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INDIA EDITION

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Budding Market For Organic
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The category is sprouting fresh retail opportunities for grocers
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Cover Story

Budding Market For Organic
Organically grown food products are sprouting fresh retail opportunities as grocers begin to dedicate shelf space to them, but the organic market is yet to reach full bloom. Shanti Padukone delves into this segment to understand the advantages and challenges at the retail end
With inputs by Juhi Sharma and Roshna Chandran

I

t’s been some time since the urban Indian woke up to the potentially life-threatening effects of an unhealthy lifestyle. Since then, the focus has been on healthy living, be it imbibing eco-friendly practices, reducing pollution, or reassessing one’s lifestyle and food choices. Over the years, consumers have been consistently exploring newer avenues to eat and live healthy -— from embracing gluten-free food products to becoming vegans.It is these consumers who are driving the organic industry. The estimated size of the world’s organic food and drink market is over USD 60 billion, where the biggest contributors are North America and Europe with a 49 and 48 percent share, respectively. The estimated year-onyear growth of this market is 10 percent, with India’s estimated contribution to the world organic export market about 1 percent. A report released by Technopak Advisors in 2012 states that India ranks the 7th largest in the world with a total of 1.5 mn hectare under organic production. In fact, in the last six years, land under organic cultivation has increased by almost 250 percent. By 2015, the organic

food market is expected to grow to Rs 7,000 crore with a CAGR of 60 percent from Rs 675 cr (including exports) in 2010. Currently, about 85 percent organic products produced in India are exported to European and Asian countries, with the balance 15 percent available for domestic consumption, which has been pegged at approximately Rs 200 crore. Currently, the organic food industry is concentrated in the metros, with about 95 percent of the brands having their presence in top cities such as Delhi (NCR), Kolkata, Mumbai, Pune, Chennai, Bangalore, and other tier 2 towns. The major organic products retailed include cereals,
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pulses, vegetables, fruits, confectionery, snacks, bakery, non-dairy beverages, meat and baby foods. Organic India, Navdanya,and Morarka Organic Food are some of the leading players.

Demand and availability

Increasingly available organic products that are being picked off the shelves are catching the eye of the retailers and suppliers alike. There is greater availability and better accessibility as health-conscious consumers drive demand. But the segment has been receiving a lukewarm response, even though the concept of organics is not new to Indians. According to Swati Maheshwari, Co-Founder of the brand Rustic Art, Indians lived a completely organic lifestyle for centuries since everything was sourced from nature. However, when Western culture began to influence our lifestyle, use of synthetic products became rampant. It is rather ironic that India needs to re-learn its own philosophy and culture. Says Kishan Guptaa, Director and Global CEO of Lucknow-based Organic India, “Organic food is not a new phenomenon, during the ancient age people consumed natural and fresh food, which was grown without the use of chemicals and fertilisers. It is only in the last few years, we have become accustomed to using and consuming chemicals in our food. In fact, in some far flung villages, farmers are still growing and consuming organic food, as they do not have money to purchase chemicals for their farms. Through organic food, we are trying to bring the same pure and naturally grown food to the consumers for healthy life. Experts can help in spreading the knowledge in favour of consuming organic food, which will propel growth in consumption and sales.” “In India, environmental concerns, impending health hazards and better farming practices have led to the promotion of organic farming,” says N Balasubramanian, CEO, Sresta Bioproducts. “Consumers are becoming aware of the dangers of non-organic food ingredients in everyday food, and more people are learning about the harmful chemicals and pesticides found in non-organic food. “Several other factors support the growth of this niche market,” says Sunil Kumar, AGMSales & Marketing, Morarka Organic Foods. “These include the increasing number of players in the segment; aggressive marketing and promotional activities; increasing awareness and rising disposable incomes; and the increasing number of lifestyle diseases and cases of food adulteration.”
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Customers do not understand the difference between organic, natural, and chemical-based products. Maybe that is why there is such an imbalance in the supply and demand of these products
– Sanjeev Azad, Conscious Foods

Says Abhinandan, Director of Bangalorebased Brown Tree, “Eating is one of the most important events in everyone’s life. The quest for healthy life always starts with healthy food and the diet that one takes.Concept stores for health food such as ours offer a healthy lifestyle to consumers.” “Organic food has been always perceived as the food of the rich and famous. So far, we have seen their presence in only specialty stores, targeted at the affluent consumers, and offering only the exotic variety,” says Varun Gupta, CEO & Founder, Pro Nature Organic Foods, who in 2006, saw the potential in the domestic market and broke the norm by launching a range of every day staples and placing them in every outlet for potential consumers, irrespective of their socioeconomic status. “My aim is to make organic food the first choice for all consumers in India,” he declares.

