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Organics mkt growing in India despite slowdown

Posted by retailigence on February 13, 2009

CHENNAI : The organic market in the US and Europe may have taken a hit because of the slowdown, with growth rate down to 5% in 2008 from 25% the previous year. But it is still growing in India say regional as well as national players, including Fabindia and Hyderabad-based 24 Letter Mantra, albeit at a slow rate of 10-12%.

“We have not witnessed a significant change in the pattern (in the last few months)… The demand is on the rise… The potential is tremendous and we are developing our supply base to keep up with the demand,” Fabindia communication head Prableen Sabhaney told ET. The ethnic retail chain has some 120 SKUs including cereals, spices, honey, preserves and herbs.

There has been no obvious change because of slowdown, says VR Ananthoo of reStore in Chennai, an organisation that initiates farmers into organic produce and helps them sell. “Growth has always been slow but steady at around 10-15%. There has been no cut-back in spend by regular customers as they probably look at spending on organics as medical insurance.”

Players are bullish on the potential of the domestic market and have introduced a slew of products in the last few months. Hyderabad-based Sresta Bioproducts, which retails its brand 24 Letter Mantra through Spencer’s retail chain throughout the country, introduced ready-to-eat products and fruit juices. Fabindia added a range of soups to its kitty in January and is working on muselis and flavoured pastas for introduction soon.

“India has a Rs 1,000 crore market available immediately,” Sresta Bioproducts managing director Rajashekhar Reddy Seelam said, quoting from a International Competence Centre for Organic Agriculture report. He went on to add that in the next decade or so 3-5% of the $116 billion food industry in India would turn organic.

Pricing is one factor due to which organic products, which are 15-40% more expensive than their regular counterparts, do not have immediate acceptance. But returning NRIs and expats have given a boost to organic sales, says Gomathi Viswanathan of Enfield Agrobase, which has 200 acres under organic cultivation and gets 65% of its revenues from exports.

The hospitality industry too has started taking interest in this segment, with client requesting organic items. “Supply issues have to be considered before incorporating anything on the menu as we cannot turn away a request for a dish because the items are not available on the particular day,” Radisson GRT vice-president Vikram Cotah told ET. He went on to add that every now and then they put temporary organic menu cards with limited varieties on tables. Market research firm Euromonitor International estimated the global market for organic food and beverages to be $22.75 billion in 2007, 45% of which is in the US. In India, the fragmented, yet niche, market is estimated to be a minuscule Rs 100 crore.

Varun Gupta of Bangalore-based Pro Nature, which sells its products through retail chains like Total, Namdhari’s, Reliance Fresh and Food World, said the organics market is small in India since most early entrants did not tap into the domestic market and went the export way. But now, many had realised the potential in India. “We don’t believe organics need address a niche client base. But prohibitive costs keep potential customers away. In the long run, I do see organics becoming more mainstream.”

Sources :- The Economic Times

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