Organic manufacturers in India have a definite advantage over the rest, including China, its biggest competitor, according Nikunj Harlalka, Director, CG Herbals. A Rs 100-crore supplier of quality essential oils and other organic ingredients acquired through controlled and sustainable agriculture, CG Herbals caters to the personal care and Ayurvedic product manufacturers. With the global organic beauty market estimated to grow to $22 billion by 20241, and the Indian market too projected to grow at a robust rate of 17.27 per cent per annum till 20222, it is a win-win opportunity for Indian companies operating in the organic ingredients and finished products business. India has an advantage with regard to quality standards compliance as well as brand India in the global organic products market, believes Nikunj. In an interview to Cosmedic India, Nikunj discusses the key compliances that manufacturers in India need to abide by in order to capitalise on the lucrative growth opportunity that the global market offers. Excerpts of the interview:
What are the statutory licenses that a company has to acquire to start manufacturing? Is the process as time-consuming as it is commonly believed?
To start a manufacturing unit in India, obtaining the FSSAI, FDA, fire clearances and pollution control license is a must. Basically, barring the FDA, all these licenses are standard for establishing any kind of manufacturing unit. Acquiring these licenses does take a little while, but the time-frame for the same has shortened over the years. The entire process of meeting these statutory compliances has come down to merely three months.
What are the key compliances from organic ingredients and cosmetics perspective?
In India, organic had been more of an export-oriented industry until a few years ago. Since 2001, the Agricultural and Processed Food Products Export Development Authority (APEDA) APEDA has been running a programme of national standards for organic production. Introduced by Ministry of Commerce and Industry and regulated by APEDA, the National Programme for Organic Production (NPOP) covers producers of organic food and other agricultural commodities.
There is an equivalence agreement between APEDA and a few developed countries like the USA, the countries from the European Union and Switzerland. So, under this agreement, a manufacturer based in India can export to these (western) markets, if they comply with the NPOP standards.
Interesting! So Indian companies will not need any further specialised, overseas compliance certification?
For the US markets, no further certification is required. But to export any processed product to Europe, a processing certification is required. So, if you are exporting raw material, say, paddy, there is no further compliance needed. But if you are exporting rice, then you will require additional certification as processing of the raw material is not covered under the equivalence agreement. In that case, you will need a European agency or its counterpart in India to certify your unit.
In case an India-based company purchases pre-processed raw material and makes their own finished goods, will the company still require the processing certification to export to Europe?
No, if the raw material has not undergone processing then further certification is not required. For instance, if a salon owner buys ready packs, mixes her own fragrances, re-packages and sells, no processing is involved. Whereas in the case of my earlier example, to get rice from paddy, processing is involved as paddy will require de-husking, and polishing. Hence, you will need to get your unit certified by a European agency in order to export.
What are the challenges that you see for Indian manufacturers with respect to compliances and certifications?
India is already doing it very well and is way ahead of China and other countries. English language is a major barrier for many countries as the US and European legislations are drafted in English. And these two are also the huge markets for organic products.
In fact, during a leadership programme organised by the Asian Productivity Organisation, which is a consortium of 21 Asian countries, India was found to be way ahead in the learning curve. The others were still discussing things which we were talking about in the year 2001. While they are stuck at farm-level produce, India is moving towards high-end organic products like organic essential oils and cosmetics.
China is far ahead when it comes to manufacturing of FMCG products or electronics, so how are they are lagging on this front?
There are two aspects here. APEDA had the foresight that equivalence is vital and will give the Indian organic industry an edge. Initially, you had to call inspectors from overseas and their charges too were high. Most manufacturers avoided the costs. Only large groups could afford it. However, after these equivalence agreements have come into force, the cost of Indian manufacturers has dropped to nearly one-tenth.
Secondly, as I said earlier, English language is a barrier for many other countries but not for the companies in India. A lot of paper work is involved in the process and all of it is in English. So, the Indian manufacturers have been able to leverage on their knowledge of the language.
Today, everyone is talking ‘organic’, be it ingredients, products or even packaging. Where has this focus on organic come from?
Education has been the game changer. Earlier people used to come into the industry from a hard-core chemistry background, but today people come from a specialised cosmetics background. Besides, there are educational institutes in India which have been providing vocational training on the subject for over 15 years now. Just to give you an idea, the Institute of Chemical Technology (ICT), an institute that was established in 1933, was instrumental in nourishing the talent in chemistry and post independence, a strong chemical manufacturing industry came up in India. Alumni from these colleges have grown to become high level executives in top organisations like ITC, L’Oréal, Unilever and Procter & Gamble. Their technical know-how is tremendous.
What we are witnessing is a collaboration of organic and cosmetic industry. So a similar impetus is likely to come in from a few good educational institutes as well as the knowledge base of ancient Ayurved. Add to that the established chemical industry and you have the right recipe for catalyzing revolutionary growth in cosmetics and allied industries in India very soon.
Does the fact that Ayurveda is deep rooted in the Indian culture give impetus to the Indian organic industry?
The world can culturally relate to India as a brand for organic. Our Vedic system of agriculture is so well-known globally that people connect with natural Indian produce.
On the other hand, while China has huge fields, the Cultural Revolution it underwent had extreme effects. Many movements under it did not consider ecological balance. So now, for China to come back to organic production from the Cultural Revolution, with the Communist party in power is a difficult journey.
But India has even our history working for us. For example, Gandhi is the face of India, and people world over connect to the fact that he used to spin his own khadi. And that adds to brand India.
What are the key consumer market trends that you see in India?
The trend is moving toward Ayurved but in a contemporary fashion. The emergence of brands like Kama, Forest Essentials are in keeping with this trend. Even BodyShop now have products based on essential oils and have launched entire product ranges on Tea Tree, Rose etc.
Finally, what are the expansion plans for C.G. Herbals?
We have been a pure-play B2B company till now. But we are looking to foray into the B2C segment through organic air care. Traditionally, we have been burning incense in India, but over a period of time the quality has diluted immensely. The use of aerosol sprays has increased as well. However, the negative effects of these on the human body are now coming to light.
There have been technology interventions that aid in dispersion of natural essential oils in a seamless and effective manner. Since ‘essential oils’ is our forte, we have collaborated with US-based NOSO to bring these smart diffusers to India. We are perfecting the prototype and will be setting up the distribution channel shortly.
References:
1 Persistence Market Research:
https://www.persistencemarketresearch.com/mediarelease/natural-organic-personal-care-product-market.asp
2 The Tactical Business citing Azoth Analytics research report:
https://thetacticalbusiness.com/644540/india-natural-organic-personal-and-beauty-care-products-market-2017-2022-vicco-laboratories-godrej-consumer-products-limited-and-colgate-palmolive/