“Retailers would say that this category has limited buyers due to high prices. But today, I feel organic is a key differentiator on retail shelves. However, the range is not complete, as organic alternatives to jams, milk, eggs, pickles, fruits and vegetables are still not widely available,” he adds.

Natural, not organic

According to the US Food and Drug Administration (FDA), ‘organic’ refers not only to the food/product itself but also to how it has been produced. The raw materials of such food must be grown and processed using organic farming methods that recycle resources and promote biodiversity — two key elements of environmentally sustainable agriculture. Crops must be grown without using synthetic pesticides, bio engineered genes, petroleumor sewage-sludge based fertilisers. Moreover, organic livestock

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The strategy is to focus on reliable, trustworthy sources of organic products, and consistently offer them to regular customers
– Geetha Madhavan, BigBasket.com
must have access to the outdoors and be given no antibiotics or growth hormones. Finally, organic foods may not be irradiated. Apart from this, organic food is the result of a product harvested from soil that is not abused or is clear of abuse after several years (the number of years differs with each certifying body). Moreover, the land around this soil should be contamination-free, and the aerial fall out of chemicals minimal. That’s why organic food will not be homogeneous to look at prior to processing, nor will the produce be as much as in a conventional harvest. According to FDA, the term ‘natural’ applies broadly to products that are minimally processed and free of synthetic preservatives; artificial sweeteners, colours, flavours, and other additives; growth hormones; antibiotics; hydrogenated oils; stabilisers; and emulsifiers. Moreover, these products may not necessarily be cultivated in contamination-free soil. As a result, all organic food is natural but not all natural food is organic.

Growth in domestic consumption

In the last five years, organic agriculture has developed rapidly in India and has become

an attractive opportunity for most developed countries to source organic products from. There are about 230 to 250 companies involved in organic export from India, which exported close to 50,000 tonne of organic products in 2010. Agricultural and Processed Food Products Export Development Authority (APEDA) is targeting exports of organic food worth 1 billion dollars in the next five years as Indian produce is receiving wide acceptance in many mature markets of the US and Europe. In terms of domestic consumption, the growth chart is rather slow. The pattern of organic food consumption in India is very different from that in developed countries. In India, consumers prefer organic food because of the health benefits it has to offer. Marmalade, basmati rice, fruits, honey, tea, spices, medicinal and herbal plants, account for 98 percent of the total organic food basket. The other products that contribute to the remaining 2 percent are oil crops, coffee, pulses and value-added food products, amongst others.

Organic Food Consumption

Examples of Modern Retails offering Organic Food Modern Retailers Average store size (sqft) 30,000 - 35,000 15,000 – 25,000 % of shelf space for organic food 7-8 2-5 Avg. number of organic skus 400 250 Existing atores (nos) 9 Expansion Plans

co

L ns oca um l 15 pti % on
Export 85%

Spar Retail Spencer’s

Plans to open 13 stores by 2013

200 Plans to open 20 to (including 30 25 hypermarkets by large formats) 2012 14 30 by 2013

Godrej Nature’s Basket
SOURCE: APEDA

1,800 - 2,500

3-5

200

Fab India

400 - 8,000

5-8

>100

142

-

Country-wise Export (%)

Exclusive Organic Food Stores in India Retailer Organic India Brand Name Organic India Farmers Association 20,000 farmers Store (Nos) 6 own stores+ other retail stores 350 stores (owned + others) Through 15 + modern retail stores 7 own stores Expansion Plans 20 exclusive stores by 2013 Another 650 by 2013 14 Expanding in mid market retail segment

