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BW Businessworld

Produce, Sustain, Prosper

With organic products flowing into the mainstream market, farmers, manufacturers and retailers are developing creative business models to thrive in this space

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It’s 8.30 a.m. on a hot, humid Sunday morning: you would expect the well-heeled to be asleep or weekend lolling. In fact, most are. But a consistently increasing number — including young couples with kids — happily queue up to buy fruits, vegetables, cold pressed oils, pulses, milk and soaps and shampoos at the Delhi Organic Farmers’ Market, started five years ago by a handful of people dedicated to bringing producers and consumers into direct connect.

Viraj Mahajan, a single parent, grows heirloom vegetables in his garden greenhouse, but is also a regular buyer from Monsoon Harvest Farms, an online and social media selling format that home delivers pulses, mustard oil and kinnows.

“When we started 25 years ago, there were a handful of farmers and a few buyers. Today, the market alternates between Bandra and Colaba, and both suppliers and buyers are significantly more,” says Farmers’ Market (of Mumbai)pioneer Kavita Mukhi.

Propelled by aware, tech-savvy consumers, who are concerned about what they put into their body — and on their body — the shift towards organic and natural produce is clearly happening. Even government bodies are on board to take farming back to the basics (BW Businessworld 5 September issue). Although the area under organic farming in India is less than 1 per cent of arable land, that is a vast amount of land and sources says growth in the last two years is well over 100 per cent.

The result: as organic products move out of their niche positioning and occupy serious shelf space in supermarkets and retail stores down to the local kirana stores, more entrepreneurs and companies are entering the organic space and building brands — some with basic commodities, others with innovative value-added products. In personal care too, the organic element is now a unique selling proposition that attracts customers — about as much as bees to pollen-laden flowers.

There are four kinds of players in the organic and natural marketplace. First, the farmer groups with their own brands such as Ahana, 4S, Gayatri and Organic Ashram; next, companies that provide farmers market access (such as Sresta, Conscious Foods and Just Organik). Then, those with tie ups with growers for staples, herbs and plants to manufacture pickles, jams, juices, snacks, breakfast cereals, mixes, teas, supplements, soaps, shampoos (Organic India, Forest Essentials, Shuddha and others); and finally, big and small retailers and e-tailers — Fabindia, Nature’s Basket, Foodhall, Spencer’s Retail and Amazon among others.

There are some players, within these categories, who are experimenting with clever combinations in marketing formats to inform and convert curious customers into regular buyers.

The Producers
A key element of the organic trend is the growing number of small farmers who have gone back to the basics — either alone or by banding together — and are providing serious traction to the move towards natural farming.

One example is Dinesh Balsaver, who began farming his five-acre plot near Lonavala after retirement, but soon urged neighbouring farmers to switch another 15 acres to organic. He says it wasn’t difficult: it took an hour’s meeting. “Farmers actually understand that we have to follow nature,” he says, adding, “When there is microbial and fungal activity in soil, it releases minerals, which the crops absorb. Organic crops are therefore rich in minerals and anti-oxidants.”

What the group needed, after forming a PGS (peer-guaranteed support) group was market access. So Balsaver and the team tied up with Conscious Foods, a company originally started by Mukhi of Farmers’ Market (Mumbai). He provides rice, wheat and green moong to the company and café-owners such The Village Shop’s Javed Mallick and his food consultant wife Jennifer. The cafe also serves as a marketplace for organic produce. He says farmer incomes have increased by over 50 per cent since the switch, adding, “Initially, the yield goes down, but chemical fertilisers only help in the short term. They leave salt deposits in the top nine inches and microbes do not like saline soil.”

Another example is Preetendra “Patsy” Singh who comes from a typical Punjabi farming family. His father farmed in the conventional manner till 2002. “Seeing what was happening with the soil in Punjab with chemical fertilisers and pesticides, I chose to switch back to organic,” he says. He has tied up with a few others and together they cultivate 50 acres in Punjab and 35 acres in Haryana.

