Spices Business Guide: From Establishing To Expanding
Sarat
October 18, 2024 at 05:34 AM
Introduction
Our country is the largest producer, exporter and consumer of spices. It is often referred to as the “Land of Spices”. There are no Indian dishes or cuisines, which don’t use spices or masalas. We Indians can’t imagine a world without spices. The business of spices is not new, it has been supporting the Indian economy since ancient times. Indian spices are highly sought after in international markets because of their superior quality and flavours.
There are approx 109 different types of spices, out of which more than 75 spices are produced and exported by India. Therefore this is a very huge market which has demands from both domestic and international markets. Moreover, the tropical and subtropical weather of India is perfectly suitable for producing high quality spices. Hence starting a spice business is one of the greatest business opportunities available to Indian entrepreneurs and traders. In this article, we will understand everything about the spices business and how to establish and expand it.
Things to Consider Before Starting
India has been the global hub for spices for centuries and the demand for Indian spices doesn’t seem to be slowing down anytime soon. Moreover, the demand for spices is not only internal but regional as well, hence the Indian spices market isn’t just growing, it’s booming and there is a huge potential for newcomers to join and disrupt the market. However, it is important to consider some below-mentioned points before deciding to dive in:
- High Competition: The Indian spices market is highly competitive. There are many big players and this market can be said to be an oligopoly market. Therefore you need to have a comprehensive strategy for establishing and expanding your business in this highly competitive sector.
- Credit Risk: Other than competition, this market is also prone to credit risks. Spices Business is a traditional business which is why deferred payments and credit sales are common, which may result in bad debts.
- Premium Packaging and Labelling: In domestic space, packaging and labelling don’t matter so much. However, when it comes to international markets premium packaging and labelling is one of the most important factors to ensure high demand and sales.
- Machinery and Equipment Requirements: Spices Business might seem very simple and low cost. However, the cost of machinery and equipment for processing and packaging of spices is very high. Moreover, the cost of labour is also very high. Therefore it is a capital incentive business.
- Raw Material Sourcing: After considering the cost of labour, machinery and other equipment. You also need to plan the sourcing of raw material and its cost as well. The overall quality of your final product depends on the raw material you choose. So choose your raw material source wisely.
- Certification and Compliances: Starting a Spices Business in India would require you to obtain various certifications and comply with various standards and regulations as well.
- Licences and Registrations: Similarly before starting your business, you would be required to obtain certain licences and registrations, which will be discussed in detail later.
- Market Research and Analysis: Before starting any business, market research and analysis are required to find out the potential customers, understand their demands, product fit and placements etc. It gives out industry insights and trends so that you can plan a comprehensive strategy and efficiently tap the business opportunities.
- Marketing: Lastly you should also plan the marketing and promotion strategy for your products. Nowadays online marketing is very popular and highly effective. Marketing strategy depends on various factors such as target customers. So choose a suitable marketing strategy accordingly.
Establishing Your Spices Business
Now that we have a fair understanding of the spices business, we can dive deeper into the technical and legal aspects of establishing a spices business. You can establish your spices business by following the below-mentioned steps:
- Step 1 – Choosing the Structure
For any business, choosing an appropriate business structure is a must. You can choose any business structure as per your requirements, business scale or number of partners. Available options for the spices business are:
- Step 2 – FSSAI License
The primary authority regulating the food businesses in India is FSSAI (Food Safety and Standards Authority of India). Spice Businesses are also regulated by this very authority and are required to obtain the FSSAI Licence, which is of different categories and you should choose the applicable category by considering your production scale. Different categories of FSSAI Licence are as follows:
- FSSAI Basic Registration
- State Licence
- Central Licence
- Step 3 – Trade Licence: This licence is acquired from the local municipality. It simply permits the trader to trade from that territorial jurisdiction. This permit is given only after considering various factors such as health, safety, local customs, regulations etc.
- Step 4 – GST Registration: If your business falls under the mandatory registration category or satisfies the registration threshold, then you are also required to do the GST registration of your business.
Expanding Your Spices Business
Just like any other business, a spices business should also be expanded after establishing it successfully. There are various prospects for a spices business to expand as per your strategy you might put in efforts to expand your business in domestic or international markets. To expand your business in the international markets you are required to do the following things:
- Spice Board Registration: This Board was set up in 1987, by the manager of the Cardamom Board and Spices Export Promotion Council. It is a government regulatory and export promotion body under the Ministry of Commerce and Industry. It works as an interlink between the spices imports and Indian exporters.
Registering with the Spice Board is a mandatory requirement to export spices from India. Therefore to expand your business globally you must do the spice board registration. Moreover, it’s not just a government registration, it also provides certain benefits for your business such as global recognition, expert guidance, export assistance, exclusive treatments, brand promotion and many more.
- Obtaining IEC: Just like any other exporting business, a spice business should also obtain IEC (Import Export Code) by registering with the DGFT (Director General of Foreign Trade). It is an essential requirement to legally export/import goods and services to and from India. Therefore obtaining an IEC for your business is a must to expand it globally.
IEC is a one-time registration, which you do not need to renew annually. However, you need to update your IEC profile annually even if there are no changes in your profit. Otherwise, it will be suspended and can only be brought back by updating your profile.
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