Others* 15% Japan 5% EU countries 60%

Sresta Naturals Pristine Organics Morarka Organic

24 Letter Mantra 8000+ farmers across 25,000 acres Beginnings Down to Earth >2.5 lakh farmers

US 20%

Navdanya Navdanya
* OTHERS INCLUDE CANADA, AUSTRALIA AND EAST ASIA, SOURCE: APEDA

5,00,000 farmers 20,000 farmers across 60,000 acres

7 own stores Distribution through modern retail

Ecofarms India

Ecofarms

SOURCE: FOOD & AGRICULTURE OUTLOOK REPORT (2012), TECHNOPAK

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According to N Balasubramanian, with the advent of organised retail, it has become easier to talk to the right target audience which is health conscious and willing to eat good food. Increase in awareness levels and product availability is

helping the category scale up. This also builds loyalty because once a customer starts eating organic food, he/she continues to do so because it tastes better than the conventionally grown food, and being free of pesticides and chemicals

is more wholesome. What’s more, the organic/ natural products industry is fashion driven, as it is considered ‘cool’ to be eco friendly, with the young generation driving its acceptance.

Sunil Kumar
By Juhi Sharma

AGM - Sales & Marketing, Morarka Organic Foods How is competition growing in this segment?

Q& A

What are your observation about India’s organic food market?

In the last 4 years the market has grown by over 100 percent year-onyear. Fours years ago, the domestic organic food market was around Rs 300 crore, and now it is over Rs 2,500 crore. Although organic food is a niche market, it is seeing an increasing number of players, aggressive marketing and promotional activities, and a significant consumer shift towards it as the segment offers a healthier food choice.

With growing competition, every player is trying to increase the knowledge and awareness about organic food. Competition is also driving suppliers to expand their product portfolio, especially in categories where they are not present and gain the first mover advantage. So, we perceive competition differently, rather, more positively.

Tell us about your products and retail distribution.

We have around 100 categories and 300 food products. We do not operate in non-food, FMCG products like detergents because in India organic detergents are still not accepted. The FMCG space is occupied by Ayurvedic and herbal formulations. Our products are distributed through our exclusive franchisee retail stores (more than 58 pan-India) under the brand name, Down to Earth; our products are also being supplied to more than 700 traditional retail stores and more than 500 modern retail stores across the country. We have recently tied-up with Central Police Canteens which are present across India, and with Sodexo, whose meal passes will carry slogans promoting Morarka. We will also be supplying to Vaishno Devi Shrine Board and will also put up stalls at the pilgrim centre. We have tied-up with restaurants such as the American Embassy’s restaurant, Have More at Pandara Road, Delhi, and Mr Brown Bakery in Lucknow. Retail contributes 48 percent to our sales, 25 percent comes from bulk supply and the rest from our international business. We have three packaging and processing units in Jaipur, and the upcoming fourth will be the largest plant in Asia.

What is your average store size and return on investment?

On an average, Down to Earth store size is between 400 and 1500 sqft. For the first six months of opening a store, we do not expect any ROI because our fixed cost is high. But from the seventh month onwards an investment of Rs 3 lakh in a tier 2 or smaller city can generate a profit of Rs 40- to 50,000 per month for the franchisee. In case of tier 1 cities the investment cost would go up to Rs 5 lakh. So, ours is a self sustaining, affordable, and easy-to-operate business model.

What does Morarka’s tie-up with farmers entail?

We have more than 1.5 lakh farmers associated with us. The government gives the farmers and us subsidies for organic farming on farmer land, for instance, we have more than 670 farmers associated with us in Doda village of Jammu & Kashmir. We also guide and teach them, and assure them that we will purchase their products and market them under our brand. So, we have a three-way agreement with them: we teach them, we get them the necessary certifications, and we buy their products as raw material.

How is your brand performing in tier 2 and 3 cities?

The awareness has grown in smaller cities over a period of time, in fact, we get more business queries from these places. In metros, the customers are more educated and more aware about the benefits of consuming organic food, and have a more refined taste and understanding of such products. But in terms of growth, I would say that the smaller cities are catching up fast with respect to organic food consumption. Over the last one year, we have registered sales of around 35-45 percent from these regions.