But it was no sinecure: in the first three years, they lost 70 per cent of the crop and since, they began with a business model of selling to large rice exporters, the price premium was too low and the wait for funds too long. And when they sold in the local market, they got no price premium at all.

So, four-and-a-half years ago, the group decided to sell directly to customers under the brand Monsoon Harvest. For three years, Patsy sold kinnows to a small but growing customer base. Primarily through social media and word of mouth expansion, he now sells organic rice, wheat atta, mustard oil, pulses and kinnows. He even offers home delivery or customers pick up from a collection point. “We do a monthly basket for non-perishables and a fortnightly one for citrus fruits,” he says.

Ahana Organic, a decade-old farming enterprise near Varanasi, is yet another example of a family’s will to bring about a healthy change. Started with a family farm of 30-40 acres, Ahana’s Lakshmi Tripathi and daughter Vindhya today have 280 acres under cultivation. “The catch is, you must have a marketplace,” says Vindhya Tripathi Chowdhry.

After supplying their produce to people they knew around, Chowdhrys’ Ahana —named after Vindhya’s daughter, but also apt as it means the first light of the sun — began selling directly to customers from a small shop in Hauz Khas village and on e-platforms such as ‘I say Organic’. “But we were not utilising the land to optimal production,” says Chowdhry. So next, they found shelf space in The Altitude Store (see box) and other retailers in Delhi. Word of mouth and social media make great marketing tools, explains Chowdhry, who also participates in exhibitions and social initiative markets.

This year, Ahana has made a jump to exports. It’s got an order for a container to Europe for karenhi wild rice, millets, sesame and other oilseeds. If 25 metric tonnes seem small, Chowdhry explains that the order means virtually double the price she gets locally, as retail margins eat up a big chunk. “Small companies such as Ahana need to be sustainable. We are fortunate to have significant holdings; we can multi-crop and rotate,” she says.

There are many others who have joined the organic bandwagon. Sneh Yadav, a founder member of the Delhi Organic Farmers’ Market, has just 10 acres (in two plots) near Alwar. With husband Colonel Tara Rao, she grows and sells organic vegetables and herbs. Direct interaction with customers at the Sunday market is her USP; she knows them all by name and they discuss how the cook went. She now also posts what’s available online, and the regulars can place their orders likewise. She only sells any excess crop to e-tailers. She now hopes to pass on her passion for growing by opening a homestay at Tijara from next month.

Not every producer is growing crops; there are companies in the poultry space too such as the Gayatri Organic Farms. Owner Vivek Kushwaha supplies free range chicken, duck, turkey and Japanese quail to a number of hotels and retailers. He explains that while his poultry is free from antibiotics and steroids, it cannot be classified as organic because commercial feed might well contain wheat, maize or other products that are not certified. It’s a comment echoed by Kegg Farms founder and chairman Vinod Kapur: “Our hens are not caged; they have significant social interaction and are antibiotic free. Keggs eggs are natural and free range, but cannot have the organic stamp.”

Gajendra Singh Yadav, who markets milk under the 4S brand, has developed a cluster of eight farms. Total land is about 200 acres, with multi-crops that provide grains and fodder for the 140-odd cattle.“We work on a subscription model and supply milk, paneer and ghee regularly to 1,200 customers,” he says. In addition, several artisanal cheese-makers source milk from him.

The Marketers
Apart from such passionate small-timers, there are companies that have created large farmer bases and market their produce. The giant in this segment is Sresta Foods, which markets under the 24 Mantra Organic brand. Raj Seelam, its founder, decided in 2004 to band together farmers and market their produce. Sresta now has some 25,000 farmers and 1,50,000 acres across 15 states.

