Pure grain

Organic food fast catching on with the Indian consumer

E. Kumar Sharma Edition: Feb 17, 2013 TAGS: organic farming business

| organic food

STORY TOOLS
Change font size Print this story E-Mail this story Comment

RELATED
Precision farming brings new hope to Indian farmers Organic is the way to go

Yoav Lev was a 22-year-old backpacker when he first came to India in 1987. A graduate from an agricultural boarding school in Israel, he came seeking inner peace from his 'spiritual guru', the late H.W.L. Poonja of Lucknow, better known as Papaji. "The quest was to find my true purpose and true self," he says. He eventually stayed on in India, taking on a new name, Bharat Mitra, and is currently the Founder and President of Organic India, one of India's leading organic foods companies. It ended 2012 with Rs 60 crore revenues and hopes to reach Rs 90 crore this year, with about half of its sales in India.

Five years ago, 75 per cent of our revenue came from exports and the rest from the domestic market. Now both markets have equal share:Raj Seelam Photo: A Prabhakar Rao

Organic foods are those made from agricultural products grown without the use of pesticides or chemical fertilisers. It was from Papaji that Lev learnt the healing power of tulsi (basil plant). By 1997, he had begun cultivating three types of tulsi organically in Azamgarh in eastern Uttar Pradesh. In 2006 he launched Organic India with tulsi tea as its flagship product. Today, the company makes 18 different flavours of tulsi tea and 33 different herbal formulations or supplements, which are said to have medicinal value. He is gearing up to launch a complete range of organic food items, including rice and pulses. "We are in the final stages of a very promising joint venture to launch a comprehensive range of products both for the Indian market and for exports," says Lev. He prefers not to reveal the name of the well known Indian company he is negotiating with. Lev is not alone. A clutch of entrepreneurs in India is betting big on the domestic organic food market. Consider Raj Seelam, an Indian Institute of Management Ahmedabad alumnus. When Lev first took up tulsi cultivation, some 1,200 km down south in Hyderabad, Seelam was still selling pesticides and fertilisers. From 1988 to 2000, he worked in the farm inputs division of E.I.D Parry, a Murugappa Group company, one of the largest industrial groups in India.

"It gave me a chance to interact closely with farmers and see the havoc that indiscriminate use of pesticides can create," he says. This spurred him to consider organic farming, even though he was aware agribusinesses rarely succeed in India, because of low margins and excessive government control. Today, his company, Sresta Natural Bioproducts, sells a range of 200 organic products in India and overseas from rice, pulses, sugar, and juices to breakfast cereals and jams. "Five years ago, 75 per cent of our revenue came from exports and the balance from the domestic market. Now both markets have equal share," he says. Indeed, the demand for organic foods in India has seen a sharp growth in recent years. While earlier, organic food producers primarily aimed at exports to Europe and the United States, there is now a gradual shift. "The demand for organic foods has been growing and today we stock a range of around 38 different organic foods in 40 stores as against just about half a dozen stores three years ago," says S. Jagdish Krishnan, Chief Operating Officer of the retail and bakery divisions of Heritage Foods, an organic food company with a big presence in Bangalore, Chennai and Hyderabad.

Most of the big retail chains now stock organic products, including Godrej Nature's Basket, Hyper City, Food Bazaar, More, Nilgiris, Spencers and Tesco - Starbazar. While

no of-ficial figures are available, industry estimates put the organic food market within India at close to Rs 100 crore, having grown five-fold in the last six years. When Seelam began organic cultivation in 2004, not a single domestic retailer was willing to stock his products. They feared stocks would not move, since organic foods are significantly more expensive than conventional foods. That is partly due to higher processing costs, since they choose to eschew chemical additives, as well as higher packaging costs, to ensure a reasonably long shelf life. A kilo of Sona Masuri rice, a well known brand, for instance, sells at Rs 40 per kg while organic rice of the same variety costs Rs 60 per kg. Again, tur dal (a commonly used variety of pulses in India) is available at Rs 90 per kg while its organic version costs Rs 140 per kg. This is despite the doubling of prices of these commodities in the past three years, while the organic variants have stayed at almost the same price levels. Seelam was forced to focus on exports. But unwilling to give up on the local market, he set up his own retail stores in four cities - Hyderabad, Bangalore, Pune and Chennai - to promote organic products. Today, almost every major retail outlet is willing to stock his products. He has a presence in close to 40 cities and towns, ranging from Patiala in the north to Guntur in the south, and broke even last year. So, why have domestic consumers taken to organic foods despite their cost? Mukesh Gupta, Director of Morarka Organic, which mainly focuses on the domestic market, attributes it to rising disposable incomes and improved awareness about the health benefits of organic foods. "From 2007 to 2012, the average middle class income in India has shot up. The consumer is willing to pay more for good quality food," he says.

