marketing and export of organic products.lect 31.pptx

marketing and export of organic products

1. LECTURE No. 31 Marketing and export potential of organic products- Opportunities and constraints

2. The market of organic products is expected to grow globally by 10-15 to 25-30 % in the coming years . The organic market expansion makes it possible for farmers to reap the benefits of a trade with relatively high price premium ( Yussefi and Willer , 2002 ). However, this market is not very well known to most of farmers of developing countries . Furthermore, information about it is not readily available to farmers of developing countries.

3. Organic Market: World Scenario and Market Trends Market research company “ Organic Monito r ” estimated the global market for organic products in 2015 : 81.6 billion US Dollars. The leading market is the United States , followed by Germany and France . In 2015, official market data was for the first time ever published for China ( 4.71 billion Euro), making the country the fourth biggest organic market in the world. The highest per capita spending was in Switzerland followed by Denmar k and Sweden .

4. producers 2015: 2.4 million ( 1999: 2,00, 000) 1. India (5, 85’200 ) 2 .Ethiopia ( 2,03’602 ) 3. Mexico ( 2,00’039 ) Organic market 2015: 81.6 billion US D (75 billion euros ) (2000:17.9 billion US D ) 1. US (39.7 billion US D 35.8 billion euros) 2. Germany (9.5 billion USD 8.6 billion euros ) 3. Frances (6.1 billion US D 5.5 billion euros) Per capita consumption 2015: 11.1 US dollars ( 20.3 euros) 1. Switzerland (291 US D 262 euros) 2. Denmark ( 212 US dollars; 191 euros) 3. Sweden (196 US dollars; 177 euros)

5. Number of countries with organic regulations 2016: 87 Countries   Number of Affiliates of IFOAM- Organic international 2016: 833 affiliates from 121 counties   Germany 91 affiliates India . 73 affiliates China. 55 affiliates US. 49 affiliates

6. Potential organic products in International market   Internationally, organic dairy and meat registered the strongest growth in all the major markets. However , there are growing markets in the developing co untries (of the Middle East, Latin America, Africa and Asia regions) such as Argentina, Brazil, South Africa, China and India . In the EU , Austria, Denmark, Germany and UK are the largest consumers of organic livestock products . Besides EU, among other developed countries, USA and Japan are significant markets for organic livestock products . Organic meat, Dairy, Beverages, Textiles, cosmetics, fruits & vegetables, functional foods and food ingredients are the important products that have potential international market .

7. Current trading of Indian organic products in the export market India produced around 1.70 million MT (2017-18) of certified organic products which includes all varieties of food products namely Oil Seeds, Sugar cane, Cereals & Millets, Cotton , Pulses, Medicinal Plants , Tea, Fruits , Spices , Dry Fruits, Vegetables , Coffee etc. The production is not limited to the edible sector but also produces organic cotton fiber, functional food products etc . Out of 1.70 million tones , farm production is 16.75 thousand tones and wild harvest is 27.55 thousand tones.

8. Among different states, Madhya Pradesh is the largest producer followed by Maharashtra , Karnataka , Uttar Pradesh and Rajasthan . In terms of commodities Oil seeds are the single larges t category followed by Sugar crops, Cereals and Millets , Fiber crops, Pulses , Medicinal , Herbal and Aromatic plants and Spices and Condiments.

9. The total volume of export during 2017-18 was 4.58 lakh MT . The organic food export realization was around INR 3453.48 crore ( 515.44 million USD). Organic products are exported to USA, European Union, Canada, Switzerland, Australia, Israel, South Korea, Vietnam, New Zealand, Japan etc . In terms of export value realization, Oilseeds (47.6%) lead among the products followed by Cereals and millets (10.4%), Plantation crop products such as Tea and Coffee ( 8.96 %), Dry fruits ( 8.88% ), Spices and condiments (7.76%) and others (16.4%).

10. No. of farmers registered with certification agencies = 10.93 lakh ICS groups = 3488 ( 10.91 lakh farmers ) Individual farm producers = 1918 Total traders = 822 Total operators = 7388 India being a country with different agro-climatic zones, each state produces its own specialty products. Based on soil and climate, India is divided into 21 agro-ecological zones.

