Daybreak - FMCG giants are caught in a spice war

Episode Date: July 22, 2025

India’s packaged-food bigwigs ignored spices for a long time. Not anymore.Since 2020, everyone from ITC to Tata Consumer Products, from Dabur to Wipro, has been scrambling to cement their place in this essential corner of the Indian kitchen. They’ve pounced on spice brands, sometimes paying top dollar for them, all while their investors cheered them on. In fact, the stocks of Tata Consumer and ITC have both outperformed the S&P BSE FMCG index over the last five years.Turns out, this was all the vindication that Norwegian conglomerate Orkla needed to go publicBut this isn’t just another public listing. It’s the opening salvo in what industry insiders are calling the “great spice wars”. And here’s where it gets even spicier: though the category offers some of the highest margins in FMCG products—with pure spices commanding 30–35% gross margins and blended spices going up to 60%—they come with their own unique challenges.Tune in. Check out the latest episode of The Ken's brand new careers podcast, 90,000 Hours. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Welcome to the Great Indian Spice Wars. Since 2020, everyone from ITC to Tata Consumer Products to Darbar and even Bipro

has been scrambling to cement their place in kitchen pantries. across the country. They've recognized that spices are where the money is at. This is a category that offers some of the highest margins. We're talking 30 to 35% for pure spices and anywhere up to 60% for blended spices. Which is why many of the biggest FMCG giants haven't tried away from paying top dollar to acquire some of these brands. It's proven to be like a gift that just keeps on giving. Case in point, the stocks of Tata consumer and ITC have both outperformed the SNP BSE FMCG index over the last five years. Now, that was all the vindication that Norwegian conglomerate Orkla needed to finally go public.

Earlier in June, its Indian unit filed its draft red herring prospectus. It's preparing for a partial exit at an undisclosed amount. Now, here's a company that's been ahead of the curve for quite a while now. It saw the promise that spices could offer way before others did, which is why its Indian unit went ahead and acquired Bancel. Angloor-based MTR's Packaged Food Division in 2007, and then Kerala-based spice company Eastern Condiments in 2021. Its bet paid off.

MTR ended up becoming O'Kla's Golden Goose. In FY25, it reported a revenue of nearly 2,400 crore rupees. That's a 10% increase in just the last two years. Today, 60% of O'Kla's revenue comes from spices alone, which explains why it has finally decided to shoot its shot and go back. public. But while Okla may have an early mover advantage, it isn't going to be a smooth run. You see, the spice category comes with its own unique challenges. First and foremost, it is an extremely fragmented segment, dominated by a bunch of regional players catering to hyper-specific

local tastes and preferences. And then of course there's the issue of adulteration. Some of the biggest national brands have been accused of it. After all, there's a reason to that these margins are so high. So while this industry is hot, could it be too hot to handle? Well, let's find out. Something changed right after the pandemic. Suddenly, every major FMCG player wanted to have a spice brand to its name. And what followed was a downright feeding frenzy, where they started acquiring regional

spice brands left, right and centre. So what was once a rather niche category ended up becoming the hottest, commodity in the industry. An industry expert we spoke to said it's gotten to a point where if an FMCG company hired a management consultancy to figure out which segment to get into next, the likely answer would be spices. Why? Well, it ultimately comes down to the margins.

Where, say, oil and ghee offer single-digit margins and staples like rice and pulses hover around 20 percent, spices consistently offer margins north of 30 percent. This, when even premium products like dry fruits max out at 25%. The real gold mine though is blended spices, the likes of sambar powders or chola masas. The kind of thing that you could make at home, but it's often tedious. Now, Okla excels in this department. Its most popular offerings include its sambar masala, its chicken masala and its pylogre masala. The high margins that these blends offer make them even.

irresistible for FMCG companies looking to boost their bottom line. But it isn't quite that straightforward either. You see, the biggest challenge for these companies is the fact that each region has its own unique spice blends. Think Rishado Masala and Goa or Bissi Ballybath in Karnatica. Hell, even sambar masala will vary from southern state to southern state. It's difficult for one blended spice brand to cater to all regions, which explains why around 2,000 brands.

compete for over 50% of this market. The rest? Well, they're all unorganized. This is one of the most fragmented categories in Indian FMCG. It's also kind of like the mafia, where each boss controls their own territory. The brand's Archie and Shakti rule Tamil Nadu, Brahmins, Nirapara,

kitchen treasures and eastern dominate Kerala, and sunrise is big in eastern India. In Kanatica, of course, it's all about MTR. So the issue then becomes scale. How do you break out of a region? The broader verdict is almost unanimous. National FMCG companies looking to achieve pan-India dominance on the backs of standardized products must now bow down to regional tastes in spices.

