India’s big companies have suddenly woken up and smelt the flavours bursting forth in the nation’s spices business. Call it masala magic, if you will, as investing in spice is wise.
Tobacco-to-hotels conglomerate ITC made headlines over the weekend when it announced that it was acquiring the Kolkata-based Sunrise Foods, the market leader in the spices business in the eastern part of the country. In its filing to the bourses, ITC said it was acquiring 100 per cent of Sunrise Foods as it “aligned to the company’s aspiration to significantly scale up its spices business and expand its footprint across the country”. While the value of the deal was not disclosed, some reports put it at Rs 2,000 crore.
ITC is not the only investor itching for a new taste. Last week, reports had emerged of MTR, the Bengaluru-based food products company which is a subsidiary of Norway’s Orkla, buying up Kerala’s famous spices and curry powder brand Eastern for around Rs 750 crore. Mumbai brand Badshah masala is reportedly in talks with equity firm General Atlantic to sell its owner shares. If that comes through, it will be General Atlantic’s second significant investment in India’s spices sector, after investing in the owning company of the Ching’s Secret brand some time ago. Sunrise itself, before it was acquired by ITC, was being wooed by Carlyle, another private equity firm, besides MTR/Orkla.
Conventional wisdom says the hotter the spice, the better the quality. But what explains the sudden sizzling up of the business itself? Is there a COVID-19 angle to it?
To some extent, yes. While the fragmented and localised masala market had been slowly progressing toward getting branded in recent years, COVID-19 seems to have accelerated the pace—a public wary of the coronavirus being present on surfaces and food items of suspect origin are increasingly playing it safe, going in for packaged foods and branded items which come sealed. The result? A rise in the share of branded spices and related products (curry powder, pickles and condiments) compared to loose, local items. “Customers now prefer packaged spices compared to loose spices,” said a shop owner in Gurgaon, adding that ready-to-eat foods are also seeing a huge demand.
But the real reason lies in the distinct palate of Indian consumers. “The spices category is a very regionalised category as much as cuisine preferences are local and regional in India,” explains N. Chandramouli, CEO of TRA Research, a brand consultancy. “Good masala is about authentic taste, and it makes sense for larger brands to buy into the decades of experience of these regional brands to grow their footprint.”
He gives the example of sambar masala, and how it varies across regions. “(Local) brands have been able to capture the intricate nuances authentically,” Chandramouli points out.
For ITC, which is harbouring visions of expanding its FMCG footprint across the country, this makes immense sense—its Aashirvaad brand is already the leader in the masala category in Andhra Pradesh and Telangana. With the addition of Sunrise, which dominates Bengal and the eastern states (beside even a few neighbouring countries), the company’s spices market suddenly gains leadership in almost half the country.
Same for MTR, which has over the past two decades built up a pan-Indian retail network using its strength in south Indian sambar masala, chutneys as well as vegetarian packaged food portfolio. With the acquisition of Eastern, which specialises in Kerala-style non-vegetarian spice products, MTR has suddenly become indomitable in the south Indian market, not to forget the appeal two cuisines—Udupi vegetarian and Kerala non-vegetarian—hold across urban markets across the north as well as amongst the Indian diaspora in the Gulf and elsewhere.
“Such takeovers also help the larger brand to get a footprint into the regional market with their other products to expand its portfolio footprint,” analyses Chandramouli.