A study on Marketing Strategies and Certification standards for Organic Food Products in India Organic Food Products in India

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1 A study on Marketing Strategies and Certification standards for Organic Food Products in India Organic Food Products in India Netravathi Vasudevaraju.S Asst Professor Jyoti Nivas College Abstract: The paper aims to explain the importance of marketing strategies and the certification schemes for organic food products. In recent years organic food products are considered healthier than conventional food products. Thus the growth of organic agriculture is seen as a part of emerging marketing trends. Reasons for buying could be grouped as food safety, human health, and environmental impact. The study emphasises on consumer understanding and identifying the organic food products. The study makes an honest attempt to understand the certification standards employed by the organic labelled food product marketers. Certification guarantees that the production and processing are managed with a holistic approach that enhances the ecosystem health. Marketing strategies in organic supply chains operating in three certification schemes in developing and transition economies. Key words: Marketing strategies, Organic food products, certification schemes, Consumer. Introduction: Organic products are grown under a system of agriculture without the use of chemical fertilizers and pesticides with an environmentally and socially responsible approach. This is a method of farming that works at grass root level preserving the reproductive and regenerative capacity of the soil, good plant nutrition, and sound soil management, produces nutritious food rich in vitality which has resistance to diseases. India is bestowed with lot of potential to produce all varieties of organic products due to its various agro climatic regions. In several parts of the country, the inherited tradition of organic farming is an added advantage. This hold promise for the organic producers to tap market which is growing steadily in the domestic market related to the export market 1 Currently, India ranks 33 rd in terms of total land under organic cultivation and 88 th 1

2 position for agriculture land under organic crops to total farming area. The cultivate land under certification is around 4.43 million Ha ( ) 1 In 2000, the Government of India released the National Standard for Organic Products (NSOP) under the National programme for Organic Production (NPOP). It stipulates that inspection and certification by a nationally accredited certification body is mandatory for labelling and selling products as Organic 1 Production India produced around 3.88 million MT(Metric Ton) of certified organic products which includes all varieties of food products namely Basmati rice, pulses, Honey, Tea, Spices, Coffee, Oil Seeds, Fruits, processed food, Cereals, Herbal medicines and other valuable products 2 Exports India exported 86 items last year ( ) with total volume of MT. The export realization was around million US$ registering 33% growth over previous year. Organic products are mainly exported to EU, US, Australia, Canada, Japan, Switzerland, South Africa and Middle East 2 Indian National standards for organic production & India logo is governed by APEDA (Agriculture and Processed food products Export Development Authority), which provides national standards for organic products through a National Accreditation policy and programme. The NPOP standards for production and accreditation system have been recognized by European Commission and Switzerland as equivalent to their country Standards. Similarly, USDA has recognized NPOP conformity assessment procedures of accreditation as equivalent to that of US. With these recognitions, Indian organic products duly certified by the accredited certification bodies of India are accepted by the importing countries 3 Indian Organic food products manufactured and exported from India Organic certification mark issued by the APEDA. APEDA has recognised 11 inspection certification bodies, some which are branches of foreign certification bodies, others are local certification bodies 4 The aims of the National programme for organic production include: To provide the means of evaluation of certification programmes for 2

3 organic agriculture & products as per internationally approved criteria. To accredit certification programmes To facilitate certification of organic products in conformity to the National standards for organic products INDOCERT is a nationally and internationally operating, certification body established in India. It is accredited by National Accreditation Body (NAB), Government of India, as per National programme for Organic production (NPOP). Furthermore, INDOCERT offers Organic certification as per USDA-NOP standards for products destined for export to the United States. INDOCERT is accredited as per ISO & ISO by National Accreditation Board for Certification Bodies (NABCB, QCI, India) for conducting awareness training programme on Food Hygiene 4 Objective: To learn about the marketing strategy for organic food products To know about certification schemes for organic food products Methodology: The purpose of the study is to emphasize the importance of food safety and environmentally-friendly production. Organic food products play a major role in eradicating food borne illness. A Conceptual study of different marketing strategies and certification schemes of Organic food products tries to through light to consumers in identifying organic products and ensures food safety. Basically, this is a secondary research paper where the argument has been supported by rich literature review by authenticated research papers, articles, like British Food journal, Indian journal of Agricultural Economics, American journal of Agricultural Economics, Journal of food science, and Journal of international food and Agribus Marketing. In nutshell, this study has referred extensive number of journals, reports and information from reliable sources across the globe. The study provides an opportunity for me to work on Marketing strategies and certification schemes for Organic Food Products. Review of Literature: In recent Years, organic trade experienced an outstanding expansion, mainly driven by consumers concerns regarding safe food and environmentally- friendly production. 3

