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Investor Relations

India: Spicing up the world with clean, sustainable products

By Munish Minocha, Senior Vice President, Olam SVI

The world has always loved Indian spices, with India currently being the largest producer and exporter of spices accounting for US$6 billion annually, half of the global market.

The key trends in the global spices industry are clearly evident within India’s spice industry.

Food safety is of utmost importance as safety norms and pesticide and allergen requirements remain the top priority for buyers.  Branding around sustainability, traceability and organic produce continues to gather steam among consumers. Purchasing habits are shifting towards a preference for branded, processed and pre-packed products and away from buying loose or in wholes.  Consumers are also becoming more discerning in their selection of spices where taste, colour, heat, ethnic flavours and clean natural labels now matter much more than ever before.

In line with these shifts in consumption habits and preferences, and as a global supply chain manager with a purpose of growing profitably and responsibly, our focus in India has been on developing origination, processing capabilities and exports of traceable, sustainably sourced ground spices to major markets in Asia, Europe and USA.

Clean label, sustainability focused

In India, we participate in five major spices – chilli, cumin, black pepper, turmeric and curry powder. Collectively these spices account for about 70% of India’s spice exports. Chilli is the largest segment in volume terms, followed by cumin, turmeric, pepper and curry powder.

Our acquisition of the bulk spices assets and businesses of Vallabhdas Kanji Limited (VKL) in 2011 set the stage for our current participation in India.  The assets acquired included VKL’s spice processing facility in Cochin and its sales and distribution operations in North America. With these assets, we now process and offer a range of value-added spices, including heat treated, dehydrated and naturally steam sterilised spices, and blends in various forms which are customised to the needs of industrial customers across the USA and Europe.

The transaction catalysed our entry into new, attractive product segments, particularly red chilli and turmeric, and we have further invested in improving the infrastructure and testing capabilities of these assets. Our testing lab in Kochi tests 100% of our products before they leave our factories for the port.  It also provides analysis for the establishment of proprietary processes, such as those for reducing pathogens.  These elements contribute to the clean label objective.

RedChilli-India
Ground chilli, India: Our business model in India ensures a sustainable production of spices by farmers who adopt the integrated pest management technique on farming. 

 

Importantly, our Sustainable Spices Programmes (SSP) focus on sourcing and marketing spices that are traceable and farmed in a sustainable manner with strong integrated pest management (IPM) and proper post-harvesting farming practices.  Pesticides and toxins are often the challenge for spices exports to the USA and European markets.  Based on our SSP under the Olam Livelihood Charter, we work with farmers to educate them on the correct usage of pesticides and chemicals and preventive techniques for pest control and mycotoxins.  This training enhances farm productivity and income, and ensures that the crops produced meet or better pesticide limits set by USA, EU and Codex standards.

For example, in the three major states of Andhra Pradesh, Karnataka and Telangana where chilli is grown, we have been successful in building a robust IPM programme that involves working with more than 1,200 small and medium farmers to develop sustainable agricultural practices and generate a higher return for the farmers.

Small but growing addressable market commands a premium

The key markets for Indian spice exports are the USA (between US$300-350 million), China and Vietnam. Together China and Vietnam  equal the USA market in size.  The EU and Asia Pacific (excluding China and Vietnam) markets each consumes about US$200-250 million worth of Indian spices.

While the addressable market size for IPM spices is still a fraction of India’s overall market – roughly 100,000 metric tonnes or US$200 million – it commands a premium and is growing on the back of changing consumer behaviours.  Olam is well-positioned among the top five players in India to meet the stringent requirements of this market.

With our SSP differentiated products, we will grow our domestic market in whole, ground and spice blends segments, which have traditionally relied on local traders for their needs.  Our Olam brand, clean label, traceability and sustainability focused strategy put us in an advantageous position and ahead of other global food companies as well as private labels operating in India.