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Business Growth 27 Sep 2014

Organic food market in India to reach Rs 7,000 cr by 2015

The high prices of organic foods not only affect the demand but are also the biggest impediment to sales.

Explaining the reason for the higher percentage of export, Krishan Guptaa, Global CEO, Organic India, says, “Market dynamics in India is different from that of other countries. In India, we are retailing these products at much lower prices. To give you an example, we sell our products here for $ 3 while the same product is retailed in the foreign markets at approximately $ 22. This is a huge price difference,  and as such, our real margins come from outside the Indian market.”

 

The high prices of organic foods not only affect the demand but are also the biggest impediment to sales. If a household switches over completely to organic food products, the extra spend comes to around ` 2,000 to ` 2,500 per month, which has restricted the demand of organic products to families with higher disposable income living in the bigger cities of India.

 

Growth drivers in organic category

 

The organic food market in India is expected to grow from ` 675 crore in 2010 to ` 7,000 crore by 2015 with a CAGR of 60 per cent. Changing lifestyle of today’s consumers, rising health awareness, higher disposable income and increasing number of modern retail outlets across the country are the major growth drivers for the organic food segment. “We are witnessing growth in terms of both the customer base and the consumption trends. We are, therefore, constantly working towards bringing a greater variety to the market. We started with 70 products in our range in 2004; today, we offer more than 300 products and are still growing,” says Ashima Agarwal, Category Head – Organic Foods, Fabindia.

 

Guptaa shares, “We started Organic India in 1997 with sole purpose to keep all – farmers, Mother Earth, manufacturers, associates and consumers – in a win-win position. We work closely with farmers, assuring them to pay premium prices so that they don’t suffer financially and give-up the organic method of farming.”

 

Certification of organic product

 

Organic food is one of the focus areas for the Indian Government. The National Programme for Organic Production (NPOP) provides an institutional mechanism for the implementation of National Standards for Organic Production through a National Accreditation Policy and Programme. Agricultural and Processed Food Products, Export Development Authority (APEDA) is the regulating authority for the same. APEDA governs each process before a product is labelled ‘organic’ and retailed. The NPOP standards for production and accreditation system have been recognised by the European Commission and Switzerland as equivalent to their country standards.

 

Growing awareness will help 

 

Over the years, there has definitely been a lot more discussion and awareness about going green, but the Indian consumer is still wary. Going green is not an easy task; it’s a lengthy process and needs time and patience. “Over the last five years, the awareness and acceptance of organic food has increased in India. The increase in organic food consumption is evident from the fact that many organic food stores (inclusive or exclusive) are spurring up in bigger cities,” shares Pratichee Kapoor, Associate Director – Retail, Technopak.

 

Agarwal says, “We sell our products under three categories – Green, Blue and Yellow.  The green symbol is used for products that have been certified organic by an external accredited organic certifying agency, while blue denotes products that are under conversion for organic certification. Yellow marks products sourced from farms that have cultivated these naturally, without a history of chemical use.”

 

Organic products get 2-3 per cent shelf space

 

In India, the organic market is still at a nascent stage and has a long way to go. Today, all major hypermarket and supermarket retail chains, including Spencer’s, Fabindia, Hypercity, Spar, Nature’s Basket, Namdhari Fresh, Le Marché and Nilgiri, have a dedicated shelf for organic food. These modern retail stores are continuously increasing shelf space for organic food products, which is still a small part of overall business. “In the last few years, organic food has captured a shelf space of about 2-5 per cent in modern food retail. On an average, there are about 100-200 SKUs of organic food available in any retail chain offering organic food products,” says Kapoor. Apart from the modern retail network, organic food is also available through exclusive or producer owned stores in bigger cities. A few of such stores are Organic India, Live Organic, Sresta Naturals, Pristine Organics and Monarka Organic among others.

 

“In order to reach out to a wider audience, we are selling our organic foods not only through our retail outlets across 63 cities in India but also through our online store www.fabindia.com.  This has enabled us to offer customers an even easier shopping experience, wherein the range of products is just a click away,” says Agarwal.

 

Seeds of progress

 

Organic farming is simply a technique, which uses the cycles of nature to produce food. India has always been known for its traditional farming techniques but somewhere we are losing it in the name of advance technology and high product yield. But with the help of some NGOs and selective players in the organic food category, India is rediscovering its old heritage now. “With the growing awareness among consumers, the organic food sector shows a considerable potential for growth,” says Agarwal.

 

“The organic food sector requires having larger scale investments to grow their operations and facilitate marketing activities, along with better distribution system,” says Kapoor. The rise in disposable income and health awareness is a positive indication for this category. “Now we are sure that the acceptability of organic product in India is increasing and we also want to grow our business accordingly. In the next five years, we see ourselves growing into a 

` 500 crore company,”  adds Guptaa.     

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