What are Morarka Organics’ expansion plans?

In the next one year, we plan to take our retail sales to more than Rs 100 crore from the current Rs 65 crore. We will be tying up with more retail chains across the country and double our store count to 100. We also plan to increase our institutional sales to around Rs 40 crore from the current Rs 15 crore. We would also take more initiatives to increase consumer awareness.

What are the major operational challenges in operating a storecum-cafe concept?
Real estate availability, costing or rent, and ROI are some of the basic challenges. Apart from these, it is maintaining the quality standards of perishables like milk, vegetables and the continental range. Also, being an organic cafe, we cannot add any colours to our food because adding colours would mean contaminating the organic, pure and natural food.
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What are your expectations from the organic food market in India?

If the organic food segment can have economies of scale, if better laws and legislations are implemented in its favour, if ‘sticker marketing’ by a lot of non-organic brands can be eradicated, and the products be more reasonably priced, and if they can be promoted as beneficial not only for consumers but for the environment and the entire world at large, then we can surely expect the market to grow to Rs 5 billion in the next three years.
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Suppliers - driven by passion

The ‘organic revolution’ came to India in small droves. Several of the top companies today started out small in the early 1990s -— mainly riding on a passion for healthy food. Mumbai-based Conscious Foods, for instance, was started by a nutritionist and naturopath Kavita Mukhi, who partnered with farmers to produce and sell organic produce, making it more accessible to consumers. Mukhi sold the company in the early 2000s, which is now a thriving business dealing mainly in dry organic foods like flours, grains and cereals. Informs Sanjeev Azad, Director, Conscious Foods, “Conscious Foods sells its products in a shop-in-shop format through major retailers like Godrej Nature’s Basket, Sahakari Bhandar and Dolce Vita.” What started as a hobby farm in 1996 became one of the first few organic brands to cater to the Bangalore market. Amin Manjrekar, owner of Green Fundas, cultivates his own vegetables in Srirangapatna and then sells them to the hospitality industry as well as to established retailers like Nilgiris and

Indians lived a completely organic lifestyle for centuries. It is rather ironic that India needs to re-learn its own philosophy and culture
– Swati Maheshwari & Sunita Jaju, Erina Eco Craft

foundation tied up with the State Directorate of Agriculture, Government of Rajasthan, to privatise agricultural extension services. In its efforts to increase production, the foundation discovered organic farming and organised one of the largest group of farmers in India to take it up. In 2006-07, Morarka Organic Foods Ltd was launched to facilitate direct linkage between producers and consumers, while still providing staunch support to the organic farmers. Today, the company sells condiments, cereals, grains, spices, edible oils, etc.

Morarka Down to Earth store
MK Retail. His company offers a variety of fresh vegetables like tomatoes, lettuces, basil, arugula, romaine lettuce, etc; besides rice and honey; and is also working on cereals and spices, some of which are out-sourced from across the country. Morarka Organics’ humble beginnings took root in 1993 through the Morarka Foundation that Kamal Morarka set up in memory of his late father M R Morarka. In 1994, the
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For Sresta Bioproducts, the journey was long. Working in a company selling pesticides and chemical fertilisers, Rajshekhar Reddy Seelam (now Managing Director of the company) decided to give it all up and start an organic business after witnessing his family falling ill due to adulterated food. But, it took 12 years for his dream to germinate. In March 2004, Seelam started out with contract farming on 2,000 acre, which has increased over the
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years to 50,000 acre, with more than 12,000 farmers in 15 states. Sresta is now present in 40 major cities across India, and is exporting to the US, UK and other countries. The company sells grocery and processed products under the brand name 24 Letter Mantra. Pro Nature products are present in over 2,000 stores across south India — from the likes of Spar to kirana stores. In fact, a third of the revenue comes from stand-alone supermarkets and smaller stores. The company’s positioning away from a “premium organic fad brand” helped the retailers in these cities to trust the brand. Pro Nature placed itself in tier-2 markets like Mysore, Mangalore, Coimbatore, Erode, Madurai, Salem, Sivakasi, Tirupur, Trichur, Calicut, Kasargode, Guntur, Vijayawada, Vizag, Tirupati, Mangalore, and Udupi in the southern states. The company is generating Rs 70 to 80,000 per month in revenue from Mysore without any display or advertisement spend. “If we do spend in marketing, we can comfortably expect sales of about Rs 2.5 lakh per month from this city. And there still remains a large area that we are yet to capture,“ says Gupta. According to him, while the general market is growing at 50 to 60 percent, Pro Nature is growing by 80 to 90 percent per annum. He attributes this to growing demand and better availability of organic products. “There is a latent demand for organic products and retailers should tap into this by increasing their shelf space allocated to them. In fact, the presence of organic products can be the big differentiator.”

