The organic products market in India has been growing at a CAGR of 25 per cent and it is expected to touch 10,000-12,000 crore by 2020 from the current market size of 4,000 crore, according to a report produced jointly by Assocham and Ernst & Young.
The Assocham-EY joint study also estimated that the market size for Indian organic packaged food is expected to cross 87.1 cr by 2021 from 53.3 cr in 2016, growing at a rate of 17 per cent. A boom in Organic Product market is already started and the organic food industry in 2019-20 is expected to grow at a good pace. Below are the few factors which are helping in accelerating the growth of the organic food industry:
More Awareness and rise in Demand of Organic food has helped in increasing sales not only in Tier-I but in tier-II cities also. Now buyers in Tier-II & Tier-III also have more awareness about the harmful effect of chemical and pesticides. People have started looking for Organic products for themselves and especially for their kids.
Also, because of the increase in disposable income and awareness now families are spending more and more on their baby’s well-being and are ready to pay higher/premium price in terms of quality of the product.
After the success in Tier-I now Brands are marketing their products to customers in tier II & tier-III cities. Brands are approaching consumers in tier-II through Ecommerce, by using digital marketing options, franchisee model and through the mobile app.
A few years back, there were very few Organic Brands and few product variants were available while now there are many Brands are available not only in Tier-I but in Tier-II cities as well. With the increase in the availability of Organic products to the consumer is also one of the factors for the increase in the sale of Organic products in Tier-II.
Online availability of organic products in Tier-II cities and shifting consumer preference towards organic food are among the major factors expected to boost demand for organic food products in India during the forecast period. Expanding marketing and distribution channels coupled with an increasing number of health-conscious people in tier-2 & tier-III cities is also anticipated to fuel organic food consumption in India until 2022.
While the sales of Organic products are increasing in Tier-II cities but there are various challenges involved in selling organic products. One of the major challenges comes in selling Organic perishable items like Fruits & Vegetable are the mismanagement of the supply chain. It becomes difficult to fulfill demand as per requirement. There are various costs associated with procurement of Organic FnV from Organic Farm of other states in terms of logistics, damages during transit and remaining stock which does not get a premium price.
High Price Markups for Organic products than conventional products is also one of the major factors affecting the sale of organic products. While the high price is because of the cost associated with the product like procuring in bulk, the logistic cost involved in the procurement of Organic products from Certified Organic farms and then distribution within the city increase the cost of the product.
Further, lack of trust in Organic Products of consumers affect sales and People doubt whether Organic Produce in India is really Organic or is it really worth to buy Organic products. People are buying only on their trust basis and the earlier consumer had almost no way to check/track whether the products are really produced organically. But things are changing from last 2-3 years and FSSAI has also implemented regulation and guidelines for Organic foods from July 2018 and every seller has to follow labeling and other regulations to sale Organic products. Also, sellers are now more transparent to their consumers and apart from certification, they are sharing test reports, farm/farmer details and access to farms anytime to check/visit to gain the trust of the consumer.
This article is contributed by Chirag Arora, Founder, Organisch Overseas Pvt Ltd