Business Model

CONTENTS

S.No Topics Page

No.
01 Empirical Insights 1
02 Value proposition 1
03 Current Products 3
04 Customer Segments 3
05 Revenue Streams 4
06 Key Resources 4
07 Key Partners 6
08 Key Activities 6
09 Distribution Channel 7
10 Customer Relationship Management 9
 Empirical Research

● The hydroponics market was valued at USD 9.5 billion in 2020; it is projected to grow at
a CAGR of 11.3% to reach USD 17.9 billion by 2026.
● The pressure on the agriculture industry to meet the growing demand for grains and food
leads to the search for high-yielding farming techniques, such as precision farming and
urban farming.
● Hydroponics is looked upon as a potential solution for the growing concern about food
security in the coming years.
● According to the UN reports on global population, plants grown in hydroponic systems
have achieved 20%–25% higher yield than the traditional agriculture system, with its
productivity being 2–5 times higher.
● On average, a 500 sq. ft. hydroponic farm can cost up to USD 110,000 for a base level
system that is not fully automated. This huge cost for the initial set up of the system is a
major factor refraining farmers from investing in these systems.
● However, the yield obtained from these systems are higher, and the produce can also be
marketed as premium products, thereby raising the ROI for growers.
● The rising population is increasing the demand for food across the world. According to
the Food and Agriculture Organization (FAO) of the United Nations (UN), the world
population is expected to reach up to 9.1 billion by 2050, for which food production is
expected to increase from between 25% to 70%. This is anticipated to drive the demand
for alternative farming technologies that give high yields in less time
● In terms of volume, the tomatoes segment dominated the market with a share of more
than 40% of the total market share in 2020. Tomatoes are the largest hydroponically
cultivated crops across the globe owing to the faster cultivation rate and as it requires
very less amount of water compared to regular farmed tomatoes.

Value Proposition

To sum it up in a line, Himalayan Greens strives to offer rich, hygienic, and healthier food options
which are free from chemicals and are full of nutrients, all year round in a sustainable fashion
through its hydroponic farming techniques.
Problems Faced:
There are three big problems faced by hotels and restaurants (especially high-end ones) that
Himalayan Greens can potentially address in order to establish its presence in the market.
These are as follows:

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1. Wastage: Restaurants purchase vegetables from suppliers in bulk. Wastage takes place in
two ways.
Firstly, a portion of vegetables are rejected during initial inspections and quality checks
due to several problems, one of them being pests such as worms and insects in vegetables,
in particular leafy vegetables.
Secondly, vegetables are also rejected if they are bruised, or if they deviate significantly
from the desired maturation stage.

2. Exotic Vegetables: High end restaurants require a variety of exotic vegetables for producing
continental dishes. These tend to be difficult to grow in a natural environment in many parts
of India. This problem however is easily overcome by the technology used in hydroponics.

3. Relationships With Suppliers: The food service industry relies heavily on trust. Customers
trust their restaurants and restaurants desire trustworthy suppliers.

There are two extreme categories of suppliers.

On one hand, there are very small-scale vendors with whom the restaurant can develop a
relationship at a personal level, however, their capabilities are limited. On the other hand, there are
large companies whose capabilities are extensive. Nevertheless, the restaurants’ relationships with
these companies are much more impersonal and operate at a surface level.
4. The Health Factor: In recent years, due to increased awareness among the public, several
restaurants and large supermarket chains have started offering their customers the option to
eat/buy organic and pesticide/insecticide/herbicide – free fresh produce.

The Solution
1. Hydroponics can resolve this issue as these crops are not grown in soil in the natural
environment. Hence, there is negligible chance of contamination and spoilage by worms,
insects and other pests. Since hydroponics vegetables show more uniformity in terms of
size and maturation level, aforementioned concerns can potentially be addressed, and
wastage rates lowered.
2. Himalayan Greens can provide the best of both worlds. Its production capacity is supposed
to keep growing, and at the same time it can use its business development managers to
establish trustworthy, mutually beneficial relationships with its clientele.
3. Hydroponics crops are, owing to their controlled environment, free of pesticides,
herbicides and insecticides. They are also extremely environmentally friendly due to lower
water requirements and efficient utilisation of land resources.

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 Current Products

Himalayan Greens currently provides hydroponic produce in 4 categories namely Herbs, Leafy
vegetables, vine crops and vegetables. Within these 4 categories, there are a total of 31 SKUs
ranging from Italian basil, arugula rocket, bokchoy, iceberg to button mushrooms, cherry tomatoes,
zucchini and bell peppers.
These are sold through two channels, that is, direct to consumer (D2C) as well as high-end hotel
and restaurant chains. The company also aims to expand its distribution to large grocery chains
offering hydroponic produce. Furthermore, it hopes to collaborate with food/health based startups
and nutritionists in spreading awareness as well as increasing revenue.