Challenges

While the entrepreneurial ventures are all inspiring and motivating, the challenges in this segment are many. One of the main issues has been to develop a reliable supply chain involving growing, processing, storage and distribution. Another one is to convince farmers to grow organic produce because of the three-year conversion period when yield
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may go down and farmers may not realise any premium. In Sresta Biop Products’ past nine years, the model has been developed further, and the company is now associated with about 12,000 farmers, has 14 processing units, and over 200 products. Apart from this, ensuring the organic integrity and traceability across the supply chain, methods for processing and storage are huge challenges. Funding of start-ups and developmental costs pose challenges of their own. In terms of retailing, real estate availability, high rentals, and return on investment are some of the primary challenges. Suppliers agree that back-end supply has to be strong and logistics, seamless. He adds that one has to have a sharp understanding of rural transport, storage, networking and proper training in handling the products. Moreover, powders, grains, and cereals all need to be processed in an organic environment as well. Azad from Conscious Foods says that various processes aid in adding to the ‘organicness’ of the processing environment. For instance, in his company’s manufacturing facility, they use the process of iron pounding or low heat grinding of powders and flours to ensure that not too much natural oil is lost. While all these challenges hold true, probably the biggest one is awareness or the lack thereof. “Customers do not understand the difference between organic, natural, or chemical-based products; and are not aware of the adverse effects of consuming chemically treated/grown food. Maybe that is why there is such an imbalance in the supply and demand of these products,” confides Azad. Moreover, with the country depending on the rains for higher agricultural yield, and the fact that organic farming does not have much yield as it is, it becomes increasingly difficult to provide for the masses. This is also the reason why such products are higher priced. The solution lies in getting the right volumes of demand and supply.

Retailers would say that this category has limited buyers due to the high prices, but today, I feel organic is a key differentiator on retail shelves
– Varun Gupta, Pro Nature Organic Foods

The price factor

Consumers complain of the hig prices. The solution lies in increasing demand and availability. Suppliers say that retailers have to be convinced that there is a demand for organic products. Plus, they demand a higher trade margin for such products as volumes are low. “In my view, five years down the line, this segment will grow significantly and generate higher volumes, which will increase sales and drive margins down. As sales increase, the price differential will come down and the gap
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in prices between organic and non-organic should reduce,” says Varun Gupta. He enumerates on the cost factors: “The structural costs of organic food, that is, the cost of producing, transporting, storing and maintaining the quality of organic food, is higher. At the farming level it is very labour intensive, the yield is lower, and the risks are higher. Then there are the volume related costs for organic — as the volumes in organic are lower, the per unit costs of transporting these goods is often significantly higher. Moreover, trade margins for retailers and distributors are higher to compensate them for the lower volume, which I think is justified. The volume related cost components are the larger drivers of cost escalation for organic food. The structural costs are not expected to change much over time. However, the volume related cost components should see a significant reduction as sales volume take off with increasing consumer demand.” Says Kishan Guptaa,”It is a myth that organic products are high priced because chemicalfree, natural products cannot be available below a specific price range. A lot of brands are selling their products with claims of being 100 percent natural at very low price points; they are not offering genuine products. For instance, our pure, organic, stress-free cow’s ghee is priced Rs 445 for a 500 ml jar. But there are other brands claiming to offer a similar product for only Rs 300 per litre. The fact is that it is not possible that such a pure, organic product could be available at such a low price point. There is a need to spread awareness about the right price points and the reasons for their high pricing, so that consumers are assured that they are consuming the right stuff.”

