Strategic focus on India

Fifteen years ago, at the end of 2007, Gerard Backx and his fellow directors at HZPC decided that the company should seriously consider India. "Occasionally we came to India, but we had never given the country structural attention." That has to change, Backx believes. Coincidence or not, a few months later an employee of Indian conglomerate Mahindra calls him. He asked if he could come and visit them in Joure. Backx is curious. "What does such a gigantic concern that is mainly strong in iron and engines want with seed potatoes? I was curious where their interest came from."

That first appointment almost went wrong, Backx recalls. "Mahindra's representative arrived at Heerenveen station on Friday at 6.30pm instead of 11am. He had taken a wrong train and then got lost." But when the two struck up a conversation that Friday night, it clicked. Mahindra appears to have decided to expand their agro-business and would like to introduce the potato varieties of world market leader HZPC in India. The meeting led to a cooperation agreement in 2008 under which Mahindra will represent the Friesians in India.

Potato plants in test tubes

"Wherever we start new activities, it takes about ten years to get the business up and running," Backx emphasises. "That is in the nature of our business. In India it takes a little longer. HZPC is not allowed to export seed potatoes to India, but test tubes with small potato plants, which go through a quarantine procedure and which we can further cultivate there. Before these varieties are put on the list of varieties and can be used commercially, they have to be tested extensively for all kinds of characteristics.

In most countries, these tests take four to five years, and in India a few years longer. Backx: "The institute that carries out these tests also breeds potatoes itself. Since we are the first foreign company to start producing potato varieties in India, that breeding institute is actually our biggest competitor in India. They are clearly not waiting for us: one year our samples were lost, the next year a test field failed. This process took a lot of time and energy, but now six of our varieties have been officially registered."

Joint venture

Meanwhile, HZPC and Mahindra were not sitting idle. In 2014, the two companies set up a joint venture: Mahindra HZPC. That company started with the cultivation and trade of common Indian potato varieties. Backx: "That own structure is now in place. We have a network of qualified, professional growers. Slowly but surely, we are cultivating and marketing more of our own potato varieties. We multiply our potatoes by a factor of 10 per year, so it will take some time before we reach a serious volume. We expect our varieties to grow to an annual turnover of 20,000 tons of seed potatoes in the next five years."

Sales market in India

The potato varieties of HZPC will soon be sold to the processing industry and supermarkets in India. "The processing industry - think of large french fries and crisps manufacturers such as Lays - are very happy with our arrival. With our high-quality varieties, they can make better products and more profit. The fresh market is by far the biggest market for potatoes in India. Traditionally, growers take little account of the eating preferences of Indians: they focus mainly on technical cultivation issues such as disease resistance and the amount of water needed. Our varieties have different tastes, are smoother and look nicer than the classic potato varieties with deep pits. With this, we think we can primarily serve the middle class and the elite through the supermarkets."

An Indian partner opens doors

HZPC has an interest of 40 percent in Mahindra HZPC. Backx: "We have looked for a good balance. They do the finances and the HR policy, we the technology and the potato varieties. The joint venture pays our Dutch company a licence for the use of the varieties. As far as we are concerned, we are in good balance this way. The fact that we have a minority interest is not a problem. If the joint venture makes a profit, that is great, but for us it is mainly about the income from the licence stream. The more Indian farmers who grow our varieties, the better. We are not completely dependent on Mahindra and are also talking to third parties to get more farmers in India to grow our varieties. By the way, we are having these discussions together with Mahindra. Our relationship is excellent."

Curious about the opportunities in the Indian food processing or agricultural sector for your business? In our sector overviews, we give you a glimpse of interesting investment options in India's various key sectors.

India is not an easy market but it is a very big one. Too big to be ignored. Certainly for Dutch companies with ambition, guts and perseverance, there are many opportunities in this country. More and more Dutch companies are able to seize these opportunities. How do they do it and what can other companies learn from them? Lessons for success in India from seed potato grower HZPC Holland and machine builder Meyn Foodprocessing Technology.

IndiaConnected is regularly asked to share knowledge about India. For Globe, the magazine of the Dutch Export Association EvoFenedexpartner Maarten van der Schaaf wrote this article about the lessons from Dutch companies for success in India.

At the end of 2007 HZPC Holland, the largest Dutch exporter of seed potatoes, decided that the company from Joure in Friesland should seriously consider India. "Occasionally we came there", says ceo Gerard Backx, "but we had never given the country structural attention." That had to change, Backx thought. Coincidence or not, a few months later an employee of Indian conglomerate Mahindra calls him. He asked if he could drop by in Joure. Backx is curious. "What does such a huge concern, which is mainly strong in iron and engines, want with seed potatoes? I was curious where their interest came from."

