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Orkla’s acquisition of Eastern Condiments: Why has the spice market become so hot?

Consumption of spices both in India and overseas has grown, as people become aware of their immunity-boosting properties. Branded spices are gaining a larger share of the market as people become aware of the dangers of adulteration and also order online to avoid stepping into shops.

September 16, 2020 / 05:18 PM IST

One of the essentials of an Indian kitchen is the masala dabba, a traditional spice box. It typically consists of small cups containing spices that are used in daily cooking.

Whether it’s a south Indian Rasam, a Gujarati Dhokla, or Kashmiri Kahwa tea spices are widely used in all parts of the country, in all kinds of cuisine.

Some of the leading players in this segment are Everest, MDH, Badshah, Catch, Ramdev, Priya and Goldie Masala.

Despite being a crowded market, there are still players who want a bigger slice of the spices market.

Acquisitions

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On September 4, Norwegian consumer major Orkla announced the acquisition of a majority stake in leading southern spice maker Eastern Condiments.

The transaction, which values the Kerala-based firm at Rs 2,000 crore, will result in Orkla picking up a nearly 68 per cent stake through its wholly-owned subsidiary MTR Foods, which it had acquired in 2007. Following the acquisition, the company will be merged with MTR Foods.

Oslo-headquartered Orkla is a leading supplier of branded consumer goods and concept solutions to the out-of-home and bakery consumer markets in the Nordics, Baltics and select markets in Central Europe and India.

“Eastern’s acquisition by Orkla will definitely feed the ambitions of the holding company to acquire and build strong local Brands,” said Kaustav Das, CEO of brand creative agency Ralph&Das.

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In July, the spices segment saw another big-ticket transaction with ITC announcing the acquisition of spices manufacturer Sunrise Foods, a market leader in Eastern India, for around Rs 2,150 crore. 

Why spices?

Both the acquisitions have taken place in the midst of the Covid outbreak. Spices are being used as immunity boosters by some people to keep from getting infected.

“The new category — immunity boosters — is the season’s new FMCG topper. The Covid outbreak has triggered a big bang effect for spices, creating a Covid-immunity category that has overnight transformed spices from a traded commodity to a high-decibel branded FMCG product,” Pavan Padaki, brand consultant and coach, told Moneycontrol.

In recent months, social media too has played a role in the birth of numerous spice-based immunity-boosting cocktails with milk and tea.

“One could also clearly see tea consumption going up to consume these immunity-boosting spices,” Padaki said.

Echoing Padaki’s view, Shrikant Kuwalekar, a commodity expert, added: “Covid has induced a steady change in dietary habits globally, especially after the WHO endorsed spices-dominated Indian food for better immunity.”

“Turmeric is at the centre of immunity building spices, but black pepper, clove, jeera, cardamom have  also been getting increased attention in the last few days,” Kuwalekar added.

Brandwagon grows

In the last few months, brands such as Amul, Mother Dairy and ITC have launched immunity-boosting products. Amul launched an entire ‘immunity’ line, with star anise doodh, haldi ice cream and its “immuno chakra” ice cream with turmeric, ginger and tulsi.

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Mother Dairy also launched its turmeric milk packs, while ITC has a range of immunity juices under the brand BNatural.

Another trend during the pandemic is consumers consciously shifting to branded food items, be it spices or edible oils, which is also luring food companies to expand via acquisition of smaller players with a strong regional presence.

“This is because of increased awareness about massive adulteration in food items following FSSAI campaigns, and a shift to e-grocery platforms to avoid visiting physical markets due to the coronavirus,” Kuwalekar said.

Demand surging in India, abroad

India is the world's largest producer, consumer and exporter of spices. The country produces about 75 of the 109 varieties listed by the International Organization for Standardization (ISO) and accounts for half of the global trading in spices, according to the Indian Brand Equity Foundation.

In the last five years, the Indian spices industry has grown at a CAGR of 13 percent, with numbers rising from Rs 10,516 crore in 2013 to Rs 21,538 crore in 2019, according to Nielsen India data.

The Indian spice market is estimated to reach a value of about $18 billion by 2020, according to data on Statista.

The best part is that demand for spices has increased not just in India but internationally as well.

Bhaskar Shah, owner of Japs International Private Ltd, the largest exporter of spices, is of the view that spices have got more recognition after the worldwide pandemic.

“Everyone wants to eat hygienic food because of Covid, so people are shifting to brands. Globally also, Indian spices have got recognition,” said Shah, adding that India exports spices to 185 countries.

According to the Spices Board of India, the country exported 11,83,000 tonnes of spices and spice products during the last fiscal year to realise Rs 21,515.4 crore. Spices exports in 2019-20 exceeded their targets in terms of volume, rupee value and dollar value.

Chilli, mint products, cumin, turmeric and spice oils & oleoresins were the major contributors, contributing 80 percent of the total earnings.

Traditionally, spices in India have been grown on small land holdings, with organic farming gaining prominence in recent times.
Himadri Buch
first published: Sep 7, 2020 02:42 pm
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