Conscious Foods, which Mukhi sold to customer and friend Titoo Ahluwalia in 2004, was in the red for years. “It was only in 2009-10 that the bottom line began to see black,” says adman Kurien Mathews (chairman and managing director of Metal Communications) who came on board in early 2009. Now a profitable enterprise, Conscious Foods has brought in professional management, in the form of Kingshuk Basu, formerly of Spencer’s Retail. “The company was started by Kavita (Mukhi) in 1990 and was well ahead of its time,” says CEO Basu, adding, “its objectives were to help farmers, provide employment to women and improve customer health”.
Basu explains that though Conscious Foods had a good margin structure, it wasn’t aggressive in investing in the business. Now, with a presence in Nature’s Basket, Spencer’s and a co-branding with Fabindia, he says the company is growing at 35 per cent, increasing procurement, improving packaging and is poised to launch four new Indian breakfast mixes.

Another well-known marketing company is Pankaj Aggarwal’s Gurgaon-based Just Organik. Known for its range of organic teas, especially Kashmiri Kahwa, Just Organik actually offers a great range of things Indian kitchens need — staples, pulses, spices. Begun purely as an e-commerce platform in 2013, Aggarwal explains that the market wasn’t ready for such a model. He has since placed products in premium retail chains such as Nature’s Basket, WH Smith, Save Max, Modern Bazaar and singular A-plus stores. “We have partnered with a farmers’ group, NGOs and big aggregators from south India,” he adds. Its teas are in the kitchens of several Taj group, Mariott and Crown Plaza properties as well.

One of his main marketing planks is jute packaging (others in this space also use eco-friendly packs, such as brown paper boxes). “Our idea was to merge eco-friendliness, transparency and attractiveness. We want customer to see what they buy,” he says.

There are also social enterprises in this space. Under The Mango Tree (UTMT) was started, says founder Vijaya Pastala, to help poor tribal farmers improve productivity and income —by adding bee-boxes to farms, as bees are necessary for cross-pollination. To be sustainable, they also had to be profitable — and to help the farmers, they had to market the by-product, honey. UTMT now has six varieties, one fully certified as organic and one in conversion; the rest are natural. “Incomes are up by 30-40 per cent,” says Pastala, adding that bee boxes are kept only after the farms are certified organic. The enterprise also links farmers with other marketers for their produce.

The Manufacturers
A trend-setter in this space is the Rs 200-crore Lucknow-headquartered Organic India, which specialises in herbal green teas and supplements. “Our company’s genesis was inspired by the concept of holistic wellness and to promote healthy, conscious living,” explains CEO Abhinandan Dhoke. Present in over 15,000 outlets pan India, including retail chains such as Spencer’s, Big Bazaar, Nature’s Basket, alongside being co-branded with Fabindia, is a marketing synergy that has helped the company grow at 35-40 per cent year on year.

Other companies that source organic produce, manufacture or assemble diverse range of products. Nourish Organics manufactures healthy, ready-to-eat snacks, cereals and granola bars, while Whole Foods makes healthy staples, mixes and snacks. While the former’s products are available through premium retail stores, its website and Amazon, Whole Foods’ USP is that the products are available in hospital cafes and also home delivered.

Riding the juicing wave, Shuddha, founded six months ago by Devika and Raghav Modi, home delivers cold pressed juices.“Our smoothies are 100 per cent organic,” says Modi, adding that their juices, however, cannot be certified organic because many fruits and vegetables do not have a year-long supply and regulations don’t allow recipe changes. “Our products are also available in some hotel gyms and spas,” adds Modi.

An ancient Indian science that’s moved out of simple production and prescription-based products to a luxe positioning is Ayurveda. Not surprisingly, there are more than a few companies working in this flourishing space. Catering to the well-heeled, globetrotting customer, 15-year old skin-care brand Forest Essentials’ USP is to make customers feel good with pure, Indian, luxurious products. It retails through exclusive stores, apart from partnering with over 100 hotels for hotel amenities. “We believe true beauty and health come from within, from the balance and harmony of the body,” says founder Mira Kulkarni.

Kama Ayurveda is another big player in this space, a tad younger (13 years old) to Forest Essentials. Begun with a shop-in-shop (in stores such as Good Earth) concept and tie-ups with hotels, Kama’s growth spurt, however, began only four years ago, when it opened a store in the capital’s tony Khan Market. Now, there are 20 stores pan India and significant presence in e-commerce (Amazon and Nykaa). But as CEO Vivek Sahni says candidly, not all Kama’s products are organic. “A range of cold pressed oils, henna and indigo are; the rest are natural and go through rigorous cleaning and distillation,” he says.

