A promising entrant in the Rs 1 lakh crore Indian spice market is seeking to strike the iron while it's hot, as recent concerns around suspected contamination in India's leading spice players spike and the growing trend of ordering online.
Founded by brothers Akash and Ashish Agrawal in 2018, Raipur-based direct-to-consumer brand Zoff Foods has been able to scale their spices business to a Rs 100 crore topline, primarily via e-commerce and quick-commerce platforms.
"People's views have certainly changed towards those spices because two major brands were alleged to have been adulterated. People don't know the extent of adulteration, but they have started searching for newer brands. As a result, our new customers have increased," Akash told NDTV Profit in an exclusive conversation, referring to suspected contamination in MDH and Everest spices.
Agrawal added that as a result of these concerns against spice powders, the whole spice market is also growing.
"The purity and trust that come with whole spices versus powdered spices have come to the fore. The immediate benefit, however, has gone to their smaller, direct competitors. But searches for 'new-age' spice brands have skyrocketed. For the last 2-3 months, every month we're witnessing a 20-30% uptick month-on-month. We're on track to do our highest ever monthly figure on e-commerce this month as well," he said.
Zoff Foods, which Agrawal describes as an abbreviation for 'Zone of Fresh Foods', is in the business of selling packaged whole spices, powdered spices and dry fruits. It has quickly grown to roughly Rs 100 crore in revenue for FY24, with Ebitda-level profitability, with a large chunk of growth coming in the last two years, thanks to folks ordering online, be it Amazon and Flipkart or Zepto and Blinkit.
"For FY25, we're targeting a Rs 125-130 crore topline, which is about 25% growth. We'll beat the spice market growth, which is at 11% CAGR," he said.
About 65% of Zoff's revenues come from e-commerce platforms, while about 35% come from general trade or offline channels. Quick-commerce, part of the e-commerce pie, is at about 20% alone. "Amazon, Flipkart, our own website, BigBasket, and Cred are heavier for us than q-commerce," Agrawal said.
Armed with its first institutional fundraise, with Rs 40 crore from JM Financial, Zoff Foods now wants to set processes internally. Prior to that, it had only raised seed-level money from Aman Gupta on Shark Tank India and Chhattisgarh Investments Ltd.
"Investors saw a quick-commerce revolution coming in, and we have the potential to be the first large q-commerce-driven spice player. JM Financial has seen the short time span in which we've reached Rs 100 crore," Agrawal said.
He adds that JM now wants to see Zoff work like a corporate in the coming years. "In the next two years, all our compliance systems and processes will be in place. After this funding, we might not have to raise for another two years. Any funds we’ll raise next will be only for marketing. Any major marketing expenses will come only in Series B rounds."
The company currently owns one manufacturing facility in Raipur, which has the capacity to churn out revenues worth Rs 300 crore. "It’s only about half-utilised currently. We own our facility, which means we have full control over our quality. We were clear that we wouldn’t be outsourcing this part," he said.
According to Agrawal, two technologies set it apart from competition. "We use cool grind technology for spices, a technology that is typically used in the pharma industry, to lock in the aroma. Further, we've introduced ziplock packaging in this segment, which makes it attractive."
Despite having gained its growth surge from e-commerce, Agrawal believes that e-commerce growth will taper off at some point.
"A few limitations can be intensified competition, reduced visibility on e-commerce platforms and limited target market size via these apps. With general trade, you can work with 1,000 distributors and you have the entire country to target. Suppose the spices market reaches Rs 1.5 lakh crore by 2030; about Rs 90,000 crore of that would be coming from general trade and the rest from e-commerce. So the major chunk is offline," he said.
By 2030, Agrawal aims to expand beyond spices, diving into seasonings and a snacking range with makhanas, papad, and even pickles. Within the next two months, Zoff will also enter the ready-to-cook segment with 5-minute gravies.
On the possibility of going public, Agrawal said reaching a topline scale of Rs 1,000 crore and managing Ebitda at 15% would give him comfort during listing. "I see us listing by 2028-2030. By 2030, we'll be a solid brand and have a solid general trade presence as well," he said.
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