How to Start Organic Food Business in India

organic food business

Operating an organic food business doesn’t only involve handling products, but it’s also concerned with location. The perfect location is vital for the future success of the organic products business. Selecting a location with the local community’s ideal support goes a long way to making your organic food business a big success. Organic products businesses also need to be located where there are a high ingress and egress of foot traffic, increasing sales.

The promotion of your organic food business is equally important as it can determine the business’s profitability and sustainability in the long term. Entrepreneurs can take advantage of the favorable financial environment towards organic business and avail of business loans for organic food.

What is Organic Food?

The term organic indicates the methods in which agricultural commodities are grown, refined and processed. Organic foods are highly known for their delicious taste and high levels of nutrition. In addition, the safety levels of organic food are enormous thanks to the avoidance of pesticides and chemicals in normal soil. Organic foods reinforce the human body with resilient immune systems by providing healthy vitamins for the restoration of human health.

Is there a demand for Organic food?

Switching to organic produce has gained good attention levels in recent years. People realize the enormous benefits of organic products compared to the traditional consumption of agricultural and meat products. The following are a few of the reasons that made possible the spectacular growth of the organic food business:

The increased penetration of smartphones into India’s interiors and the corresponding digital literacy is acting as a facilitator for increasing the customer base for organic foods. The organic products business is mainly growing in Tier 2 and Tier 3 cities, which shows the heightened interest across all societal groups when it comes to shopping for organic foods.

The price differential between everyday food and organic food is insignificant. Apart from the cost benefits, organic foods help the human body to stay clear of harmful pesticides and artificial biohazards. Organic food increases the future’s positive health outcomes, thus making it an attractive alternative, further boosting demand levels.

Global Share for Organic Products

ContinentPercentage
Africa8
Asia10
Oceania45
Europe25
South America12

Infrastructural Support from the Indian Government

The Indian government is conducting promotional activities for organic farming by introducing financial incentives to organic food farmers. The government has initiated social welfare projects such as Mission for Sustainable Agriculture, Krishi Vikas Yojana and National Programme for Organic Products to encourage entrepreneurs to invest their capital in organic farming.

This has led to a steady increase in the quantum of exports in organic produce. The climatic conditions pertaining to agriculture in India are also favorable for sustaining the industry of organic farming. The quality of Indian organic food products is also high due to the agricultural roots of the country. Reports indicate that the organic products business is all set to scale the highest market peaks with a market capitalization of over 1 Billion dollars in India over the next 5 years. Nationalized banks are harnessing the organic food business’s growth and offering business loans for organic food businesses at competitive interest rates.

Benefits of Starting an Organic Food Business

organic food business

The popularity of organic foods is increasing in the general populace. From the cosmopolitan culture to the traditional roots, people are making healthy life choices through organic food purchases. More than 49% of retail buyers have indicated that they prefer organic food over conventional foods in a recent survey.

  • Organic restaurants are becoming profitable machines as more customers are willing to bear the extra cost to help the environment. The concept of green dining has captured urban customers’ imagination, and these are willing to spend 10 % more on the food bill to support environmental causes.
  • Organic foods help in preserving the land by eliminating the negative effects of agriculture on the ecosystems. Organic food business helps form a strong and healthy soil system, increasing the level of natural soil nutrients and removing any potential causes of soil erosion.
  • Organic food is high on the delicacy factor when compared to conventional food. All this is made possible without the deadly cocktail of pesticides, additives, antibiotics, hormones and other excessive chemicals.
  • There are diverse options that come with an organic food menu. Be it an organic salad or an enormous array of organic food products; there is a lot of choice. Organics chefs can use different organic fruits and veggie baking goods, organic chocolate and create an impressive list of mouth-watering items.

Starting an organic store involves planning, logistics and fine-tuning the operational capabilities.

Here are a few things that can help entrepreneurs to start an organic food business:

1. Licensing requirements

To make the organic product business legally acceptable, the following procedures need to be adhering to:

  • Becoming adept with the rules regarding the certifications of organic foods, as set by the organic foods’ standards body
  • Applications differ for organic food businesses in different states in India. It is advisable to take the necessary food permits from the local health department.
  • Apply for an employer identification number through the GST website
  • Identifying the main structure of the tentative organic food business such as LLP (Limited Liability Company), Corporation and sole proprietorship
  • Opening a bank account to record the financial transactions of the organic food business

2. Storing locations

The location of the organic product business determines the future profitability. It is best to avoid undesirable locations as not everyone may be interested in purchasing organic food. Following are some of the indicators that need to be looked into when zeroing on the store’s correct location.

An acceptable level of security with flexible access to public transport is an essential need for all the locations. Along with it, adequate parking infrastructure should be offered to ensure a hassle-free shopping experience for customers.

Keep a vigilant eye on the nearby competitors. Increased competition can take a big chunk of your sales. It is preferred to open shops where there are fewer competitors.

The ideal location for an organic food business is to ensure the visibility and affordability factors in addition to the lease agreement. The best location of an organic food business is the recently developed areas where there is a high presence of educated people who can empathize with society’s environmental needs.

3. Employing Talented Human resources

To run an organic food store, it is advisable to hire people with a customer service background. Good customer service can help your good organic store to thrive. Sales associates and cashiers are important job positions for an organic product store.

4. Customer Experience

Customer service representatives should exude pleasantness in the organic food store as it greatly increases the customer prospects. Organic food store owners should properly educate the employees regarding the specifications and benefits of organic food products. The employees are brand ambassadors of your organic store’s products, and sales conversions can be increased by the presence of an agreeable repository of staff.

