The fruits of a spiritual journey

The Hindu Business Line

December 9, 2010

Talk of a long gestation period. Organic India was set up in 1997 but it was only in 2007 that the company really surfaced, so to speak. "The first 10 years we were investing in the supply chain," explains Krishan Gupta, Managing Director of the company known for its distinctly branded range of herbal teas, especially Green Tulsi.

Maybe the long gestation was also to do with the fact that the company owes its origins to a spiritual journey rather than an entrepreneurial one. In the mid-Nineties Israeli Yoav Lev (now called Bharat Mitra) and American Holly (daughter of former Seagram chairman Edgar Miles Bronfman), came to India as backpackers, discovered their spiritual guru, who in turn opened their eyes to the healing properties of tulsi (holy basil). They stayed back to cultivate three varieties (Rama, Krishna and vana) of the holy plant the organic way.

Along the way they got married, set up a company called the Indo Israel Trading Corporation (IITC) (renamed in 2006 as Organic India) and began exporting organic tulsi and several organic herbal concoctions from the country.

"For the first ten years we worked very closely with farmers," says Gupta, describing how the company now employs nearly 20,000 contract farmers on 50,000 acres of certified organic land in parts of Uttar Pradesh and Madhya Pradesh, especially the arid bundelkhand region spread over both these States, and Rajasthan.

He describes how the fertiliser-free, drought-prone lands of Bundelkhand were ideal ground to grow organic produce, especially hardy tulsi which didn't require too much water. "The inner villages were not sprayed," he says. The model - dictated by Yoav Lev's spiritual guru in Lucknow, H. W. L. Poonja, lovingly known as Papaji, and begun in Azamgarh in UP, was to focus on small, marginalised farmers and encourage them to grow organic. From tulsi, they branched to other herbs and spices and eventually started manufacturing herbal medicines at a factory in Lucknow, which were largely exported.

Today, the model has paid off. Gupta says they have an engaged community of organic growers - a loyal market in the US and Israel (in 2001 and 2005, subsidiary distribution companies were set up in the US and Israel to fuel exports) and a fast-growing domestic market.

Suddenly, the company has become very visible.

"We hope to touch Rs 100 crore by next year, says Gupta, adding that they hope to close this fiscal (2010-11) with Rs 60 crore. Currently the US contributes 30-35 per cent of the company's sales, India another 35 per cent amd the rest of the world (it has a presence in 15 countries) the remaining share.

PULL NOT PUSH

If the first ten years were spent focusing on supply chain, then now its the turn of the distribution chain to come in for attention.

Gupta points to how they have worked on making sure the Organic India products are readily available to consumers, focusing on kirana stores and modern retail as well as stores with aligned goals, such as Fabindia. The fact that Fabindia is suddenly on a mass expansion spree only helps the company.

"We have also tied up with the Army and all our products will be in CSD Canteens by the end of this year," says Gupta. "Already the products are in Navy ships - in fact, it's on one ship sailing to Somalia right now as well as ships berthed in Visakhapatnam," he says.

In addition, sales are driven online (not directly from the company's Web site but with online marketers) as well as through SMS. For instance, the ghee from'tension-free cows', a new product, is not yet on stores but if you SMS, it is delivered in three working days.

This year, the first exclusive Organic India store also came up—interestingly, in Chandrapur (near Nagpur) in Maharashtra, to be followed by stores in Dharamshala and Meerut.

A taste for the organic.

Why Chandrapur? Could there be demand for the premium range in this tier-4 city?

"These stores happened by chance," says Gupta describing how a loyal 74-year-old consumer, Bhupendra Singh, in Chandrapur decided to open the store this year, making it the first city.

Ask Bhupendra Singh why he opened the store and he says, "The products were giving me relief and I was also sourcing them for my friends, so I thought why not open a store." He claims the store clocks sales of Rs. 40,000-50,000 per month. He promotes it through advertisements in a local cable channel that his son owns. "All the promotions I am doing, the company is doing little sales could have been more if they had helped," he cribs.

Gupta has a ready answer to that one. The company does not believe in advertising. "We prefer using the pull strategy rather than push," he says, explaining the approach has been a word-of-mouth-driven one influencing key decision makers. "If I have to go the other route, I will have to invest a lot," he says.

The aversion to spending also extends to not paying modern retail any extras for a better display. And yet, without paying, we still are displayed prominently at a Spencer's or a Reliance. We want customers who ask for our products by name," he claims.

Where exactly is the growth coming from? Especially given that organic is such a niche area and even within the category, the company has such a niche product range?

Despite being an established market, the US market is giving us 60 per cent growth year on year, says Gupta, while India is growing at 80 per cent year on year. Mauritius, where the company clocked Rs 1 crore in its first year of operations, Finland, Germany, the UK and Italy are other growth markets, according to Gupta.

"The target is to be in 40 countries by 2011," he says.

ADDING TO THE BASKET

Although tea is the flagship product, and available in 18 flavours, including Pomegranate Green, Passionfruit, Sweet Lemon, Vanilla Creme (not all of them are yet in India though), the company is fast coming out with newer products.

Herbal medical formulations are a key focus area - the company grows 100 herbs and has 24 forumlations - as is organic chyawanprash. Another new offering is the Fiber Harmony range - psyllium husk in a natural variant as well as in flavours such as pineapple (again the flavours are not available in India due to regulatory issues). There are also spices and cereals but these clearly are not the focus like the other branded food products.

But the key question - is the market for organics really growing? Gupta thinks he can grow it if the consumer gets to taste the product - and sampling is a keyway of hooking new customers.

Meanwhile, Mohit Khattar, Managing Director, Godrej's Nature's Basket, points out that although mass acceptance for organic products is still some time away and it still is a small contributor to overall sales at the store, "Organic as a category is seeing increased consumer traction and interest. For instance, in Indian grocery today, organic products contribute about a third of the sales at Nature's Basket stores across Mumbai and Delhi. We are seeing new consumers getting hooked on every day" he says.

Gupta must be pleased to hear that.