How to Start a Cashew Processing Business in India?

The cashew business in India offers a world of opportunity, fueled by strong demand and numerous benefits.

• High Demand: Cashews are in strong demand both in India and globally. They are widely used in sweets, curries, and as a popular snack. Health-conscious consumers are driving demand for products like cashew butter and cashew milk.
• Good Profitability: Cashew processing is a business with a healthy profit margin. By adding value through processing, roasting, salting, or flavoring, you can significantly increase the final selling price compared to raw nuts.
• Export Potential: Indian cashews are famous worldwide for their quality. This means you can tap into the international market, exporting your processed nuts to countries like the UAE, the USA, Japan, and the Netherlands.
• Government Support: The Indian government recognizes the importance of the cashew industry and offers support through various schemes and loans for MSMEs (Micro, Small, and Medium Enterprises) to help you get started.

This detailed guide covers all the essential steps and insights you need to launch and run a successful cashew processing business in India.

Step 1: Do Your Market Research

Before starting your cashew processing business, it’s crucial to gather detailed market insights to make informed decisions.

• Identify Target Customers: Determine if you’ll sell to wholesalers, retailers, or directly to consumers.
• Analyze Competitors: Study existing players to understand their strengths, weaknesses, and market positioning.
• Assess Product Demand: Research demand for different cashew grades like whole kernels (W), halves (H), and pieces (P).

Step 2: Create Your Business Plan

A well-structured business plan will guide your operations and help secure funding from banks or investors.

• Define Business Goals: Clearly state your short-term and long-term objectives.
• Outline Financial Needs: Include startup costs, working capital, and projected revenue.
• Detail Operations Plan: Explain your production process, sourcing strategy, and staffing needs.
• Include Marketing Strategy: Show how you will promote your products and reach your target market.
• Add Risk Analysis: Identify potential challenges and your plans to overcome them.

Step 3: Exploring Funding Options

Securing the right funding will ensure you have sufficient capital to start and grow your cashew processing business.

• Bank Loans: Approach banks for term loans or working capital loans, backed by your business plan.
• Government Schemes: Explore subsidies and low-interest loans under MSME or agro-based industry schemes, such as

• Prime Minister’s Employment Generation Programme (PMEGP),
• Credit Linked Capital Subsidy Scheme (CLCSS),
• Agriculture Infrastructure Fund (AIF).

• Private Investors: Pitch your idea to angel investors or venture capitalists interested in food processing.
• Crowdfunding: Use online platforms to raise funds from a large number of small contributors.
• Self-Funding: Consider using personal savings or assets to cover initial setup costs.

Step 4: Choose Location & Source Raw Nuts

Selecting the right location will help you ensure a steady raw material supply and smooth distribution.

• Proximity to Raw Cashews: Choose areas near cashew-producing states like Maharashtra, Andhra Pradesh, Odisha, Karnataka, and Tamil Nadu .
• Access to Transportation: Ensure good connectivity to highways, ports, and railways for smooth logistics.
• Import Option: Consider locations with easy access to ports if you plan to import Raw Cashew Nuts (RCN).
• Utility Availability: Check for uninterrupted electricity, water supply, and waste management facilities.
• Local Labor Supply: Select a region with readily available skilled and semi-skilled workers.

Step 5: Set Up Facility & Machinery

Establishing a well-equipped and hygienic facility is essential for efficient and safe cashew processing.

• Meet Hygiene Standards: Ensure the facility complies with FSSAI and local food safety guidelines.
• Purchase Machinery: Invest in essential machines like boilers, shell cutters, dryers, and grading machines.
• Decide Automation Level: Choose between manual, semi-automatic, or fully automated setups based on budget and capacity needs.
• Facility Layout: Design the layout for smooth workflow from raw nut intake to final packaging.
• Safety Measures: Install fire safety equipment, ventilation systems, and protective gear for workers.

Step 6: Understand Processing Workflow

The processing workflow is the heart of your cashew processing business in India. It involves several key steps:

• Cleaning & Grading: Raw nuts are cleaned to remove impurities and sorted by size.
• Roasting/Steaming: The outer shell is roasted or steamed to make it brittle and easier to crack.
• Shelling: The roasted nuts are cracked open to extract the raw kernel. This can be done manually or with automated machines.
• Drying: The kernels are dried to remove moisture, which is essential for shelf life.
• Peeling: The thin inner skin (testa) is peeled off to reveal the white cashew nut.
• Grading: The final kernels are sorted into different grades based on size and quality.
• Packaging: The graded cashews are packed, ready for sale.

Step 7: Introducing New Value-Added Products

Expanding your product range with innovative cashew-based items can boost profits and attract more customers.

• Develop Cashew Butter: Create creamy, nutritious cashew butter as a healthy alternative to traditional spreads.
• Offer Cashew Milk: Tap into the plant-based milk market by producing cashew milk, popular among health-conscious consumers.
• Flavored Cashews: Experiment with different flavors like spicy, salted, or sweet-coated cashews to appeal to diverse tastes.
• Cashew Snacks: Package roasted or coated cashew snacks for easy consumption and better shelf life.
• Ready-to-Use Cashew Pieces: Supply pre-processed cashew halves and pieces for bakeries and food manufacturers.
• Explore Organic Options: Consider organic cashew products to target premium market segments.