was formed in early 2011 to make organic bathing soaps. Later on, seeing a growing demand for alternatives to regular, day-today products, the aunt-niece duo Sunita Jaju and Swati Maheshwari, who started the company, decided to expand their range, which now includes six categories — soaps (in 24 fragrances); body care (lotions, lip care, massage oils), hair care (oil and shampoo); baby care (lotion, soap, massage oils, pH balanced detergent); bio-degradable laundry

Organics in personal care

Organic products in personal care are also on the rise. Erina Eco Craft that sells its products under the brand name, Rustic Art,
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Organic food section at Brown Tree store

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There is a need to spread awareness about the right price points and the reasons for their high pricing, so that consumers are assured that they are consuming the right stuff
– Kishan Guptaa, Organic India

(detergent powder, liquid, flakes and bar); and pet care (soap). These are hand made at Auroville in Puducherry. According to Maheshwari, “Almost all regular personal care products contain sodium lauryl sulfate (SLS), a chemical for cleansing grease, which is a harsh surfactant (or detergent) present not only in soaps and shampoos but also in toothpaste, detergents, etc. SLS is inexpensive and is a great foaming agent. However, increased usage can damage the hair follicle, cause permanent eye damage, and liver impairment.” Organic personal care products, do not contain volatile oil compounds (VOC) used in synthetic products, and are safe to use even on babies, besides being safe for the environment as the drainage water remains toxin-free.

At the retail end

How has this segment been performing in retail stores? The response is mixed.

According to Geetha Madhavan, Business Head - Mumbai, BigBasket.com, “Organic fruits and vegetables are most popular amongst customers. As most of these are consumed fresh, customers appreciate the importance of using pesticide-free products. The next most popular organic category is dry grocery like rice, dals, flours and spices. The offtake of oils, packaged organic food, however, is slowly picking up.” A senior spokesperson from Haiko Supermarket states that the category has been able to get a market share of 15 percent in the grocery category, which is phenomenal since the prices are 50 percent higher. Manoj Satia from Navi Mumbai-based Direct2You supermarket says that the category is in demand, but the customer is still confused about what is organic and what is not. He has reduced his organic skus from 79 to 23, and has no intention of expanding the range till the category picks up.

At Bigbasket. com, almost 200 products are classified as organic, from fresh produce to grocery items to condiments and ready-to-eat food. According to Madhavan, in the overall sales of the store, the organic contribution would be close to 5 to 7 percent, but in certain categories, the contribution is much higher. For instance, there is a large demand for organic Alphonso mangoes, and the sales contribution is close to 30 percent, while organic wheat flour contributes to 20 percent of the flour sales. “The strategy is to focus on reliable, trustworthy sources of organic products, and consistently offer them to our regular customers,” she shares. Haiko has around 200 skus in this category (which are contributing well primarily in grocery and tea), where they occupy about 15 percent of shelf space. Since the average sales price is high, the margin is also slightly higher by 3-5 percent than normal, informs the spokesperson. The organic products range at Haiko includes grocery, masalas, juices, dry fruits, tea, and body care products. Both Haiko and Bigbasket.com find that the fill rate is not at its best since the products are produced under strict conditions and Bigbasket operates on a just-in-time model. Another hurdle at the brick-mortar store level is maintaining the organicness of the products. While, as mentioned earlier, the entire supply chain and processing environment for organic products has to be organic, it must be the same even at the store level. Many retailers carry out monthly fumigation at their store level, and while these goods are packaged, there is no telling how much chemical infiltrates the packaged products. Thus, “till all of this is streamlined, it is very difficult to maintain organic products in retail stores,” feels Satia. “Organic India operates through four types of sales and distribution models: most of our sales are generated through modern trade. Then we have the ‘ethical model’ where our representative visit a doctor to sample our product, and he in turn would recommend it to patients after experiencing its benefits. We have a customer service centre, where
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The customer is still confused about what is organic and what is not
– Manoj Satia, Direct2You

customers can call and order our products. Customers can purchase our products online by logging onto our website and the order is delivered free of cost. In the last fiscal year we posted a turnover of Rs 90 crore and are targetting a turnover of Rs 150 crore in this fiscal. Customers who demand and buy organic products are mainly from the working class, more urban and in the upper middle class category. They are health conscious, have a higher disposable income, and well educated.

