The global spice trade has grown at a strong rate in the last decade and India, the largest producer, consumer, and exporter of spices has been at the forefront of this evolution.

However according to Rabobank's latest report, 'Decoding the Spices', structural changes in the global spice market mean that India, historically a bulk commodity supplier of spices, is now becoming a global hub for exporting processed powdered and value-added spice products, such as oleoresins, oils, extracts and seasonings.

"Some of the countries which previously imported whole spices have shifted to imports of ground and blended spices from India," explained Rabobank analyst Shiva Mudgil. "This is creating a shift from merchant export businesses to process manufacturing businesses. Demand for oleoresins and seasonings has also led many Indian players to focus on research and technology in order to manufacture innovative products."

Indian players have been setting up the processing infrastructure to tap the growing demand. India's exports have grown by 20 percent in the last four years in value terms and Rabobank anticipates they will continue to show similar trends going forwards.

However, upstream sourcing challenges need to be addressed to fully tap this potential. The Indian spice market is fragmented. Spice production in India is largely a marginal farming business and small farm landholdings will remain important in the foreseeable future. Sourcing quality spices to meet this growing demand will be a critical challenge.

In response, the Indian spice industry is increasing formalisation and processors are becoming more involved in directly engaging with farmers. There is a growing aspiration among India's regional players to expand into new geographies and new product segments. This will lead to greater need to access capital and product technology. Some of the Indian processors are looking to other countries, such as China and Vietnam, to secure supplies for meeting demand. Global players such as McCormick have also entered the Indian spice industry by partnering with Indian players with the objective of catering to their global demand.

India's estimated production of spices is 5.9 million tonnes in 2012/13. India imports 0.1 million tonnes of spices, with most of it meant for re-exports. Approximately 11.5 percent of the total goes to exports, amounting to 0.7 million tonnes. Key exports markets are the United Arab Emirates (UAE), the United States (US), the European Union (EU) and Malaysia. Chilli, turmeric and cumin are the key spices being exported.

www.rabobank.com