Between 2007 and 2012, the average middle class income in India has shot up. The consumer is willing to pay more for goodquality food: Mukesh Gupta Photo: Vivan Mehra/www.indiatodayimages.com

The demand for organic foods will only grow in India, organic food producers claim, with the implementation of the Food Safety and Standards Act from February this year. The new law sets more stringent standards of food safety - raising the bar on the quality of food manufacture, storage, distribution, sale and import. The stress on quality under the new Act will push up prices of foodstuff made using conventional techniques, reducing the price differential with organic food, and boosting sales, asserts Gupta. However, consumers would do well to ensure that they only buy certified organic products, say producers. Organic food products manufactured in and exported from India are marked with the 'India Organic' certification mark issued by certification agencies accredited under the the National Programme for Organic Production (NPOP) and monitored by the Agricultural and Processed Food Products Export Development Authority (APEDA). Most of the ing organic food companies in India voluntarily opt for this certification, though it is not mandatory for domestic sales. "The demand for certified organic foods has been growing since 2001. These are produced by about 570,000 small farmers in India with 500,000 hectares under cultivation," says P.V.S.M. Gouri, Advisor, National Accreditation Body, NPOP (under the Ministry of Commerce). Health Benefits A cross section of consumers BT spoke to said the high prices of organic food were a deterrent, but given the perceived health benefits they still opted for it. Says Sunitha Morampudi, 35, wife of a Hyderabad-based IT professional and a mother of two: "I prefer to take food that is produced organically. Yes, it is priced higher but I think it is better for our health." There has been considerable debate on whether organic food is, indeed, healthier than conventional food. A study by the American Journal of Clinical Nutrition in 2009 had concluded that there was no evidence of any difference in the nutrient quality of organically and conventionally produced food. "The small differences in nutrient content detected are biologically plausible and mostly relate to differences in production methods," it said. The debate continues in India too. "We should not have fertilisers and pesticides in the food we consume but the nutrient quality of grains grown organically and conventionally is the same," says Dr Brundavani, consultant nutritionist at the Rainbow Children's Hospital in Hyderabad. But organic foods may have added benefits even if their nutritional value is the same as that of the conventionally grown. "In terms of the vitamin C content, an orange grown organically and another conventionally may be the same, but that is only half of the story. The chemicals present in conventional food make it difficult for the body to absorb the vitamin C," says Lev of Organic India. For the moment, with rising demand for their products, the organic foods industry in India appears set to flourish over the next few years.

