Avalon outlines massive organic food market potential in India

26 November 2019 Consultancy.asia

Management consultancy Avalon has outlined the impressive organic food market opportunity in India, which with a concerted effort is poised to push well above $2 billion by 2024.

Indian-origin management firm Avalon Consulting has contended that organic produce may prove the next big thing in the domestic market. Already a large supplier of organically-grown non-GMO produce to the US and Europe – which together combine for almost 90 percent of the global organic market – the consultants from Avalon say the local organic market has all the hallmarks of a growth story in the making.

Even by conservative measures, the Indian organic food market is expected to grow in the short-term at a compound annual growth rate of 20 percent – taking it above the $2 billion mark by 2024. Yet, a number of factors if resolved – such as addressing authenticity concerns, a scattered supply-chain, and creating a reliable ecosystem to bring much larger quantities to market – could see its worth rise well above that.

According to Avalon’s figures, the domestic consumption of organic food has climbed moderately by a compound growth rate of 13 percent between 2011 and 2018 (to a worth of $189 million, while exports have grown to $515 million over the same period at a CAGR of 33 percent), but demand for healthier products will continue to increase in line with the growing wealth of the nation’s booming middle class.

In terms of the general domestic market, it may be worth reiterating some numbers; tipped to become the world’s third-largest economy before the end of next decade (with private domestic consumption to reach $5.7 trillion by 2030), Bain projects 500 million people to move above the low-income bracket over that period. Avalon predicts the nation’s food sector will reach a worth of $1.14 trillion in half that time.

Organic food exports vs domestic consumption

Now then would be the desirable time to act to overcome certain market impediments and best capitalise on the opportunity at hand. On the supply-side for example, a fragmented sector sees around 200 players (mostly exporters) combine for a large portion of the market, providing according to Avalon an opportunity for category leadership – potentially by investing in a few regional players to create a national footprint.

Elsewhere, while India does have an official symbol for organic certified produce, it lacks widespread acceptance as a mark of authenticity, with the development of identifiable and credible certification likely go a long way to alleviate concerns. Avalon also suggests a focus on emphasising organic food’s ‘better-for-you’ proposition, by creating greater awareness through the media and strong regional associations.

“Communication of ‘health’ is high on the agenda for packaged food companies and there is a far greater urge among Indian consumers to reach out for products with ‘No preservatives’, ‘No added sugar’, and ‘Gluten-free’ labels,” state the authors, Avalon vice president Asish Puri and associate vice president Niyati Dave. “Organic food, with its naturally ‘better-for-you’ proposition should ideally be flying off the shelves.”

Avalon also notes the local advantages from a farming standpoint, where through government initiatives the land under organic farming is expected to triple to ~2 million hectares next year. “India is intrinsically agrarian, natural manure is abundantly available, as are vast tracts of naturally organic virgin land in the western and north-western extremities which can be made arable through clever agricultural innovation.”

While Avalon concedes that the local market won’t quite reach the heights of the US (which has grown from a $1 billion worth in 1990 to $53 billion today) without an established conservationist mind-set serving as a driver, it concludes that “the right catalysts in the form of supply-chain debottlenecking, regulatory push and some above-the-line marketing could propel Indian organic food into the next big phase of growth.”