Apr 4, 2016

ORGANIC PROFITS

Today the organic food market in India is growing at 25-30 per cent and a study says that the domestic organic food market would touch 1 36 billion by 2020 Let us see what opportunities it offers to franchisees

 

THE Indian market for organic food has been growing at a rapid pace over the last few years. With the rising health consciousness among the consumers in metro cities are the key factors for the growth. Prior conventional food, which involves use of chemical fertilizers and pesticides, organic food products are manufactured using natural products. As a result, organic food products are free from chemical residues and are healthier compared to conventional food products.

As organic foods have more beneficial nutrients such as antioxidants, than conventionally grown counterparts. In addition, people with allergies to foods, chemicals or preservatives often find their symptoms lessen or go away when they eat only organic foods. Organic food contains fewer pesticides such as fungicides, herbicides and insecticides. They are more fresh, tastes better. Organic meat and milk are richer in certain nutrients as the levels of certain nutrients, including omega-3 fatty acids, were up to 50 per cent higher in organic meat and milk than in conventionally raised versions. Organic food is also GMO (Genetically Modified Organisms) free.

Franchising The Best Route

Organic food is a prominent business sector for franchising and thus earning a good amount of revenue in return. With organic food getting recognition and easily available, the market is expected to witness remarkable growth.

“So far, our experience is good. Frankly, those who know the benefits of organic foods or already started using it at homes are the ones, who are associated with us as franchisees. These people understand the concept and know what consumers will demand in organic foods in future”, said Seema Dholi, Founder, Farm2Kitchen.

She further adds, “Ours is a simple and affordable model with good RoI. We have opted for the FOFO (Franchisee Owned Franchisee Operated) model as we want to focus on building a good back end supply chain for the organic produce and want to focus on it. With FOFO model, the franchisee will solely look after business in his/her area of operation and focus on customer service. For us, we will take care of maintaining the highest quality of the organic prod-ucts that will be offered through stores.”

However, Mukesh Gupta, Director Operations, Morarka Organic Foods Ltd says, “In 2009-10, we faced problems of lack of marketing support for organic farmers. It was therefore felt to set up a pilot cum demonstration enterprise for organic foods in India. As a result, model retail first 'Down To Earth' outlet was set up in Tardeo Mumbai, the first organic food store in Mumbai. Based on the success of this store, the franchisee model was evolved. In 'Down To Earth' franchisee model Morarka Organic offers products either directly or through distributors. The franchisee is provided 2-3 weeks orientation cum exposure to organic farms cum training in quality management of organic foods. A 'Down To Earth' store having 200-300 sq. ft area with Rs 2-3 lakh investment is good enough to set up an organic store. This kind of 'Down To Earth' store can earn 80-100 per cent return on investment in the first year itself.”

How to choose franchisees

Selecting an excellent franchisee is essential for building a successful and prosperous franchise network. Selection is the main part of overall franchisee recruitment process, which involves evaluating a franchisee's suitability for a business.

“We look for people, who are aware about the future of organic foods in India. The person/business that we want to associate with for franchisee stores should be ready to accept the challenge. And, also spread awareness about the benefits of organic foods over conventionally grown foods. They should be ready to learn everything about organic farming and foods, which we will provide them at training", pointed Dholi.

Benefits for franchise partners

Franchising provides benefits for both franchisor and franchisee. For franchisors, the principal benefit is the ability to use other people's money to expand the brand. The original franchise fee and ongoing royalties they collect allow franchisors to build their brand without sacrificing control to outsiders or the pressure of repaying lenders. With the fees and royalties, they even train and support franchisees, market and advertise the brand, improve the quality of goods or services and build the brand in the market.

Speaking on the same, Dholi adds, “We provide long term opportunity to everyone, who joins us. We call franchisees our partners as they grow with us in long run. I want to make Farm2Kitchen the number one destination for organic foods in India in next three to five years. I want everyone to eat organic, so working on it to make it affordable. All these factors will help the franchisees to do a good business for life.”

In addition, Veerendarr D Nahar, CEO, Satvikk Speciality Foods Pvt Ltd explains, “We offer guaranteed RoI plus investment safety by taking back ownership with reasonable terms, if they are not in a position to continue business for any reason. We also have a definite training program followed by appointing one experienced person till franchisee gets practically trained.”

Strategy for growth

The main challenge in selling organic food is the high margin expected by retailers. Therefore, Farm2Kitchen has strategically decided to use multiple platforms to reach out to consumers across the country. Farm2Kitchen will do omni channel retailing of organic foods across India and that's where we have decided to go for the franchisee model, so that Farm2Kitchen can reach to not only metros, but also tier-I & II cities.

Also, Gupta comments, “All 'Down To Earth' products are sold after passing through a rigorous quality management system. In addition to normal quality, the 'Down To Earth' also undertakes behavioural quality checks, introduced for the first time anywhere in the world. This is our biggest competitive strength.”

The present growth in the organic food is driven by rising health consciousness, changing lifestyles, mounting disposable income and accessibility of organic food products in retail outlets. At the same time, the government is supporting organic farming in the form of subsidies and also planning to roll out a comprehensive policy. As per the government data, organic farming is practised in 12 states in about 4.72 million hectares.

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