India: Organic taking root in the cities

Until a few years ago, organic produce from India mostly went into export markets such as Europe and the US. It is only more recently that sales figures in the domestic market have started to surpass exports. Along with this growth, the domestic market has become more diversified. While some big organic export companies have started to diversify into domestic sales and are opening their new retail chain. In addtion, there are also many new marketing initiatives that focus exclusively on local and regional markets. Nina Osswald, the author of the book "Organic Food Marketing in Urban Centres of India" wrote this article.

(Picture: India is an organic sourcing land but also develops the domestic market)The domestic market for organic products was estimated at Rs 1,000 crore (or approximately 190 million US $) in 2011-12, and is expected to grow to 1 billion US $ by 2015. The main reasons for this growth are a growing awareness of the dangers of pesticide residues in food and growing disposable incomes of the urban middle classes. According to our survey of urban markets for organic food products in India (see below) that was conducted for the Humboldt University Berlin and ICCOA during 2011 and 2012. India’s organic boom is happening primarily in the metropolitan cities. For instance, the authors Nina Osswald and Manoj Menon, estimate that during 2011-12, the total sales value of organic food products was at least Rs 9.9 crore (2 mio. US $) for Hyderabad, Rs 17.9 crore (3,4 mio. US $) for Mumbai, and Rs 21.4 crore (4,1 mio. US $) for Bangalore. These figures include third-party certified, PGS Organic certified and non-certified, organically grown food products. Bangalore was found to have the highest sales of organic food products, as well as the greatest number of organic outlets per 100,000 inhabitants. (Picture: The overview map shows the region the study has taken place)

The bulk of certified organic food sales currently happens either in organic specialty stores (including non-food chain stores that specialize in crafts and handloom fabrics), or in modern supermarket chains. While a few organic stores have been around for longer, there has been a wave of new store openings since 2010. Most supermarkets and modern retail chains started stocking organic products only recently, and in many stores the organic product range is still limited. The growth rates that are reported by organic retailers are impressive, ranging up to 300 % at times. (Picture: Women are often working in the agri-production)

In addition to organic stores and supermarkets, a variety of other retail channels has emerged over the past few years. Our study gives an overview of the broad variety of supply chain models and retail formats, and looks at the specific features of each of them in detail. For instance, online retail and home delivery are picking up fast. This enables more consumers to access organic products, as organic stores are scattered across large cities with high traffic volumes and inadequate transport infrastructure. Another innovative approach, community- supported agriculture and consumer cooperatives are trying to bridge the widening gap between rural producers and urban consumers. (Picture: Organic food is found in specialized organic stores and supermarkets) 

Most stores in India sell only packaged, dry organic food products. Organic fresh produce – fruits and vegetables – is not as readily available, because many retailers avoid the risks of selling these highly perishable products under uncertain market conditions. Organic producers in India lack access to separate facilities for transport, storage and processing of organic produce. These logistical challenges make it difficult to bring a reliable flow of fresh produce to urban consumers and it is also one of the reasons that drive up the prices of organic produce.
Organic in India is still a small niche market. Hence, at present there is not a sufficient number of producers to meet the growing demand in the cities. Coupled with inadequate transport infrastructure, lack of storage facilities and high losses, this brings up the cost of organic produce. At the same time, many organic farmers do not have access to organic markets and are forced to sell their produce in conventional outlets, losing out on the premium.
As the product range in the organic sector is still limited compared to conventional food, most organic stores do not sell exclusively organic but also a number of conventional and “natural” products. At present, even though adequate supply is the more important bottleneck, lack of awareness on the part of consumers is another obstacle that needs to be addressed in order to sustain the growth of organic sales. (Picture: Vegetables are not often found in the stores but in this supermarket well)

A lack of market access is one of the biggest obstacles that stop small and marginal farmers – who constitute the majority of farmers in India – from taking up organic production. In our research, we came across a number of examples of how these market linkages can be created successfully.
In Anantapur District of the South Indian federal state of Andhra Pradesh, the NGO Timbaktu Collective has been working with small farmers since 1991, supporting them in adopting sustainable production methods, reforestation, water conservation and other activities. More recently, the NGO facilitated the formation of a producer-owned company for processing and marketing of organic produce such as millets, pulses and peanuts under the brand of Timbaktu Organic. Collective processing, professional brand development and access to premium markets (mainly in the cities Bangalore and Hyderabad) has helped the producer cooperative develop into a viable business, and significantly improved the livelihood situation of the member farmers. (Picture: Some best practice examples develop the markets)

Another inspiring example of a successful organic vegetable supply chain is the community-supported agriculture initiative GORUS. By linking small and marginal producers directly to a group of consumers in Pune, the initiative circumvents the high risks involved in organic fresh produce supply chains. The initiators help farmers plan their production for each season, train them in organic growing methods and grading of produce, facilitate value-addition through processing of surplus production, and manage the delivery logistics and consumer memberships. GORUS thus managed to establish a short regional supply chain that gives more security and higher returns to farmers, provides fresh organic produce to urban consumers, and reconnects the producers and consumers of food on a personal level. (Picture: GORUS delivers by demand to the consumers)

Apart from access to viable marketing outlets, another crucial factor that can facilitate the success of marketing initiatives in India’s emerging organic sector is external support, either through an NGO or the government. This support is needed because of high initial capital investments, and because organic is at a disadvantage compared to the highly subsidized agro-chemical industry. In order to be successful, organic processors, companies and brands also have to invest in building a strong base of producers who can assure a consistent and reliable supply of high-quality produce. On the consumer side, it is essential to build trust in organic production methods, whether it is through certification, publicity or personal relationships.

(Picture: Sale on markets help to build trust on the consumer side)

About the authors: Nina Osswald (picture) has a background in Development Geography, with an M.A. degree from the University of Freiburg, Germany. In the past, she worked in different organisations in the sustainable consumption and production sector, and since 2009 has been researching the Indian market for organic food. Nina previously co-authored a publication on Sustainable Food Consumption and Urban Lifestyles: The Case of Hyderabad, India. She coordinated the present study on urban market structures as a Research Associate at the Humboldt University Berlin in the Indo-German cooperation project Sustainable Hyderabad. Manoj Kumar Menon (picture) holds a degree in Agricultural Sciences and did his Post-graduation in Management (MBA from FMS, University of Delhi). He has been the Executive Director of ICCOA since 2006. He has worked in the organic agriculture sector in many parts of India, and actively participates and advises policy formulation in some state governments. He was also a co-author of the previous research study "The Market for Organic Foods in India: Consumer Perceptions and Market Potential", published by ICCOA in 2006.

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Read more about the current status of the domestic market in India, urban market structures, challenges and more success stories of organic marketing:

Organic Food Marketing in Urban Centres of India
by Nina Osswald and Manoj K. Menon
ISBN 978-81-925226-3-0 (Paperback) & 978-81-925226-5-4 (e-book)
145 pages / 2013 / Bangalore: ICCOA
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