Customer Segments

Existing Clientele:
The present customers of Himalayan Greens fall into two categories. These are as follows:

● Individual Retail Customers: These comprise the direct to consumers model.

Produce is delivered directly to the customer. Owing to a higher market price as compared
to regular vegetables, and the vast array of exotic vegetables and fruits offered by
Himalayan Greens, the customers are usually residents of tier 1 and tier 2 cities and belong
to the upper-middle and high income groups.

● Hotels, Resorts and Cafés: These comprise the business to business model.
It should be noted that the business which Himalayan Greens caters to are high end and
luxury hotels, hotel chains, resorts and cafés. Many of them are located in the Jim Corbett
national park - a large tourist attraction.
This also means that the demand of produce through this distribution channel is somewhat
seasonal and dependent on tourism.

Opportunities:

Currently, Himalayan Greens is providing its service to select retail customers and hotel chains as
mentioned above. Following are the lucrative segments that Himalayan Greens can tap-
● Supermarkets and gourmet stores are gradually introducing a hydroponics section wherein
they sell an assorted box of hydroponically grown vegetables and herbs as they are
witnessing an increase in demand for such items. Himalayan Greens can become an active
supplier for places where it has its reach currently.
● Multiple companies and startups are providing personally curated meals to individuals and
thus helping them reach their fitness goal. These organisations require nutritious fresh

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 produce for preparing their food as they cater to high income individuals. This is often an
overlooked market and can be leveraged by Himalayan Greens.
● One factor that will create new opportunities for Himalayan Greens is the increasing
income levels of people in India especially among the rich population. Furthermore, the
increasing focus of consumers on healthy, nutritious food as witnessed during and after the
pandemic will be a major driver in increasing the total addressable market (TAM).

Revenue Streams

Target consumers can be divided into 3 major categories-

● Individual Consumers
● Restaurants and Hotels
● Supermarkets and Stores

Individual Consumers - estimated to be about 35%

Restaurants and Hotels- estimated to be about 45%
Supermarkets and stores- estimated to be about 20%

Considering the Target Consumer Base for Himalayan Greens Production Based and Subscription
Based Revenue Model would be best suited. The price of the product or service constitutes the
production costs and margin. Increasing the margin, the business is able to generate more income
from sales.

Production Model- This is the most traditional and simplest revenue model. Manufacturers earn
revenue by directly selling their products and services directly to the customer.

Restaurants and Hotels being the largest target consumer we can directly supply them with bulk
orders (directly as a B2B business). They require packed high-quality herbs, vegetables, and fruits
in large quantities on a regular basis. Particularly in metro and tier-1 cities, Fine-Dine restaurants
cater to the elite section of the economy.

KEY RESOURCES

Assets required for Production

● Nutrients - Plants require several key micro and macro nutrients. These include:
1. Nitrogen
2. Potassium
3. Phosphorus
4. calcium

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 5. Magnesium
6. Sulphur
7. Iron
8. Manganese
9. Copper
10. Zinc
11. Molybdate
12. Boron
13. Chlorine

● Water-Reverse osmosis (RO) water is the preferred choice for hydroponic systems. This
purification process provides water which is 98-99% pure. The purer the water, the easier
it will be to keep plant nutrients in the correct balance. You’ll also need additional
hydroponic tools to monitor water pH.

● Substrate- Substrates can be natural materials like coconut fibre, pea gravel, sand,
sawdust, peat moss, perlite, and vermiculite. Or they can be man-made products such as
rockwool or expanded clay pellets.
1. Perlite, pumice or vermiculite: very light and porous stones that retain water but
allow air to circulate through the roots.
2. Rice husk, wood fibre or wool: these break down slowly, but they are very efficient
in keeping the roots aerated.
3. Rock wool: this is obtained by melting basalt rock and obtaining filaments that form
a kind of sponge that does not break down

● Light- Many vegetable plants require a minimum of six hours of direct light per day.
1. Sunlight provides the full spectrum of visible and non-visible light. It’s not only the
cheapest, but also the best way to provide light for hydroponics. Southern-facing
windows and greenhouses have the potential to provide this amount of sunlight.

