5 Reasons Why it's the Right Time to Invest in Organic Food Industry
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In the past few years, the words like ‘natural’ and ‘organic’ have gained immense popularity as the millennial generation is increasingly becoming aware of the pros attached to being healthy. From farm produce to meat, to seafood, to dairy, 'going organic' is transitioning from being a fad to a way of life. In no time, going natural has become the ‘in’ thing for most people in India.
Taking a note of this trend, many brands have dug deep into the roots of Ayurveda to come to up with 100% natural food and beverages, cosmetics and personal care items and other healthcare products. This trend has accelerated so much so that Organic food is believed to be the next food wave in India. This growing industry of Organic food offers a bright future to all its investors. Some of the reasons for investing in this industry are:
Increase in demand for organic products
In many ways, organic food is still a niche concept in India. The current Indian domestic market is estimated at INR40,000 million which is likely to increase by INR100,000 million to INR120,000 million by 2020 with a similar increase in exports. (Source: EY Report on Indian Organic Market March 2018). The predicted rapid growth rate of this industry along with other key factors makes it lucrative for investors.
The growth of e-commerce in India
With the ease of accessing the Internet, e-commerce has changed the way India shops. Be it groceries or personal care items, the ease of its availability on a click saves a lot of time for buyers. There is a growth in e-commerce platforms that deals in only organic products that helps the seller choose the best product available out there.
Export of Organic Products
India is ranked second largest in terms of the export of organic products in Asia after China. The increasing export market coupled with the Government’s support is making organic cultivation in India highly successful. Indian organic food exports were estimated at US$299 million during 2015-16 with total volume of 263,688 MT. The major export destinations were the US, European Union, Canada and New Zealand.
Introduction of the new variety of foods
Just a decade ago, superfoods were unheard of and not a part of the Indian diet. However, due to the increase in awareness, new organic products have come into being. Brands are now introducing the organic version of the usual products like tea, spices, juices, and herbs for health-conscious consumers.
Increasing support from Government of India
The Government of India is promoting organic farming and the consumption of organic food in the country. Financial assistance is provided to farmers who are adopting organic farming under various central sector schemes such as National Mission for Sustainable Agriculture (NMSA), Mission for Integrated Development of Horticulture (MIDH), National Food Security Mission (NFSM) and Rashtriya Krishi Vikas Yojana (RKVY). In the Union Budget of 2016, the GoI proposed to allocate 500,000 in the country under organic farming and develop value chains in the Northeastern Region (NER).
All of the aforementioned factors are favourable for investing in the organic food industry in India. However, one must also keep in mind that the cost of operating and producing organic products is higher than the conventional foods, which adds to the high price markups. Secondly, these prices are also subject to high tax rates in India. The higher price acts as a barrier and refrains many consumers to choose organic products; therefore, the bulk of sale is restricted to metro cities and supermarkets. As an industry, any government reform that helps in bringing down the price of these products will be pleasantly welcomed.