Spice Startups in India: How To Start One

Spice Startups in India: How To Start One

India as a third-world country has a lot of scope for improvement in its economic sector. One of the most common ways of doing that is by encouraging startups. There is a pool of business startup ideas to choose from. Moreover, globalization has paved for new technology-based startups that include fintech companies like Paytm, which were once a startup but now have become immensely stable. Moreover, India being the world’s largest spice producer can also rely on its traditional wealth and can initiate spice startups in India, which will be the highlight of this article.

However, commencing a startup and handling it is not a piece of cake. It takes a lot of hard work, determination, and sacrifices in order to achieve the goal laid. Therefore, one needs a proper guide to ensure the achievement of the goals set for a startup in any domain. For this purpose, this article will act as a guide for spice startups in India with a variety of divisions to aid understanding.

Capital Required For Spice Startups In India

The most important factor that determines whether a startup should be initiated or not is the requisite capital. So, we will be discussing this point at the very first. We know that India produces about 520 different types of spices every year and that Indians love their spice Industry. Further, increasing changes in lifestyle have pushed people to buy packaged spices for their convenience. This makes one thing clear, any investment made in the sector is unlikely to go in vain.

Now, let’s bring light upon what exactly you would need for such a startup. The basic monetary investment would range from INR 50,000 to up to INR 1,00,000. In addition, one also requires land area for the production and storage of spices. The average land area that one would need is 2,250 sq feet. However, that is not all, there are other expenses that one has to bear. These include maintenance of equipment, work area management, marketing costs, and employee remuneration.

Earnings and Profit Percentage

Since the initial capital requirements have been discussed, one would want to know what these investments will yield. Spice startup businesses yield a profit of about 50% to 70% in India after they become relatively stable. In addition, successful spice startups ensure an earning of INR 50,000 to INR 1,50,000 per month at the initial stages itself. Such yield is commendable if compared to the small-scale capital investment required, as discussed earlier.

Licensing Requisites

Every business entity needs a license to operate and so does a spice startup. However, it has to follow several regulations laid down by the government. The sole reason for such stringent measures is that the spice business falls under the food category. It is a very sensitive domain and any adulteration involved would negatively affect a major chunk of the nation. Therefore, the following points should be considered for obtaining a license for a spice startup in India:

  • The first thing that should be brought to attention, for a startup registration, is the time and scale of business. The organization should be registered as Pvt., Ltd., a partnership entity, or even a sole-proprietorship business.
  • In addition, obtaining a GST number is also obligatory, therefore, one should apply for GST registration of the startup.
  • For small to medium-scale enterprises (SME), the government has launched a special range of subsidies and benefits that one can avail of after registration. These governmental aids are essential in the initial phases of a startup. One such governmental aid provided is the Startup India Scheme.
  • Now the list of all important licenses and approvals one should obtain will be named. The list includes trade license, FSSAI approval, BIS certification, application for Trademark, and obtaining an importer-exporter code.

The above-mentioned licenses and registrations, except the FSSAI approval, are required for almost all sorts of startups in India. Therefore, one can follow a similar process in any other startup domain as well since they are very much a part of the startup India registration process.

How Much Space Is Required?

As mentioned earlier, the spice startups don’t require acres of area or space. Therefore, a feasible amount of space is required for carrying out the operations of a spice startup in India. The initial capital investment for land area, that is. 2,250 sq feet is enough for the processing and manufacturing of spices. The same amount of space is required for the curation and packaging of the spices produced.

One point to be noted here is that the government has prohibited the operations of food businesses to be carried out from one’s home. Therefore, it is necessary that one makes an investment in purchasing or leasing out land and other space-related accompaniments. Also, the place chosen for production and packaging should have easy transport access and should be situated nearby to the target market.

Requisites For Raw Materials

It is obvious that the raw materials would consist of ungrounded spices that would be processed further in the manufacturing unit. Apart from this, packaging materials should also be taken care of since it is needed to be resilient enough in order to keep the spice products safe. Another important point is that those materials that might be hazardous according to the food industry’s standards should be avoided at all costs.

Machinery Needed

Since the raw materials include ungrounded spices, it is understood that a grinding processor would be needed. However, the number and size of the processors would depend on the scale of operations of a spice startup. In this domain, small-scale startups generally use Double Stage Pulverizer machines, whereas, a large-scale business would prefer an impact Pulverizer. In addition, for the manufacturing process, spice grinders, a weighing scale for proper distribution, packaging machines, compressors, and rosters, are also integral.

Understanding The Spice Manufacturing Process

The process of manufacturing and curation of spices has 7 steps in total. These steps are explained in chronological order for better understanding.

