The derivative industries’ spice oil has opened yet another door in the export business in India. The Spell’s annual report for the year of 2023-2024 suggests spice export grew by 1.25 trillion rupees. The export for specialty oils such as oleoresins, spice extracts, blended spices, and essential oils is overtly rising.
Multiple startups are breaking away from the traditional wholesale spice business as they find spice processing more fulfilling and profitable. This is the optimum period to collaborate with Niir Project Consultancy Services (NPCS) for the attainment of the business objectives.
Market Overview
Exporting and producing spices is something India has mastered in. From the period of 2023-2024 the country has exported the spices of the worth of 1.25 trillion rupees and 15.3 million tonnes.
India is most known for its pepper, turmeric and chili, as well as the oleoresin derivatives, which has the most rapid growth in profit. This is mostly because of the food, nutraceutical and cosmetic industries. This is due to the gaining popularity of clean label, natural products.
Profits from spice derivatives
The profit margins for whole spices is around 5-10%, but essential oils, oleoresins and encapsulated flavors has margins of 25-40%.
These products are more concentrated, serve Industries such as food, beauty and health, have longer shelf life and are more profitable for startups. The ample product differentiation along with lower logistical costs makes it even more appealing.
Furthermore, companies gain greater visibility and brand competitiveness in overseas markets. This feature in particular makes spice derivatives especially enticing for new business undertakers.
The Most Important Opportunities for Spice Derivatives for New Ventures
Oleoresins from Chilli and Turmeric
In the food and health supplement industries, chilli and turmeric oleoresins are pivotal owing to their attractive color, distinct taste, and aroma. These are extracted through the processes of solvent extraction, evaporation, and then standardized.
Greater demand specifically for turmeric oleoresin is due to the nutraceutical industry’s growing use of the substance. Thus, it is possible for newly established firms to set up mid sized extraction units to source turmeric from farmers. This, combined with targeting exports to the USA, EU, and Middle East with the support of APEDA, would prove beneficial.
Cardamom, Clove, and Pepper Essential Oils
These oils are valuable to the flavor, cosmetic, and pharmaceutical industries. Like most oils, these are extracted through steam distillation and the spices’ waste can be used as feedstock.
Opportunities for new entrants are favorable, as India is the world’s largest exporter of spice oils and oleoresins, representing 30% of total spice exports. In addition, new players are bound to profit from the availability of MSME schemes, as they assist startups in expanding while improving their technology.
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Encapsulated Spice Flavors
Encapsulated spice flavors are produced through the process of encapsulation, which changes liquid spice extracts into powders. This enables easier addition into dry foods and easier rehydration into liquids. Therefore, demand for these products from manufacturers of ready to eat foods and drinks is high.
Moreover, techniques such as spray drying microencapsulation are available upto 100 % subsidised cost under PMKSY schemes and thus become feasible for startups to pursue this sector.
Value Added Spice Blends
Instant cook masalas other than marinades and ready-to-use spice mixes as products no longer are restricted to domestic sales and are witnessing rapid growth in the international market. Spice blends are easier to formulate than oleoresins and hence require low capital, making them readily available for brands to launch.
Startups can also integrate with food service chains, hotels and even online grocery providers to enable rapid increase in sales. In addition, MSME registration with GEM (Government e-market place) can enable startups to gain a substantial increase in the order volume.
Read More: Booming Business of Trading Of Spices
Trade Analysis
India exports large volumes of cultivars such as celery, cumin, chilli and turmeric but the actual value lies within the derivatives, especially essential oils and oleoresins. In regions such as Shimla with high domestic production, imports of products like oleoresins and black pepper oil can drastically lower import dependency.
Additionally, Natural spice products are seeing rapid growth in exports to countries like North America, Europe, Middle east and East Asia making them theme fastest growing markets which provides a substantial opportunity for new market entrants.
Case Studies of Success in the Spice Derivatives Sector
Small businesses in spice oils and haleresin in Kerala and Karnataka have turned into global suppliers. Many of them began with contract construction for large exporters and later developed their own brands in nutraceuticals and flavonoids.
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Action Steps for New Manufacturers
- Develop with NPCS a feasibility study to select the appropriate spice derivative.
- Request the government grants under the Ministry of Food Processing Industries and the PMKSY and the upgradation tech schemes for MSME’s.
- To lower costs, procure raw materials through farmer producer organizations.
- Establish robust export partnerships through APEDA trade exhibition.
- Enhance global competitiveness through gaining quality certifications like FSSAI, ISO, HACCP, IndGAP.
How NPCS Helps You
The expansion of entrepreneurship within the spice industry is an area of concern. The successful attainment of opportunities can only be accomplished through the preparation of a Comprehensive Market Survey cum Detailed Techno-Economic Feasibility Reports (DPR), which will be executed with the assistance of Niir Project Consultancy Services (NPCS).
All of our proposed DPRs follow through with the entire cycle of production which includes processes of fabrication, demand forecasting, plant size determination, the plants’ needed raw materials, machines and equipment, economical projections, and financial profit planning.
The reports supoprt your business, and assist in selecting the proper product, fulfilling the stipulations needed for receiving government aid, and attaining the needs required for expansion in the derivative and essential oils sector.
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Conclusion
The complete transition from whole spices to derivatives and essential oils offers Indian entrepreneurs a unique opportunity to set up a new business with high returns in investment.
The international interest, along with the government schemes in place to boost investment, makes Indian entrepreneurs optimistic. The unique MMA in the country gives the entrepreneurs high confidence to invest.
By using the right strategy, expert reports, and government incentives, and by building a modern spice supply chain, India can turn its strong spice heritage into a successful modern spice business.
FAQs
Q1. Why do you think spice derivatives are more advantageous for a startup as compared to whole spices?
The export demand, uses, and profit margins available in spice derivatives is a lot more comparatively advantageous than whole spices.
Q2. What are oleoresins and why are they in demand?
These spice extracts are oleoresins and are necessary in the food, cosmetics, healthcare, and pharmaceutical industries. Their increasing demand is due to their unique flavor, color, and biological activity.
Q3. Which government schemes support spice derivative startups?
The PMKSY (MoFPI) and MSME tech upgradation and APEDA export incentives schemes support startups with financial and technical aid.
Q4. What is the export potential of spice derivatives?
India exports spice derivatives to the US, EU, Middle East, and East Asia, where demand for plant products is growing rapidly.
Q5. How much margin can spice derivatives give compared to whole spices?
Spice derivatives are very profitable as they deliver a 25-40% margin. It is compared to whole spices, which only provide a 5-10% margin.
