Magnit is testing a new model of working with farmers

36 farmers work on the basis of the first aggregator. Their products - MILK and dairy products, deli meats, fresh fish and vegetables - are consolidated and processed at a specialized site, after which they are sent to the chain's stores. As part of the pilot, Magnit concludes simplified contracts with farmers. In addition, separate processes for the acceptance of products in the distribution center and retail outlets have been formed. Delivery is carried out by the company's transport; special shelves are allocated for such products in stores.

According to the Minister of Agriculture of the Tula Region Alexei Stepin, the potential of the Russian market for farm products is huge. However, farmers face many difficulties related to access to distribution channels, high cost of raw materials and equipment, shortage of working capital in the off-season, lack of qualified personnel, crop losses due to lack of storage capacity, he notes.

The fundamental difference between the target model of the Magnit aggregator and other solutions, including wholesale distribution centers, is the support for farmers throughout the chain “from field to shelf”. Thus, within the framework of the aggregator, the company provides farmers with advice on production and marketing of products, support programs and obtaining subsidies, provides analytical data, co-finances the purchase of raw materials (seeds, fertilizers, feed) and equipment, trains farm employees, provides support in labeling products and etc.

Together with Tula farmers, Magnit works out business processes at the stages of transportation, processing, storage and marketing of goods, develops standards for farm products. The retailer is also testing it solutions for order planning, transport management, etc. At the same time, work is underway to centralize the purchase of raw materials and equipment for aggregator participants, organize product sales outside the company’s perimeter, create capacities for product processing, and introduce advanced management practices and new technologies in farms .  

“Our market research shows a high interest in farm products: 90% of the consumers surveyed are ready to buy them. At the same time, the vast majority of buyers note that they are ready to purchase farm products more often if it costs less, is guaranteed to be of high quality and safe, - says Yegor Shumilin, commercial DIRECTOR for the range of fresh products of the Magnit retail chain. “It is these tasks that our new project will solve, the concept of which we are testing in the Tula region. It is aimed at really small farms that need comprehensive support.”

As a result of the pilot, it is planned to develop an optimal service model of the aggregator, which will significantly simplify the process of retail entry for farmers - both to Magnit stores and other chains and HoReCa, and will also help make their business more efficient and sustainable. In the near future, the retailer will sum up the results of the pilot, and then make a decision on scaling up the project.

This is a great initiative if it is really aimed at helping farmers, small and medium-sized businesses get on the shelves of large retailers, commented Vitaly Shmalts, founder of the Food Up business accelerator. According to him, it is especially good that Magnit declares support for farmers along the entire chain “from field to shelf”. “Certainly, the project is interesting for the market and after some time I would like to receive feedback from the participants of the pilot project on how their cooperation with large retailers has developed and whether it has developed. In addition, the success of the project can become an impetus for the development of farming in RUSSIA and its EXPORT opportunities,” he said. So, if you look at the experience of other agricultural countries, such as Turkey, then it is precisely due to the large number of small and medium-sized businesses that produce a huge amount of products, the country occupies a leading position in terms of agricultural exports, Schmalz notes. “Therefore, if the Magnit project helps to increase the number of farmers in the country, the quality of their products, etc., then our export opportunities will increase significantly,” he believes.

Magnit actively develops relationships with farms and local suppliers and now cooperates with more than 420 peasant farms and small agricultural producers. In 2014, the retailer created a farm shop format in its stores. Now special zones with farm products are presented in most supermarkets and hypermarkets of the company. The total number of farm products in the chain’s assortment at the end of 2022 was about 1.9 thousand SKUs (+54% compared to 2021). Over the past year, the turnover of farm products in the retail network increased by 35% and amounted to 23.5 billion rubles. Since 2016, Magnit has been working with domestic agricultural producers under the agro-contracting system, concluding long-term contracts with guaranteed supply volumes. The share of farm products in such supplies is 45%.