According to retailers, this category will grow exponentially as customers develop trust in the brands. The key is to have consistent supply and good quality all through the year. For suppliers, maintaining their quality standards is the key. According to Gupta, the diehard organic consumer will prefer to shop at a speciality store where she will be assured of a wider range of products. But a general store, by keeping organic products will be able to draw

Owner of Green Fundas, Bangalore
By Roshna Chandran

Amin Manjrekar

Q& A

Tell us about Green Fundas.

It started out as a small hobby farm for cultivation in 1992, and in 1996, we shifted focus to organic farming. We also networked with various individual groups for organic produce such as rice, grains, and vegetables, etc. By 2002 we were actively involved in the organic segment when we started marketing our products.

What products were you offering?

Only vegetables, primarily lettuce. We were the first to introduce arugula rocket in Bangalore, which is used in salads. Then we introduced rice and honey, and are now working on breakfast cereals and spices. With fresh produce like lettuce, we have to be quick in distribution and supply, so we had to set up our back-end efficiencies. We integrated the farms and the various groups who were working with us. They had to comply with the quality standards we had set up, and we worked with them on 2 to 3 year projects. Now, we are regular suppliers to restaurants, retailers and wholesellers.

Which products are you outsourcing?

Our rice comes from north Karnataka, millets from Andhra Pradesh and north Karnataka, honey from the Western Ghats, and rock salt from the Himalayas. This is powdered potassium chloride (not sodium chloride present in the normal iodised salt) and has medicinal properties. We are also dealing in oil, millets, spices, and fresh vegetables, and constantly working on new products. Once we had begun to bottle various jams such as barbados cherry jam, passion fruit jam and chikoo jam, but had to phase them out as the raw material was never enough to sustain supplies.

satellite stands, co-ordination, point men who pick up the stuff, networking by phones, knowing which offices are where, what is the best routing, advising back-end guys on handling of perishable items, etc. We do not have dedicated trucks, and have to coordinate with transporters. We have to understand the logistics and how to make it cost effective. We are transporting to Rajasthan and Gujarat, so we have to find the quickest method. For fresh produce, we debate whether we should airlift it. At the same time, we are trying to keep good carbon credits by not using too many flights. We have to consider the distance a product can travel without spoiling, how easy or difficult is it to handle. Products such as carrots, potatoes, and garlic transport well, so we send them by road, but only up to a point, which we can handle,. So we have limits we can push, but no futher. We have a distribution centre in Bangalore where our quality control, packaging and delivery to various points takes place. We try to keep limited stocks but sometimes have 5 tonnes sitting here, so handling large quantities becomes a challenge. Once we had the place filled with passion fruits which we converted into juice. But this was for very specific clients who knew what they could do with it.

How has the organic market changed over the years?

What factors are propelling growth of organics?

Basically, a lot of write ups from the press! That’s how the segment started to grow. When we were retailing our products in Food World, I had to stand on the shop floors to explain to the customers about organic products. There was so much ignorance at that time, but things have changed and there is a lot of positive perception about the category, given its health benefits.

In 2004- 2005, the organic market was not integrated enough, nobody knew what was happening; there were small farmers growing little stuff. I have linked a lot of people and we are all inter-dependent; if we fall short of something we do not run out of stock. Today, if a retailer were to ask for one tonne of jam, I would be ready with the supply. Also, earlier, we did not have any packing for our jams, and no printed labels either — something that we are working on now. We were amongst the first few organic brands to supply to the Bangalore market. We are now present in Goa, Delhi and Chennai as well, and will be expanding to Hyderabad and Mumbai.

How do you differentiate your brand from others?

What are the challenges in distribution and supply?

