Profits... in a nutshell March 2018 issue

Profits... in a nutshell

This generation of Indians have more spending power than any of the others that came before and they have a taste for dry fruits, specially cashew nuts. With the increase in demand of cashews and domestic production unable to keep up with demand, opportunities for import have been growing. Will the recent reduction in import duties for cashews boost profits for importers? The Dollar Business analyses.

By Anishaa Kumar | March 2018 Issue | The Dollar Business


Cashews were first introduced to Indians by the Portuguese in early 16th century. These nuts, indigenous to Brazil, found Indian soil to be a great fit for their nutritional requirements and spread across the country. Over the next two centuries, cashews made a place for themselves in Indian fields and Indian hearts.

India’s centuries-old love affair with cashews nuts got a new lease of life as the present generation of Indians grew more health conscious. For, cashew nuts are believed to be high in heart-healthy oils and antioxidants. Experts are touting these nuts as a superfood which can reduce the risk of heart disease, help with weight loss, prevent and even cure anaemia. India, which is getting younger and healthier each year, is seeing a rise in the demand for cashew nuts. But it would be wrong to credit the entire phenomena to the new generation of Indians. Even before people knew of cashew’s health benefits, the nut was used in various cuisines all over the sub-continent. Cashews are used in various Indian dishes to add richness and texture to the food. They are also an integral part of dry fruits boxes, which are a popular gift item during festive seasons.

Domestic production has proven to be insufficient to keep up with the growing demand and imports are on the rise. Another reason for the growth in imports, according to V. Yogish Mallya, Owner of the Udupi, Karnataka-based Tirumala Cashew Industries, is the seasons of availability. He says, “The import of cashews has increased because in India, the Indian produce is available only between March and May. Other countries produce throughout the year and thus we are able to import and sell cashews all through the year.”

Ups and downs

Indian cashew imports have had a bumpy ride over the last few years. According to the Ministry of Commerce data, they hit a low of $756 million in FY2014, down 22.2% from FY2013’s $972 million. Traders say that the decline in imports leading to the 2014 low was the direct result of the introduction of import duty on cashew which till then was a duty-free import item. The market has been on the mend from then on, with imports increasing in both FY2015 and FY2016. Import of fresh/dried cashew hit a high of $1,318.14 million in FY2016. FY2017, however, saw a small decline in cashew imports. The government, noticing these fluctuations, has decided to reduce the import duty on the nuts. The reduction in import duty seems to be having the desired effect as despite the decline the previous year, figures for FY2018 are showing an upward trend. Indian imports of cashews (dried or fresh in shell) under HS Code 080131 currently stand at $1,005.21 million and is expected to grow further in the coming days.

Profits... in a nutshell

India’s growing demand for cashews is met by West African nations such as Cote d’Ivoire and Tanzania which are the main sourcing markets for Indian importers. In FY2017, India imported maximum cashews, under HS code 080131, from Cote d’ Ivoire at $323.33 million, followed by Tanzania ($290.59 million) and Guinea-Bissau ($210.16 million). Dhaval Vora, Director of Mumbai-based King Agro Processors, says that most Indian importers prefer cashews produced in these areas because they have white kernels. White cashew kernels are the preferred variety of Indian consumers and currently high in demand in India. Apart from African nations, other areas that contribute to India’s imports include countries such as El Salvador, Brazil and even neighbours like Bangladesh. Although India has a market for both raw and processed cashews, domestic consumption is not the only factor driving imports. Exports too have a role to play in imports. Traders say that India’s increasing processing capacity has opened up new export opportunities for the product. Flavoured and processed cashews are high margin products which are in high demand in US, UK and EU.

"Currently, there is a shortage of high quality cashews in the international market"


With imports on the rise, new importers too have entered the market. The market however has its own challenges. Vora says that one of the biggest challenges that importers face is the constantly fluctuating prices and the ever-changing policies of the governments of cashew exporting nations. “Cashew prices have increased by around 12-15%, year-on-year, since 2011, while at the same time there has been a decrease in global production,” says Vora adding that “good quality product has become hard to come by at affordable prices. Some countries have taken notice of this and have refocussed on the cultivation of cashews to capitalise on this opportunity. But, at the moment, there is a shortage of high-quality product in the market.”

Competing to import

India is currently the second largest importer of fresh/dried raw cashews-in-shell, with Vietnam being the largest. India has a 46% share in the world’s total cashew imports to Vietnam’s 51%. Some cashew traders in the country believe that Vietnam’s increasing interest in cashew imports is proving to be a challenge for both Indian importers and exporters. Importers say that many West African nations prefer to export their produce to Vietnamese importers as they are willing to pay a higher price than the market value, making access to the produce a challenge for other importers. Indian importers, who are already grappling with increased costs because of import duties must now also compete with the Vietnamese, who are able to pay much more for the same product than them.

Profits... in a nutshell

One way to control costs is to only import from countries on the LDC (Least Developed Country) Index as India has an LDC zero-duty provision. The issue here is that many of the African nations, which export cashews, are not listed on the LDC Index. Till 2012, imports of cashews from all countries were duty-free. Then a 5% basic customs duty was introduced which importers say has impacted the imports of cashews as well as the profit margins of importers.

Under the Union Budget 2018-2019, the government announced a reduction of these import duties to 2.5%. In a statement released after the Budget, S. Kannan, Executive Director and Secretary of the Cashew Export Promotion Council of India (CEPCI), stated, “The CEPCI very much welcomes the decision of the government in reducing the import duty on raw cashew nuts from 5% to 2.5%. The cashew fraternity was in fact expecting the withdrawal of import duty and CEPCI had made it the first point on its strategic plan submitted to the government. This is only a partial relief, we still request the government to withdraw the duty fully.” Importers feel that the only way imports of cashew can be profitable is the complete removal of the import duty as importers are already faced with challenges like fluctuating market prices and changing government policy decisions. Currently, the import of cashews into India is subject to a GST rate of 5% (which was reduced in June 2017 from the earlier announced 12%).