5. Increased investment

As this is a niche business, the level of investment in the initial stages should be substantial. This is important as most of the organic food business customers will be highly educated and will look for a good ambiance in the stores.

The shelves of the organic food business should be stored with a diverse range of products that cover the customers’ holistic wellness. Filling the shelves with niched products can be a costly affair in the initial stage.

6. Fix reasonable selling prices

The average cost of products in an organic food store is generally on the higher side when compared to conventional stores. However, this does not mean that there are no buyers for organic food stores. The demand for high-quality organic food products in an affordable range is always high.

7. Give emphasis on Offline advertising

Organic food products are all-natural products that have the potential to dominate the food market of India. However, the population has significant pockets who have heard about the products but have not yet taken the first step. This is an important demographic that needs to be targeted for sales conversions. The following points can be considered for advertising purposes:

  • Local advertising, word of mouth spread, and pamphlet promotions are some of the key offline mechanisms to increase traffic to your store.
  • Sharpen your focus on drawing the right set of people, the kinds of people who turn out to be loyal and valuable customers to the sore,
  • Print media is a powerful driver of advertising, particularly to target middle-class households. This is due to the importance of the grocery budget in a middle-class family in India. The distribution of promotional flyers will have a cumulative effect on enhancing the organic food business’s overall sales and marketing campaigns.
  • Designing a unique brochure that reflects your produce’s varied collection definitely helps in generating a positive impression of our organic food business.
  • This brochure can be used to educate the customers on the well-being effects of organic products and their specific benefits on the health, environment and society.
  • Sales staff should be trained on the important advertising facts when they’re facing the customers. A script can be prepared for the front-line staff to inform the customers.
how to operate an organic food business

Importance of marketing for your organic food business

Educating shoppers on the importance of going organic and using natural products is extremely critical for successful business outcomes. Here are the important steps that need to be taken for successful marketing of organic products and naturals:

Choosing an integrated approach allows customers to compare different kinds of organic products. Organic food businesses should assist customers by increasing the visibility of prominent food products.

Generate a strategy that accentuates in-store communication. Displaying proper signs is extremely important for sales conversions. Highlighting the vital benefits of organic products such as animal welfare, non-GMOs, and the absence of toxic pesticides should be advertised prominently using efficient signage.

Increase the education exposure of employees in organic food products as this is a vital marketing strategy that helps convert casual visitors into buying customers. Deploying targeted social media campaigns to net the millennial generation is the key to increasing business profitability.

Going digital with your organic food business products is key to surviving in this changing landscape and remaining competitive. Designing an excellent website that brings out the best of your products and how they stand apart from the products of competitors is important.

How to apply for a business loan for Organic Food Business?

The natural health food industry is showing tremendous progress. The interest of the consumers in eating healthy organic and non-processed good products is gaining momentum. Banks in India are expressing a positive inclination to offer business loans for organic products business.

  • Entrepreneurs need to establish a track record of good management of a business. They need to come with a plan that shows a clear map for the business’s sustainability and future profitability.
  • Banks are also offering business loans for organic food businesses for the renovation or expansion of existing facilities. This helps in creating a top-class variance for customers and boosts the consumer awareness of the specified products.
  • Indian Banks provide a diverse array of loan options that helps organic food businesses.
  • The business loans for organic food products are convenient and have a flexible repayment schedule.

Required Documentation and Permits for starting an Organic Food Business

The documentation is simplified for faster processing with competitive interest rates. Reputed financial institutions show a high degree of transparency and make sure that any hidden costs are eliminated.

  • Any business entity that expresses interest in undertaking an organic food business needs to adhere to certain state regulations. The most important one is obtaining the requisite permits from the Department of Health.
  • The organic food business should get its product range certified by the Organic Trade Association, which is the apex body that deals with organic foods’ quality standards.
  • The business should qualify for an Employer Identifications Number, also known as EIN. In addition to this, the business organization has to classify itself as any one of the below commercial structure for taxation and legal purposes:
  • Partnership
  • Limited Liability Company
  • Sole Proprietorship
  • The business should avail a GST registration number if the company’s annual capitalization is expected to be greater than Rs 20 Lacks per financial year, and the PAN number should also be registered or the firm.
  • Opening a current account to record the cash flows of the firm, accounting purposes and to avail credit facilities for a business loan

Eligibility for a Business loan for Organic food business

Financial institutions like nationalized and private bans, in addition to cooperative societies and NBFCs, offer agribusiness loans for organic food products. The necessary documents that are required are Identification proof, land ownership proof and Address proof.

  • An organic food business requires to cross the threshold investment of Rs 10 Lacks in the initial stages, which includes the cost of manpower inventor and operations.
  • For the organization to qualify for a business loan, there should be an express understanding in the memorandum of articles that the products will be grown with the use of synthetic pesticides and artificial fertilizers.
  • The business firm should hire quality personnel to overlook the quality standards of organic food products.
  • Loan applicants for organic food business should be in the age range of 18 to 70 years old.
  • The loan applicant can avail of loan from financial institutions in the category of agricultural land cultivation.

Organic foods can be classified as a category with a large scale and high margin profits. The increase in consumer consciousness is driving the demand for organic foods. Customers are also willing to pay more for niched products. The maximum retail price is not a priority for customers who are keen to buy more organic foods.

The spending power of the middle class has increased, and this is leading to the increased popularity of the organic food business in India. The entrepreneurs need to employ highly talented people to manage the social media campaigns and other promotional activities of the organic food business to gain the upper hand over other competitors.

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