March 7, 2012:  
From marketing chemical fertilisers to selling organic products, it was a leap to the other side for Raj Seelam when he set up Sresta Natural Bioproducts Pvt Ltd in 2004.
“I initially started my venture as a shop-in-shop among retail chains in Hyderabad, Bangalore, Pune and Chennai. Seeing that very few were interested in organic products, we even scaled down,” says Seelam.
But that was only for a while, because in the last few years, the market for organic products has begun to witness phenomenal growth.
“Once we saw people showing interest, we gathered courage to set up our own retail outlet for organic products in Hyderabad. We also have another outlet in the Infosys campus in Cyberabad,” says Seelam.
The growth of the organic products market in India is warming even the hearts of those abroad.
One of them is Gerald A. Herrmann, Director of global consultancy firm Organic Services GmbH, Germany. “Today, there are 30 modern retail outlets in India for organic products, with an annual business worth €6 million (Rs 39 crore). These outlets are witnessing a growth of 500 per cent annually,” he says, the statistics at his fingertips.
The domestic organic products market in India is worth €400 million (Rs 2,650 crore) and the sale of organic products through general trade outlets is around €10 million (Rs 65 crore) with a growth of 400 per cent annually, says Herrmann.
Again, he says, there are 2,000 shops that are operated in rural areas, including those run by non-governmental organisations, and these are witnessing a growth of 300 per cent.
“There is clear potential to rope in institutional customers. There is scope to increase modern retail outlets to 2,000 and sales to €35 million (over Rs 225 crore),” says the German who is also a consultant for Intact Consult GmbH that provides integrated solutions for traceability and commodity safety.
“Modern retail stores for organic products is a way to reach consumers. Currently, organic products' share is 7.8 per cent in the total food market. It can be easily taken up to 40 per cent,” says Sresta's Seelam.
With 85 per cent of farmers growing organic produce being outside Europe and the US, there is great scope for that market to grow in developing countries, says Beta Huber of Research Institute for Organic Agriculture (FiBL), Switzerland.
“There is a change in Indian people's awareness towards organic products. There is no need to tell them about these. They have realised their importance,” says Ulrich Walter, who buys organic Darjeeling tea and spices from India.
“The domestic response to organic products is getting better. The food business is growing in the sector. There are over 300 products available from farms that can be used in the kitchen or as food or used as cosmetics,” says Mukesh Gupta, Director (Operations) of Morarka Organic Foods Ltd.
The demand for organic products has witnessed such growth that Sresta has got a second round of funding from venture capital funds.
The response, not just from consumers but even from growers has been encouraging. “Farmers are intrinsically inclined to producing organic crops,” says Morarka's Gupta.
Sresta, on the other hand, has entered into contract farming with growers. Some 40,000 acres have been contracted for growing its organic products, says Seelam.
“Every year, we are adding 10,000-15,000 hectares and farmers' participation is good. In fact, the drop-out rate is less than one per cent,” he says.
But growers' interest can be sustained only by ensuring remunerative payment. “We pay farmers Rs 80 for a kilo of holy basil (tulsi) against a market price of Rs 20. This automatically ensures that farmers take a keen interest in producing what they are paid for,” says Krishan Guptaa, Managing Director of Organic India.
The products come at a premium so by the time they reach the stores they will be already 20-30 per cent costlier than normal products, says Sresta's Seelam.
Some organisations have taken the precaution of having more than one production centre. “It helps as, if there is any problem in one region, the other can help salvage the situation,” says Seelam.
The precaution is necessary as most of the farming is carried out in rain-fed areas.
For all these efforts, there is one advantage that retailers in organic food enjoy – an almost zero cost to advertise their products.
“Promotion of our products is mainly through word of mouth,” says Seelam.
In-store activities also form part of the advertising strategy, while sampling also helps the retailers. For some retailers, such activities have helped improve the customer base by 10 times in the last 3-4 years.

Pits and troughs

“If you talk of drawbacks, infrastructure is one. Logistics and supply chains pose problems,” says Organic Services' Herrmann.
With 200 million people belonging to the middle-class waiting to be tapped, the organic retail market has the potential to explode. “But there is lack of trained manpower,” says the German.
Just offering organic products, either in the domestic market or abroad wouldn't do, says Jayaprakash Narakkat, Managing Partner of Justrop. “You now need to give a face to a product. Earlier, it was enough to say you have got the certification for your product being organic. Now, you need to tell your consumer that you have other certification such as Rain Forest Alliance that guarantees that forests have not been destroyed or Fair Trade that guarantees that the producers have been made adequate payment.”
“It can no more be hype to market organic products. They have to be really good since consumers' expectations are high,” says Simone Seisi of Remei AG of Switzerland.