The growth story behind the half-billion dollar bets on ‘regional’ Indian spice makers

  • Major FMCG Dabour India announced the acquisition of a 51% stake in Badshah Masala for ₹588 crore.
  • With that, FMCG and PE’s bets on ‘regional’ Indian spice makers crossed half a billion dollars.
  • According to a report by Avendus, the branded spices category presents an opportunity of ₹50,000 crore by 2025.

Dabur from India
acquisition of a 51% stake in Badshah Masala for ₹588 crore is part of major FMCG’s strategy to expand its food business to ₹500 crore in three years.

According to a report by IDBI Capital, this acquisition will also strengthen Dabur India’s portfolio in the large branded blended spice market. According to the research report, this market is worth ₹12,500 crore which is about $1.5 billion.

And it’s not just Dabur India that is snapping up top regional spice makers – FMCG majors and private equity funds are also betting on this market. Kerala-based Eastern Condiments was acquired by Norwegian food major Orkla for ₹2,000 crore and was later merged into Southern food company, MTR.

ITC also acquired Kolkata-based spice maker Sunrise for ₹2,150 crore.

The potential of the branded spices industry is also of interest to private equity players – A91 Partners acquired a 25% stake in Pushp Spices for ₹126 crore and InvestCorp acquired a minority stake in Intergrow’s Kitchen Treasures brand for ₹80 ₹ crore.

Overall, these recent deals total ₹4,944 crore, or just over $600 million.

Brand Spices – a ₹50,000 crore opportunity

Spices are central to almost every Indian meal, regardless of region. This presents an opportunity of ₹50,000 crore by 2025 for branded spice makers, up from ₹24,000 crore, according to a 2021 report by financial services firm Avendus.

The report notes that while pure spices have gross margins of 33-35%, blended spices offer even better margins at over 45-50%.

The report highlights several factors that make spices one of the most attractive categories in the packaged food segment.

Thanks to their extensive use in Indian dishes, spices constitute a broad category that can be approached by several brands catering to the very wide taste palate of Indians.

“Having fresh ‘home foods’ has always been the way of life for Indian households. With growing health awareness, consumers are realizing the importance of fresh cooking at home rather than having unhealthy food out,” the Avendus report said, highlighting the vast market available for spices. .

The gradual shift from unorganized spices to branded spices and the growing adoption of blended spices make this a high growth category. The organized sector is expected to account for half of total activity by 2025, up from 36% in 2020, according to Avendus.

Customers are willing to pay extra to cook more easily

Along with a gradual shift from the unorganized to the organized, the report adds that there has also been a noticeable shift from traditional home-ground masalas to branded spice blends like
garam masala, pav bhaji masala, and
Sambhar Masalato name a few.

According to the report, blended spices are growing at a CAGR (compound annual growth rate) of 25%, while pure spices are growing at a CAGR of 12%.

Multiple factors such as region-specific blends, brand adherence, convenience, and availability of various options in kitchens contributed to the higher growth of blended spices. The report notes that customers are willing to pay extra if it makes their cooking faster and easier.

“Global multinationals have a large share in a few packaged F&B categories, while spices only include local Indian players due to their regional/local nature. The spice market is a difficult category for multinationals to grow organically,” adds the Avendus report.

The local/regional nature of spices also means that multinationals – which have a large share in other packaged food categories such as noodles, savory snacks, ready meals and juices – have not been able to break into the spice category.

According to the report, this category is dominated by local players like Everest, MDH, Sakthi, Aachi and Eastern with a combined share of 43%, while multinationals are not present. These companies, with the exception of Aachi, are also among the top 20 food companies, the report adds.

“Even domestic players have to modify their blended spice recipe to suit the tastes of different regions,” the report adds.

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