11. Product Season States Tea Throughout the year Assam, West Bengal & Uttranchal Spices Throughout the year Kerala, Tamil Nadu & Karnataka Coffee Throughout the year Kerala, Tamil Nadu & Karnataka Rice Kharif & Rabi Punjab, Haryana, Assam, Maharashtra, Tamil Nadu Wheat Rabi Punjab, Haryana, Uttar Pradesh Vegetables Throughout the year All India Fruits Throughout the year All India Cotton Kharif Maharashtra, Gujarat, MP

12. The channels adopted for the export of organic products are mainly through export companies . , except for tea , Organic tea is produced by major well organized tea estate s which are exporting tea directly . In the case of other organic products, predominantly small farmers are involved in producing organic products . Hence, these products are exported through exporters .

13. Organic products are mainly exported to the following countries ( in order of priority ): Europe : Netherlands, United Kingdom, Germany, Belgium, Sweden, Switzerland , France, Italy, Spain ; Americas : USA, Canada ; Middle East : Saudi Arabia, UAE ; Asia : Japan, Singapore ; Australia ; Africa: South Africa.

14. Indian organic products having great demand in International market 1.Oilseeds including soybean : Highest organic was achieved with a production of 5.39 lakh ha ( 2017-18). Out of this, 3.43 lakh tones was exported with value of 245.6 thousand US dollars. It is equivalent to 47.65 per cent of share of total value of exports . The demand for oilseeds increased tremendously in recent years due to awareness of consumers in the developed nations towards GM crops.

15. 2.Cereals and millets : Highest organic production of Cereals and millets was achieved with a production of 2.84 lakh ha ( 2017-18). Out of this, only 0.52 lakh tones was exported with value of 53.86 thousand US dollars. It is equivalent to 10.44 per cent of share of total value of exports. The demand for cereals and millets in the domestic market is mainly the reason for less value of exports .

16. 3.Organic Tea : India is the largest produce r and exporte r of organic tea . Of the total organic tea production in the country, 90 % is exported to Australia, Germany, Japan, UK and the US . Darjeeling has the largest number of estates under organic cultivation, followed by Assam and South India . Organic tea farming had been identified as a major growth sector during the Tenth Five Year Plan, and continues to be the focus area. With the European Commission (EU) having granted ‘ equivalence’ status to Indian organic certifying agencies , So, Indian organic tea producers in a position to expand their markets in Europe, one of the leading tea consuming regions.

17. 4.Organic Coffee: Organic coffee is mainly consumed by the developed countries , namely, USA, Germany, France, Italy, Japan and other European countries. Together , the 3 developed markets of US, EU and Japan account for over 90 % of world organic coffee consumption . India accounts for nearly 1% of the estimated world organic coffee market, The main geographical regions cultivating certified organic coffee are Karnataka (60%), Kerala (27%) and Tamil Nadu (13%).

18. 5.Livestock : India has the largest population of livestock in the world and It is 4 th largest exporter of beef in the world . India is also the largest producer of milk in the world . With organic meat and dairy market rising significantly, India holds ample scope to expand in these markets .

19. 6.Organic Spices : India currently accounts for over 11 % (in terms of quantity) and over 5% (in terms of value) of the world organic spice market. The main consumers of organic spices are Germany, UK, France, Japan and USA. Organic spices in India represent a very negligible part of total spice production. Organic spices produced by India, and having export potential include: pepper, ginger, turmeric, cloves, mace, nutmeg, vanilla, cardamom, chili, mustard, tamarind, rosemary, parsley, sage (fresh, dehydrated and oil).

20. India is a significant supplier of certified organic ingredients to the global organic cosmetic and health care industry , and has a vast area under herbal and aromatic plants production . India is also a significant producer of essential oils in the world . So, India can become one of the leading suppliers of organic ingredients to the global organic cosmetic and health care industry.

21. General Price Policies and cost structures for organic products   In general, an organic marketing initiative is expected to build in or carry more costs in contrast to conventional marketing . This is largely because of the ‘ additional’ environment management and social responsibility it wants to carry. Organic marketing initiatives therefore have a distinct cost disadvantage against conventional businesses , which do not internalize equivalent environment and social costs, in the market for similar products categories.

