Organic fertilizer startup looks to prosper in Vietnam amid green drive

Vietnam currently consumes 11 million tons of fertilizers and approximately 35% of these are organic. There is a huge demand for organic fertilizers which is not yet being met by local production, said Heloise Buckland, CEO and co-founder at HUSK.

HUSK recently received a $5 million investment from Mekong Capital Fund IV. Could you share the firm's plan to expand in Vietnam and promote low-carbon agriculture in 2024 and beyond?

In 2024, we will build a network of distributors in Vietnam to ensure our carbon-based fertilizers reach farmers in key sectors, focusing initially on the rice and coffee value chains, as well as the high-value horticulture sector.

Our products help to both reduce synthetic fertilizers and build soil organic carbon, which is a significant contribution to the government's goal of low-emission, high-quality rice. In addition, our granulated products for rice, in combination with our natural pest control products, help to achieve low residue rice which sells for a higher price in export markets.

We will work closely with Can Tho University and other research centers to run third party verified trials to gather key data on the impact of our products on low emission farming and net revenue for farmers. By 2026, we will have our first operating site up and running for both national consumption, and from 2027, start to export to other countries in the region.

Finally, we will invest in R&D to build our product portfolio to reach at least 10 carbon-based fertilizers and biostimulants by 2030.

How do you see the potential of the Vietnamese market for foreign companies providing low-carbon agricultural technology?

Vietnam currently consumes 11 million tons of fertilizers and approximately 35% of these are organic. There is a huge demand for organic fertilizers which is not yet being met by local production.

What are the challenges that need to be overcome to decarbonize the agricultural supply chain?

Bringing new products to the agricultural input sector takes time. Product registration, field trials, training, and demo farms are all part of the process, which require significant investment in resources and time. In farming, seeing is believing, so providing clear demonstrations of the benefits of our carbon-based fertilizers is a challenge that can be overcome with the right resources. The investment from Mekong Capital is critical to catalyzing this process.

What difficulties have you encountered, and how did you address them to attract Mekong Capital to invest in your company?

One of the key challenges is that carbon-based fertilizers are new to farmers. Transitioning to any new practice takes time. We had to conduct crop trials, demonstrations, and farmer training courses. Farmers need to see the results to believe in the product, but this process takes time. For example, rice takes three months to grow, so we need to invest significant time in these activities.

Another challenge was aligning our vision with potential investors. When I first met Ellen Van, principal at Mekong Capital and deal leader for the investment in HUSK, she mentioned that Mekong Capital was creating a new fund with the mission to regenerate soil, sequester carbon, and improve livelihoods. I thought, "Wow, did you read our website?", because this is exactly what we do.

The alignment in values and vision was clear, which inspired us to do the necessary work to demonstrate that we are a commercial enterprise capable of building value for our shareholders. Most importantly, our values are aligned, which was crucial in attracting Mekong Capital's investment.

After receiving this investment, how do you plan to allocate it?

There are several key areas where we will allocate the investment. Firstly, we will strengthen and streamline our existing operations in Cambodia.

Secondly, we will replicate our successful model in Vietnam by starting a new production facility and growing the business there. We have already begun hiring in Vietnam, with two team members already on board.

Thirdly, we will invest in product development. Our vision is to have 10 effective products by 2030 that suit different crops. We are starting with rice and coffee in Vietnam, two very strategic crops, but we plan to expand to other crops in the coming years.

What percentage of the market demand do you expect to meet?

If we can capture just 1% of the organic agriculture sector, we would already be selling 10 times more than our initial plans. Given the size of this sector, achieving 1% market share by 2030 would represent a huge opportunity. We are confident that reaching this milestone would demonstrate significant value to our investment partners.

You mentioned that your product will reduce fertilizer costs. Can you compare the cost of your synthetic fertilizer to traditional fertilizers?

Farmers typically compare costs on a per hectare basis, not per product. In our trials, for example with rice, we've seen a reduction in costs per hectare of 20%. This is the critical measure, not the cost per ton of fertilizer. Farmers use a range of inputs, and what matters most is the cost per hectare. We generally achieve a 20% cost reduction per hectare, coupled with an average yield increase of 16%. This means the net revenue increase can be between 16% and 20%.

With plans to build new plants in Vietnam by the end of 2025 and 2026, how do you plan to scale your operation to meet the growing demand? What key steps are you taking to ensure stability and market penetration?

Firstly, we envision establishing a new factory in the Mekong Delta region, partnering with a key rice mill that has the appropriate capacity. We are looking for a partner with around 20,000 tons of paddy throughput per year, similar to our operations in Cambodia. We aim to identify a rice mill committed to regenerative agriculture, even if they are not 100% organic.

We will build our operations by setting up the supply chain for the other ingredients we use. To support this, we have hired a new general manager with extensive experience in the fertilizer industry and in setting up factories. Additionally, we will develop a distribution network with key players in strategic sectors.

We already have a distribution partnership with ECOM, one of the world's largest coffee traders. Coffee is an interesting sector as it is seeking to decarbonize its value chain, and we are conducting trials with ECOM to demonstrate how much fertilizer use can be reduced.

Our strategy involves lean operations, and strategic distribution partners in value chains such as coffee, rice, cashew, and cacao. In the Central Highlands, we are also looking at horticulture, which presents a significant opportunity for some of our substrate products.

Could you share a bit about Husk's business results over the past years and the goals moving forward?

We started our business in 2017, and the first two years were focused on understanding the potential uses of rice husk. In 2019, we began our operations. In the very first year, we sold out of our products, starting from scratch. Since 2019, we have doubled our sales revenue every year and continue to do so.

In terms of our business results, we are also focusing on increasing our product margins through product development. Our sales revenue has grown year-on-year, and we are working on improving margins to reach industry standards for fertilizer products.

Vietnam represents a much larger market than Cambodia, and over time, we expect a significant portion of our business to be in Vietnam rather than Cambodia.

Farmers in many parts of Vietnam use chemical fertilizers. How does HUSK convince farmers to buy HUSK's products?

It does require a considerable amount of time and effort at the beginning to conduct trials and build demo farms, and a team to train and support distributors and farmers. This is necessary because seeing is believing, but HUSK believes that once they sign a distributor or successfully gain a new customer, the majority of them are retained as returning customers. This is evident by the fact we are constantly selling out of our biofertilizer products.

In the biochar industry, a B2B business does not require intensive branding and marketing activities. Customer trust is often built through word-of-mouth strategies. When farmers witness positive results in their neighbors' fields, they tend to follow. Consequently, HUSK also operates demonstration and trials near its distributors, serving as a strong marketing tool and a means to attract new clients.

HUSK will support their distribution partners with marketing materials, including website, promotional materials, and other digital campaigns as appropriate in the local language. This is adapted to the local context and provides marketing materials such as banners, posters, flyers, and HUSK polo shirts to distributors who are committed to or proactively using HUSK materials.

Another strategy is to train women as super farmers and carbon-farming ambassadors. HUSK will also educate those women on soil health and conduct on-the-ground sales, which made up 14% of sales in 2022.

In Vietnam, the main regions for marketing HUSK products are the midland plains for vegetables and coffee and the Mekong region for rice cultivation

What is HUSK's development strategy in the Vietnamese market?

Vietnam soil has been depleted and heavily polluted with inorganic residues from fertilization. We want to offer a climate positive solution to farmers.

Where does HUSK source its raw materials for production? What is the quantity sourced from Vietnam?

We aim to localize our production in Vietnam and only source from abroad whatever ingredients we cannot find in the market. We expect 90% of our suppliers will be from the region.

How do you evaluate the potential of the Vietnamese fertilizer market in general and the organic fertilizer market in Vietnam in particular?

The Vietnamese fertilizer market is the largest in the region and the one with most potential to shift to organic and good agriculture practices thanks to the government's commitment to decarbonize one million hectares of rice in the Mekong Delta.