Organic food market to grow at 20-25%: 24 Mantra Organic CEO
Organic produce is an emerging market in India, clocking a turnover of Rs3,350 crore in 2016, and is expected to treble it by 2020. According to N. Balasubramanian, CEO of 24 Mantra Organic, among the largest organic food companies in India, rising consumer preference for safe food and emergence of companies who are working directly with farmers is driving this growth. Edited excerpts from an interview:
Give us a brief idea about the business model of 24 Mantra, how you are working with farmers and how farmers are benefiting by shifting to organic.
Our business model is based on the vision of helping small and marginal farmers earn better livelihood, provide safe food to consumers and improve the environment. We work directly with more than 45,000 small and marginal farmers across 15 states of India, managing more than 90 agricultural commodities. We have 200 associates managing and helping these farmers produce food without use of chemical fertilizers and pesticides. We get the land and produce certified by accredited international agencies to meet US, European and Indian norms. The produce is then processed, sorted and graded in 25 units across India and made available to consumers through 10,000-plus stores across 145 cities of India and retail stores in 21 countries. In the US, we are available in more than 800 Indian ethnic stores and 600 stores of Kroger’s.
The key person in this is the farmer who earns between 10-20% price premium (compared to wholesale mandi rates) depending on crops and location.
As one of the largest organic food companies in India, do you see a gradual shift in consumer preference towards safe food?
Consumer preference is shifting towards better food… the momentum picked up in the past few years. With higher disposable incomes and rising awareness of health and wellness aspects, consumers are opting for healthier alternatives, especially for children and in post mid forties age group when the fear of lifestyle diseases kicks in.
When you work with farmers, how much of a challenge is certification, getting them used to the stringent norms of growing organic food? Does it significantly add to costs?
The challenge is reduced by our team which spends a lot of time and effort to identify and train farmers who are open to organic cultivation. Many farmers are aware that they are using more and more fertilizers to maintain same production levels due to depleting soil conditions. Therefore, they recognize that unless they change their farming practices, they will face major issues some years down the line, if not immediately. Our team hand-holds them to help them migrate to organic cultivation in the mandatory 3-4 year transition period. The process of certification is expensive, but we bear the costs.
Do you see organic food becoming cheaper and affordable for the common man as the market grows?
Organic food value chain for 24 Mantra—and this may not be true for other companies—has three major cost components: the additional price paid to farmers, cost of honesty such as no mixing of varieties, maintaining high-quality processing facilities, and paying minimum wages to all factory employees and an extra 10% margin to retailers for stocking organic food. So, even as economies of scale kicks in, organic food in India would sell at 40-50% premium compared to conventional food in the next 4-5 years. This number is close to 30% in large markets like the US. Despite the price difference, we expect the organic food market to grow at 20-25% over the next few years. Better awareness about health and rising incomes will help this growth. Our aim is to extend our reach to a million households through one lakh farmers with a total of half a million acres under organic cultivation by 2020.
What are the primary challenges in the safe food business—say at farmers, marketing or regulatory levels?
The biggest challenge is to stay true to our vision of helping farmers earn a better livelihood and provide consumers the option of safe and quality food, while building a sustainable business. However, there is little or no support from banks and regulators though there is a lot of lip service on priority sector etc.