Ease of business

Overall, importers say, importing cashew is a rather simple process. Challenges related to quality, Mallya says, are best resolved by personally meeting the suppliers and inspecting the product before importing it into India.

While the growing market presents a lot of opportunities for importers of cashews, doing well in the business depends on the quality of the product one is able to import into India. Rakesh Patel of Aksh Overseas, an Ahmedabad-based importer of cashew nuts, explains, “While there are many companies that are getting into the business of importing cashews into India, the number of companies who actually do well is limited, as they are unable secure an exporter that can consistently provide them with high-quality product. Those who are able to import high-quality cashew have a chance of doing well in the market.” Premiums, Vora concurs, are higher for the high-quality cashew. The profit margin for importers, Patel says, depends a lot on the market rates at that time. “If the shipment takes a month or two to come, the change in the market rate during that period can impact the profits. It may so happen that the price is high when we place an order but may fall by the time it reaches our shores. Government policies also impact our business returns.”

Indian importers can sense the potential of cashew nuts when it comes to domestic consumption as well as re-export. While the current global production scenario does not favour them, they believe that cashew exporting countries will soon increase their production. And Indian importers too will be ready when the next big opportunity presents itself in the cashew market. In the meanwhile, increasing awareness about health benefits and a growing population is likely to fuel slow but steady growth in the demand of cashews in India. And that is good news for importers as it should translate into an upward trend in imports!


“Importing cashews is a high-risk business”

Profits... in a nutshell

Dhaval Vora
King Agro Processors


TDB: Where do you primarily import cashews from?

Dhaval Vora (DV): We have been importing cashews for the last eight years from Benin, Togo, Gambia and Tanzania. We import from these countries because the demand in the Indian cashew market is specifically for white kernels. The cashew nuts from these countries yield the best white kernels.

TDB: Tell us how the market has been in the last couple of years. What challenges do you face in the business?

DV: From around 2011, cashew nut prices have increased by around 12-15%, year-on-year. At the same time, Indian exports of cashew kernels fell drastically, as Vietnam wooed our buyers. Recently, there has also been a decrease in the global production and while some farmers are concentrating on the cultivation of cashew nuts others are not, and at this moment, there is a shortage of high-quality cashew nuts. To add to this, our government’s policies are not export friendly and we face many trade barriers. A major problem is the improper drying of the nuts. This reduces the quality of the nuts and has caused an acute shortage of quality produce in the market.

TDB: How will the reduction in import duty on cashew nuts impact profits?

DV: It would be wrong to think that reducing import duty from 5% to 2.5% is enough to ensure profits for importers. The business is far more complex than that. The reduction is meant to encourage importers to look at countries that are not listed in the LDC (Least Developed Country) Index, such as Ghana and Nigeria, as potential import markets.

TDB: Is the import of cashews a profitable business?

DV: It is definitely a profitable business. But if you look at the matrix, import risk is high and profit in terms of risk is low. The market is volatile, not only because of frequent changes in the market price of the nuts, but also because the local government of the exporting country might introduce some new tax which will affect the costing. Earlier, in 2011, risk was high but profits were also high.

TDB: How is the competition amongst Indian importers of the product?

DV: There is hardly any competition if you bring in good quality cashew nuts. Manufacturers and processors are willing to pay a premium for that. New traders are inexperienced and import product which is of inferior quality and thus end up making a loss. While there is a lot of competition if you end up with bad quality nuts, high quality product always gets a premium. It is true that the number of importers has grown over the years, but a few of the new ones have already shut down. Competition is welcome, the market is always open.



“The demand for cashews has been growing”

Profits... in a nutshell

Rakesh Patel
Director, Aksh Overseas


TDB: Why did you get into the business of cashew imports? Which markets do you usually source from?

Rakesh Patel (RP): Our company has been importing cashews for the last three years. We started importing cashews as it has high demand in India. The demand for cashews has been growing in India. Currently India cultivates only 30% of the required crop, so the remaining 70% ends up coming through imports. We import our cashews from Tanzania. Some of the main markets for imports, apart from the African nations, are Indonesia and Cambodia. The quality and type of product of course varies from country to country.

TDB: India was experiencing a healthy increase in cashew imports a few years ago. However, currently its import has been on a decline. What do you think has caused this change?

RP: In my opinion, the decline in cashew imports is a direct result of the introduction of import duty on cashews from the previous zero-duty imports. With the decrease in import duty under the recent Budget, we are expecting the imports to increase yet again.

TDB: What challenges do you face while importing cashews? Are quality issues a major concern?

RP: Yes, sometimes there are issues with the quality of the product if the shipment is delayed. Spending long periods in cargo holds hampers the quality of the nuts. To add to this, there are also specific issues related to the procedures followed in the exporting country. In Tanzania, where we import from, the exports of cashew is done through a process of auction conducted by the government. We have to submit a tender in the auction and only then can we get our supply.

TDB: Over the last few years, there has been an increase in the number of cashew importers in the market. Are new importers able to turn in a profit?

RP: It is true that many companies are getting into the business of importing cashews into India. However, the number of companies that are ultimately successful in running a profitable business is small. Most companies are unable to source high-quality product. If they can, they have a chance of doing well. Another issue is that the market is highly volatile in nature. The profit margin for importers depends on the market rates at the time. If the shipment takes a month or two to reach port, the change in market rate during that period can impact the profits. It may happen that when we place the order the price is high but when the cashews reach us the market rate may have fallen. Doing well in this market is highly dependent on the quality of the product and the price that you can procure at.