India’s ‘organic’ food factory is buzzing

With more than 15,000 certified organic farms, the organic food space in India is getting bigger – and on a path of becoming a $2 billion market.

   
India’s ‘organic’ food factory is buzzing

“If I say that organic farming was always there [in India], then I am not wrong,” says K Jayachandran, partner at Jaycee Organics LLP, Chennai-based producer of organic tea, honey and oils.

Conventionally, there was no use of chemicals, as it is now being used in the methods of farming. So, the concept was always there, but we just adopted chemicals for more yield, adds Jayachandran. 

In India, it was the Green Revolution that helped farmers to increase their productivity – although it came with certain tradeoffs. But over past few years, the idea of a chemical-free diet is fast catching up with consumers globally, including India – mostly among the urban and well-aware population.

As dynamics of the consumerism market is transitioning from a production-driven supply chain to a demand-based supply chain, the organic sector is growing strong. Consumers are now choosing products based on factors such as safety, quality, nutrition level, etc.

The mind-shift is also leading to a change in the way market operates. For instance, in 2018, Sikkim became 100 per cent organic state with all its farmland certified organic.  

As per the research firm IMARC, the Indian organic food market reached a value of US$ 704 million in 2018, which is expected to grow at a CAGR of 20 per cent – hitting US$ 2,091 million by 2024.

“It’s just we are going back to the basics. People are now once again adopting organic solutions as they are chemical-free and are healthy to consume in any way,” opines Sailesh Ashar, an organic chocolates maker, when asked the organic market growth in India.

SME Futures.com spoke to several industry stakeholders to get some insights on the overall industry.

Interestingly, today discussions around organic food have reached at the next stage. ‘Why should we eat organic food?’ – is no longer a question that consumer asks.

“Now the queries are diverse. Today, people ask about the authenticity of the products, whether they are certified or not, what are the health benefits,” states Pankaj Agarwal, managing director, Just Organik, a Delhi-based organic produce firm procuring from Uttarakhand farmers.  

Overall, the organic consumption seems to be increasing, and the export market is also showing positive signs. Agarwal believes that India, a land of 1.2 billion people, consumes only 0.2 per cent of the total organic produce, wherein in the US it is $50 billion market.

“Hence, the Indian market has immense opportunities to grow,” he further adds.

As per the Agricultural and Process Food Products Export Development Authority of India (APEDA), around 50 per cent surge is observed in organic product export in FY 2018-19, which was ₹ 5151 crore ($757 million). Indian flax seeds, sesame, soybean, tea, medicinal plants, rice and pulses such as arhar and chana gained popularity this season.

In FY2017-18, export market stood at $515 million, growing 39 per cent from $370 million worth export reported in previous financial year.   

“USA and European Union member-countries were the biggest buyers of organic products from India. There is a growing demand from Canada, Taiwan and South Korea in recent years, Germany is one of the biggest importers of Indian organic products. Now, many new countries are also taking interest.” 

Paban K Borthakur, chairman, APEDA, at an event
Startups ‘organic’ race  

With rise in organic consumption, the market has become a lucrative business. And, several startups have emerged in the space with new products and services, attracting consumers to turn organic.

One such startup is Mea Ame’s Organic Smokes. Focused on oral health and wellness, this Delhi-based startup is into herbal cigarettes.  

Conceptualized in 2015, the startup is run by Chhabra brothers, Gaurav,  Piyush and Nitin. Talking to SME Futures, Gaurav Chhabra, co-founder of Mea ame informs that it was the random idea that got transitioned into a successful venture.

“We currently have a presence in more than five countries. Our products include herbal cigarettes, organic smokes, Indian hem blends. We recently launched Canabese capsules also. We are a profitable company.”

In an absence of competition, Mea ame is looking for doubling growth in the next financial year. “Expectations for growth is never-ending. Our products are ingenious, they have advantages over traditional smokes and cigarettes. They are tobacco-free and helps wean off the habit with the least complications,” adds Gaurav. 

Infographic2- India’s ‘organic’ food factory is buzzing

In another story, Vivek Shah and Vrinda Shah – a Gujarati-origin couple quit their plush jobs in Silicon Valley – returned to India to embark on a career in organic farming. Together, they run 10 acres of an organic farm on the highway of Nadiad in Gujarat, producing organic wheat, Jamun, Banana, potato and other crops.  

In addition to organic vegetables and fruits, they produce organic banana chips if production is surplus using organic oil.

On the challenges, the couple inform that the menace pest attacks made is the major hiccup. To counter the issue, the couple has adopted inter-cropping and multi-cropping. “To prevent the pest attack, we also grow Tulsi and Lemongrass to increase immunity. Also, we are making use of farm waste as manure for our crops.” 

Both techies turned farmers are now imparting their knowledge to other people by offering courses and seminars in kitchen gardening and organic farming – working on the concept of ‘farm to fork’ model. 