The Retailers
With such traction in the availability of products, retailers — both brick-and-mortar and e-commerce platforms — have clearly woken up to the potential of the business of organic. The Altitude Store (see box) in Delhi has a physical as well as an online store; I say Organic is big in the online marketplace. In terms of large retail, big chains such as Godrej’s Nature’s Basket, Foodhall, Le Marche and Spencer’s Retail are all gladly stocking organic products on their shelves. And then there is Amazon, which has over 400 products and 25 brands.

That wasn’t the case in 2002, when furnishing and clothing company Fabindia began sourcing and stocking organic products; it was definitely in the vanguard.“We started before organics was even being discussed. A lot of the gestation happened at Fabindia,” says Prableen Sabhaney, head, of Communications and Public Affairs at the company.

Fabindia is extremely careful of its supplier associations. “The products that form a part of the offering must follow certification norms and all the legal compliances,” explains Sabhaney. Now, Fabindia partners with Nourish Organics and Bhuira; co-brands with Conscious Foods and Organic India; and has a host of other suppliers pan India, from Auroville to Kashmir.

Walk into the Koregaon Park Nature’s Basket in Pune and two of the five rows are devoted to organic staples, pastas, quinoas, teas and supplements. A division of Godrej Agrovet till 2007, it became a separate company in 2008. Nature’s Basket has 12,000 stock keeping units, of which a quarter is organic or natural products (see table).

“Organic is only 10 per cent of the company’s Rs 300 crore turnover, but that’s because cheese and wine are high value items in the bill,” says Srinibas Swain, deputy general manager, Nature’s Basket, adding that Godrej is developing its own brand of fruits, vegetables, groceries and staples because “we see high potential”.

Among other FMCG companies, Godrej is in a minority though. HUL did not reply to BW Businessworld’s queries. Cargill managing director Siraj Chaudhry was more forthcoming: “Cargill has been off the organic train because of a lack of conviction about the potential of this stream.”

Within the organic space too, it’s certainly not all milk and honey. “Our industry is fragmented and disorganised,” says Aggarwal of Just Organik.“The segment will see fragmentation before a consolidation process occurs,” says Dhoke. For producers such as 4S’s Yadav, there is an infrastructure gap: quality of cattle is poor, veterinarian training is lacking and the certification process under-developed. “We copy paste guidelines from the West, but India is a different geography,” he says.

From the consumer perspective, the biggest problem is authenticity; although there are many genuine players in the market, consumers are still skeptical. Delhi-based architect Pitamber Sahni is among them. “One can’t be sure just because the label says organic. Certification in our country is not exactly reliable,” he points out.

As Mumbai-based nutritional therapist Rachna Chhachhi points out, she personally uses organic millets for upma, cutlets, etc as the nutrients stay mostly intact. But there are some inherent risks. “I prescribe organic food as long it’s safe. What producers and sellers must ensure the produce is devoid of infectious bacteria and organisms, especially if they are selling fresh produce,” she explains.

Therein lies the rub: some rotten apples could spoil this barrel. For good companies in the organic marketplace, the litmus test is to convince more consumers that they are, indeed, going all green.

Packing A Herbal Punch

When Bharat Mitra and Bhavani Lev came to India in 1996 in search of truth, the couple didn’t know one outcome would be the creation of a company dedicated to regenerating Indian agriculture. But when their guru Sri H.W.L Poonja told them to set up a company that would be a vehicle of consciousness, doing so was a natural progression. The first step was to convince famers in Uttar Pradeh to grow medicinal herb Tulse, which had never been grown commercially before. The couple established Organic India as a brand with Tulsi Green Tea as the flagship product. Herbal supplements such as Triphala and Ashwagandha followed later and then packaged food, such as quinoa.