One has to have a sharp understanding of rural transport, feeder
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Our selection and quality of products is very specific and more about functional foods. We have specific categories in whole staples. Once we expand to 10-15 items, and our brand is well-established, we will be in a position to increase our visibility. Presently, Green Fundas is growing at a CAGR of 50 percent.
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COVER STORY

India’s food consumption is more than Rs 3,00,000 crore per annum. Even if we capture 0.5% of the total food consumption, it is a huge potential
– R. Rajshekhar Seelam (L) & N. Balasubramanian, Sresta Bio Products

clientele who are more educated and better aware of the products they choose to buy. “The grocer should realise that by attracting such customers he can hope to increase sales of his other (more premium quality) products in his store. The same would apply to a supermarket - if they were to increase their organic skus they would get higher footfalls from consumers who would tend to look at other categories as well. For the grocer, the trade off would be that the presence of organic products would build his brand image as being modern, and thereby he would draw a better class of consumers.”

Certification and standards

One of the mainstays of organic production is the certification. According to a 2012 report by Prabodh Halde and Chetana Bhandari from the Regulatory Department at Marico, organic agricultural methods are internationally regulated and legally enforced by many nations, based in large part on the standards set by the International Federation of Organic Agriculture Movements (IFOAM) - an international umbrella organisation for organic farming organisations established in 1972. In India, the central government implemented the National Programme for Organic Production (NPOP), which proposes to provide an institutional mechanism for the implementation of national standards for organic production, through a National Accreditation Policy and Programme. The NPOP includes the policies for development and certification of organic products and provides national standards for organic products and processes. In addition to this, keeping in view the growing demand and to check fraudulence in organic production, the Ministry of Agriculture
40 • PROGRESSIVE GROCER • JUNE 2013

launched the notification ‘Organic Agricultural Produce Grading and Marking Rules, 2009’. Thus, organic agricultural produce may now be graded and certified under Agmark. Agmark is the accreditation body, and the Agricultural Marketing Adviser issues the certificate of authorisation to certification agencies authorising them to certify organic farms, products and processes, to grade and mark organic agricultural produce. Any accredited inspection and certification agency under the NPOP is eligible for the grant of certificate of authorisation under these rules by applying with complete documentation as prescribed in the guidelines. These authorised inspection and certification agencies in turn certify the agricultural produce of operators/grower groups as organic. In terms of the requirements for organic certification, the quality of the produce must be as provided in the NPOP. It must also comply with residue levels of a contaminants as provided in the c FSSAR rules. The requirements for F method of packing and labelling m of agricultural produce have also been prescribed. Some of the packing requirements include use of food grade packing material, employing approved additives for manufacturing packaging films, etc. The label of the produce must be provided with the person/company legally responsible for the production with the grade designation mark securely affixed to each package as approved. The ink used for marking must not contaminate the produce. A series of procedures follow once the product meets the mark.

Potential growth

Suppliers are planning to expand as they are looking at the future favourably. Morarka, for
AHEAD OF WHAT’S NEXT

instance, plans to take its retails sales to more than Rs 100 crore from the current Rs 65 crore in the next one year. It will aggressively expand its presence through tie-ups with retail chains across the countrry and increase its institutional sales to around Rs 40 crore from the current Rs 15 crore. Says Kishan Guptaa of Organic India, “This sector has tremendous potential to grow into a full fledged industry, but currently, there is lack of awareness of its health benefits, lack of availability, and lack of knowledge about it’s status (it is perceived as a rich man’s food), due to which the industry’s growth is still slow. Besides, there are operational problems such as storage, consistent supply, storage, pricing issues, genuineness of the products, but these are manageable.” He informs that the company has started farming of a product called ‘kinwa’, which is a grain-like crop in the regions of Bundelkhand and Azamgarh in Uttar Pradesh. “We are the first ones to grow this crop in India and will introduce it to the domestic market by July in the modern stores. We will also be launching a product for men called O Joy at leading pharmacies and modern retail stores. Other upcoming companies, too, can chart a similar growth if only the organic food segment can have economies of scale, and better laws and legislations. Making these products more cost effective, creating consumer awareness through better promotions and government initiatives can augment growth. As N. Balasubramanian sums it up, “India’s food consumption is more than Rs 3,00,000 crore per annum. Even if we capture 0.5 percent of the total food consumption, it is a huge potential.”
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