That first appointment almost went wrong, Backx recalls. "Mahindra's representative arrived at Heerenveen station on Friday at 6.30pm instead of 11am. He had taken a wrong train and then got lost." But when the two got into a conversation that evening, it clicked. Mahindra appears to have decided to expand its agricultural branch and would like to introduce the potato varieties of world market leader HZPC in India. The meeting leads to a cooperation agreement in 2008, in which Mahindra will represent the Friesians in India.

Good balance

In 2014, the two companies set up a joint venture: Mahindra HZPC. This company started the cultivation and trade of common Indian potato varieties. HZPC has an interest of forty percent in the joint venture. Backx: "We have looked for a good balance. They do the finances and HR policy, we do the technology and the potato varieties. The joint venture pays our Dutch company a licence to use the varieties. As far as we are concerned, we are in balance. It does not matter that we have a minority interest. If the joint venture makes a profit, that is great, but for us it is mainly about the income from the licence stream. The more Indian farmers who grow our varieties, the better. We are not completely dependent on Mahindra and we are also talking to third parties to get more farmers in India to grow our varieties. By the way, we are having these discussions together with Mahindra. Our relationship is excellent."

Almost ten years

The potato varieties of HZPC are sold to the processing industry and supermarkets in India. "The processing industry, think of large french fries and crisps manufacturers such as Lays, is very pleased with our arrival. With our high-quality varieties they can make better products and achieve higher returns. The fresh market is by far the largest market for potatoes in India. Traditionally, growers take little account of the eating preferences of Indians: they focus mainly on technical cultivation issues such as disease resistance and the amount of water needed. Our varieties have different tastes, are smoother and look nicer than the classic potato varieties with deep pits. With this, we think we can primarily serve the middle class and elite through the supermarkets." It took almost a decade to get his high-quality potato varieties to market in India. Ceo Backx takes this long lead time for granted. "India is perhaps the most promising market of the future."

Tipping point

At Meyn Foodprocessing Technology, one of the world's largest machine builders for the production of chicken meat, they have a similar experience. It took the company from Oostzaan more than twenty years to get a firm foothold in India. "We had to sow a lot of seeds there before we could start harvesting, but it was worth it," says Karel de Waal, Meyn's senior sales manager for India. "Thanks to our patience, we now have over fifty percent of the market." That market is large and growing: India is the fifth largest producer of broilers in the world. As more chicken is sold through supermarkets, the demand for automation in the meat processing industry will further increase.

What is the key to Meyn's success? "A good partner," says De Waal. "Before we found our partner, we had a few less than smooth collaborations, which didn't yield much. But when we came into contact with Alok Raj, there was an immediate click. He opened up the market for us and worked for us in India for twenty years, more as an advisor than a salesman actually. In India, building a personal relationship is extremely important when doing business with each other. Alok understood this like no other and has seen about every meat processing company in India from the inside. He would work with the entrepreneur to see how the production process could be organised more efficiently and even help start-ups design entire factories," says De Waal with a smile. "Those factories actually materialised, because the entrepreneurs felt they could always count on us. That was the turning point when we were able to start charging for our service."

Much faster

Meanwhile, Alok Raj has retired and Meyn has a hundred per cent subsidiary in India. "Before we had the office, we arranged everything from the Netherlands. From sales to installation and after-sales. But as a company we want to be as close to our customers as possible. That is our global strategy. That is why we have a total of 16 after-sales offices, where we work in the local language and currency and sell spare parts. Especially in India, providing this kind of quick after-sales service is very important."

On the advice of Meyn's owner, the Berkshire Hathaway group, the Indian office was set up in partnership with a law firm that the Berkshire Hathaway group itself already had experience with. "In retrospect, this may not have been the best party. It was a very big firm that wouldn't do the metres for us. We were led to believe that setting up would be a matter of months, but it ended up taking two years." Smaller agencies can do it much faster, within three to six months, De Waal later learned. "As an international company, you shouldn't focus on size and international experience. It is more important that such a law firm has the right contacts in India and can focus its full attention on you."

All lessons from HZPC and Meyn in a row:

Give India structural attention;
A good partner is crucial in India;
Continuous professionalisation offers opportunities for high-quality products;
Selling in India takes time. Take that time, it is worth it;
Build relationships. Or work with Indians who have good relations in your sector;
Service and after-sales are very important to Indian customers;
Choose local knowledge, advice and support on the ground. You will need them.

How the Dutch potato ended up in India