Freshket team
Every month, the team at e27 runs a monthly Startup of the Month poll where we pick the most outstanding startup to give it the extra attention that it deserves. Three startups are selected internally by taking into account idea, team, funding and founders. After which the e27 content team picks the winner.
The winner for October is none other than Bangkok-based agritech startup Freshket which aims to enrich the lives of farmers by helping them sell their produce at a premium rate to restaurants and consumers.
Bangkok’s farmer distress
While most Southeast Asian countries are largely agricultural, Thailand is one of the countries where agriculture is given great importance. This is why it is popularly referred to as the “country’s backbone”.
Founder and CEO of Freshket, Ponglada Paniangwet, tells e27 in an interview that farmers make up one-third of the population in Thailand. While they are good at farming, they need extra help in logistics, packing and selling.
Because of this lack of knowledge, farmers usually have to go through middlemen who tend to propose a price which gives them little profits. These middlemen mark up the margin cost of the logistics and product and then deliver the produce to the market.
Paniangwet observed all these problems first hand while she was working as a fresh food supplier at a wholesale fresh market. She says that she experienced their plight while working with both farmers and buyers.
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“I learned that the whole supply chain process was very tedious and inefficient. So from that day on, I wanted to solve this problem and streamline the whole process of the fresh food supply chain.”
How Freshket solves the problem
To solve this problem, Freshket pulls together processing centres and suppliers by connecting them directly to farmers, who tend to rely on middlemen.
Since the operating costs of perishable goods are high, Freshket utilises a cluster model which means that they deliver multiple orders together at one go.
It also takes care of processing and logistics for farmers. The company has its warehouse centre where it cuts, trims and packs before sorting the orders and then delivers it to the restaurants. This is how the company takes care of logistics for the farmers.
Currently, Freshket has 30 farmers on its platform but Paniangwet has expressed that their goal is to upstream and go from 30 farmers to 150 farmers by the end of 2020.
Recently, the company also managed to raise US$3 million in a Series A funding round which was led by Singaporean VC Openspace Ventures, with participation from Thai PE firm ECG-Research and public-private joint venture Innospace.
Pivot, pivot and pivot
When Freshket launched in 2017, it was only meant to be a marketplace where suppliers and farmers could connect.
In the first model, suppliers were allowed to set their rates and make the delivery themselves. However, they noticed that this led to a problem in pricing and on-time delivery.
Just after a few months of the company’s launch, the team learned that their value proposition did not serve the customers because the ones most valued at that point were farmers.
Because there was so much control given to the farmers in terms of setting their price and making the delivery, this created a clash between the values of the buyer and the seller.
Paniangwet also stresses that this was one of the valuable lessons that she learnt in her early days of validating the product-market fit.
The team then pivoted the platform to not just be a marketplace but to become a full supply chain platform, where logistics and delivery were taken care of by the company.
The COVID-19 effect
But soon again in 2020, the company had to pivot again. The onset of COVID-19 has led many companies to revisit their business models and make necessary changes in their work process, and Freshket was not spared.
On March 22, when the Thai government announced a lockdown, all restaurants temporarily shut down which created a problem since Freshket until then was B2B-focussed.
“So on March 23, we decided to open the platform to consumers and pivoted the model within 24 hours. We planned ahead in terms of the product and created smaller pack sizes for the consumer. And for the payment method, we usually give our restaurants credit terms but for the customer, we can’t. So we adjusted that on our programme,” she shares.
But the quick pivot came with its own set of challenges. “We faced some challenges, especially in customer service. Normally, we serve only restaurants and our team speaks the business language. But for the consumer, it’s more emotional, right?. And we received an overwhelming amount of calls,” she quips.
After the lockdown, the company says that the logistics costs have come down due to an increase in the average order value and the demand for Freshket has grown.
In the end, the company eventually managed to make a successful pivot despite the few hurdles. It will stick selling orders to consumers and will apply its cluster model to people’s villages or condominiums.
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Image Credit: Freshket
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