To grow in the industry, you have two options. Either acquire an existing brand that's popular in a region or create a different brand altogether. Naturally, most choose the former. It gives you access to a loyal customer base and proven flavour profiles that would otherwise take decades to develop. Look no further than MTR, which tried to enter Kerala four times and failed every single time. It finally acquired Eastern condiments for about 1,356 crore rupees rather than fight the uphill battle of consumer acceptance. Now, even if you do figure that out, the other big issue to address is distribution.

Gaps there could very quickly. erode hard-won loyalty. And that's exactly why some brands choose their territory and stick to it. They don't even entertain aspirations of venturing out or becoming a pan-India brand. Stay tuned. Why do pictures have to be

in offices and cafes and Zoom calls? That's the question Arjun Vedia, founded VC and pickleball enthusiast, is asking. And he's not alone. From courts to climbing gyms, a new wave of.

founders and professionals are rewriting the rules of networking. They want to make it more human and less transactional. The first episode of 90,000 hours, the Ken's new podcast on the future of work, dives right in. Check it out wherever you get your podcasts. Now, because of the spice boom, a lot of things started to change. For starters, the Indian spice market started shifting from unorganized to packaged spices. Earlier, consumers, most of whom were women, would typically buy whole spices and then grime them at home. But the world has changed since then. You see, with lifestyle changes, urbanization,

and more and more women going to work, there's an increasing demand for convenient, pre-packaged, pre-ground masas and spices. What hasn't changed is where people are purchasing spices. Even today, majority of sales continue to take place through retail chains and kiranhas. Of course, there is a small but very fast-growing percentage coming from e-commerce channels now as well. So, in the In a fast-growing, fast-changing market like this, most FMCG companies are paying big bucks to acquire regional champions in lieu of organic growth. For instance, take ITC's Ashirvad, which is a household name across India, particularly when it comes to wheat flour.

In spite of its stellar brand recall, ITC was unable to expand the brand into spices. At the end of the day, customers just were not able to connect the brand to spices. forced ITC to acquire the Kolkata-based spice maker Sunrise Foods for about 2,150 crore in 2020. That, despite having one of the country's strongest distribution networks. Similarly, there's Tata Salt by Tata Consumer Products. This is another popular choice among consumers. But the company faced the same problem. It's struggled to carry the brand equity into spices.

That is, until Spice and Pulse Focus brand Tata Sampan acquired Lucknow-based organic India in 2024, that helped its scale. This not only brought in more revenue, but also some crucial local market knowledge. Now, MTR is an anomaly here. You see, unlike with ITC and Tata, Orkla India is almost entirely dependent on spices for its revenue. It brings in about two-thirds of its top line. The rest comes from ready-to-cook-and-eat meals. But the thing with ready-to-cook-and-eat is that people buy it only when they want to trade time for convenience. Mostly people make time, which ends up making these products quite difficult to scale. That's why I say ID Fresh Foods, the Bangal-based food products company,

is nowhere near being a thousand-craw company. That despite the fact that it's been in the business for more than two decades now. MTR's success in South India, where it makes 70% of its revenue, goes hand in hand with its failure to expand in the north. Influes from the region are limited to 5%. West and East India follow with 3% and 1% respectively, and the rest comes from global exports to the US for MTR and to the Middle East for Eastern. This is perhaps why the current IPO is entirely an offer for sale with no fresh capital raised.

The company may not have immediate expansion opportunities to justify fresh investment. The other big issue plaguing the Indian spice industry is adulteration. Since spices are sold in ground or powdered form, they're a very easy target for adulteration, which only adds to the beefy margins these categories already enjoy. For instance, several MDH and Everest products were suspected of being contaminated with ethylene oxide, which is a carcinogenic pesticide. Their sales ended up being suspended in Hong Kong and Singapore in 2024. Now, it's common enough for brands to substitute brown spices with fillers like lower-quality spices.

flour, cornstarch and even sawdust. Some even add coloured dyes to spices to make them look fresh and hide the fillers they've mixed in. Needless to say, it can obviously be extremely harmful. In fact, just last year, the Food Safety Administration Standards Authority of India even released a booklet on how certain home tests can help identify adulteration. Want to know if your chili powder has sawdust in it? Well, add it to water. The chili powder will settle at the bottom, while any sawdust.

while any sawdust will float to the top. That's the risk that arises when FMCG companies fight tooth and nail to acquire regional brands. In this relentless pursuit of higher margins, this is the unfortunate underbelly. So, as Ocla gears up for its public market debut, it would do well to heed to the quintessential strengths of the spice industry without undermining its rather unique challenges. Can a pure play regional strategy command premium valuation? Well, Orkla's fate will likely influence how other regional food companies move forward. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippo's and edited by Rajiv Sien.