2. The alternative is the use of grow lights. Bulbs with an output in the range of 4,000
to 6,000 Kelvin will provide both warm (red) and cool (blue) light. When using
artificial light, additional hydroponic tools and equipment are needed. These
include light fixtures, structural support for lighting, power strips, and accessible
outlets.

● Conductivity metres: the electrical conductivity of the nutrient solution indicates the
amount of dissolved nutrients and whether they need to be replenished.

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 ● pH metres: it is essential to control the acidity of the solution and substrate, as the optimal
level is different for each crop.

Human capital and business capital

Hydroponics relieves labourers of the burden of tilling, weeding, herbicide and insecticide
application, and other labour-intensive farm tasks, and may be managed with significantly less
man-hours. This lowers the cost of raising crops while also freeing up time for other activities. A
tiny hydroponic greenhouse, in fact, can be run fully by a single part-time employee, which implies
that more capital that would be spent will be on the working capital and the human capital.

Key Partners

Himalayan Greens currently has collaboration with many firms and an online platform also, to
increase the reach and help to expand the business activities and scale.
· Online partner- Shopify
• The Shopify platform offers online retailers a suite of services including payments,
marketing, shipping and customer engagement tools.
• It helps Himalayan greens to sell the products online within the targeted areas.

· Offline partners-
The firm has collaboration with various established networks. These include:
• Taj Hotels
• Pots & stones
• Corbett wilds
• Namah & Tarangi
These are the established partners who use the products and make them reach the ultimate
consumers. The partners mainly help in establishing the customer base and scale the business.
Offline partners serve as potential customers also

Key Activities

Establishing the Hydroponic supply chain - A hydroponic technology farming

structure requires a supply chain, where the main players of the chain, which starts from
production and ends at target customer, are linked together. This has to be maintained in order to
create a smooth flow of day to day operations and leads to minimal difficulties faced in the
delivery of the products.

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B2B Channel - Managing a B2B channel requires a different set of skills and functioning
compared to the D2C model. A major focus is on enhancing the current B2B vertical and to
expand it further as this kind of model will allow Himalayan Greens to have a higher Average
Order Value(AOV) and thus greater revenue. This will in turn aid in establishing the brand and
ultimately lead to profitability.

Consumer awareness- One of the key factors in growing the hydroponic produce market is
generating awareness about the technology and its benefits. Since it is a relatively new concept
and segment, steps would have to be taken to gain the trust and acceptance of consumers.
Himalayan greens works on this by leveraging the increasing purchasing parity among people in
the country who are on the lookout for healthier alternatives.

Distribution channel
ONLINE DISTRIBUTION STRATEGY

A distribution channel is a chain of businesses or intermediaries through which a good or service

passes until it reaches the final buyer or the end consumer. Online distribution channels have
various advantages: -

1. Lower business overhead and operating costs:

In comparison to getting a brick-and-mortar store started to retail, selling online is

extremely cost-effective. Even with a marketing budget for the first 2 years, it is often still
less than opening up a physical store. Online retailing is relatively cost-effective, fast to
launch, has a quick reach to the market, and the overhead and operating costs are minimal
in comparison.
2. Greater sales reach and customer accessibility:

Retailing products online gives a business much larger sales reach. At the same time
customers have a greater experience and accessibility to products and services. E-
commerce websites represent a brand 24/7, every day of the year, and worldwide. This
would be hard to beat with a brick-and-mortar retail business.

3. Improved communications channels:

When retailing online, communication is often improved across multiple channels.

Through email, chat, online forms, and the website brands quickly publish information
streamlined. Online retailing allows brands to efficiently take orders, process shipments,
payments, and communicate with suppliers, vendors, and potential customers.

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Common Industry Distribution Practices

The commonly used distribution practices in the hydroponics industry are as follows:

1. Sales Through the Business Website: This is a very efficient distribution method,
particularly for new businesses that want to establish a presence in the market. Information
about the sales of various products can also be used to make necessary changes to
production based on consumers’ demands.

2. CSA Vehicles: CSA (Consumer Supported Agriculture) Vehicles enable consumers to

subscribe to the harvests of various forms. This channel is indeed very lucrative and is
helpful in scaling businesses and retention of customers.

3. Online Farmers’ Markets: These are designed to mimic conventional farmers’

markets and are intended to serve retail customers. Customers shop separately from
individual firms.

4. Online Wholesale Markets: These cater specifically to large-scale buyers such as

restaurants and schools.

5. Indirect Sales Channel (Agent-Based): In this model, the firm hires agents such
as brokers, online platforms, and other organizations which function as intermediaries
between buyers and sellers. They conduct extensive research on potential customers to
execute their distribution objectives.

STRATEGY

Himalayan Greens can initially concentrate on selling its products in Tier-I cities in the Delhi-
NCR region. This will be critical moving forward, as demand for such items is increasing in
areas such as Delhi, Gurgaon and Noida, with an increasing number of individuals opting for a
healthy lifestyle enhanced by smart food choices.

Products can be offered in two ways-

1. Direct Selling: Products can be delivered directly to the customer, as and when the
demand rises. It is imperative that there are no middlemen involved in this distribution
channel. Thus, Himalayan Greens can cut on commission expenditure paid to middlemen.
2. Food Aggregators: Listing its best-selling vegetables and other products on food
aggregator apps like BlinkIt and Big Basket will help boost sales while also providing

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 exposure to a huge client base. As a result, the collaborating companies would be able to
gain from the arrangement as well.

Distribution Channel For B2B

The possible distribution channels for B2B segment are-

Direct selling

It means selling the products directly to our collaborating firms (i.e businesses like cafes, resorts
etc) in a non-retail environment.

Selling through intermediaries

Intermediaries are individuals or organisations that undertake the role of mediators or linkage
between two parties. The businesses can be contacted through these intermediaries.

Dual distribution

a system of marketing channel organisation in which a manufacturer uses two approaches

simultaneously to get products to end-users; commonly, one approach is to use marketing
intermediaries, while the other is to sell direct to end-users.

Reverse logistics channels

Reverse logistics is a type of supply chain management that moves goods from customers back to
the sellers or manufacturers. Once a customer receives a product, processes such as returns or
recycling require reverse logistics.

Customer Relationship Management

One-To-One Customers Service Strategy

One-to-one service is a customer relationship management (CRM) method that focuses on

personalised interactions with clients (also known as 1:2:1 marketing). Customization, according
to the method, develops customer loyalty as well as a higher return on investment for marketing
initiatives.

Customer service refers to the one-on-one engagement here between a consumer making a
transaction and a designated representative selling it.

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They can range from phone, text messages, emails, social media, live chat, in-person contact and
a lot more.

Customer Retention

Getting new consumers on board is one thing, but keeping existing customers and getting repeat
orders is crucial to a company's success. Retaining clients is less expensive than acquiring new
ones. Customer retention refers to a company's capacity to convert one-time customers into
recurring customers and keep them from transferring to a rival.

Using customer feedback techniques, consumer education, better, clear and transparent
communication, reward systems and customer loyalty programs are some of the useful
techniques for customer retention.

Building Brand Loyalty

Building loyalty towards the brand is very important to survive in the market. & The truth is it is
not earned overnight, it takes years to establish brand loyalty. Most consumers claim that their
loyalty is earned by companies that share their social, economic and environmental values.
Things to keep in mind while establishing a brand:

1. Keep quality high.

Depending on the price of your product there is an expectation of a certain level of quality from
the marketplace. So, just maintain that level of quality throughout. People will go back to what
they know they can count on, don’t let them down.

2. Engage your customers.

Keep in touch with your target market on a frequent and consistent basis. Let them know about
the new and exciting developments within the company and what to expect next, build
momentum through communication and let your customer feel that they are a part of your
company and create a sense of belongingness among them.

3. Solicit feedback from consumers.

Stay in touch with your consumer, ask their opinion of your business, did they like their most
recent experience with your company, were they satisfied with the customer service, did the
product or service meet their expectations? Let them know that you care about their experience
and that you are listening to their concerns. Make sure to respond to their quires too, make them
feel their interest matters too. If you want your customer to come back, give them what they
want!

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4. Give them a reason to come back.

Provide incentives for consumers to return to your company instead of the competition. Create
programs that reward loyalty to your brand. Consider giving insider access, special status and
other non-monetary driven incentives. Everyone wants something that cannot simply be
purchased, provide some privileges and create some cache!

Providing information customers actually want

In order to win a customer's heart and wallet we need to proactively offer them relevant
information about our product so that they can trust us and know about our product a little
deeper.

Some of the important and relevant information are: -

1. Pricing of the product

2. Nutritional value of product (This would cover all the carbs, proteins, vitamins etc.)
3. Benefits of product
4. USP of Product
5. Offers related to product
6. Method of storage

Subscription Billing

Subscription billing, also known as "recurring billing," provides businesses with nearly
guaranteed revenue by allowing them to collect money from customers at predetermined
intervals. In order to do so, customers must enrol in 'auto-pay', provide payment information, and
authorise merchants to debit their accounts.

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