Today, Organic India has long-term contracts with over 2,000 farmers, who cultivate over 10,000 acres organically. “Our field staff assist farmers with technical know-how 24/7 and, more importantly, take care of certification procedures,” explains CEO Abhinandan Dhoke. With exports to 40 countries, compliance with USFDA, EU and Japan regulations is essential.

As Organic India began with a novel product line, its primary business strategy was to create demand, trusting that distribution would follow. The company carried out a number of sampling and other retail activities to create a change in consumer habits, even used dieticians and nutritionists and carried advertorials. As Dhoke says, “We have been pioneers in building the organic category, not just the brand.”

The Height Of Natural

In 2,000, when Ayesha Grewal, a New York-based financial consultant, decided to come back home, an organic retail outlet wasn’t in her sights. But having managed a small debt fund and financed NGOs for renewable energy solutions in villages, she learnt that fiscal discipline was the exception rather than the rule. She also realised that renewable energy and an organic set-up went well together.

So she began with a juice making project to help farmers in Uttarakhand extend shelf life and get better prices for their produce. “But I was personally delivering crates to shops,” says Grewal. The Altitude Store was set up in 2010 as a bridge between farmers and consumers.

“We keep everything a household needs,” explains Grewal, from poultry, grains, fruits and vegetables, to cleaning supplies and personal care products. Next on the anvil, is the Altitude Café.

Most products are certified organic, but some are free range, or in the case of fish, wild caught. Her mantra is ‘test and retest’. Every supplier’s stock is randomly selected and tested in a lab. “My annual budget for this alone is Rs 10-12 lakh” says Grewal, adding, “Certification alone is not enough: we want certainty.”

Healthy Snacking Options

We, Indians, love snacking, but our snacks are not healthy; they are full of carbohydrates, have little or no fibre and are often deep fried,” says Seema Jindal Jajodia, daughter of steel baron Om Prakash Jindal. That’s a lacuna that bothered Jindal. So in 2008, she began making her own mueslis, seed mixtures, health bars and cookies.

Manufacturing healthy munchies on a larger scale followed soon after under the brand name Nourish Organics. “I believed that healthy fats were the answer to a satiated feeling. Once people thought that fats were not good, now, we know differently; fatty acids are essential. We have also introduced the traditional goodness of Indian grains such as millets and amaranth,” expains Jindal.

“Nourish Organics manufactures all its products in-house,” she says, adding that she sources directly from farmers and almost everything, except dates and cranberries, are from Indian producers. Nourish is now in several retail spaces: Nature’s Basket, Le Marche, Food Hall and Big Basket and co-branded with Fabindia. But Jindal is targeting a niche audience so retail presence is limited to premium outlets.

Her biggest challenge is procurement. Since organic production is nature-based, crops can and do fail. Or, as once she was late in ordering by a week, the farmers sold their produce in the open market because they couldn’t wait. But the potential is huge — people now understand that processed food is not healthy and want natural products.

A Healing Diet

Clinical nutritionist, dietician, columnist and author Ishi Khosla is also a businesswoman. But the idea for Whole Foods was born when, as the head of Preventive Cardiology at Escorts Hospital, she saw that while hospitals and doctors promoted healthy eating habits, cafes and coffee shops within hospital premises served food that was anything but healthy.

“In a hospital, you have to showcase model food. We were promoting a healthier lifestyle, but healthier alternatives didn’t exist,” she says. So Khosla started developing healthy food products as an extension of her work in the field of nutrition, while her accountant husband Gagan gave the company its business shape. They began with a whole shelf of grains, pulses and oils n 2001.

But it was too early for such an experiment. Apart from expats or people with serious health issues, the products did not find a market. People also questioned the higher price. “So we decided to take orders only,” she says.

Then, the pesticides in colas controversy happened. The effect of the news was obvious, explains Khosla saying, “The connect was made between disease and food.”

Since then, Whole Foods has grown exponentially, with two shops, cafes in 29 hospitals and office buildings such as American Express and Ernst & Young.

The author is a Delhi-based writer, editor and keen consumer of all things organic

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Vidhu Khanna

The author is a Delhi-based writer, editor and keen consumer of all things organic

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