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The jury is out on the benefits of organic food. Will producers be able to lure the masses without compromising on their hefty price tags? By Savreen Gadhoke
“I was on a diet for the last two weeks, and all I’ve lost is 14 days,” read the slogan on the T-shirt of a 20-something over-weight girl, whom I saw rummaging through the organic foods shelves in a departmental store. Unable to control myself, I decided to eavesdrop on her conversation with her friend: “I’ve heard organic foods help lose weight. Which brand should I buy?” even as she compared rates of different packs. I went back and did my own little research on how far the craze had travelled in India. To my surprise, the segment had really found its ground amidst consumers with names like Fabindia and Khadi Gram, investing heavily in organic foods. But however fast-growing the demand in India may be, the real moolah for organic food is found in global markets, which according to a RNCOS report is pegged to touch $70 billion by 2010. B.L. Dalmiya, Director, Centre of Organic Farming reveals, “Internationally, the demand for organic foods is rapidly growing because of increased consumer awareness.” In response, India has increased its production of organic foods and exports to a whopping 45% of the estimated Rs.560 crore organic food market in the country.
According to National Centre for Organic Farming, the area under organic cultivation is likely to quadruple in the next couple of years and cover two million hectares of land by 2012, as compared to the present area of 5,28,000 hectares. In fact, various state governments have also announced incentives and tax benefits to farmers who opt for organic agriculture. But R&D is one area where organic foods manufacturers are facing problems. Grins Dalmiya, “To keep pace with the global demands, we have to regularly invest in R&D, which is a big problem for small farmers,” adding that it eventually adds to higher costs. Within the country, organic foods enjoy a relatively niche demand and so far mass appeal has evaded. The reason, according to a January 2008 Assocham survey, is largely to do with premium pricing. The price differential between organic and non-organic products ranges from 35-40%, which finds little takers among even the educated and health conscious urban lot. Over 1,000 lead retailers selling non-organic and organic products participated in the survey.
Despite that however, the fast-multiplying growth of the industry cannot be entirely attributed to the increase in global demand. The Indian consumer too is getting savvier, fed by Internet information overload and satellite connectivity. Like their NYC counterparts, uber crowds in Gurgaon and Bengaluru alike, are getting hooked to the supposedly healthier organic alternatives. When asked, a local organic foods retailer in south Delhi explained that while there weren’t too many regular buyers for this category because of its higher price tag; amidst the swish set (premium segment consumers), these products were really sought after. Organised retail has in fact spawned dozens of private labels in the category, led by retailer Kishore Biyani’s Food Bazaar. As for the 20-something girl I saw in the departmental store the other day, I hope she has found her choice of brand in organic food and is working toward losing more days... oops, kilos!
Savreen Gadhoke
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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