparency in the value chain.
“All, including regulators and consumers, can see from where and from whom we have bought, what types of pesticides have been used, and whether those are harmful for health. I think it is possible to create transparency in the entire value chain and we are moving towards that,” said Nasir.
He, however, said the cost of Shwapno increases if it implements the global good agricultural practices (GAP). However, consumers are still not aware of this and thus are not willing to pay extra for safety.
He urged consumers to come out of what he terms “contradiction” regarding the reluctance to pay extra while remaining concerned about food safety.
Shwapno has had to give up some of its earnings margin because of the unwillingness of the consumers to pay higher for safe food.
“But we are doing this because if consumers know about our efforts on safe food, they will come to us and buy from us. If the sales volume goes up, we will gain ultimately.”
He said Shwapno has been able to make supermarkets a part of the daily life for people from all walks of life and it would continue to grow in the years ahead.
The supermarket chain has improved its margin in the last three-four years as consumers in increasing numbers are shopping at Shwapno.
“I think we are becoming more relevant to consumers. We are getting the results of the learning curve of understanding the consumers’ need,” he said.
He said consumer confidence in Shwapno is growing. As a brand, Shwapno is much more powerful now than before.
“If we can follow our promise of everyday life as a mantra, financial issues will not only be sorted out, Shwapno will also create a huge impact for Bangladeshi consumers.”
There is concern about the losses of Shwapno. But Nasir said the growth of consumers and other indicators, such as gross margins, earnings before interest and taxes, have improved.
He says the problem of Shwapno is that its financing structure is not right.
The company borrowed a lot when it was formed and for bankrolling its losses, he said, adding that the debt should be reduced and equity should be injected.
“If equity is injected, Shwapno will become profitable,” he said.
He said the company is not too much worried about profitability.
“Because we know it will be profitable in future. The management and the board are rather worried about how much of the annual retail and wholesale market we can manage to get.”
Shwapno joined organised retailing after Agora, Meena Bazar and the evolution of the supermarkets in an area dominated by millions of small unorganised stores.
The industry grew close to 17 percent annually in the last five years. Shwapno’s compound annual growth rate is 25 percent.
“This year, the growth trend is very good,” he added.
However, the journey for supermarkets in Bangladesh has not been smooth and they had to overcome ordeals.
There was a time when people were very concerned about formalin. Now many say that there is nothing like formalin in fruit and vegetables and there was nothing like this in the past, said Nasir, who joined the ACI as the executive director in December 2011.
Nasir, who studied mechanical engineering at the Bangladesh University of Engineering and Technology and obtained an MBA degree from the Institute of Business Administration under the University of Dhaka, also touched upon the impact on businesses of rumours and drives and statements from agencies and individuals related to food safety.
He said a lot of things are published in the media and spread by general people although they don’t have adequate information and understanding on the issue.
In many cases, steps taken by government agencies and comments made by researchers, academicians and responsible persons give the impression that all the people in the private sector have gone bad and are greedy.
“This creates an anti-business stance although many of the allegations were not based on facts,” he said.
He said Bangladesh’s economy has come this far also because of the contribution of millions of private sector businesses.
He, however, said dishonest businesses should be brought to justice.
Nasir urged academicians, researchers, regulators, bureaucrats and other stakeholders to talk sensibly on food safety issues.
“The issue of food safety should be dealt in a systematic way.”
(TDS)
