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Despite high distributor margins, organic food sector in India growing
Tuesday, 19 November, 2013, 08 : 00 AM [IST]
Nandita Vijay, Bengaluru
Increasing awareness and considerable acceptance for processed organic food products are opening up opportunities for Indian companies, despite the prevalence of high distributor margins (estimated to be between 25 and 30 per cent), according to participants at the 2013 essay of the BioFach India International Organic Fair, a three-day event that concluded recently.

“There is no doubt about the existing market potential for the organic food processing industry. The market is showing continuous growth since 2007, and there is an upward since 2010,” representatives of such companies as Morarka, Sresta, Nature Bio Food, Mother India Farm, Amira Foods, Terra Firma, Sri Sri Ayrveda, Tamil Nadu Organic Certification Department and Jyothiraditya Biosolotions Pvt Ltd, pointed out.

According to Kriti Mehrotra, director, Organic Tattva (a part of Mehrotra Consumer Products), “Organic food products are now seen as the quickest-growing category. In fact, the consumption of organic was a phenomenon in the United States and Europe. Now, we see India catching up on this front. The scene is positive and there are significant growth prospects. People are aware of the bane of adulteration and the need for healthy, safe products, which drives them to pick up products off the shelf.”

Navin Kalra, head, international business, Moraka Organic Foods Limited, shared a similar sentiment. “There is a huge potential in India and the global markets for the growth of the organic food processing sector. We are witnessing 200 per cent growth, and this is because the products are accepted, and the consumers and customers return for more,” he said.

“There is considerable emphasis on organic farm production and marketing, which have surfaced as important sectors in India as they have in developed countries. The business of organic processed products and their ingredients are seen to be a critical strategy to facilitate sustainable development,” Kalra added.

Sresta Natural Bio-products is one of India’s largest organic food companies and promoters of 24 Mantra, one of India’s leading organic brands. Its managing director, Rajashekhar Reddy too was convinced that India was an important supplier of organic food ingredients and processed foods.

According to Pristine Organics managing director K C Raghu, “Processed organic food products is the way forward to ensure a healthy India and as a source of preventive medicine. Therefore, one sees a huge influx of focussed entrepreneurs storming into the space with a value-added range.”

The Indian organic food industry was pegged at $189 million in 2011, and is expected to grow at a compound annual growth rate (CAGR) of 45 per cent, to reach $1,733 million by 2017.

Currently, the urban metros are generating much of the growth. Organic Tattva's fastest-growing products are wheat flour, pulses, spices, sugar and jaggery.

“We see wheat flour doing well in the northern states, and rice and ragi in the southern markets. In the eastern region, there is a demand for rice, and western India indicates considerable interest in both rice and wheat,” said Kalra.

“However, it is not all rosy for the organic processed food product sector. High retail margins of 25 per cent, poor payment commitment and increased credit facility are serious challenges. There is also no support from the government to look into the business of processed organic foods,” the spokespersons of Organic Tattva and Moraka Organic Foods pointed out.
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