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Promising EU export

markets for essential oils

The EU market for essential oils is growing, triggered by consumers
who consider natural products as safe and healthy. This growing
perception is being strengthened by well-known scientific
institutions as well as the media.

EU cosmetics manufacturers are interested in many different essential oils. Many of these
oils are of tropical origin. Especially, oils which are organically and/or Fair Trade certified
are of great interest. As a result, market opportunities generally exist for species which are:
sensitive to environmental factors
cannot be grown in the EU
wild collected if it is competitive compared to EU-cultivation/wild collection
and crops for which the cultivation is more profitable in developing countries (DCs).

Large and growing share of essential oils in cosmetics
Exact data on the consumption of essential oils is not available. Essential oils are extracted
from over 3,000 plants, of which about 300 are commonly traded on the global market.
Essential oils are used in different industries such as cosmetics, pharmaceuticals, foods and
households. Of all essential oils used as fragrances and flavours, it is estimated that 20% is
consumed by the flavour industry, 20% by the pharmaceutical industry, and the remaining
part by the fragrance industry, being represented by the perfumes/fragrance, aroma therapy
and hair & skin care industries. Especially the essential oils contained in many resins are
highly valued by the cosmetics industry for the production of perfumes.

Frost and Sullivan, a large business research and consulting firm with offices located
globally, estimated the market size of essential oils for Europe and the USA to grow to
US$ 666 million or 106 thousand tonnes in 2009. The EU market is estimated to only grow
by 3% per year.

Developing countries more important in global production
The EU remains a modest producer of essential oils, accounting for less than 10% of global
production, while DCs are increasingly commanding a dominant position in the global
production, especially for raw essential oils. The competition with EU countries remains yet
very strong for further processed essential oils, many of which are based on raw materials
imported from DCs. EU countries also remain competitive for high-yielding species which
allow for mechanisation in harvesting and processing.

Major EU producers are Mediterranean countries like France (accounting for 4% of world
production), Italy (3%), Spain (2%), Portugal and Greece. Nearly 90% of the global
production of essential oils are produced in the following countries:

Promising EU export markets for essential oils
Table 1 Major countries producing essential oils
Countries % of global production Countries % of global production
USA 24%
Bulgaria 4%
China India
Brazil France
Turkey Italy
Indonesia Spain
Morocco Egypt
Source: Shrinivas (2009)

According to estimates by Dr. Brian Lawrence, editor of the Journal of Essential Oil
Research, global production of the 20 leading essential oils amounts to approximately 104
thousand tonnes. This figure should be used solely as an indication, since the figure
addresses not only the cosmetics industry, but also other industries such as foods,
pharmaceuticals and households. Moreover, next to these 20, there is a huge range of
smaller oils, such as cumin oil, caraway oil, valerian oil etc.

On a global scale (incorporating all industries), the 18 most important essential oils
represent nearly 75% of the total production value. The concentration in terms of tonnage
is even higher, as there is a trade in small volumes of products with high unit values (e.g.
rose, jasmine, vetiver).

Table 2 Global production of top 20 essential oils, 2008
Essential oil Production size
Essential oil Production size
Orange 42,000 Patchouli 1,200
Cornmint 32,000 Scotch Spearmint 1,040
Lemon 7,200 Eucalyptus Citriodora 1,000
Eucalyptus 4,000 Chinese Cedarwood 800
Peppermint 3,300 Litsea Cubeba 760
Citronella 2,400 Native Spearmint 750
Clove leaf 1,800 Texas Cedarwood 550
Chinese Sassafras 1,460 Star Anise 500
Lime (distilled) 1,400 Mandarin 460
Lavandin 1,300 Virginia Cedarwood 300
Source: Italian Association of Herbalist Sciences and Technology (SISTE), 2008

Major oils produced in Europe are citrus fruit oils (orange, lemon), lavender, lavendin,
peppermint, eucalyptus, coriander, rosemary, anise seed oils, mandarin, tangerine oil and
marjoram oil. Some other oils for which the selected EU countries play a role are caraway
(The Netherlands), sage (Southern Europe and the UK have significant production), thyme
oil (Southern Europe) and lemon balm oil.