Taking a tip from tech, food incubators launch startups

Link this Share this Digg Email Print Related News

Small businesses have to be strategic about giving

Sat, Nov 17 2012

By Neal Ungerleider
Fri Dec 14, 2012 1:42am IST

A new group of food-based startups are applying tricks learned from the technology industry to grow a new wave of businesses to cash in on the growing "foodie" movement across the U.S.
Like tech entrepreneurs starting out in a Starbucks, foodies who find themselves needing space to prepare boutique treats are turning to shared programs called incubators and accelerators that help them launch by offering communal business spaces and logistical assistance. Small food businessesmom and pop operations selling goods at farmers markets, food trucks, or at boutique retail establishmentshave proliferated in the last few years, according to data provided by the National Association for the Specialty Food Trade. In the New York City area alone, city politicians are rushing through 22,000 additional permits for mobile food vendors. Due to hygienic needs, raw material needs, and other factors, new small food businesses often need help getting started. In large urban markets such as New York and Los Angeles, startup costs frequently exceed $10,000, and that's where the incubators and accelerators come in. "A company can come in, rent space for the day, pack up their things and leave," says Michael Schwartz at the Organic Food Incubator in New York. "The not so traditional part is that we have companies who stay here more permanently." Tenants at the Organic Food Incubator work on everything from spicy Indian sandwiches to gluten-free breads to soft-serve "ice cream" made from crushed fruits. Both incubators and accelerators offer small food businesses the opportunity to grow within a nurturing environment while defraying large startup capital costs. The Organic Food Incubator hosts trade shows to introduce their members to prominent local grocery chains and distributors; members also have access to classes, networking event, and consulting assistance for recipes, social media, and distributors. Ahkilah Johnson is the co-founder of Manhattan's City Cookhouse, which offers commercial kitchen rentals along with community cooking classes and business development opportunities. Johnson says that "I used to do children's cooking classes in the neighborhood, but could never find space for classes. We needed space in the community. My day job is in building schools so I thought we could build a space. We created a center for businesses and for healthy cooking classes." Incubators such as the Organic Food Incubator and City Cookhouse offer microbusinesses access to high-end kitchen equipment, space to produce at scale, and support to

grow their business. This can include anything from packaging assistance to networking sessions with large wholesalers and distributors. While most of New York's food incubators are medium-to-large sized commercial kitchens, several even larger facilities are coming to the city. 3rd Ward, a Brooklyn community arts and educational organization, is opening a large culinary incubator and educational center. Also in Brooklyn, a former pharmaceutical plant is being converted into a 660,000 square-foot culinary production facility whose rooms will be subdivided among a warren of small businesses. While traditional accelerators have been aimed at internet-based startups and small technology firms, food accelerators are a much newer proposition. Food businesses traditionally require thousands of dollars in launch capital at the very least and are subject to much more intensive government regulation. The large sums that small food businesses need to expand have traditionally been found through more traditional fundraising methods in the past. One accelerator, 500 Startups, is nurturing mail-order food businesses among others. Culture Kitchen (which sells make-your-own ethnic cuisine kits) and Craft Coffee. In exchange for up to $250,000 in seed funding, participating businesses give up 5% equity. One accelerator in Arkansas, The ARK, pays special attention to food. Due to Wal-Mart's and Tyson Food's headquarters being located inside the state, The ARK is specifically recruiting food start-ups who could benefit from close proximity to the agribusiness giants. Three of the groups funded by ARK's 15 are food startups, including a social network for food trucks, a high-tech meat analytics firm, and an online marketplace for farmers. The ARK offers recipients approximately $18,000 in funding in exchange for 6% equity and a promise to relocate to northwestern Arkansas for the duration of the program. "Not only do food-oriented startups get access to mentorship from top minds in the food industry, but founders also receive support and resources to accelerate their businesses during the threemonth program, all in preparation to make investor pitches," the ARK's Jeannette Balleza told Reuters. Another accelerator specializing entirely in food startups was recently launched in California as well. Palo Alto's Local Food Lab is unlike traditional accelerators in that it doesn't offer capital in exchange for equity, but rather an intensive six-week program for food startups to develop a business plan and cultivate industry contacts. Recipients include all-brunch food truck Brunched in the Face, South African-style snack maker LifeBites, and urban farming education effort Seeducate. "Working through (ARK) benefited us by providing mentors and advice related to the industry we are entering," said Derek Kean of Truckily, a logistics firm for food trucks funded through the ARK. "Being able to build upon experience and knowledge from former executives, entrepreneurs and current employees of companies that have had years of research and, more importantly, 'mistakes made' was invaluable." But despite the growing the popularity and apparent need food incubators and accelerators, they aren't found everywhere: Apart from outliers such as ARK, most are situated in large cities or in dense suburbs. Only a few food incubators have sprouted up in smaller communities. Replicating the food incubator model in rural areas and college towns is the next great challenge for the growing field. (The author is a Reuters contributor) (Editing by John Peabody and Brian Tracey)