Organic food fast catching on with the Indian consumer

E. Kumar Sharma; Feb 17, 2013

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 India’s 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 Nature’s 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 good quality food

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 P.V.S.M. Gouri, Advisor, National Accreditation Body, NPOP (under the Ministry of Commerce).

Health Benefits
A cross section of consumers BT spoke to said the high prices of organic food were a deterrent, but given the perceived health benefits they still opted for it. Says Sunitha Morampudi, 35, wife of a Hyderabad-based IT professional and a mother of two: “I prefer to take food that is produced organically. Yes, it is priced higher but I think it is better for our health.”

There has been considerable debate on whether organic food is, indeed, healthier than conventional food. A study by the American Journal of Clinical Nutrition in 2009 had concluded that there was no evidence of any difference in the nutrient quality of organically and conventionally produced food. “The small differences in nutrient content detected are biologically plausible and mostly relate to differences in production methods,” it said. The debate continues in India too. “We should not have fertilisers and pesticides in the food we consume but the nutrient quality of grains grown organically and conventionally is the same,” says Dr Brundavani, consultant nutritionist at the Rainbow Children’s Hospital in Hyderabad.

But organic foods may have added benefits even if their nutritional value is the same as that of the conventionally grown. “In terms of the vitamin C content, an orange grown organically and another conventionally may be the same, but that is only half of the story. The chemicals present in conventional food make it difficult for the body to absorb the vitamin C,” says Lev of Organic India.

For the moment, with rising demand for their products, the organic foods industry in India appears set to flourish over the next few years.