Synopsis: Agritech firms are turning to private labels to drive revenue and improve margins amid a challenging investment environment. Companies like Agrostar have significantly increased their reliance on private labels, which now account for a major portion of their revenue.
Agritech companies are increasingly leveraging private labels to drive growth and enhance profitability amid a challenging investment landscape. This strategic shift comes as venture capital funding for Indian agritech and food tech startups dropped by 33% to $2.4 billion in 2022.
The Rise of Private Labels
Private labels allow agritech startups to control their supply chains and secure higher margins. While this approach has shown promise, its long-term success remains uncertain. Despite these challenges, many agritech firms are prioritizing private labels as a key revenue driver.
Case Study: Agrostar
Agrostar, a prominent player in the agritech sector, exemplifies this trend. The Pune-based company, founded 11 years ago, primarily serves as a marketplace for agricultural inputs such as seeds and fertilizers. In 2020, Agrostar introduced its first private label brand. Since then, the contribution of private labels to its topline revenue has surged from 5% to 70%, according to co-founder and CEO Shardul Sheth.
"Private labels now account for almost 80% of our business," Sheth told Mint, highlighting the significant role these brands play in the company's strategy.
Strategic Shift in the Agritech Sector
The increasing reliance on private labels indicates a major strategic shift among top agritech startups. With the sector facing challenges in scaling up and a decrease in venture capital funding, private labels offer a viable path to sustaining growth and improving margins.
By owning brands, agritech firms can better control their supply chains, reduce costs, and improve product quality. This not only enhances profitability but also strengthens their market position.
Future Outlook
While the adoption of private labels is on the rise, the success of this strategy is yet to be fully realized. The agritech sector must navigate various challenges, including market acceptance and competition, to ensure the sustainability of private label growth.
However, the initial results are promising. If agritech companies can continue to optimize their supply chains and maintain high-quality standards, private labels could become a cornerstone of their business models, driving long-term growth and profitability.
