International Marketing

Marketing of Spices in
International Market

(With respect to PRICING)

1
 INDEX
Sr. No. Topic Pg. No.

1. Price 3
Justification of
spices at local
markets

2. Global 7
Scenario of
spices
3.
Factors in
international
Marketing of
Spices Causing 10
3.1 Effects on
Pricing
- Pricing
strategy 10
adopted
3.2 by
exporters
11
- Assistanc
e by
3.3 governme 12
nt
3.4
14
- Competiti
on

- Demand
and
Supply

2
4 Bibliography 15

5. Group 15
Members

Introduction
“Spice Marketing in international markets with respect to pricing “ is studied
with example of Turmeric and Chilly , which are the most income fetching
spices for India.

The project starts with a briefing of price at local level and the factors with
contribute to the COST of SPICE at farm gate .

We then explore the global scenario and acceptability to Indian Spices , after
which the factors are shown which actually affect PRICING in international
markets

A role play is then shown , which focuses on Spice Board and its Aid to
Exporters

Domestic scenario
The domestic scenario is of:
1. Turmeric
2. Chillies

Turmeric:
Turmeric is grown as a Kharif crop in India. The crop-harvesting season starts
between
end of January and March in India. The country is the leading producer,
consumer and
exporter of turmeric in the world. It has near monopoly in this commodity.
Indian
turmeric has been known to the world since from ancient times. India
accounts for 78%
in world production and 60% in world export share. Major turmeric growing
states are
Andhra Pradesh (57%), Tamil Nadu (23%), Karnataka (6%) and Orissa (4%).
Indian
turmeric is considered as the best in the world because of its high curcumin
content.

3
FACTORS INFLUENCING TURMERIC PRICES

• Domestic and export demand

• Carryover stocks of previous year with trade; and stock with farmers

• Warehouses Acreage under turmeric

• Progress of monsoon and weather conditions

• Cost of cultivation as turmeric cultivation is highly labor intensive job

CROP SEASONALITY

Turmeric is a 8-9 months crop. The main harvest season begins from end of
January and extends up to March. Turmeric is harvested when leaves turn
yellow and start drying up.
In harvesting, the whole clump is lifted out with the dry plant, then the
leafy tops are cut off, the roots are removed, all the adhering mud particles
are shaken or rubbed off and the rhizomes are then washed well with water.
The fingers, sometimes called the daughter rhizomes, are separated from
the mother rhizomes and kept in shade for 2-3 days.

C ROP CALENDAR

Planting is done either on raised beds or on ridges during June. The crop-
harvesting
season starts between end of January and March in India. It will start entering
into the
market by March. The peak arrivals season will be between March and April.

Table: Turmeric crop calendar

Jan Fe Ma Ap Ma Jun Jul Au Se Oc No De

b r r y e y g pt t v c
Turme
ric
Harvesting Period
Sowing Period
Peak Arrivals

4
Source: Spices Board of India
Area under turmeric cultivation is about 1.3 lakh ha annually. The yield will
be around
3000-4000 kgs per hectare. The production is estimated to be about 4 lakh
tons per
annum. From 2006-07 onwards, turmeric output started declining as farmers
have shifted
to other remunerative crop like cotton and sugar cane.

FACTORS RESPONSIBLE FOR SIGNIFICANT DECLINE IN OUTPUT: UNFAVORABLE CLIMATE conditions,

crop maintainace, use of hybrid varieties, prices factors, and crop rotation

STATE-WISE AREA UNDER TURMERIC (IN HA)

Note: Turmeric output an average stood at 4 lakh tons in India.

Andhra Pradesh continued to hold majority of area under turmeric with a
share of about
34%. Meanwhile, area under turmeric in the state of Orissa is also significant
although
level of yield is anticipated to be lower in the state.
Tami Nadu enjoys higher yield of turmeric compared with most of other
states. Although, the state has witnessed sharp decline in total production
due to shifting of area towards

5
other crops such as sugarcane on account of poor price realization. Both
Andhra Pradesh and Tamil Nadu constitute major share in India’s total
production.
Major turmeric growing districts are: Karimnagar, Nizamabad, Guntur and
Kadapa in
Andhra Pradesh, Erode, Coimbatore, Dharmapuri and Salam in Tamil Nadu;
Belgum and Chamrajnagar in Karnataka; Allepey in Kerala, Sangli and
Nanded in Maharastra.

