When the opening rhetoric of the India Today Magazine is graced with a leaning figure of “Power Yogi” Baba Ramdev and his flexi muscles, you have got to believe the change in the Indian outlook – from a society influenced by the West to open acceptance of organic products marked with the Power Yogi’s flickering eye.
Your grandmother’s homemade face-scrub popularly known as ‘Ubtan’ now has a fancy tag attached to it. The ‘organic’ label adds status to products – from vegetables to jeans- it’s a new trend in society. Several reasons have been attached to this new wave- rising disposable income, raising awareness towards environment deterioration, more concern about health benefits etc. All in all, it’s a Venn diagram of various factors- The costing, the organic ‘brand’ segmentation and the strong hand of marketing.
Organic comes with a ‘Cost’
One of the major influencing factors to buy a product is its price and the term organic has attached a premium to itself over the years. The high demand for organic food results in an increase in their prices, despite the presence of government subsidies. Without the use of cheap chemical pesticides, organic farmers must tend to their crops much more extensively than conventional farmers. Most organic crops are weeded by hand as compared to the conventional method of employing machines. The wages for these extra hands working on organic farms increase the cost burden. Along with this, Synthetic Growth Hormones cannot be used to grow organic food. Organic farmers use composted natural materials or manure for fertilization, which is expensive in terms of transportation, handling, and cost. Due to these factors, organic food takes longer to grow with yields lesser than conventional methods. The output is therefore limited and economies of scale take longer to be achieved for organic farms relative to large-scale conventional farms.
Moreover, the transition from conventional farming methods to standards approved organic methods is a costly process. In a report by the Organic Consumers Association, the costs of a three year transition period- when yield and consequently farm sales fall- outweigh the benefits of the “premium” they will ultimately earn from organic products. This cost forms another bracket into the ultimately charged prices.
Along with the growing cost, the supply too has increased. The surge in the number of suppliers including small-scale producers to elephant chains and now yoga gurus, have raised overall supply w.r.t demand and capitalization on the sudden availability of retail shelf space by ramping up organic production. The epitome of the umbrella concept, Walmart has finally opened its shades to organic products.
By simple observation, the surging prices of organic products are a result of growth in demand which is much higher than growth in supply of organic products. We must also consider the opportunity cost- the extra yield from conventional farming foregone in the additional time dedicated to organic produce, to the maximum retail price of the product. The annual compounded growth rate of consumption in India for organic food is 46.34% as compared to the growing production rate of 25 % (M.Varghesse, I.Shahhidul- Growth of Organic Food Industry in India). These market forces are hence creating a gap between the cost structures of organic and non-organic food.
Organic is the New Black
How the ‘greens’ started filling our plates is an unexpected tale. During the Great Recession, many brands began offering natural choices only to pull out or discontinue them as consumers scaled back their spending. Once marketed as the alternatives to highly priced conventional products, organic or natural products over a period of time were strategized as luxury items instead. This shift can be attributed to rising wages, job growth, concerns for animals, labour, and environmental welfare, as well as an aging population concerned about their health. These are categorized over and above the basic needs of survival in Maslow’s Pyramid of hierarchy of needs. Such a categorization explains the behavior of the current society towards the organic market. For instance, in India, as compared to other less developed countries, the current population is experiencing a much higher level of social security due to the stabilizing economy and the deeply penetrated perks of globalization. This gives us the luxury to choose and experiment rather than just concentrate on satisfying our basic needs. The well-to-do segment of the population now has a lens to look at the market with higher need levels such as health considerations, ethical considerations, political considerations and quality considerations.
These needs can also be credited behind the age composition of the demographic market. The more economically stable and exposed generation of millennials therefore account for a large fraction of the demand for organic food.
With these developments taking place in the sector, further segmentation of the organic industry comes almost naturally. ‘Budget Organic’ is one such segment which has caught the imagination of the people. With the swooping organic wave, initiatives by the big players are slicing the market latitudinally and longitudinally as well – they become affordable to the pockets of less affluent consumers.
Selling the Organic right
Emerging from the segmentation of organic products, a whole new industry has emerged with various choices at the consumer’s disposal. These choices that have newly factored in the purchasing decisions, have made room for marketing to work its magic in tailoring consumer appealing products.
Organic labels which capture consumer’s visionary senses are strategically designed. It often includes a narrative of production process, using a farmer’s name and other information about their farms. Through a collective comparison of words on packaging on both organic and non-organic products, a research by Ulf Hjelmar noted that keywords on non-organic products tend to incorporate imagery associated with the kitchen, whereas organic foods emphasized farms with different shades of green and the point of production. Additionally, the language used to market the product tends to be poetic, dialogic, narrative, and emotive, with an emphasis on countryside imagery and consumer self-interest.
In India, marketing for organic products is now venturing into absorbing the synergy of different waves- that of nationalism or Make in India Project. The Indian take on organic food or consumption makes for a whole new package of studies for new MBAs, with the pole bearer being the ‘power yogi’ Baba Ramdev’s Patanjali.
With organic products blurring the boundaries of what is ‘in’ and what is ‘not’, this new movement gives us the best of both worlds. From the simple ‘Aum’ to romanticized plump cows to the range which makes you ‘Sundaram’, this green-tinted trend has scaled soaring heights.
Links for Further Reading: