Industry Analysis of Spice

Sub-Category: Powdered Spice

Course: Strategic Management

Course ID: MGT490

Submitted to: Md. Latiful Khabir

Lecturer, School of Business
Independent University, Bangladesh (IUB)

Submitted by:
Isaba Ali 1910836

Mohammed Sameer 2020013

Md. Sohab Imran 2021112

Shopnil Ahmed Prachir 1820198

Yusrat Saadiah Sarwar 1710628

Date of Submission: 20.11.2022

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 LETTER OF TRANSMITTAL
20 November 2022
th

Mr. Latiful Khabir

Lecturer

School of Business

Independent University, Bangladesh (IUB).

Bashundhara R/A, Dhaka-1229

Subject: Industry Analysis of Powdered Spice.

Dear Sir,

The members of our team are very pleased to submit the report on Industry Analysis of the

Powdered Spice that was prepared with great effort and commitment, incompliance with course

requirements and instructions. This is our immense pleasure to present the term paper, which we

were assigned by your good self.

We have tried our best to prepare the report with necessary information and suggested proposals.

We did all the activities in a concise and comprehensive manner. We hope that this report will

fulfill the expectations.

Yours Sincerely

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 ACKNOWLEDGEMENT
First and foremost, we would like to thank the Almighty for giving us the moral integrity,

devotion, patience and ability to carry out this project nicely.

While working on the report we had to take the help and guideline of our respected faculty, who

deserve our greatest gratitude Mr. Latiful Khabir, Lecturer, Department of Management,

Independent University, Bangladesh, who has helped us accomplish our project with his solid

guidance and valuable consultations.

We thank you for your contribution to our assignment. We would also like to expand our

heartfelt gratitude to those who have helped us accomplish this directly or indirectly.

We are also genuinely thankful to all of the group members, who have been co-operative in

every aspect. Our each and every member has given all their might to this report. It was indeed a

pleasure working in such friendly environment.

Thank you.

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 TABLE OF CONTENTS
LETTER OF TRANSMITTAL............................................................................................................................2
ACKNOWLEDGEMENT.................................................................................................................................3
INDUSTRY ANALYSIS....................................................................................................................................5
Industry Size & Growth Trends................................................................................................................5
Global..................................................................................................................................................5
Bangladesh Market..............................................................................................................................5
Maturity of the Industry......................................................................................................................6
What is the effect of seasonality, if any?.............................................................................................7
Key Segments......................................................................................................................................7
COMPETITIVE NATURE OF THE INDUSTRY...................................................................................................9
Economical Effect....................................................................................................................................9
Inflation:..............................................................................................................................................9
Political Crisis:.....................................................................................................................................9
Natural Disasters:................................................................................................................................9
Transportation Issue:..........................................................................................................................9
Technological Factors:.......................................................................................................................10
Regulatory, Political, and Legal Concerns..........................................................................................11
Quality Product..................................................................................................................................11
Permission from the authority...........................................................................................................12
It should be laboratory tasted...........................................................................................................12
Perfect Pricing of the product:...........................................................................................................12
Porter’s Five Forces...........................................................................................................................13
The Threat of New Entrants...........................................................................................................13
Threat of substitute.......................................................................................................................13
Bargaining Power of Customers.....................................................................................................14
Bargaining Power of Suppliers.......................................................................................................14
Competitive rivalry........................................................................................................................15
KEY CHALLENGES FACING THE INDUSTRY..................................................................................................15
STEPS TO MEET ONE KEY CHALLENGE.......................................................................................................17
REFERENCES..........................................................................................................................................18

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 INDUSTRY ANALYSIS

Industry Size & Growth Trends

Global

The global demand for spices has risen steadily in recent years, owing to an increase in the

consumption of snacks, convenience foods, and confectionary items. The global spice market

accounted for US $17.75 billion in 2021 and is estimated to account $ 22.8 billion by 2026. One

of the primary factors driving spice consumption is the growing global demand for authentic

cuisines. The growing popularity of different flavors in foods and snack items will encourage

manufacturers to create high-quality, appealing, and trustable products that can sustain consistent

standards globally. Spices can modify the flavor of specialized cuisines and correspond with

regional varieties. The expanded market for ready-to-eat and processed food products has also

had a positive impact on global spice consumption, thereby augmenting the sales growth of the

global spice market in the forecast period set between 2021 and 2031. The global spices market

is categorized on the basis of product, form, and regions. In terms of product, the market is

classified into cloves, pepper, coriander, ginger, cardamom, cumin, turmeric, cinnamon, and

others. With respect to form, the market is grouped into chopped or crushed, whole, and powder.

Bangladesh Market

Spice industry is one of the biggest fields for the industrial development of Bangladesh. This is

really propagating immensely in the business market growing by around 15% a year. As an

agriculture-based country, Bangladesh is well-known for producing different spices besides other

sectors. Though according to the majority, many Bangladeshi people still use verdant spices

from market or cultivate by themselves and then processed it at home for maintaining the

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freshness of the spice, busy urban people are using branded processed spices to cook. Rural mass

is also consuming these spices. But everyone remains aware of the absolute hygiene of the

product. Every year, the spices market is growing in double digits.

Maturity of the Industry

At one time, turmeric and red chili was ground in mortar and pestle (Sheel Pata) at home. There

came a time when this was done by machine at a mill, in both rural and urban areas. But now,

packaged powdered spice brands, produced by big industrial companies using advanced

technology, are gaining popularity it means local market is getting blur.

Value added Packaged Market are now getting popular. The country’s spice industry is worth

about $ 443-$ 492 million and the market for packaged spice alone is worth approximately $ 128

million. One such powdered spice brand is Radhuni of Square Food and Beverages. The

company started selling packaged spices 20 years ago since 2001. Since then, many large

companies have entered the market, Radhuni of square food and beverages hold 70% of the

market while other brands like BD food powders, Pran, ACI Pure each hold about 10% - 12 %

share in the market. All these companies sell various powdered spices including turmeric, chili,

cumin, coriander, beef, and chicken spices, phuchka-chatpati spices, biryani spices, and Halim

mixes.

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 What is the effect of seasonality, if any?

In Bangladesh during the month of Ramadan, Eid al-Fitr or any other religious festivals or

cultural festivals the demand of spice usually remains high. Majority of household make

different food items that require different type of spice. The demand an also arises right before

Eid-ul-Azha the second largest religious festival in the country.

Key Segments

The key segments for the spice industry can be segmented in the following ways: herbs, salt, salt

substitutes and spices. Since we are focusing on the spices and narrowing it down to powdered

spices, the list of products gets streamlined to a narrow segment. From powdered spices, the

spices can be segmented to ordinary spices that are commonly used in households of all classes,

such as the red chili powder, turmeric powder, coriander, cumin, phanch poron, etc. Other spices

like black pepper, oregano, ginger powder, garlic powder, saffron, etc. fall under the bucket of

premium spices that is mostly used in the middle-class and the rich households.

Geographical segmentation of the ordinary and premium spices in Bangladesh can be segregated

according to the availability and the use of the spices for the cooking purposes. Premium spices

are more readily available in the capital and booming districts like Dhaka, Chittagong, and

Sylhet, etc. These premium products are usually available in the local grocery stores other than

the big supermarkets for these booming places.

Since the development of technologies, the production and distribution of spices have changed

immensely, the packaged spices from big companies like ACI, Pran, Square, etc. have taken the

market by storm. People instead of grinding and having to make their own spices they could just

purchase these packaged one for a reasonable price. The products through distributers are sold in

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bulk to the retailers (local grocery store) then to us consumers. Even though a huge bulk of

packaged spice products could be distributed from the manufacturer to big restaurants, some

restaurants still prefer grinding and making their own spices in bulk for a better quality, cost

effective and hygiene purpose.

The business standard has learnt that Radhuni of square food and beverages hold 70% of the

market while other brands like BD food powders, Pran, ACI Pure each hold about 10% share in

the market. Thus, we can understand Radhuni powdered spices are much preferred by the

consumers, and it is extensively distributed around the country. Since the ordinary spices are

much more readily available in all the grocery stores, a local grocery store in Dhaka gets their

inventories refilled with Packaged powder spices every 2-3 days by the respective distributors.

So, the distributors of the packaged spices sell their packaged spice to the local shops at a lower

rate than the MRP printed in the package. The price difference could be between BDT10-30

depending on the size, type, and quality of the product. If a local store purchases ordinary spices

worth of BDT 5-7k every 2-3 days,

So, the local store buys around BDT 52-55k. And the total amount of packaged ordinary spices

sold by one local store is around BDT 59,000- 70,000 for a month only for ordinary spices

(applicable for local stores in moderately busy market areas). The premium spices restocking

time is much longer than the ordinary ones since they are used by middle class or rich

households. There are also loose powdered spices available that is made by local spice producers

and are distributed to the local stores, they cost almost similar to the packaged spices.

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 COMPETITIVE NATURE OF THE INDUSTRY

Economical Effect

Economic effects on the spice industry can play out in several ways. This can be due to various

factors such as: Inflation, Natural disasters, Political Crisis, Transportation Problem, High labor

cost and many other factors that can affect the industry.

Inflation:

Inflation has made the prices of everything so high that consumers try to buy spices within their

means, which is likely to reduce the sales of premium spices drastically. High prices of

everything results in the overall rise of all costs as well making it harder for the manufacturers

even harder to make a profit.

Political Crisis:

Bangladesh occasionally experiences political crises. It can be observed that not only the price

of spice products increased at that time, but the export of spices abroad also decreased. As a

result, it has a major impact on the national economy.

Natural Disasters:

Our country is prone to natural calamities, various types of natural calamities hit here from time

to time which disrupts spice production and affects the market and industry.

Transportation Issue:

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Due to the increase in the cost of fuel in the transport sector, the cost of supplying spices from

the spice-producing areas of the country is higher than before, which has resulted in a higher

price of spices than before, which is a threat to the industry. The volatility of the fuel prices

makes it difficult for the manufacturers as they cannot suddenly change the price of spices

however keeping the same price is causing them a lower profit margin.

Also, higher wages of workers and higher cost of important fertilizers as well as higher cost of

agricultural implements are affecting the economy of the industry.

Technological Factors:

The main difficulties encountered in the field of spice production are environmental changes

including drought/high humidity, increase and prevalence of pests and diseases, invasion, and

competition from other major spice suppliers. In the face of these challenges, we must create

forward-thinking, smart, and farmer-friendly frontline developments.

Improved soil-less technique

The major illnesses in ginger are delicate decay brought about by bacterial shrivel. These

microorganisms are both seed and soil borne. Infection by these microorganisms can be

decreased by in any event half using disease-free planting materials. A transplanting procedure in

ginger by using single bud sprouts has been regulated to deliver great quality planting material

with the reduced cost the advantages of this innovation are the formation of sound planting

materials and a decrease in seed rhizome amount and in the end reduced expense on seeds.

Helping farmers use available phone apps and smart agriculture for better yields

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These days, many farmers worldwide are already using digital technologies with the help of

smartphones, sensors, drones, and satellites. These technologies provide a range of solutions for

producers of spices and herbs, such as remote measurement of soil conditions, better water

management, forecasts of pest and disease emergence and crop monitoring. The most important

fields of farming digitalization include precision farming, decision support tools and robotics.

Mobile banking

Mobile banking is a very important digital tool that is frequently used in our country. It is an

excellent low-investment tool that replaces risky cash payments and can be used by anyone who

has a mobile phone. Smartphone applications have in general increased the market transparency

and enable even small farmers to follow the fluctuating spice market prices daily.

Increase yield using robotics solutions for spice production

The robotics solutions currently used in agriculture include robot picking, harvesting and

weeding machines, precise pesticide applicators and drones. Drones are used on large farms to

help farmers closely monitor crop and soil conditions. Useful for watering and planting planning.

Regulatory, Political, and Legal Concerns

Quality Product

In the case of spice marketing, the first thing to keep in mind is the quality of the product. If the

quality of that product is right, then it can survive in the market with others otherwise it will not

be possible to survive in the market. To maintain the quality of the product, it is necessary to

collect good quality raw materials, not only that, but also must keep an eye on the raw materials

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until they are manufactured. To maintain the quality of the product, it is necessary to collect

good quality raw materials, not only that, but also must keep an eye on the raw materials until

they are manufactured.

Permission from the authority

If the quality of the spice is good, it is possible to export the spice within the country and outside

the country with approval from the Bangladesh Food Safety Authority. It is mandatory to take

their permission to sell spices in the Market.

It should be laboratory tasted

To check whether the quality of the spice is correct, it must be checked by BSTI and ISO to

ensure that it is legally punishable to export spices without the approval of BSTI and ISO. It is

not possible to sell the product in the market without their permission

Perfect Pricing of the product:

It is difficult to provide a good product at a low price, but if you can do it, you will get an

advantage in the market. Bangladesh spice market is very big Bangladeshi people consume a lot

of spices. As this is a good thing for this industry, keeping in mind the demand, many big and

small companies are working in this industry. Therefore, to survive in the market of this country,

it is very important to set the right price to survive in this industry. If you can't set the right price,

there is a possibility of losing your place in the market. So, there is no option to set the right

price to retain space.

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 Porter’s Five Forces

The Threat of New Entrants

According to Porter, the threat of new entrants puts a cap on the profitability of an industry. The

enter the industry, there are many barriers such as the economies of scale and capital

requirement. A starting firm would require extensive knowledge in order to design and

manufacture a product. There are bigger competitors holding a very large market share which

clearly makes it difficult for the new players to enter the industry. For the spice industry, having

to find supplier is a hard task. Growing crops require land and recourses, the big market capturer

already have been using those, so for a new company to enter and make production rapidly this is

the first limitation that they have to face. Finding a proper and affordable supply chain is going

to be the hardest task for the new entrant as all the current players are already using it most

efficiently. The new entrant cannot charge higher prices for the same spice as spices does not

have any distinctive variation, the only way they can succeed is by having lower costs, however,

with the market already using the most efficient supply chain having to cut down the costs more

is going to be very challenging. Followed by the companies who have been in the industry for

decades, people are less likely to shift when a new company comes in. Powdered spices are an

integral part of every household, thus no extra commercial is needed to sell the product itself,

however, branding is required to grab customer’s attention.

Threat of substitute

Threat of substitute for spice industry is almost negligible as there is no other product ever that

can be used as a substitute for spices irrespective of the cuisine. However, the method by which

consumers are consuming the spices keeps on shifting; not that the customer will switch brands

to brands or non-brands, customers can also shift to grinding their own spices or using paste like

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the ancestors. Although the shifts from powder to paste will be very low. If the brands have

failed to provide certain quality or failed customer satisfaction in any way, the customers will

soon shift to the local powders sold in the markets, or simply buy the raw materials and have

them grinded by the store. Since there are required in large even in households, customers will

find it more preferable to shift. For instance, restaurants require large amount of spices so they

prefer having to buy the raw materials and later grind them as per the needs. This also reduces

the risk of expiry dates of the packaged spices and the degradation of the quality of lose powders.

Powdered spices are required in almost all sorts of food so they will not risk with health factor

and have poor quality spices for children and elderly particularly.

Bargaining Power of Customers

This is powdered spice industry, bargaining power of customers are high, as there are options for

customers to make a switch and all the products are easily available, making it easier for them to

switch with any extra cost to bear. Customers have several options such as switching to growing

companies rather than brands if they increase price. Another option is purchase of raw materials

and grinding them at stores. Most hotels and restaurants prefer having to buy the raw materials

and using them after grinding as per the need. As using them after prolonged period alters the

taste and ends up with a bad quality of food. Quality assurance is a biggest challenge for service

industry hence they will not compromise and always opt for better quality.

Bargaining Power of Suppliers

Supply chain value chain is very important in powdered spice industry as it is directly related to

the services provided and taste. Holding the raw materials or storing the spices for too long

degrades the quality of the product. Since raw materials are perishable, holding them for too long

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for their own good could also be expensive as it increases the cost of inventory management.

Suppliers who supply to the large corporations produce mass amount of raw materials, there is a

huge inventory cost that they have to bear. Holding the spices as raw materials or grinded, both

these methods tend to reduce the quality as time goes by, hence the bargaining power of the

suppliers are limited.

Competitive rivalry

Companies producing packaged spices does have a huge competitive rivalry as for the customers

the switching cost is lower, on the other hand, there is not much of innovation that can be in the

regular product; thus, it is imperative for the companies to make constant marketing of the

product and bring a value chain of high customer satisfaction. Recently Bashundhara Group is

setting foot in this industry by the end of this year. Bashundhara Group, being a huge

conglomerate itself is taking very calculative steps to make sure they can make progress in the

current market with the existing companies. Efficient an d effective marketing strategies and

quality assurance is the only constant that will keep the companies in the top position.

