Marketing Concepts MKT 501

Team Project - Oleoresin of Spices

Raju Bandugula Jessie Li Fulia

Section - 1

1. Situation Analysis:
Trading of spices dates back to very ancient days in the history and the demand is growing every year in the domestic as well as in the international market. The dominance of India in this segment is clearly evident from the history that Columbus in search of India for trading spices ended up in discovering America and Vasco-da-Gama successfully found a sea route to India, it is interesting to know that India still holds its prominence even today in exporting spices. India's exports during April-June 2013 alone was $484.11 Million of that traded internationally 1. The geographical and climatic conditions of South India in particular are very favorable for cultivation of spices. Spices are used as flavoring, coloring and preserving agents for food and beverages. Spices are commonly used after processing and drying but, another way of utilizing these spices is by extracting essential oils as standardized products either by solvent extraction or distillation process. 1.1 Company Mission The company aims setup a production plant in India to produce and sell Oleoresin of Spices that are of international standards and majorly consumed in United States, domestically in India primarily and later enter into neighboring countries like China, Singapore & Malaysia. 1.2 Market Analysis The trade of spices internationally is not only viewed as agricultural exports but is also a major source of foreign exchange for a Nation to balance the trade and maintain exchange parity with the other world economies. India being one of the fast developing Nation requires more

. Spice Board of India, Ministry of Commerce & Industry Govt. Of India

exports than imports. So it is always advisable to export value added goods rather than exporting raw materials to increase dollar revenues. Of the total global exports in spice market India's share accounts to 45% in volume and 23% in value 2. It is interesting to know that many countries import spices from India, of them United States is the largest importer 2 and the consumption is in uptrend for the past decade 3 the growth is anticipated over 5% year in the import of spices 2. European Union is the second largest importer and is anticipated to grow at 4% annually with Germany being largest single market. EU contributes to 40% of imports globally 4. Appendix A illustrates the export statistics of spices from India to different countries in the last 5 years. Extraction of essential oils and oleoresins of spices began in early 1970 but did not takeoff at a fast pace until the last decade. It is only for the past few years the production and consumption of Oleoresin of spices has kicked-off and is still in budding stage. The consumption of Oleoresin of spices is more in the international market than the Indian domestic market. Oleoresins are concentrated essential oils that are extracted from raw spices which are superior in quality and easy to use than whole spices. The demand for these essential oils is increasing in the global market which can be attributed to increased use in food industry for maintaining a uniform taste/flavor. Our strategy is based on the diverse population of United States which creates a demand for variety of spices. Oleoresins have a wide range of consumer & industrial applications viz. confectioneries, restaurants, Pharmaceutical industries, soap, perfumes, etc. Of the total spices consumed in the United States 40% are produced domestically and the rest of the demand is met by importing majorly from countries like India, China, Canada, Indonesia and Mexico 3.

. A joint report on Spice Industry by UNIDO & FAO USA . Agriculture information Bulletin No. 709 US Department of Agriculture 4 . Spices Industry USAID
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1.2 Competitive Analysis: Though the Oleoresin of Spice industry is presently being dominated by few big players it is still in nascent stage so there is less fierce competition in the market which gives an advantage to new entrants into this business. 1.3 SWOT Analysis: Strengths: Local availability of raw materials at much lower costs and all around the year, manpower, availability of sea ports near by the production plant for the ease of exports, dollar revenues, strong encouragement by State and Federal Govt. to new Entrepreneurs and Export Oriented Units. Weakness: New to US Market, No pre-established supply chain/distribution network, No R & D Opportunities: Immature/budding market, Global opportunities, uptrend in international and domestic consumption, large consumer base, customers migrating from synthetic additives to natural Oleoresins. Threats: Big players entering into market, domestic competition, too many players entering into the market. 1.4 Marketing Strategy: The company classifies its target customers into two segments 1. Business Customers 2. Retail Customers

Sales to business customers will be done by direct marketing while sales to retail customers will be done indirectly through distribution channels.

Appendix A