‘Farm to Table’ in fashion 

Apart from all the attention the organic market is reaping, the demand for locally sourced produce in restaurants, markets and households has surged, lately. Organic consumers want first-hand experience of what they are having, to satiate the craving of local ingredients and flavours.

Farm to fork model has been introduced; and many farmers have even adopted it which is showcased in the form of organic pop-up markets in many cities.  

This model is an “innovative approach” that focuses on sustainable development for helping local food businesses find their niche. This is a social movement that promotes serving foods made from local ingredients in restaurants, fast food chains or households.  

Another reason why this concept has become the talk of the town is because it somewhat mitigates the middlemen chaos, and farmers get a full share. “India has more than 80 per cent of small and marginal farmers, among them only 2- 3 per cent are organically cultivating,” G Shyam Sundar, Student of Agriculture Research and co-founder of Urban Orchards, states.

Adding further, he believes the reason for less organic farmers and organic produce is its price, which costs twice the price of chemically grown produce. The role played by middlemen has made the production costs very high, which leads them hardly get any reasonable profit.  

Based on the Farm to Fork model, the team of four is working on motivating and helping Delhi and NCR residents to establish vegetable gardens on terrace and homestead, where they can start growing their veggies organically.

For each project they work on, costing depends on various factors such as crop area, number and variety of plants, organic pesticides they are using.  

“To preserve the rich cultural farming and indigenous varieties practised  for generations we should adopt ‘Farm to fork’ model by which we can remove the SME farmers from the clutches of middlemen and most importantly indigenous cereals and millets with very high nutritional content will reach the consumers at a cheaper rate,” Sundar notes.

Sundar’s startup, that shaped up from helping a retired IIT-Delhi professor in setting up a home kitchen garden, is now focusing on conducting workshops and establish kitchen gardens across schools and homes.   

Infographic3- India’s ‘organic’ food factory is buzzing

In short, the model is working towards increasing the habit of consuming locally grown food and Urban Orchards is just a glimpse of how ‘Farm to Fork’ concept can be converted into a business idea while various benefits which farmers can harvest through this ideology are: 

  • Money spent on food will drastically come down by reducing the number of stakeholders in the food supply chain. 
  • Reduces the Carbon footprint in the environment 
  • Greatly improves agro-biodiversity 

Based on the same philosophy, Bhumijaa is an organization promoting agriculture-based ventures and organic food and linking them to production and markets. The firm includes programmes such as agripreneurship programme, mentor connect, B2B exchange, market solutions, etc. 

Bhumijaa founder director Gauri Sarin firmly believes that farm to fork model is one of the best ways for organic Indian practitioners to get into substantial ecosystem.

“This model can create a strong ecosystem that will benefit the farmers and convert them into small businesses. Firstly, it connects the consumer directly to the farmer; secondly, it provides the best remuneration to the farmers; and thirdly, it removes the middle people from the entire value chain; and lastly, it allows having the best quality, healthy high nutrient traditional biodiverse food.”  

Bhumijaa founder director Gauri Sarin

Competing with the large food processing industry is often an impossible task for small, local farms. The farm-to-table movement has contributed to the economic development of local communities in many ways.

However, there are different views on the theory.

From the industry standpoint, everyone is talking about farmers connect and procuring directly from farmer to your plate. On the other side, organic players do not feel that it can be implemented widespread or change the way products are grown.  

Talking on whether or not farmer connect is a long-term strategy to follow, Agarwal says, “The concept is the latest buzz in the organic sector. To some extent, it can mitigate the middlemen who work as brokers but if you are in business they can’t be ignored.”

For the perishable produce, this model can work for some time. On the other hand, for non-perishable products you must have the processors and aggregators, he believes. While explaining why middle entities are important, Agarwal cites examples of Banana which is grown in South and Mango from North is exported across the country with the help of middlemen only.  

Chhabra from Mea ame, too, feels the same. He claims that farm to fork model is not for the large enterprises. “The procurement is not an easy task, there has to be someone in the middle to make it happen. An enterprise owner cannot go directly to a farm to procure things as this is not only a task in a business to do.” 

Additionally, ‘Ready to Eat’ food products have also made their way into the organic food market. Targeting the emerging class who prefer healthy and organic eating, plus don’t have much time to be in the kitchen, the RTE packaged foods are working like a charm for them.

Infographic4- India’s ‘organic’ food factory is buzzing

Brands like Sresta, Just Organik, Waah Organic and many more have a range of RTE meals, and they are constantly innovating to be on a competitive edge. The players contemplate that innovation is imperative to stay aloft.

“It’s a niche sector, all new ventures are accumulating in the limited size of the market. Thus, trimming each other’s share. We must keep innovating to tap the consumers’ demand as per the trends. We have also launched an RTE range. The idea was to have super ingredients combined in the healthy mix with good taste,” Agarwal informs.  