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  • Cleaning: This is the very first stage of the process where unground spices are cleaned with help of manual labor. This step is aimed at removing impurities that include dust, dirt, and even small stones. Spices are also washed to ensure that no foreign particles hamper the quality.
  • Drying: Since the spices have to be ground into a fine powder, it is necessary that the wet spices are dried perfectly. Therefore, these spices are to be kept under direct sunlight. It is also believed that the quality and taste are enhanced if the spices are dried correctly. However, for this step to be successful, it is important that the first step is carried out properly. Without proper cleaning, bacteria would still be present on the spices and would spoil the food when kept for drying under sunlight.
  • Roasting: After the spices are dried, 8it is time for roasting them. This step is undertaken to ensure better taste, aroma, and quality of the spices produced. Careful supervision should be provided so the spices aren’t overly roasted since that might lend a burnt taste to it.
  • Grinding: In this stage, the roasted spices are cooled down and transferred into grinding processors. The spices are then ground into a fine powder. It should be ensured that the entire lot has been ground well.
  • Grading: The ground spices are then to be graded or sorted on the basis of the raw materials used for production. For instance, a separate lot should be dedicated to Turmeric, another one for Red Chilli powder, and the spices that contain a blend of other spices should be sorted according to similar taste, clour, and density.
  • Sieving: After the spices are segregated efficiently, the process of sieving is initiated. It involves passing the spices through a sieve to eliminate any lumps and to provide uniformity of texture to these spices,
  • Packaging: To ensure that the packaged spices remain fresh and safe, it is important to choose the correct packaging. It is recommended to use stand-up zip-lock pouches. Moreover, this kind of packaging also enables the enterprise to choose the best-suited style, size, and other requirements for the betterment of the product.

After the selection of the package, the spices should be weighed according to the portion size to be packed and then should be transferred into the packages. The final step is to seal these packages with the help of a sealing machine to ensure that those pouches or boxes are leak-proof.

Branding

Branding is necessary for any food industry participant so that their customers are able to remember those products and eventually come back to them. However, there are various elements to the branding process. These branding elements are explained in brief below:

  • A brand identity should be created so the customers can be reminded of the brand easily. This can be done through brand logos, usage of specific color schemes, and even punch lines that were used to promote the product.
  • A brand image should be developed as it lets the consumers know what to expect from any brand. Therefore, the design that best suits the brand should be developed.
  • Brand positioning can be done to create an effective position in the market amidst the prevalent cut-throat competition. Things that inform how the product is different or beneficial compared to others are helpful. One can provide elements such as no preservatives, no MSG, or a home-like taste to grab a customer’s attention.
  • Build a brand personality so consumers associate with them emotionally. For instance, Maggi’s ad campaigns often target mothers and their children, students’ hostel life, and many more. These ads are highly emotive and have added to the brand personality of Maggi.
  • The packaging design should be creative and unique so the customers are inclined towards buying it. Also, it should not be similar to any other existing brand since in that case the newer brand will be crushed due to competition.

Spice Startups In India: Challenges

Any business cannot run without facing challenges. Moreover, it is even worse for a startup company. Major challenges that are faced by a spice startup are discussed below:

Cut-throat Competition

Since these startups require a small initial investment, a lot of regional companies have entered into it. Though they don’t participate in the national level competition, these local companies promise to deliver organic spices. Which gives them an edge over large-scale firms that might use preservatives. Therefore, the pressure of maintaining the product quality is higher.

Labor Problems

The people who are indulged in the manual activities of the spice manufacturing process are often affected negatively. This is because of the pungent odor that might arise due to a large amount of spice in one place. Further, the spices are ground finely which might be inhaled by workers and pose a threat to their health. These adversities are difficult to be tackled and also reduce the workforce, thereby, limiting operations.

Expansion Pressures

The already existing behemoths in the spice business domain will adopt fresh and updated technology. This is difficult for a startup to cope with. Therefore, the pressure of expansion is increased since not every startup can be a unicorn startup.

Credit Risk

Manufacturing businesses often have to distribute products at credit to market mediators. In the spice startup domain, this risk is relatively higher and poses a threat to the profit-earning capability of the enterprise.

Package leaks

Many small-scale spice enterprises prefer using hand-made packages due to budget limitations. However, these packages aren’t leakproof and lead to the loss of a large amount of produce.

Recap

Spice startups in India are highly futuristic in nature. One needs a fairly feasible amount of capital investment to start such a startup and can earn a profit of about 50% to 70% in a few months. In addition, the simple raw materials and limited use of machinery make the process even easier. However, there are various steps in the spice manufacturing process that should be followed strictly. These include cleaning, drying, roasting, grinding, grading, sieving, and packaging spices. Another important field to focus on is the branding of such spice products.

An important point that should be kept in mind is that it cannot be all glitters for a spice startup in India. There are several challenges that these startups face. These include cut-throat competition, labor issues, expansion pressure, credit risk, and package leaks. With sheer determination and careful supervision, these limitations can be eliminated in the long run.

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Nitin Kapur

Nitin Kapur is an entrepreneur, investor, business advisor and speaker. If you wish to know about businesses and their position then there is no better analyst than him to help you with that.

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