PepsiCo contract farming

Potato farmers are vital to the production efforts of PepsiCo and to the nation of India, which ranks third in the world in terms of potato production. Contract farming is an agreement between farmers and the company for production and supply of agricultural products or commodities of a certain type, under forward agreements regularly at a pre-agreed price and time for a certain quantity. Motivated by the success of contract farming for tomato in several districts of Punjab, PepsiCo has been strongly imitating the model of food grains, such as in case of Basmati rice, spices like chilies, oil seeds namely ground nuts and vegetable crops like potato. PepsiCo introduced index based insurance product in 2007 as part of its contract farming programme with the aim of limiting weather related risk of the crop to the farmers and in its supply chain.