By Karan A Chanana
This year will see the domestic organic market grow, with increased tier 2 & 3 city penetration, rising urban spending and wider availability of retail products
Organics is no longer the fad of an elitist few, but an indispensable way of life for the growing class of urban, hyperconnected, health conscious global consumers. The domestic organics industry has witnessed an upswing in recent years. Organic farming is being practised on 43 mn hectare worldwide. The current global organic industry, valued at around USD 72 bn, puts this growth in perspective. The industry is expected to grow at a CAGR of 15-18 percent globally, but the Indian market surpasses this, with a CAGR of 20-25 percent, with the 2015 market pegged at approximately USD 1 bn. This rapid growth needs to be taken into account in the overall development plan, particularly in India.
2015 was an eventful year for organics in India. Sikkim became the first state to become fully organic. Organic farming has grown tremendously in India and government-led initiatives have multiplied manifold. Such factors have contributed to the immensely growing CAGR of the Indian organics industry.
Consumers have started seeking alternatives to conventional products. With increased awareness, demand has increased, as is evident from the growing shelf space for organics in supermarkets across India.
The Year Ahead
So what does 2016 have in store for consumers of organic products, retailers and the industry as a whole? The magic has just begun and if the momentum continues, it will not be long before it reaches the everyday lives of every Indian citizen. Following are 4 key factors that will influence the industry this year.
1. Increased Interest of Stakeholders
With increased awareness in sustainable living, organic products are sought after by many in the country. Consumers’ interest has been sustained by influencers promoting organics at their own levels. With such promotion, besides the top four metro cities namely Delhi, Mumbai, Kolkata and Chennai, cities such as Patna, Ahmedabad, Goa and towns such as Ganganagar, Moga and Bareilly have started contributing to the overall demand for organics.
Media has contributed immensely in creating awareness among the public. Digital media has had an enormous reach and relevant news is available to those who have access to Internet. This is just the beginning. In the coming years, technological advancements allowing further penetration of information into the deeper pockets of India, would eventually lead to more awareness for organics and in turn, demand.
While the global industry is expected to grow at a CAGR of 15-18%, the Indian market surpasses this, with a CAGR of 20-25 percent, with the 2015 market pegged at approximately USD 1 bn. Smaller towns and cities are exhibiting a newfound interest in organic products. Exclusive organic stores are springing up at a rapid rate, not only in metropolitan India but also in tier 2 and 3 cities
Emerging opportunities to retail organic farm produce has drawn the attention of many private players, enabling direct links between farmers, retailers and exporters. We would witness a great number of retailers joining the supply chain, helping local organic farmers take their produce to the consumers.
Interest of investors has also increased, making the online organic retail market a big hit in India. Clearly, the private equity and venture capital firms are acknowledging the benefits of investing in this segment.
This trend will continue for the next three years. Overall, the organics sector will grow by leaps and bounds and it will be an exciting time to be a part of the industry.
2. Increased Penetration in Smaller Towns
Smaller towns have a newfound interest in organic products. Exclusive organic stores are springing up to cater to the demand. Similarly, increased growth can be seen in the availability of organic products in national and regional online organic retail companies. The government’s initiative, ‘Digital India’, led by Honourable Prime Minister, Narendra Modi, has seen remarkable development of smaller towns. With such focus on small towns, inhabitants gain greater exposure to better standards of living. This in turn would lead to enhanced allocation for organics in household budgets in the emerging micro growth pockets of India.
3. Domestic Organic Market to Increase
The changing lifestyle of consumers, increased health consciousness, higher disposable income and growing number of modern retail outlets across the country are the major factors that drive the growth of the organic food segment. Currently exports dominate the market. However, domestic segment of the market is improving with each year and 2016 will be no different.
4. Consumers going Mobile
Consumers shopping on mobile platforms are the new market segment, emerging as winners in the past two years. A hybrid business model is emerging in the Indian retail environment. Online selling of local farm fresh produce is one such model that Amazon, for instance, started a few years ago in India. With many players jumping on the bandwagon, it benefits the consumer in terms of choices, availability, and increased consumer confidence. Indians have quickly adopted mobile-browsing and app-shopping. Its convenience, traceability of goods and the ability to shop on-the-go are the main factors in attracting more users. The year 2016 will witness more brands tapping into the immense potential of mobile shopping and organics will be no exception.
Overall, 2016 will see the organic industry becoming more streamlined and lucrative for new entrants, as well as, established players. Bigger players will need to focus more earnestly on the business, with innovations in terms of produce, as well as, retail operations.
The author is chairman of AMIRA Group, an Indian producer of premium basmati rice, organic products and packaged foods, with an international presence
This article was published in the April 2016 issue of Pure & Eco India