The new normal: 5 key transformations in organic food sector

Satyajit Shivajirao Hange Updated - June 29, 2024 at 11:49 AM.

Post-pandemic there has been a massive inclination towards clean and healthy eating as more individuals have come to terms with the importance of health and immunity. As a result, nowadays, a lot more scrutiny goes towards picking out regular fruits, vegetables, and grocery items with more consumers prioritising well-being over the cost of products. This has become more evident in tier-1 cities, where every supermarket shelf is filled with organic food alternatives. This awareness about health and the ills of consuming processed food has led to a 25-100 per cent increase in online sales of organic food items since the pandemic for most companies in India. It is transforming the entire food sector, with the ₹131.41 billion organic food sector projected to become an ₹625.69 billion market by 2028, recording a CAGR of 37.01 per cent. Needless to say, the shift has prompted significant transformation across the evolving sector, shaping the new normal.

Shift in farming practices & government support

The mindset of traditional farmers has also undergone a notable change, driven by a growing understanding of the economic and environmental benefits of organic farming. The new-age Indian farmers are more keen on focusing on soil health and sustainability to preserve biodiversity. This notable shift is accelerated by the entrance of seasoned and well-versed farmers with a better understanding of what modern consumers want. This awareness is also brought on by the internet age and several government programs, helping to change the notion of farming as a profession, especially among urbanites.

Today, more urban individuals can be seen investing in hydroponic systems to grow some of their produce in their balconies and gardens. Those with limited access to such technology or space constraints are increasingly participating in community-backed agriculture experiences. For instance, The Farm by Protecterra Ecological Foundation provides farm stays, enabling individuals to experience farm life and first-hand organic farming.

Government initiatives and organic-farming-centric policies have also played a key role in this shift. For instance, national programmes like the Paramparagat Krishi Vikas Yojana (PKVY) and the Mission Organic Value Chain Development for North East Region (MOVCDNER) were introduced by the government to support government farmers with production, processing, farm certification, post-harvest management, and even marketing activities. According to the Ministry of Agriculture & Farmer Welfare, under the PKVY scheme, farmers can avail ₹50,000 per hectare of their farm for three years to advance their eco-friendly organic farming techniques, training, capacity building, PSG certification, and marketing. The government’s commitment to organic farming further became evident in the Union Budget 2023-24, where it proposed the Centre would set up 10,000 Bio-Input Resource Centres, creating a national-level micro-fertilizer and pesticide manufacturing network to encourage 10 million farmers to switch to natural farming over the next three years.

The emergence of the D2C ecosystem & supply chain dynamics

The Indian direct-to-consumer (D2C) ecosystem has recorded massive growth in the last couple of years, with 600-plus new brands entering the segment between 2016 and 2023, displaying a jump of nearly 25 per cent in the market. Interestingly, grocery makes up 39 per cent of the Indian D2C market, with brands in the snacks categories witnessing more success than most categories due to their repeatability of purchase.

Previously, none of the D2C grocery or FMCG players had a dedicated organic food category, but now more leading brands are focused on building subcategories or acquiring organic startups to capture the growing market of organic food consumers. For example, the launch of ITC Spices by ITC’s Agri Business Division marked the second-largest Indian FMCG company’s entry into the organic segment through its organic, food-safe spices offerings, which are a product of farm-to-fork ecosystems and meet the global organic farming standards. Recently, Tata Consumer Products acquired Organic India, an organic brand to expand its organic offerings. Some brands are also consciously moving away from processed ingredients like refined sugar. A notable example would be Go Zero ice cream, which offers an assortment of vegan, no-sugar, protein-rich, and low-calorie variants.

Meanwhile, a few D2C organic startups are exploring niche food segments in staples like Khapli wheat and millet variants. For instance, brands like Slurrp Farms are dedicated to multi-grain-based products, while organic farming-based aggregators Green and Grains and Cora Health Store are making organic food products more accessible to consumers.

Renewed emphasis on sustainable practices

Several Studies like packaging-related food losses and waste have underscored the link between food loss and packaging. A decade ago Indian Institute of Packaging informed that around 35-40 per cent of food products were damaged or misplaced due to improper packaging. However, the traditional delivery system has transformed, especially in the food sector. The new-age transportation, storage, and distribution networks have evolved to include sustainable packaging solutions to address concerns related to freshness and the environmental impact of packaging. The need became more prominent as organic products demand special packaging to retain freshness and nutritional value. As a result, reusable packaging options, including glass bottles, metal tins, fabric bags, and mesh nets, are becoming more widespread.

The rise of farm-to-fork & evolution of quick e-commerce

As per a Statistica survey Purchase criteria for food, “Fresh” and “High quality” were the top answers among Indian consumers in 2024. Another global data consumer survey, released in 2018, stated that 47 per cent of Indian consumers were interested in and regularly used subscription-based services for buying food. These surveys highlight the success of the farm-to-fork model and quick e-commerce platforms in India, driven by the rising demand for high quality, transparency, and convenience.

New-age farms like Naturally Good by Kanpan Organic Farms involved in delivering farm-fresh organic food to homes are becoming successful examples of farm-to-fork models. These farms also allow individuals to purchase a parcel of farmland to grow their produce, enabling city dwellers to experience organic farming experiences firsthand.

On the other hand, the demand for convenience has further prompted e-commerce platforms to launch quick commerce verticals such as BlinkIt, Instamart, Zepto, and Dunzo to cater to the demand for instant doorstep delivery of food, including organic products. Similarly, niche organic food delivery services that work on subscription models such as Planet Organic India, Milk Basket, and Healthy Budhha have also emerged, transforming how consumers access organic food.

Notably, this preference change can be accredited to the bevy of food influencers and nutritionists exposing the truth behind processed and packaged food. Today, influencers like Revant Himatsingka popularly known as FoodPharmer spreading awareness about how to read product labels and understand ingredient lists. This is encouraging young consumers to consciously shift away from processed food and embrace healthy organic food brands.

Investment in organic brands & regulatory support

The organic food sector has drawn significant investment from venture capital and private equity sectors in recent years. For instance, in 2022, Indian agri-foodtech startups secured around $2.4 billion in funding, demonstrating faith in the sector’s potential. A Mumbai-based startup, FarmersFZ also raised $4.5 million in VC funding in 2020. The inclination of VCs and PEs towards agrifoodtech and the organic sector can also be attributed to regulatory support from bodies like the FSSAI who are helping identify organic players through certification, further boosting consumer confidence in brands.

This way the growth and demand for organic food have prompted several transformations redefining the food sector. With more consumers, farmers, and producers joining the organic movement, the organic food sector is expected to witness more changes.

The author is Farmer and Co-Founder, Two Brothers Organic Farm

Published on June 29, 2024 06:19

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