4 Certification provides consumers with the confidence that organic products ensure food integrity, from seed through sale. Certification also guarantees that production and processing are managed with holistic approach that enhances ecosystem health 5 Organic practices include: Rotating Crops by alternating the types of crops grown in each field, which in turn prevents the depletion of the soil. Pests are also managed through crop rotation by eliminating breeding grounds built year after year with a continuous crop. Planting cover crops such as clover adds nutrients to the soil, prevents weeds, and increases organic matter in the soil. Soil with high organic matter resists erosion and holds water better, requiring less irrigation. Studies have shown that organic crops fare better than non organic crops in times of drought and stress. Releasing beneficial insects to prey on pests helps to eliminate the need for chemical insecticides that can remain in the soil for years or leach into our water supply. Adding composted manure and plant wastes helps the soil retain moisture and nutrients. Just as falling leaves gives nutrients to forest soil, composing replenishes the soil. Preventing illness and maintaining strong animals through good nutrition and minimal stress is key to successful organic animal livestock farming National Organic standards required that all products labelled as organic meet stringent standards established by the US Department of Agriculture (USDA) noted above. The USDA allows for three categories of labelling Organic products 100% organic- Products must be made with 100% organic ingredients. Organic- Products must be made with at least 95% organic products, with strict restrictions on the remaining 5%, including no GMO s. Made with Organic ingredients- Products must be made with a minimum of 70% of organic ingredients with strict restrictions on remaining 30% including no GMO s. Products with less than 70% Organic ingredients may list specific organically produced ingredients on the side panel of the package, but 4

5 may not make any organic claims on the front of the page. 7 In developed countries economic incentives and enabling policies and regulations have boosted the establishment of organic standards. In developing and transition countries, on the other hand, small holder still face institutional and economic constraints to become organic certified producers. Farmers seeking to sell organic products must hire an organic certification agency to annually inspect their farms and confirm that they adhere to the standards established by various trading partners. Small holder group certification is envisaged as an alternative to reducing certification costs while enhancing capacity building. Another alternative explored is the participatory Guarantee system, an initiative also largely coming from the developing countries Food borne disease takes a major toll on health. Thousands of millions of people fall ill and may die as a result of eating unsafe food. Deeply concerned by this, the Fiftythird world health assembly (May, 200) adopted a resolution calling up on World Health Organization (WHO) and its Member states to recognise food safety as an essential public health factor. The resolution also called on WHO to develop a global strategy for reducing the burden of food borne diseases Building capacity in food safety is essential in most countries, especially in developing ones. Both positive and negative experiences from countries with well developed food safety systems could be used as means to improve systems globally. Forborne disease has impact on not only on health but also development. More, over globalisation of the food trade and development of international food standards have raised awareness of the interaction between food safety and export potential for developing countries 9 Putting food safety on political agenda is the first step in reducing food borne illness; however with this in place, many developing countries lack the technical expertise and financial resources to implement food safety policies. Support from donors for capacity building in order both to protect health and to improve food trade, would help to build up a framework for sustainable development 5

6 Marketing Strategies for Organic Food Products: Strategy for End Consumers and Customer via the three Tier Distribution Channel-India Distribution Channel network to reach end Consumers General Trade Wholesalers Marketing initiatives and Brand communication Using POS material merchandise, Sinages, wet sampling, etc to expand, penetrates and influence the end consumers. However the same would require quality, availability and consistency Retailers Modern Trade Retail chains Standalone stores HORECA Price offering for trails Wet sampling for assurance Brand visibility for recall Food shows for chef networking and using as a method for reinforce our understanding of the business for institutional sales. Recipe promotions in ATL for consumer as a model to reinforce our understanding of the business for institutional business ATL Mass media campaign to boost the maximum sales with our customers and during festive season-new crop along with the QPS offer to boost the maximum sales Source: 6

7 High costs of the supply chain, i.e payment of premium during conversion period, transportation costs, processing costs may undermine organisation s sustainability. The organisation should determine the marketing strategy that need to be followed. The choice could be Domestic or Exports. The domestic market are various channel of organic produce, including direct membership schemes, weekly markets and fairs, occasional markets, retail health shops, specialized health super markets, modern trade super markets, and even organic restaurants. Major export markets are Europe, The United States, Japan and other high-income countries, particularly in Asia. Conclusion & Suggestions: Domestic markets represent untapped potential for the expansion of organic agriculture. In present scenario health consider drives the increase in demand for organic products. But, the price premium attached to the organic certification makes these products more affordable principally to urban, educated and affluent consumers. country and encourage them to continue with organic farming. Not that the initiatives have not begin- they have but now an awareness and communication programme should be taken by both as Government information and Education programme at farm level while corporate Body should aggressively carry out mass media awareness on Development of Organic food. The small scale farmers should have contractual relationship with the large organizations. Collaboration between public and private agencies is beneficial to support technical and financial activities. The development of managerial and business skills to implement business and marketing plans together with measures for enhancing farmer s capacities to ensure the organic quality attribute of their produce are essential such may vary according to the certification schemes and characteristics of the supply chain. The Government and exporters should take up task of locating organic farms in the 7

8 Reference: Organic Food standards and Labels: The facts, April 2002, 6. Stoneyfield Farms, 7. The Natural and Organic Food Service Market Report, November 2003, 8. Spins and the Halegroup 9. Resolution WHA on food safety adopted by the fifty-third World Health Assembly (May 2000). 10. FAO Environmental and social standards, certification and labelling for cash crops, by C.Dankers & P. Liu. Commodities and Trade Technical paper No 2 Rome 11. Nutrition Business Journal Estimates from the Organic Trade Association Study, The past, Present, and future of the Organic industry: A retrospective of the first 20 years, a look at the current state of the organic and forecasting the next 20 years. 8

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