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Wellness Industry 2016-05-11

How supermarkets are grabbing bigger pie with organic food products?

Breaking the barriers, Indian consumers are shifting towards organic food purchases, making the supermarkets and big retail outlets its hub.

How supermarkets are grabbing bigger pie with organic food products?

With growing awareness and health consciousness among Indian consumers, appetite for organic food has stretched its presence in supermarkets. Though, available on high price, its demand and sale has seen a sharp rise, says supermarkets and food associations.

Some experts believe that better product availability and a powerful organic marketing campaign, set up by growers and retailers, have played a significant role in boosting growth of organic food demand.

“Indian market happens to be at a nascent stage. However, the trend is picking up really fast and Organic harvest has seen a growth of over 300 per cent in last one year. So, growth has been outstanding. It will keep on growing in the next five years,” said Rahul Agarwal, CEO, Organic Harvest.

Supermarkets pushing the growth

The mass-market retail outlet, which includes supermarkets, drugstores, and mass merchants, captures nearly half of the market sales of organic food. Other outlets such as gourmet stores, farmers markets, and community-supported agriculture programs comprise the remaining 10 per cent share, while the eCommerce portals capture another big portion in lion’s share.

Breaking barriers, organic food is going more mainstream, leaving specialty sections behind, as consumers are increasingly buying more of them. This rise in demand has pushed the organic food manufacturers to expand their retail presence.

“For our retail expansion, we hope to be present in high footfall areas in both metros and tier II cities. In the near future, we are also increasing our production capacity to meet the rapidly growing demand for SoulTree products,” Vishal Bhandari, Founder & CEO, SoulTree.

Market research

At present, there are about 95 per cent of the brands existing in top 10 metros like Delhi-NCR, Kolkata, Mumbai, Pune, Chennai, Bengaluru and other tier II cities. Growing at 25-30 per cent, the domestic organic food market is projected to touch $1.36 billion mark by 2020.

According to the Assocham and TechSci Research, in 2014, the size of the organic food market, which is highly unorganised, was $0.36 billion, and organic pulses and foodgrains took the lion's share of the market.

"The market is growing at 25-30 per cent at present. There is more potential to grow. The government is spending crores of rupees on organic farming. Despite this, not many people are aware of organic farming," said Mohanbhai Kalyanbhai Kundariya, Minister of State for Agriculture, at the sideline of an event, recently.

Nevertheless, a recent report released by Yes Bank said the global organic food market is expected to grow from $57.2 billion in 2010 to $104.5 billion by 2015, with a CAGR of 12.8 per cent. The report also said that India’s market for organic food including exports is currently valued at Rs 1,000 crore.

Consumer’s purchasing pattern

With rising spending power of the growing middle class, highly influenced with the social awareness and word of mouth publicity, Indian consumers are willing to spend on more sustainable food products like organic grains, pulses and other grocery items.

“Our consumer is highly educated, health conscious and cares for the environment. Most of our customers are more concerned about the environmental damage than anything else. Our customers are spread across India and are in the age group of 25 - 50+. Our average ticket size is approx 3,500+ for past 4 years,” said Mallesh Tigali, Founder & CEO, Purna Organics Pvt Ltd.

In order to grow its customer base, organic foods manufacturers and distributors are making some tactical adjustments that work well on marketing and promotions of the customers, while avoiding ‘a race to the bottom.’

Future growth

With the implementation of the Food Safety and Standards Act from February onwards, the demand for organic foods will only grow in the country claims organic food producers. The new law sets more stringent standards of food safety - raising the bar on the quality of food manufacture, storage, distribution, sale and import.

More growth is expected in future as the government is increasingly supporting organic farming in the form of subsidies and is also planning to roll out a comprehensive policy in this regard.

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