KEY CHALLENGES FACING THE INDUSTRY

Logistics and Quality Management

Many of the places in developing nations that are important centers for the production of spices

have been severely impacted by post-Covid effects and a lack of power supply, leading to a

shortage of raw materials for the spice business. Insufficient high yielding varieties and a lack of

available land resources are used in the production of spices. One of the major challenges facing

the spice industry that contributes to low intensity in the international business sectors is low

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profitability in the spice sector. Another problem that interferes with the produce's recognition of

reasonable value is poor product quality at the ranch level. Other causes of low quality include a

lack of cleaning facilities, logical handling procedures, stockpiling, and pressing.

Lack of knowledge

Lacks of ongoing knowledge on the planted area, particularly about annual harvests Farmers are

unaware of the benefits of high yielding varieties. They have to establish uniform testing and

research methods to combat the main pests and diseases that affect spice crops. To promote

international trade and export, it is necessary to unify manufacturing norms and plant-sanitary

requirements. Inappropriate pesticide use, the use of illicit substances, a lack of safety equipment

will pose risks to human well-being, as well as incorrect exchange of engineered materials, and

water contamination

Research and implementation

Business planning and development for small farmers and small holder production systems

require more attention. Although the growth rate was insufficient to fulfill the domestic demand,

there had been a substantial increase in the area, production, and productivity of the main spices

in Bangladesh. Due to expanding countryside, the production of onions and garlic grew more

rapidly than the other crops due to the use of contemporary inputs like fertilizer, irrigation, water,

etc. As well as the acceptance of contemporary spice types, the productivity of all spices has

recently grown. But in terms of area, production, and productivity over time, the majority of the

spices were found to be very unstable. It's crucial to pinpoint the factors that influence growth

and volatility in the agriculture sector in Bangladesh's example of spices. To increase

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productivity and decrease instability in spice crop production, research and policy support are

required. As a result, Bangladesh has to allocate enough money to research and improve spices.

Advanced Technology

Another challenge local spice industries are facing is keeping up with advanced technology in

making spices. To insure quality product spice industries are investing in building latest

machineries and technology despite limitations. In these modern times, powdered spices are

making life easier. At one time, turmeric and red chili was ground in mortar and pestle (Sheel

Pata) at home. There came a time when this was done by machine at a mill, in both rural and

urban areas. But today, packaging brands of powdered spices manufactured by large companies

using advanced technology are becoming more and more popular. One such powdered spice

brand is Radhuni of Square Food and Beverages.

Workforce Challenges

Spice industries are not paying enough to farmers who are involved with direct raw materials.

The pay scale is very low and there is always a chance of farmers revolting and stop working.

Already farmers are shifting to other jobs or coming to cities to look for jobs. Its high time spice

industries raise their pay scale in order to secure the industry and survive in the long run.

STEPS TO MEET ONE KEY CHALLENGE

The Export Promotion Bureau (EPB) reports that processed spices worth $43.29 million were

exported in fiscal year 2020–21, setting a record for the export of powdered spices. Around

$13.6 million worth of spices were shipped in the 2011–12 fiscal year. The export revenue from

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processed spices has more than tripled in just ten years. It is obvious that processed spices are in

high demand around the world, and Bangladesh has established markets in a number of nations.

Unarguably Bangladesh should work on quality control of spices as there is lot of demand in

international markets. As it is previously mentioned earlier that to promote international trade

and export, it is necessary to unify manufacturing norms and plant-sanitary requirements. It is

very important to focus on these issues because it’s linked with human consumption. Product

defect or any health hazard issues will greatly impact spice industry.

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 June, S.A. and Ali, S. (2021) Bashundhara Group Setting Foot in Spice
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https://www.tbsnews.net/economy/bashundhara-group-setting-foot-spice-
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November 20, 2022, from https://ibtbd.net/spicy-concoctions/

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 Sattar, S., Das, P. C., Hossain, M. S., Sarower, K., & Uddin, M. B. (2019,
November 8). Study on consumer perception towards quality of spices
powder available in Bangladesh. Open Journal of Safety Science and
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 Sauces & spices - bangladesh: Statista market forecast. Statista. (n.d.).

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