Organic Food Industry in India Essay Example for Free

Organic Food Industry in India Essay India today is on the threshold of an organic revolution and Indian Organic Food industry though at a nascent stage, has experienced steadfast growth in past few years. The country’s budding organic food market is transforming into world’s fastest growing organic food market backed by a shift in consumer behavior and spending patterns. Trends in the Industry Organic Food Stores New Varieties on offer Rising Investments Marketing Techniques Organic Food Industry has been blossoming in India. The industry to which overseas demand/exports was oxygen to breathe will be experiencing a colossal change in the consumption pattern in times to come. With growing health awareness among the people coupled with rising disposable incomes and support from Indian government, organic food will surely secure a permanent place in Indian households. Evolving perception of organic food from being a luxury only for elite to a necessity will drive the domestic consumption. Also, overseas demand for Indian organic food will remain robust and continue to drive the industry to rare heights. Indian Organic Food industry currently pegged at USD 189 million in 2011 is stated to grow at a CAGR of ~45%, to reach USD 1733 million by 2017. SCOPE OF THE REPORT Indian Organic Food Industry at a glance Emerging trends in the industry like organic food stores, Rising investments, Marketing techniques etc Demand Supply scenario encompassing production, demand export numbers and projections Factors driving growth, Issues Challenges Government Regulations Initiatives in Indian market Major players Forecasts REASONS TO BUY To understand the various factors which are fuelling the growth and those which are/will be critical for the industry performance in the near term Comprehensive report covering all the aspects required to understand the industry performance and future prospects. The report elucidates the current market scenario of the industry and forecasts key parameters which helps to anticipate the industry performance A burgeoning organic market beckons to India’s rural farmers Indian farmers have started to reap dividends from their budding interest in organic farming. It wasn’t long back, around seven years ago, when Indian farmers started to go organic. In 2006-07, around 4. 32 lakh ha reported organic produce — a large portion came from wild and non-agricultural land — which has now reached around 11 lakh ha, as per the recent report ‘The World of Organic Agriculture, 2013’ by FiBL and IFOAM (Research Institute of Organic Agriculture and International Federation of Organic Agriculture Movements). â€Å"The growth rate has reached around 20% per year, much higher than early expectations,† says Krishan Chandra, director, National Centre of Organic Farming. The current market for organic foods in India is pegged at Rs. 2,500 crore, which according to ASSOCHAM, is expected to reach Rs. 6,000 crore by 2015. It’ll still leave us at 1% of the global market. Thus, a huge potential is seen in the nascent Indian organic sector. â€Å"Apart from states like Sikkim or MP, we’re seeing a rising interest in Gujarat, Karnataka, Andhra Pradesh, UP and Bihar,† says Chandra. India outnumbers every other country in terms of organic producers with an estimated 5,47,591. Organic products, which until now were mainly being exported, are now finding consumers in the domestic market. â€Å"Even Tier II cities like Nagpur, Allahabad, Gorakhpur and Bhatinda show an increase in organic consumption,† says Sunil Kumar, AGM at Morarka Rural Research Foundation. According to a survey of 1,000 consumers in ten cities done by Morarka Organic Foods, around 30% of Indian consumers preferred organic products and were even prepared to pay 10 to 20% more for them. â€Å"Soil abused by chemical fertiliser excesses takes more time to produce comparable yields. Although, the cost of organic cultivation is much less, reducing cost incurred in purchasing costly inputs,† says Rohitashwa Ghakar, Project Head, International Competence Centre for Organic Agriculture. * Regions reap their rewards North Growth: In UP, organic certification has gone up 36 fold in the last six years. The area under organic cultivation rose from 3,034 to 111,644 ha. However, most of the organic farming is under a corporate-farmer contract. In Haryana, with hardly any takers till 2008, organic crops today are produced in more than 10,000 ha. However, Punjab farmers have shown little interest. Of the total 4046 lakh ha of land under cultivation, only a minuscule portion 2104 ha is under organic farming. Popular organic crops: Nearly 40,000 farmers in UP are growing organic wheat, rice, pulses, maize, and numerous herbs like Tulsi, Ashwagandh, Aloe Vera. Haryana grows mostly vegetables like tomato, beans, or fruits like summer-squash, melons and mangoes. â€Å"Although I sell the produce in Delhi, most of it goes to retail chains†, says Kanwal Chauhan, a farmer in Sonepat. Challenges: Punjab State Farmers’ Commission consultant Dr PS Rangi feels that organic farming cannot feed the entire country. â€Å"One can grow vegetables or some wheat for personal use, but it can’t be grown on a large scale. † (By Pankaj Jaiswal, Rajesh Moudgil and Gurpreet Nibber) South Growth: In Kerala, at least 40 % of the farming is organic and the state is set to become the second fully organic state after Sikkim in 2016. From 7,000 ha in 2007, the state has spread organic cultivation to 16,000 ha. In Andhra Pradesh another 11,500 ha would be added to the current 4273. 