Finshots - Is Amazon entering the agri-tech space?


Is Amazon entering the agri-tech space?

Is Amazon entering the agri-tech space? | Finshots Daily Newsletter

In today's Finshots we see why Amazon may be flirting with the idea of venturing into the ambitious farm to fork business


The Story

Amazon is foraying into the agri-tech space. According to one article in the Print  “The Seattle-headquartered giant has begun offering real-time advice and information through a dedicated mobile app to help farmers make decisions on crops and even deploy machine learning technology. The program — which Amazon dubs Reactive and Proactive Crop plans — promises to provide growers with cutting-edge technology and insights.”

If anything, this seems to be a formal foray into the farm to fork business — an attempt to bring fresh produce to your doorstep. And while it may feel like this move was long overdue, there is a whole host of problems any entity will have to deal with when trying to make a dent in this space.

After all, we aren’t just talking about some random commodity here. We are talking about agricultural produce.

Consider for instance the big problem — Seasonality.

Most crops aren’t grown throughout the year. We have dedicated windows for sowing and we have dedicated windows for harvesting. On most occasions, a bountiful harvest keeps everyone happy. There’s enough produce going around and nobody has to worry about supply disruptions. But when you get to the lean periods — when you’re waiting for the next harvest to come through, you may have a problem on your hands. You may have to contend with shortage. And the only way to alleviate this problem is to build storage facilities.

Because if you can’t store the produce, you’re more likely to have a mismatch in demand and supply. And if you can’t plug this mismatch, you’ll have trouble fulfilling customer orders.

This problem is more apparent when you’re dealing with perishable products — fruits and vegetables — something Amazon has already been dabbling with for a while.

Before dispatching the produce to processing centers, Amazon has to inspect and monitor quality at various stages. And they have to make sure the produce stays fresh throughout this journey. For instance, Amazon’s fulfillment centers operate with 4 separate temperature zones (ambient, tropical, chilled and frozen) to maintain the quality and freshness of produce.

And if you’re thinking we’re done here, oh no, we are only getting started. Storage and cold chain infrastructure might do the trick for a while. But running this business at scale would mean going back to the roots.

You have to talk to the farmers. You have to have agreements in place to produce and supply fruits and vegetables of the desired quality. But even the most well-intentioned farmers may not be able to follow through with their promise. They’re often at the mercy of monsoons, pests, droughts, and other such factors. So if you really want to predict both the quality and quantity of your produce, then you have to partner with them as they head into the sowing season.

You’ll have to hand them quality seeds, advise on best practices, and maybe even finance their operation. You’ll have to handhold them through rough monsoons and dry weather. You’ll have to teach them the way. Only then can you finally start making progress.

Which finally brings us to the story today. Amazon may have big ambitions to dominate this sector through their Amazon Fresh offering. But to be able to succeed in this endeavor, they have to fix the broken supply chain just like everyone else. They’ll have to work with farmers, with other intermediaries, and even with the government if they are serious about this thing.

So while the mobile app may be a good place to start, Amazon can only make meaningful progress once they start getting their hands dirty alongside the farmers.

Until then…

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