MAJOR TURMERIC GROWING DISTRICTS ACROSS STATES :

• Andhra Pradesh: Karimnagar (21.9%), Nizamabad (18.6%), Guntur –

Duggirala (8%), and Kadapa (5%)
• Tamil Nadu: Erode, Coimbatore, Dharmapuri and Salem
• Karnataka: Belgaum and Chamrajnagar
• Kerala: Allepey
• Orissa: Phulbani
• Maharastra: Sangli and Nanded

PRICES SEASONALITY:

Department of Agriculture, AP:

Turmeric prices will be hovering lower between January and June. This could
be mainly attributed to supply pressure due to new crop arrivals. New crops
arrivals of turmeric gradually increase from January onwards and peaks in
the month of March. From June onwards prices will start moving up as the
market approaches lean season. Prices peak during October and December
month of every year.

Chillies:
Currently, chillies are used throughout the world as a spice and also in the
making of beverages and medicines. If some varieties of chillies are famous
for red colour because of the pigment ‘capsanthin,’ others are known for
biting pungency attributed to ‘capsian.’ India is the only country which is rich
in many varieties with different quality factors.

CULTIVATION PATTERN:

6
 • Chillies are herbaceous annuals grown in tropical and sub tropical
climates.chillies are grown throughout the year in India.
• The crop is sown from July onwards and the sowing season extends till
September.
• Chillies need well drained soils and are mostly cultivated as a
transplanted crop.
• Crop duration is 150 to 180 days depending on the variety season ,
climate, fertility and water management.
• Crop can be grown in the regions with rainfall between600-1250mm.
• Arrival start from January and extend till May. The peak arrival period
is from February till April.

STATE WISE CONTRIBUTION OF CHILLI

CHILLIES ARE CULTIVATED MAINLY IN THE STATES OF ANDHRA PRADESH, ORISSA,

MAHARASHTRA, WEST BENGAL, KARNATAKA , RAJASTHAN AND TAMILNADU. ANDHRA

State
PRADESH IS THE FOREMOST ACCOUNTING FOR 50% OF THE PRODUCTION IN THE
COUNTRY .

INDIA ’S CHILLI PRODUCTION STOOD AT AROUND 12LAKH TONES WHILE THE GLOBAL OUTPUT

WAS 27.7LAKH TONNES.

FACTORS INFLUENCING PRICE OF CHILLIES:

The dynamics:

• Consumption & Convenience – on the rise

• Value addition driving growth
• Branded Powder sales growing @ CAGR 11%
• Spice Mixes growing @ CAGR 7%

18% 7
 • Increasing share in Indian spice exports – from about 8% to 15% in the
last 4 years
• The rise of e-commerce
• Alternate price discovery mechanisms – NCDEX…….
• Volatility to persist – “THE INFORMATION BULL-WHIP”
• Farm Cost of cultivation
• Labour and farm costs accelerating
• 25% increase in overall costs ; 50% increase in labour related
costs in the last 3 years
• Cost – benefit ratios declining – land lease and crop inputs escalating
rapidly
• Farmer interest to sustain only if remunerative prices prevail
(vis-à-vis competing crops)

Global scenario of turmeric

India is considered as the largest producer, consumer and exporter of

turmeric in the globe. Other major producers are China, Myanmar, Nigeria,
Bangladesh, Pakistan, Srilanka, Taiwan, Burma and Indonesia,etc., Global
production is estimated around 11 -11.5 lakh tonnes. India contributes about
78per cent of the world production and 60per cent to the total trade.

8
From the above graph, it is seen that major share is taken by India. It
accounts to 78per cent of the total world production, followed by China (8
per cent), Myanmar (4per cent) and Nigeria and Bangladesh together
accounting to 6per cent.

United Arab Emirates (UAE) is the major importer of turmeric from India
accounting for 18per cent of the total exports followed by United States of
America (USA) with 8per cent. The other leading importers are Bangladesh,
Japan, Srilanka, UK, Malaysia, South Africa, Netherland and Saudi Arabia. All

these countries together account for 75per cent of the world trade, and Asian
countries supplies to the entire world. Remaining 25per cent is met by
Europe and North America, Central and Latin American countries. United
States imports 97per cent of its turmeric requirement from India and
remaining portion from the Islands of the Pacific and Thailand.

9
India exports about 10% of its turmeric per annum. The key export
destination for Indian

turmeric are UAE - 17%, USA - 10%, Bangladesh - 9%, Sri Lanka - 7%, Japan -
7%,

Malaysia - 6% and UK - 6%. All these countries together account for 65 % of

the India’s

exports. Remaining 25% is being shipped to Europe, North America, Central

and Latin

American Countries.

Global Scenario Of Chillies

• India is the world’s largest producer, consumer & exporter of chillies in
the world.

• Apart from India, South Africa (South Africa, Malawi and Zimbabwe),
China, Pakistan and Mexico are other major producing and exporting
countries. These are mostly low or medium pungency varieties like Indian
S4 chillies, Tiensin Chinese chillies or Pakistan Dandicut chillies. Malawi,
Zimbabwe and Uganda export limited quantities of the highly pungent
"East African Birdseye type, and China exports some high pungency types
(Fukien). India faces competition mainly from China and Pakistan who offer
chillies at low prices in international markets.Imports as whole chillies have
fallen in the world market as exports of chilli powder and oleoresin have
grown. There are a number of factories in India, Pakistan and China set up

10
 in collaboration with multinational spice companies, which are now able to
produce chilli powder to meet EC and ASTA hygiene standards. Among the
European Union countries, UK is by far the most important importer of
chillies, reflecting its colonial heritage and large ethinic community, with
the Netherlands the second largest importer. The world demand is
expected to go up, consequently there expected to be a great scope for
export of chillies. Demand is growing for value added products using
chillies such as chilli paste, curry powders and other sauces for the
convenience food industry. Some of these are produced at origin but
stringent hygiene and quality control level must be maintained. In the
extraction industry, there is always demand for high capsaicin content
(over1%) chillies, as this offers extractors a direct saving on unit costs of
extraction. The best opportunities for new suppliers lie in production of
selected varieties of high capcaisin chillies for the extraction market, and
in supplying niche retail markets for selected high colour high pungency
whole chillies.
• Global Output of Chilli is estimated to be around 40 lakh tonnes per
year. Lion’s
Share is taken by India with the production of 11.5 lakh tonnes that
accounts to
26 % in global production, followed by China, Pakistan, Mexico, Morroco &
Turkey. India has immense potential to export different types of chillies
required by various markets around the world. India is the leader in terms
of exports in the world trade followed by China with 25 and 24 percent
share in total global exports, respectively & it is a serious competitor in the
International Market for India.

FACTORS CAUSING EFFECTS ON PRICING

PRICING STRATEGY ADOPTED BY EXPORTERS

CASE STUDY : TURMERIC

Manufacturing Cost : Turmeric

At farm gate : Rs. 75 per KG

Selling Price ( U.S ) :3,500 Rs.

8% total imports

11
Manufacturing Cost : chilly

At farm gate : Rs. 50 per KG

Selling Price ( U.S ) : 1,234 Rs approx

8% total imports

As can be seen from above facts , the price at local manufacturers , to price
in international markets . The high margins kept are due to , spices not being
produced sufficiently in US markets .

Also , Indian spices are of the best quality . Hence a huge margin can be
maintained after costs . This is probably one of the reasons INDIA has been
the spice exporter since ages

MARKETING ASSISTANCE

(1)Sending Business Samples Abroad:

For finalizing the transactions on the basis of samples and to provide more
clarity in dealings and also to eliminate the possibility for trade disputes on
quality aspects, the Board is providing assistance for sending business
samples of spices and spice products abroad. Under this component, the
Board supports the exporters by reimbursing the cost of courier charges.

(2) Printing Promotional Literatures/Brochures:

Printing of promotional literatures/brochures, video films/CDs, other

electronic modes to project competence and capabilities of the products and
service offered to the prospective buyers abroad is supported by the Board.
Under this component, the Board offers financial assistance to qualified
exporters of spices/spice products to bring out good promotional literatures/
brochures/video films/CDs and other electronic modes.

12
(3) Packaging Development and Bar Coding for promoting spices
and spice products:

For improving the existing packaging and develop modern packaging for
increased shelf life, reduce storage space, establishing traceability and
better presentation of Indian spices in markets abroad, financial assistance is
provided by the Board. Cost of Bar Coding registration for all types of
packing and traceability systems are also proposed for financial assistance
under this component.

(4) Product and Packaging Development and Bar Coding:

Effective brand promotion programmes for identified products and its

packing, which involves high cost of development, are supported. Under this
activity the assistance will be given for developing appropriate product,
packaging and compliance with other statutory requirements in force in the
target market including traceability details and Bar Coding. Similarly the
Board provides assistance to exporters to develop products to promote
different values/applications of spices. Board will also provide assistance to
the exporters to buy out existing foreign brand to capture that market and
expand the range of Indian products through this brand.

