Farming has been one of the last bastions of offline business with Industry 4.0 principles late to penetrate the sector, even in developed nations. This is now changing in many countries, including Spain which recently hosted the Smart Agrifood Summit in Malaga. There, CompassList spoke to Carlos García Santacruz, who recently launched Loones, Spain's first online cooperative e-marketplace for bulk produce.
An engineer whose family has been in agriculture for generations, Santacruz is trying to disrupt the sector to benefit farmers and ensure the sustainability of their livelihoods. “I come from a family of olive oil producers in Toledo and have seen first-hand how we use a lot of resources to make a sale – a process that is still almost entirely offline,” he said.
Some 20 years ago, Santacruz's family had invested in setting up their own olive oil-making factory to assume more control of the product value chain. That same desire was the impetus for Loones.
He said: “Achieving sales has traditionally involved going to agricultural fairs, speaking to many people and then sending many emails; it's very intensive in terms of work, time and cost. Then, in our case, for olive oil, the competition in Spain is stiff so we had to go overseas to sell but that is costly too”.
On top of all of that, in order to export, agricultural producers have to contend with commissions and bureaucracy at the local, regional and international levels. Given his experience as an industrial and systems engineer, Santacruz realized that the status quo was not sustainable.
In his spare time, he worked on realizing his vision of cutting out the middleman in the commercialization of agricultural produce. “My original objective was to create a digital platform where producers like myself can get our varied products out on the market efficiently and economically while at the same time guaranteeing minimum levels of quality and promoting Spanish produce.”
New sales channel for farmers
Loones began operating at the start of 2019. The B2B cooperative e-marketplace links Spanish agricultural producers with Spanish and overseas buyers who need bulk quantities of foodstuffs, including agrifood producers, retailers and local authorities. The platform lists a plethora of semi-perishable goods – those lasting for a year – as perishables are not suited to this business model. Goods traded securely on the website include vegetable oils, like olive oil, pulses, grains, wines and honey.
A cooperative model was chosen to allow agricultural producers of different sizes to sell goods in all quantities without having to meet a minimum level of production, and vitally, to enable farmers to sell their surplus produce. Food waste continues to be a major problem across the European Union, and NGOs have identified improving farmers’ position in the food supply chain as key to tackling this issue.
“I knew we could launch this platform because there is a surplus of stock and I knew how hard it is for producers to get their excess products out there; many also have no previous experience of being in a co-operative, so it is a first for them and they see that it removes pressure when selling together in bulk,” Santacruz said.
“Besides creating the first B2B agri-marketplace that works with varied foodstuffs in bulk, another of my aims was to bring transparency and simplicity to a market that is anything but.”
In a nod to this objective, Loones not only provides the "buy" and "sell" market prices in real-time for the foodstuffs sold, which are determined by the cooperative's producers, it also includes recent historical pricing so that users can view the optimum rates for buying and selling and decide if it is a good time to perform a transaction.
Cheaper to market
Loones is currently in the process of promoting its platform at events like Smart Agrifood. It now has 40 producers selling via its platform and buyers have started requesting prices. In fact, Santacruz's own family has just seen its first transaction on the platform, selling olive oil to a buyer in Colombia.
At present, Loones charges both buyers and sellers a fee that is “as low as possible” so the platform can gain traction. Santacruz said farmers selling on Loones can still expect to save around 5% in costs compared with the offline method of selling.
"Why else would producers want to be on our platform? Besides the hassle saved and being able to sell their surplus, it also helps some products that have been cannibalized in the Spanish market, for example, lentils from Canada have forced prices down here,” Santacruz said. “Because we eliminate the middleman, the producer can place a higher price on our platform, so, despite our small fee, it will still be cheaper for the producer.”
To promote the use of Loones, the startup targets potential agri-foods buyers via pay-per-click advertising to reach businesses that are already searching for items available on the e-marketplace's product base, noting that in Italy, for example, there is a market for Spanish almonds, and in France, for Spanish lentils.
Loones has agreements with Spanish logistical companies to distribute in Europe. It does not yet have logistical agreements in place for other potential markets identified as having high potential, like Saudi Arabia.
Changing mindsets
One of the major challenges Loones has faced to date has been trying to change the traditional mindset of producers and conveying “the need for innovation” to them. “For them, WhatsApp is the latest trend and what they believe in, so we adapt by using social media for onboarding and transactions, always talking to them about tangible benefits and not techie stuff,” said Santacruz.
He added that in any case, a new generation of tech-savvy farmers is gradually replacing the older generation and in a few years, all of them will “have a digital understanding.”
To attract producers to use its platform, the company uses a mixture of traditional advertising, like going to villages and putting posters up advertising its webpage, as well as developing a personal, relationship of trust with its suppliers. The company always seeks to speak to its producers by phone, and once a month, it goes to a part of Spain where it has several suppliers to visit them.
To date, Santacruz has bootstrapped the company as well as received some financial assistance in the form of regional innovation grants. He developed Loones together with an external developer in Denmark and the platform has already received some impressive backing in its short life. Indeed, the platform is still at the pilot stage and has yet to launch formally. It is housed at accelerator La Nave Acelera. In June 2019, it won the innovation prize at the Wonderful Summit that was started by Santacruz's hometown Toledo, and received entry to IBM's year-long acceleration program, Startup with IBM.
Loones is currently seeking seed funding from “a player who understands our sector” and is confident of securing the sum of €200,000-250,000 by October 2019. “We started at the right time because our model is not yet too exploited and the agricultural sector is now seeing the need for innovation. In our sector, we are the first B2B e-commerce for a whole variety of semi-perishable goods – our only competition deals only in cereals.”
The financing would be used to seek international buyers, conduct marketing and advertising campaigns overseas as well as formally launch the platform. Loones' plan is to eventually introduce foreign goods, like coffee, on the platform.