22. Organic products Price premium % Tea 47 Rice 44 Protein grains 44 Spices 30 Vanilla 53 Mango 25 Pineapple 28 Bananas 31 Nuts 40 premium Price obtained in the export market for different organic products

23. In most Asian countries, the local markets are just emerging . In almost all Asian countries, local distribution is a huge problem and often a price premium cannot be achieved . A number of countries, such as Israel, Japan, Malaysia and the Philippines have specialized organic stores or markets.

24. SWOT Analysis on Global Competitiveness for Organic Food Exports from India Strengths Wide variety of fruits and vegetables and other commodities can be grown organically Very less consumption of chemicals in India as compared to developed nations. These areas can be turned into organic with in less time Organic pockets existing in different parts of the country by default Differentiation can be easily created Farmers as well as Government interests are rising in organic Indian corporate investing in agribusiness especially in organic farming

25. Weaknesses Short shelf life of existing varieties Lack of farmer awareness about agricultural practices, products and technologies for organic farming Maintenance of quality is not competitive in the domestic and international market Price competitiveness Lack of market information and intelligenc e Global marketing research lacking Inadequate post harvest management and related specialized infrastructure to support organic food production R& D base in organic food production lacking Unavailability of inputs used in organic production system Certification and labeling and no access to international market

26. Opportunities Favorable government vision WTO offering global opportunities Price –premiums in different markets Export opportunities in new product/market( section ) USA, Europe and Japan are rising markets Branding offers new opportunities for differentiation Rising demand for organic products Big retail stores/chains opening up New developments in post harvest technologies

27. Threats Threat from imported products Non-tariff barriers may be imposed by developed nations

28. Domestic Indian Market for organic products: Demand and price The domestic market for organic products is as yet not as developed as the export market . The organic products that have demand in the domestic market are rice, wheat, tea, coffee, pulses, fruits and vegetables . Wholesalers / traders and supermarkets play a major role in the distribution of organic products.

29. The associated chambers of commerce and industry of india ( Assocham ) has reported that presently the market is Rs 2,500 crore (approximately) and it is set to be growing with rising health awareness and population. A study by Assocham titled “ organic products – the way ahead ” shows that the certified area used by many private players is growing rapidly & providing work for a number of farmers, consolidators, retailers and many others. Moreover , the facilitation schemes and policies by the government are also driving organic movement in the country Assocham has recently proposed the formation of a national commission to promote organic farming.

30. As the organic foods are becoming popular, the sector is picking up pac e and entrepreneurs are ready to invest in this m arket. However , the market is at a nascent stage and is facing challenges like unorganized market , lack of customers’ faith , high cost and fake products . Mukesh Gupta, director-operations, Morarka organic foods Ltd, said “In recent years, they had seen a growing awareness about health among the people . Thus , India is becoming a huge market for organic food items ”.

31. Organic food serves as a promising alternative for the population concerned about the consequences of high amounts of chemical used in food items. Nowadays , Indian population is paying attention to health and is ready to pay extra premium pric e for the products with more nutritional qualities. In addition, the affinity of an individual with the consumption of organic food items is highly dependent on the awareness level , spending capacity and accessibility available to the individual.

32. Potential areas for entrepreneurs: There is so much potential for entrepreneurs in the field of organic products. So entrepreneurs have great opportunities to grow at regional and local level . Organic food market is also spreading to tier 2 cities . So it is not just people with money who are buying organic. This is actually the health conscious community that is ready to pay even higher price for the health of their family . Apart from food products, entrepreneurs can try to occupy the space into products like clothing, cosmetics and household items . There is scope in different farm processing techniques in organic production systems. The major players in Indian domestic organic food market are Conscious Foods, Eco Farms, Organic India , Navdanya , Morarka Organic Foods and 24 letter mantra ( Srestha ).

33. company Turnover (crores) Conscious Foods 120 24 letter mantra 65 Ecofarms 85 Morarka “Down To Earth” 75 Pristine Foods 15 Navdanya 25 Suminter organics 15 Fab India 20 Organic India 175 Total 1000 Turnovers (includes exports) of leading organic product companies