E-Commerce – a ladder to grow 

Today, e-commerce platforms are new drivers of growth irrespective of segment and is being explored more aggressively in the organic space too. Using e-commerce has not only made consumers aware, it has triggered the habit of reading the labels, which in turn increases the curiosity of their eating habits and compels people towards an organic lifestyle.  

“E-commerce has played a crucial role in ensuring the consumption of organics, it has ensured consumer awareness and made them realize that organic is good for health,” expresses Jayachandran.

Seeing the immense chances, key players such as ITC and Cargill too have ventured into the organic food segment. The presence of grocery e-commerce apps like Big Basket and Godrej Nature Fresh are capitalizing on this growth spurt, whereas almost all other organic food ventures have their presence online. For instance, Organic India aims at achieving a turnover of ₹500 crores by 2020.   

The missing element

While the organic market is growing, some stumbling blocks are hindering it from becoming a mass product. The key challenge the sector faces is higher cost of cultivation and its subsequent value chains, leading to high price markups. The market segmentation focus is also on affluent consumers. Hence, there is a clear need to put special efforts in bridging the gap between production and supply chain to reach the masses.  

“There is a major price disparity between the conventional and the organic food products which interrupt consumers to consider organic,” Agarwal tells. 

It [the price gap] can only be resolved when the gap in consumption of organic and non-organic can be reduced. Once it is done, there will be a pull in the market, demand will increase and retailers will be able to reduce their margins, thus bringing the price difference to a lower level, he points out. 

Producers of organic products are continually struggling to optimize the scale of their operations, while maintaining profitability. This is primarily because of the gaps in the regulatory framework for organic products in India.

Although FSSAI has come out with the ‘Jaivik Bharat’ framework. In addition to the procedural challenges on certification and quality assurance, the increasing costs of inputs and the elongated conversion period from conventional to organic farming are a few of the key challenges faced by the producers, most of whom are small or marginal farmers.

“There is a serious lack of money in the market. I feel there is a need for big players to enter into the field with big investments,”  Jayachandran  suggests.  

The organic food products processors, on the other hand, face significant resistance in the form of inadequate post-harvest facilities for organic products. Several measures need to be taken to avoid contamination and cross-contamination of the produce and the infrastructural capabilities of the country often prove to be inadequate.  

The marketing of organic produce comes with its own set of challenges related to global competitiveness and differences in global and national quality standards. Although there has been a marked improvement in the level of awareness regarding organic products, many consumers are unaware of its benefits, thereby providing no incentives for increased supply and resulting in organic products being priced higher than their conventional variants.  

“Due to the lack of awareness on certifications, consumers are confused about the money they are paying is for the authentic product or not as the prices of the organic products are a bit on the higher side,” says Ashar of Pascati Chocolates.  

Way forward 

Despite 0.4 per cent of land being used in organic farming in India, there is an untapped potential globally. As per the records, the growth in export and the domestic market is remarkable and organic farming has seen a drastic development.

As far as the competitive landscape is concerned, there are a handful of players operating in the domestic organic space – giving plenty of room for new players to become category leaders.

To succeed in this market, companies require the right seed to have a bumper organic harvest. This requires a complete and organized supply chain.

Also, the government aiming to double the farmer’s income can only be achievable when the focus is ensured towards the organic segment and to value-added to the end produce by the farmers. 






Trending

MSME state ranking

UP, Bihar outperform, Maharashtra tops with 15.26 lakh MSME registrations

capex cut by states

COVID-19: Capex cut by states to hit construction sector, says Icra

lending MSME coronavirus

Government exploring new financial lending institutions to support MSMEs: Nitin Gadkari

real estate property coronavirus

Realtors’ body asks PM for urgent relief

3 lakh crore MSME laon

Small businesses, retailers not registered as MSMEs eligible for emergency credit

Anil K Sood

Stimulus package is a repackage of old schemes which doesn’t address problems arose due to COVID-19 crisis, says Anil K. Sood

Nirmala Sitharaman on government's Rs 20 lakh crore economic package reaction

Sitharaman’s MSME booster package: India inc gives a thumbs up. But doubts faster implementation

COVID-19 Impacted Consumer Behaviour Reshapes Indian retail, Accelerates Future Trends

Embracing the new realities of retailing in a Covid-19 world

RBI governor coronavirus announcement

RBI announces measures; cuts interest rates, extends moratorium, exporters to get more liquidity

Fada news

FADA seeks re-inclusion of auto dealers under the MSME Act

retail sector impact coronavirus RAI news

Retailers association miffed at eco package, says emergent issues not addressed

BSE, NSE cut SME listing fee by 25 per cent

BSE, NSE cut SME listing fee by 25 per cent