54 ha this year. In Karnataka, under the organic programmes of the state, an area of 1,18,676 ha has seen organic farming benefiting around one lakh farmers, said R Anuradha, agriculture department. Popular organic crops: More than grains and pulses in Kerala organic farming is prevalent in cash crops, rice and vegetables. In Andhra’s smaller towns and villages, people are slowly shifting to organically grown rice, ragi and other millets. In Karnataka, crops like pepper, vanilla, coffee, nutmeg — which are not available in other parts of India — are a popular choice. Challenges: In large tracts of the state’s tribal belt like Karnataka and AP, the farmers have engaged in slash/burn farming for generations and do not use any pesticide or fertilizer. There have been no efforts to take this into account. (By Ramesh Babu, Ashok Das and Naveen Ammembala) North East Growth: 30. 92 lakh ha out of the net cultivated area of 43 lakh ha in the region have never seen the use of chemical fertilisers. Almost 89% of farmland is categorised as organic in Mizoram, which passed an Organic Act in 2004. Whereas Meghalaya, a major strawberry producer, eyes a turnout of 500 MT from the current 250 MT a year. Popular organic crops: Much of the area in the region is taken up by paddy, vegetables and fruits such as grapes. The more prosperous farmers are into cultivation of medicinal plants, rose and anthurium, primarily for export. â€Å"Mizoram has become the largest anthurium flower producer in India, owing to almost 98% of women anthurium growers,† said Samuel Rosanglura of Mizoram’s horticulture department. Challenges: Most state governments promote vermi-compost and manure in the region since bio-fertilisers and bio-pesticides are difficult to access. (By Rahul Karmakar) West Growth: Gujarat has seen substantial growth in organic farming. It currently utilises around 42,000 ha under organic farming. Maharashtra has been a front runner in organic farming with around 6. 5 lakh ha under it, a huge rise from 18,786 ha in 2005-06. In Rajasthan, there has been a ten-fold increase. From around 22,000 ha in 2005-06, the state has taken a leap to 2,17,712 ha. Popular organic crops: Gujarat grows organic wheat, pulses and fruits like mango, chikoo and papaya. While cotton, turmeric, ginger are some crops grown in Rajasthan. In Maharashtra, cotton, cereals, fruits dominate the organic farming scene. The state has initiated a pilot project to grow grapes that will produce organic wine. Challenges: â€Å"Tribals who hardly use chemical fertilisers are left out of organic benefits,† says Kapil Shah of Jatan Trust that promotes organic farming. (By Mahesh Langa) Yoav Lev was a 22-year-old backpacker when he first came to India in 1987. A graduate from an agricultural boarding school in Israel, he came seeking inner peace from his spiritual guru, the late H. W. L. Poonja of Lucknow, better known as Papaji. The quest was to find my true purpose and true self, he says. He eventually stayed on in India, taking on a new name, Bharat Mitra, and is currently the Founder and President of Organic India, one of Indias leading organic foods companies. It ended 2012 with Rs 60 crore revenues and hopes to reach Rs 90 crore this year, with about half of its sales in India. Five years ago, 75 per cent of our revenue came from exports and the rest from the domestic market. Now both markets have equal share:Raj Seelam Photo: A Prabhakar Rao Organic foods are those made from agricultural products grown without the use of pesticides or chemical fertilisers. It was from Papaji that Lev learnt the healing power of tulsi (basil plant). By 1997, he had begun cultivating three types of tulsi organically in Azamgarh in eastern Uttar Pradesh. In 2006 he launched Organic India with tulsi tea as its flagship product. Today, the company makes 18 different flavours of tulsi tea and 33 different herbal formulations or supplements, which are said to have medicinal value. He is gearing up to launch a complete range of organic food items, including rice and pulses. We are in the final stages of a very promising joint venture to launch a comprehensive range of products both for the Indian market and for exports, says Lev. He prefers not to reveal the name of the well known Indian company he is negotiating with. Lev is not alone. A clutch of entrepreneurs in India is betting big on the domestic organic food market . Consider Raj Seelam, an Indian Institute of Management Ahmedabad alumnus. When Lev first took up tulsi cultivation, some 1,200 km down south in Hyderabad, Seelam was still selling pesticides and fertilisers. From 1988 to 2000, he worked in the farm inputs division of E. I. D Parry, a Murugappa Group company, one of the largest industrial groups in India. It gave me a chance to interact closely with farmers and see the havoc that indiscriminate use of pesticides can create, he says. This spurred him to consider organic farming, even though he was aware agribusinesses rarely succeed in India, because of low margins and excessive government control. Today, his company, Sresta Natural Bioproducts, sells a range of 200 organic products in India and overseas from rice, pulses, sugar, and juices to breakfast cereals and jams. Five years ago, 75 per cent of our revenue came from exports and the balance from the domestic market. Now both markets have equal share, he says. Indeed, the demand for organic foods in India has seen a sharp growth in recent years. While earlier, organic food producers primarily aimed at exports to Europe and the United States, there is now a gradual shift. The demand for organic foods has been growing and today we stock a range of around 38 different organic foods in 40 stores as against just about half a dozen stores three years ago, says S. Jagdish Krishnan, Chief Operating Officer of the retail and bakery divisions of Heritage Foods, an organic food company with a big presence in Bangalore, Chennai and Hyderabad. Most of the big retail chains now stock organic products, including Godrej Natures Basket, Hyper City, Food Bazaar, More, Nilgiris, Spencers