A market study of organic products in India: Marketing strategy for organic food (OF) product companies to tackle mismatch between Supply and demand

Abstract

This report is a market study of Organic Products in the Indian subcontinent. Green revolution had introduced high yielding seeds and simplified agricultural techniques where usage of chemical fertilizers and pesticides to maximise the agricultural produce and protect the crop from vector diseases. This has by far helped farmers in increasing productivity, but the soil quality has deteriorated, ground water gets polluted and also agricultural produce carry residues of these chemicals within them, affecting the end consumer. Awareness among the consumers and farmers has made them switch to earlier food habits and organic agricultural practices respectively. Farmers have inculcated sustainable agricultural practices, even though the yield is less. But, this produce is marketed as Organic Products which is differentiated from rest of the agro-produce, fetching a 15-25% premium price than non-organic products. The demand for organic products has been stable, whereas there are fluctuations in supply side, which are influenced by external factors (yield, price, rain, etc.) and farmers’ willingness to go or stay with organic techniques. Many companies have entered this market to give assurance to farmers to market their organic products for a better price and provide healthier organic products to end consumers through their distribution network. This will by far reduce the uncertainty with price and logistics issues and increase trust among the consumers about the products they consume. We have discussed the issues concerning farmers, scopes for shifting the demand upwards and have studied various business models and marketing strategies used by the existing market players in India and few other Asian countries. The organic products industry is still at its nascent growth stage in India. Companies must strive to target one particular target segment, create a niche for themselves and then expand to other segments. Also, we have studied the consumer behaviour by conducting in depth interviews with shoppers at organic shops and various other venues. Based on the inputs obtained we have come up with four potential target segments which can act as beachhead segments in this category. An organic products company can position itself so as to cater to any one of these target segments. Strategies to reduce the perceived risks in this segment have been suggested. We have also recommended relevant positioning and promotional activities the company can implement.