When online meat and seafood retailer Licious said last week that it was entering the spices market, it came both a surprise and somewhat of a foregone conclusion. Surprise because it was entering a highly competitive space that could at best be described as an unjunct category; a foregone conclusion because Licious has been in the market for about seven years now and moving out of the comfort zone was the next best thing. “We observed a gap in the present spice segment, with most offerings in the category not being specialised for meat preparations,” says Yash Bhatia, business head, Licious.
Licious’ range includes eight variants for chicken, meat, fish as well as garam masala, packed in single-use sachets, starting at Rs 49. It is looking to grow the category to more than Rs 300 crore over the next five years.
“Direct-to-consumer platforms, with their established loyal consumer base, are exploring adjacencies to their core categories in a bid to provide a larger set of offerings to consumers, and in the process amortizing the high costs of customer acquisition and hyperlocal delivery,” says Angshuman Bhattacharya, partner and national leader, consumer products and retail, EY India. Spices is a great category to add to the portfolio as it is a regular purchase item, and has the potential to increase the propensity for repeat business, leading to a higher LTV (lifetime value) to CAC (customer acquisition cost) ratio, he adds. Also, the category promises strong gross margins upward of 30% for blends that have a longer shelf life.
It’s not going to be a cakewalk for Licious. The branded segment has become quite competitive in recent years. Emami Agrotech made its way into the spices category this year with the launch of Emami Healthy and Tasty Mantra Masala, while Dabur announced the acquisition of the spices brand Badshah Masala for Rs 587 crore. In 2020, ITC acquired spice maker Sunrise Foods.
Overall, the Indian spices market is estimated at Rs 24,000 crore and the share of the branded segment (in value) is 70%. Within this, pure spices contribute Rs 10,000 crore, followed by Indian blends at Rs 12,000 crore, and western seasonings at Rs 2,000 crore. The category growth has been strong at 12% CAGR for branded spices, as against 6% for unbranded, and that growth has been driven by smaller packs, blend penetration, product innovation, and demand for convenient blends.
Bhattacharya of EY says that meat masala is a high-selling SKU (stock-keeping unit) amongst blended spices and a good adjacency with meat products.
That said, the challenge that spice brands face relate to changing consumer habits and living up to the regional preferences. Experts note that supply chain and procurement complexities are also important factors that drive margin in the category, and the new entrants would need to build the right organisational capabilities.
Licious currently serves 28 cities through its online channels. As part of its omnichannel strategy, it will look at expanding its offline presence and establishing a strong foothold in modern and general trade channels. At present, the spice mix range is available in eight cities, on its app, website, and on grocery delivery apps.