and Tesco Starbazar. While no of-ficial figures are available, industry estimates put the organic food market within India at close to Rs 100 crore, having grown five-fold in the last six years. When Seelam began organic cultivation in 2004, not a single domestic retailer was willing to stock his products. They feared stocks would not move, since organic foods are significantly more expensive than conventional foods. That is partly due to higher processing costs, since they choose to eschew chemical additives, as well as higher packaging costs, to ensure a reasonably long shelf life. A kilo of Sona Masuri rice, a well known brand, for instance, sells at Rs 40 per kg while organic rice of the same variety costs Rs 60 per kg. Again, tur dal (a commonly used variety of pulses in India) is available at Rs 90 per kg while its organic version costs Rs 140 per kg. This is despite the doubling of prices of these commodities in the past three years, while the organic variants have stayed at almost the same price levels. Seelam was forced to focus on exports. But unwilling to give up on the local market, he set up his own retail stores in four cities Hyderabad, Bangalore, Pune and Chennai to promote organic products. Today, almost every major retail outlet is willing to stock his products. He has a presence in close to 40 cities and towns, ranging from Patiala in the north to Guntur in the south, and broke even last year. So, why have domestic consumers taken to organic foods despite their cost? Mukesh Gupta, Director of Morarka Organic, which mainly focuses on the domestic market, attributes it to rising disposable incomes and improved awareness about the health benefits of organic foods. From 2007 to 2012, the average middle class income in India has shot up. The consumer is willing to pay more for good quality food, he says. Between 2007 and 2012, the average middle class income in India has shot up. The consumer is willing to pay more for goodquality food: Mukesh Gupta Photo: Vivan Mehra/www. indiatodayimages. com The demand for organic foods will only grow in India, organic food producers claim, with the implementation of the Food Safety and Standards Act from February this year. The new law sets more stringent standards of food safety raising the bar on the quality of food manufacture, storage, distribution, sale and import. The stress on quality under the new Act will push up prices of foodstuff made using conventional techniques, reducing the price differential with organic food, and boosting sales, asserts Gupta. However, consumers would do well to ensure that they only buy certified organic products, say producers. Organic food products manufactured in and exported from India are marked with the India Organic certification mark issued by certification agencies accredited under the the National Programme for Organic Production (NPOP) and monitored by the Agricultural and Processed Food Products Export Development Authority (APEDA). Most of the ing organic food companies in India voluntarily opt for this certification, though it is not mandatory for domestic sales. The demand for certified organic foods has been growing since 2001. These are produced by about 570,000 small farmers in India with 500,000 hectares under cultivation, says National Programme for Organic Production (NPOP) Organic products are grown under a system of agriculture without the use of chemical fertilizers and pesticides with an environmentally and socially responsible approach. This is a method of farming that works at grass root level preserving the reproductive and regenerative capacity of the soil, good plant nutrition, and sound soil management, produces nutritious food rich in vitality which has resistance to diseases. India is bestowed with lot of potential to produce all varieties of organic products due to its various agro climatic regions. In several parts of the country, the inherited tradition of organic farming is an added advantage. This holds promise for the organic producers to tap the market which is growing steadily in the domestic market related to the export market. Currently, India ranks 33rd in terms of total land under organic cultivation and 88th position for agriculture land under organic crops to total farming area. The cultivated land under certification is around 4. 43 million Ha ( 2010-11). The Government of India has implemented the National Programme for Organic Production (NPOP). The national programme involves the accreditation programme for certification bodies, norms for organic production, promotion of organic farming etc. The NPOP standards for production and accreditation system have been recognized by European Commission and Switzerland as equivalent to their country standards. Similarly, USDA has recognized NPOP conformity assessment procedures of accreditation as equivalent to that of US. With these recognitions, Indian organic products duly certified by the accredited certification bodies of India are accepted by the importing countries. PRODUCTION India produced around 3. 88 million MT of certified organic products which includes all varieties of food products namely Basmati rice, Pulses, Honey, Tea, Spices, Coffee, Oil Seeds, Fruits, Processed food, Cereals, Herbal medicines and there value added products. The production is not limited to the edible sector but also produces organic cotton fiber, garments, cosmetics, functional food products, body care products, etc. EXPORTS India exported 86 items last year (2010-11) with the total volume of 69837 MT. The export realization was around 157. 22 million US $ registering a 33% growth over the previous year. Organic products are mainly exported to EU, US, Australia, Canada, Japan, Switzerland, South Africa and Middle East. Oil Crops (except Sesame) leads among the products exported (17966 MT).