(5) Brand Promotion:

Under this component, positioning of specified brands in the identified

outlets in selected cities as well as necessary promotional measures for
brand building such as Media promotion, Promotional trips abroad
participation in international fairs etc., are considered for financial
assistance. The Board will undertake the required market studies and
marketing strategy development for promoting branded products and it will
be disseminated to the exporters for market penetration.

13
 Competition
Major Chilli exporters:-

Though Indian exports are showing satisfactory trends, nowadays India is

facing a very tough competition in the international export market as price of
the Indian chilli powder is considered too high and other competing countries
are providing chilli at very competitive rates to the major importing
countries. The exports can be further improved, provided India is able to
meet the strict quality demands of the international market. The total export
of chillies from India is on an average only 4% of total production. This is
mainly because of the high domestic consumption.
Steps have to be taken by the government to encourage exporters in order
to maintain India’s dominance in the world market.

As the leading producer of chilli crop in the world, India is also the largest
exporter of chilli in the world. It contributes one-fourth of the total quantity of
chilli exported in the world. But China is not far behind and it has been
posing a severe competition to the Indian exporters due to India’s variable
supply and high domestic consumption.
The major chilli exporters along with their percentage share in the world’s
total exports are India (25 per cent), China (24 per cent), Spain (17 per cent),
Mexico (8 per cent), Pakistan (7.2 per cent), Morocco (7 per cent) and Turkey
(4.5 per cent)

China has successfully penetrated the large Malaysian Market, mainly at the
expense of Indonesia. The United States of America has also been
purchasing larger quantities of chillies from China. Japan is producing special
type of chillies like Bird's Eye, Santaka and Hontaka types of chillies. These
chillies have a market, but export from Japan is decreasing mainly on accout
of local demand, which has not been matched by local production. Japan is
increasingly becoming importer of chillies and capsicum. Another significant
producer and exporter of the Bird's eye chillies is Papua New Guinea,
although it is not one of the important sources of capsicum products.
Ugandan chillies, known as "Mombasa", exported through the port of
Mombasam, are the most pungent of all and well established in the
international trade for their pungency.

14
Major Turmeric Exporters:-

India is the largest producer, consumer and exporter of turmeric. Other

major producers are China, Myanmar, Nigeria, Bangladesh, Pakistan,
Srilanka, Taiwan, Burma and Indonesia, etc., Global production is around 8-9
lakh tonnes. Indian turmeric industry size is accounting nearly 3000 crores,
where as India contributes about 78 per cent of the world production and
60per cent of the exports of turmeric. Asian countries consume much of their
own turmeric production nearly 90 per cent. The increasing demand for
natural products as food additives makes turmeric
an ideal produce as a food colorant.. The major turmeric producing countries
constitutes: -

• India - largest exporter (approximately 90%) of Turmeric

• Thailand and other Southeast Asian countries
• Taiwan
• Various Pacific islands
• Central and Latin American countries

Demand and supply

Demand for turmeric from overseas and domestic markets this year
outweighing its supply has pushed up the prices. Good domestic and export
demand, on the one hand, and less production coupled with lower carry-over
stock, on the other, have led to a disequilibrium between demand and
supply.

The cyclic price behaviour might be the causal agent for changes in area
under turmeric ie., when the price are slump in current year, area under
turmeric will be less in succeeding year. This supply side reduction causes
prices in up ward direction and next year more area under turmeric leads to
downward pressure on price.
Erode Regulated Market is the only Regulated Market functioning throughout
the year whereas the turmeric markets in Andhra Pradesh, Maharashtra and
in other States of India are seasonal in nature.

Chilli exports has been increasing consistently in both volume and value
during the past two years due to lower production in China. During the

15
period a total quantity of 200,000 tonne of chilli valued at R1255.52 crore
have been exported as against 1,63,750 tonne valued R1056.67 crore of last
year, registering an increase of 22% in quantity and 19% in value.

Farmers shifting from turmeric cultivation to soybean and chilli as last

season’s higher prices for these commodities attracted the attention of the
farming community. This has resulted into decline in acreage to the extent of
25-30%.

BIBLIOGRAPHY

1. Spice Board ( Promotional Council )

2. www.indianspices.com

3. Official Website of NABARD

4. News articles from Business Times

5. Information from kith and kin abroad

Group Members
R. No . Names

283069 Bhavna Dave

16
283070 Poorva Dekate

283086 Pooja Tiwari

283091 Bhavana Maru

283096 Sonal Parab

283102 Pawan Punjabi

283106 Nishmitha Salian

283114 Mamta Shroff

17