Step 8: Finance & Profit Analysis

Keep a close watch on your finances by tracking all expenses—from raw materials to marketing. Regularly check your profit margins to stay on track and make necessary changes.

• Maintain Accurate Records: Use accounting software (like QuickBooks or Tally ) or spreadsheets to log transactions accurately.
• Monitor Cash Flow: Ensure enough cash is available for daily operations.
• Set Financial Goals: Define clear targets and review them regularly.
• Control Costs: Cut unnecessary expenses without affecting quality.
• Review Pricing: Adjust prices based on costs and market demand.
• Prepare for Taxes: Save money for tax payments and file on time.
• Plan Investments: Reinvest in areas that boost growth.
• Use Financial Ratios: Track key ratios to understand profit and efficiency.
• Review Regularly: Check finances monthly or quarterly to stay informed.

Profit Margin in Cashew Processing Business

The profit margin in the cashew processing business is considered quite good, often ranging from 10% to 20% or even more. This margin is influenced by several factors. The key is to reduce your costs while maximizing your revenue.

By focusing on these areas, you can ensure a healthy profit margin in the cashew processing business and a successful venture.

To set up a successful processing unit, you will need the right equipment. Here is a list of the essential machinery and an idea of the investment involved.

• Cashew Steam Boiler: Used for steaming raw cashews to make shelling easier. The cost can range from Rs. 50,000 to Rs. 2 lakh.
• Cashew Shelling Machine: This machine cracks the shell open to reveal the kernel. Automated machines are more efficient and can cost between Rs. 1.5 lakh to Rs. 5 lakh.
• Cashew Dryer/Oven: Used to dry the kernels after shelling. A quality dryer can cost from Rs. 1 lakh to Rs. 3 lakh.
• Peeling Machine: Removes the thin skin from the kernel. This can cost anywhere from Rs. 1 lakh to Rs. 2.5 lakh.

• Grading Machine: Sorts the finished cashews into different grades. This can cost between Rs. 75,000 to Rs. 2 lakh.
• Packaging Machine: Seals the finished cashews in bags or containers. A semi-automatic machine can cost from Rs. 1 lakh to Rs. 3 lakh.
• Raw Nut Grader: (Optional but recommended) Sorts raw nuts by size for more efficient processing. Cost varies.

A basic, semi-automatic unit might have a machinery investment of around Rs. 10 lakh to Rs. 20 lakh, while a fully automated plant can run into several crores.

To ensure your business operates smoothly and legally, you must obtain several licenses and registrations.

• Business Registration: Register your company with the Ministry of Corporate Affairs as a Private Limited Company as a Sole Proprietorship, or a Partnership.
• Trade License: Obtain a trade license from your local municipal authority.
• GST Registration: Businesses must get a GSTIN.
• FSSAI License: As a food processing business, you must get a license from the Food Safety and Standards Authority of India. This ensures your products are safe for consumption.
• Udyam Registration (MSME): Udyam registration is not mandatory but highly recommended as it helps you access government schemes, subsidies, and loans.
• Pollution Control Board: Get a " Consent to Establish " and "Consent to Operate" from your State Pollution Control Board, as your unit might produce some waste.

The total cost to start a cashew processing business in India varies widely, but here is a general breakdown of the expenses involved for a small-to-medium scale unit.

A great product needs an even greater marketing strategy. Here’s how you can sell your processed cashews effectively.

• Wholesalers and Distributors: Partner with wholesale traders and distributors who can get your products into various retail stores across the country.
• Retail Chains: Approach supermarkets, hypermarkets, and modern retail chains to stock your packaged cashews.
• Online Marketplaces: Sell directly to consumers through e-commerce platforms like Amazon, Flipkart, and your website.
• Exports: For a wider reach and higher profits, consider exporting to international markets. You will need to register with the Cashew Export Promotion Council of India (CEPCI) for this.

Starting a cashew nut processing business comes with its own set of challenges. Being aware of them and having a plan to address them is crucial.

• Fluctuating Raw Material Prices: The price of raw cashew nuts can change a lot due to weather, international markets, and other factors. This makes it hard to plan your budget.
• High Competition: The market is competitive, with many big brands and smaller local players. Standing out can be difficult.
• Skilled Labor Shortage: The processing workflow, especially shelling and peeling, can be labor-intensive, and finding skilled workers can be a challenge, especially in non-traditional areas.
• Quality Control: Maintaining a consistent quality can be tough, as it depends on the raw nuts and the processing steps.

Solutions to Overcome Challenges

Solutions to overcome the challenges are:

• For Price Fluctuations: Develop good relationships with multiple raw nut suppliers. Consider signing long-term supply contracts at fixed or favorable prices. Explore importing from African countries to ensure a steady supply.
• For Competition: Focus on creating a strong brand identity and memorable packaging. Specialize in value-added products that your competitors don’t offer. Build a reputation for consistent quality and excellent customer service.
• For Skilled Labor: Invest in semi-automatic or fully automated machinery to reduce reliance on manual labor. Train your staff properly and offer good wages to retain them. Set up your unit in a region with a history of cashew processing, like Kollam, Kerala.
• For Quality Control: Implement strict quality checks at every stage of the process, from receiving raw nuts to final packaging. Invest in good machinery that minimizes broken kernels. Follow all FSSAI guidelines for food safety and hygiene.