However, the demand for orange and lime oils is much higher than the EU supply, and is
therefore largely met by imports, mainly from Brazil. Vetiver oil is produced in Reunin, an
overseas region of France in the Indian Ocean, which is officially part of the EU.

EU imports still on the increase
In 2008, EU member countries imported 810 million worth or 74 thousand tonnes of
essential oils, indicating an annual increase of 6.3% (value) or 0.9% (volume) since 2004.
The EU top 8 leading importing countries are Germany, the UK, The Netherlands, France,
Spain, Italy, Belgium and Ireland. Except for Belgium, more detailed information on the
market of essential oils in the different countries can be found in the Fact Sheets. Even
though Belgium is a bigger importer of essential oil than Ireland in volume terms, it has
Promising EU export markets for essential oils
been chosen to focus on Ireland as more than 50% of the Irish imports find their sources in
other European countries (7.0% from DC), in contrast to Belgium which imports only 29%
from other EU countries (51% from DC). In the factsheet Essential Oils for Cosmetics in
Ireland, possibilities for substitution of sourcing trade flows will be dealt with.

Nearly two thirds of imported essential oil is supplied by countries outside the EU. Brazil
with a share of 25% of EU imports, is the markets largest supplier. China and the USA
followed as the second and third largest suppliers, which respectively accounted for 9.3%
and 9.2% of total EU imports in 2008.

DCs account for 50% of EU imports, showing an average annual increase of 0.4% between
2004 and 2008. They play a relatively important role in the supply of orange oil (70% of EU
imports comes from DCs) and mint oil (67%). It is interesting to note that most essential oil
products come from a select number of countries. Main DCs showing a positive
development are China (3.0% annually between 2004 and 2008), India (2.7%) and Brazil
(3.0%). For that same period, Indonesia and Argentina witnessed average annual decreases
of 9.5% and 6.2% respectively.

Table 3 Imports of essential oils from DCs, tonnes
Total imports Imports from DCs Share of DC
in total
index Volume 2008 Growth

EU-27 73,755.4 1% 36,688.6 0.4% 50% n.a.
Germany 18,886.3 6% 8,880.8 12% 47% ++
United Kingdom 15,526.0 3% 8,503.2 1% 55% ++
The Netherlands 10,698.3 -5% 7,357.6 -7% 69% ++
France 8,079.6 -4% 4,436.8 -5% 55% ++
Spain 6,071.8 2% 3,422.8 1% 56% ++
Italy 3,217.8 2% 1,073.6 11% 33% ++
Belgium 3,196.9 7% 1,629.4 14% 51% ++
Ireland 2,474.2 4% 172.7 6% 7% ++
Austria 2,168.2 -10% 356.7 -20% 16% +
Denmark 662.6 7% 308.8 12% 47% +
Poland 614.8 16% 49.4 -10% 8% -
Czech Republic 365.0 -3% 46.8 2% 13% -
Sweden 245.8 0% 109.5 28% 45% -
Slovenia 216.0 13% 32.0 65% 15% +/-
Portugal 197.8 -7% 99.6 -6% 50% -
Romania 196.3 2% 41.1 7% 21% -
Latvia 185.2 62% 25.5 131% 14% +/-
Hungary 145.8 -15% 50.4 2% 35% -
Greece 126.5 2% 3.7 52% 3% -
Finland 118.4 8% 11.9 10% 10% +/-
Estonia 92.6 68% 2.2 65% 2% +/-
Bulgaria 71.7 9% 38.4 20% 54% +/-
Cyprus 54.3 -6% 4.0 61% 7% -
Lithuania 48.6 48% 9.2 74% 19% -
Slovakia 42.2 1% 21.3 22% 50% -
Luxembourg 42.0 16% 0.0 - 0% -
Malta 10.7 33% 1.2 86% 11% -
Source: Eurostat Prodcom (2009)

Promising EU markets
The growing demand for cosmetics products going along with consumers perception of
natural products as safe and healthy make a number of EU countries an appealing option
for expansion of trade. The following countries are interesting for DCs to target:
Promising EU export markets for essential oils
Germany is the largest market for cosmetics in the EU, as well as the largest and most
advanced EU market for natural cosmetics. Moreover, it is the largest EU importer of
essential oils and also the EUs largest importer sourcing from DCs. Behind France,
Germany is the second largest producer of cosmetics. To distinguish themselves from
the competition, producers are looking for opportunities to add value by using
organic, Fair Trade and specialty oils.
The UK is not only a major producer of cosmetics, but is also an increasingly
important distributor of essential oils. There is a large extraction industry in the UK,
where several processors are able to process very small quantities of oils. In terms of
volume, the UK is the second leading EU importer (also from DCs) of essential oils.
The UK is also known for being a leading market for natural fair trade cosmetics.
The Netherlands is the third leading importer of essential oils and is a large re-exporter
of essential oils. As such it is an important point of entry for suppliers.
France is the second largest EU market for cosmetics, characterised by a very high
proportion of premium products, and driven by innovation. Moreover, it is a leading
EU importer of essential oils. More than 55% of its imports originate in DCs. With a
share of 37% of total EU cosmetics production in 2008, France is by far the leading
producer. It is also the leading fragrance producer and the largest exporter of
cosmetics in 2008.
Spain, as the EU fifth largest market for cosmetics, has a sizeable cosmetics industry,
which produces conventional/natural cosmetics and cosmeceuticals. Spain also has a
very large number of small and medium-sized family enterprises in the cosmetics
sector. More than 56% of its imports originate in DC, in 2008.
Italy is EU fourth largest market for cosmetics and has a large number of medium-
sized producers. Moreover, many fashion houses and well-known designers also have
their own cosmetics and fragrance lines.
Ireland, as the 7
largest importer of essential oils, witnessed a growth rate in imports
above the EU average between 2004 and 2008. Although the share of DCs in Irish
imports is relatively small compared to the EU average, its growth has shown a
significant larger rate than the average EU member.

Please note that more detailed information on the above mentioned countries can be
found in the respective country factsheets.

EU promising essential oils
In terms of promising products, a potential opportunity for DCs producers of essential oils
lies in supplying the EU market with organically certified essential oils.

Opportunities exist especially for ingredients with properties which allow cosmetic
products to be made fully organic. For example natural ways of controlling rancidity etc. are
of interest. However, this is hardly feasible for small and medium scale producers. As a lead
to finding information on which ingredient categories are of interest, the Soil Association
has published details of the modifications to raw materials which can be carried out, whilst
still retaining organic status.

Long-term market opportunities can also be found by establishing alternatives to existing
sources. However, the approach implies risks, such as acceptance of the producer profile
and sufficient funding.

With regards to introducing new essential oils to the market, partnerships and cost sharing
with EU companies could be considered as an efficient and effective way. Ultimately,
exporters in DCs need to be able to draw on sufficient technical and financial resources to
introduce new products. It should also be borne in mind that new essential oils for
Promising EU export markets for essential oils
cosmetics primarily compete on fragrance not medicinal property. However, certain
properties of essential oils, such as anti-bacterial, might result in a dual purpose of
fragrance combined with reduced levels of an authorised preservative, in favour of a natural
alternative, subject to compliance with legal requirements. Next to this, bearing in mind
the existing wide range of essential oils, the opportunity lies in finding new natural
fragrances or alternatives to synthetics. In addition, the challenge is then to ensure
sustainable volumes of the essential oil.

The long list of essential oils used for cosmetics hinders exporters in DCs in finding a new
essential oil, as they have to assess how different (fragrance / other properties) the new oil
is in comparison to the existing oils for the same price. Launching a new essential oil
means that the exporter has to take into account the uniqueness of an essential oil and also
consider safety (especially REACH legislation if minimum threshold volumes - 1 tonne -
likely to be exceeded) and availability.