The spice rack in Indian homes has expanded considerably thanks to consumers cooped up at home trying out exotic cuisines during the pandemic. This has fuelled the growth of branded spices with condiment manufacturers launching all sorts of masala mixes.
“Earlier, we used to see only 4-5 masala packets in the kitchen. Now, as consumers began to cook a wide variety of items, the list goes up to 20-25, including blended spice products,” said Abha Agarwal, Executive Director and Co-Head (Consumer, Financial Institutions Group and Business Services) of Avendus Capital.
Avendus Capital recently presented a report on the spices market, capturing the changes taking place in this space.
From the standard standalone spices such as turmeric, chilli and coriander powders, kitchen shelves now are seeing all sorts of blended spices such as biryani masala, fish masala, chicken masala, chat masala, pav bhaji masala, puliogare masala as well as pasta and pizza seasoning blends.
Blended masalas offer high margins of over 40 per cent. This segment is growing at a CAGR (compound annual growth rate) of 24 per cent. Scenting an opportunity, established players have expanded their range of masala mixes even as young D2C brands have introduced a whole range of innovative spice combinations.
According to Agarwal, branded spices are growing at a fast rate thanks to Indian homes experimenting with making restaurant-style dishes at home. She says branded spices today account for nearly ₹ 25,000 crore of the total spices market of ₹67,000 crore — that is, about 36 per cent.
“The growth is so swift that we expect it to be about 50 per cent in the next five years, wherein the overall spices market would reach ₹1-lakh crore,” she said.
High margin market
Though a handful of companies such as Everest, MDH, Catch and Eastern hog the limelight at the national level, a large number of regional players are dominating local markets, particularly in popular masalas of a region.
The spices market, Agarwal said, was lucrative because the margins it offered were as high as 50 per cent, among the highest in the packaged food category.
“The kind of deals struck in the space over the last 18 months reflect the growing interest in this space,” says Aloni Jain, Vice-President (Consumer, FIG and Business Services) of Avendus Capital. She referred to the big ticket acquisitions by Orkla MTR, ITC, A91 Partners and Invest Crop in the last two years.
Another interesting phenomenon is that regional players, which are largely family-owned businesses, are trying to expand to neighbouring markets.
“It may be very difficult to displace strong local players from top slots, but they can always target subsequent slots in the respective markets,” she said.