R&D

Exporting oleoresins for food to Europe

Exporting oleoresins for food to Europe

The growing European market for oleoresins offers many opportunities. European buyers can use the oleoresins to manufacture a wide range of foods. They particularly value the natural origin of oleoresins. It allows them to manufacture ‘clean label’ products. This requires paying extra attention to natural and sustainable production processes.

1 . Product description

Oleoresins are a concentrated form of spices and herbs. Oleoresins can be produced from various plant sources and from different plant parts, including

  • seeds
  • roots
  • herbs
  • bark
  • nuts

Oleoresins are used in the flavour and food industry, especially for meat preparations, marinades and gourmet food, as well as for convenience products. They give the flavour of spices and herbs to foods, and in the case of paprika and turmeric oleoresin they also provide colour.

In contrast to essential oils, oleoresins contain many more non-volatile substances. This makes them more interesting for the flavour and food industry. Non-volatile substances are ones that do not easily vaporise. They are not lost when exposed to open air. In fact, oleoresins combine the volatile and non-volatile substances of plants, thus yielding a more complete flavour profile. Pepper oleoresin, for example, contains the non-volatile piperine, whereas the essential oil of pepper does not. Piperine is the spicy (hot) part of pepper.

Another difference between oleoresins and essential oils is that oleoresins dissolve in fats, oils and lipids, whereas essential oils do not. This property of oleoresins is called lipophilicity and provides manufacturers with other options for food formulation than essential oils.

With the exception of paprika and turmeric oleoresins, extraction of oleoresins starts with the extraction of the volatile part of the plant (the essential oil) using a distillation process.

The remaining raw material is then exposed to a solvent suitable to extract the non-volatile substances. The solvent is then removed from the extract. This procedure is repeated various times until all non-volatile substances are removed from the plant material.

Finally the non-volatile part (resin) and the volatile part (oil) are blended and homogenised (mixing to get the same composition in all parts of the blend) to make a smooth oleoresin and to get the whole flavour (including spiciness) plus colour.

The solvents used in the extraction process are mainly ethyl acetate, alcohols, acetone or hexane, depending on the oleoresin being extracted. The appropriate solvent, pressure, temperature and duration of extraction mainly depend on the raw material that contains the oleoresin. In recent years ‘supercritical fluid extraction’ (CO2 extraction) has become another frequently used extraction method. This method is expensive, but may increase the extraction rate and results in an oleoresin with different properties.

Within the Europe, oleoresins are classified according to the Harmonised System (HS). This is a coding system used in international trade. These are the HS codes for oleoresins:

  • 3301.9030 – Oleoresins
  • 1302.1905 – Vanilla oleoresin

TIPS

2 . What makes Europe an interesting market for oleoresins?

European market for oleoresins keeps growing

The European market for oleoresins and other flavourings continues to grow. See Figure 1 for the development in turnover of the leading flavouring manufacturers. Most of these manufacturers are based in Europe. They are the largest users of oleoresins in Europe and produce flavourings for many food and beverage manufacturers inside and outside Europe. Among these manufacturers are:

  • Givaudan (Switzerland)
  • Symrise (Germany)
  • MANE (France).

Link to CBI.EU learn the full figure chart.

In the next five years, demand for oleoresins is expected to continue to grow worldwide. Grand View Research, a US-based consultancy firm, forecasts that the global oleoresins market will grow from USD 1.15 billion in 2014 to USD 1.69 billion in 2022.

European imports are growing

In the period 2011–2015, imports of oleoresins increased at an average annual rate of 3.0% in terms of volume. Figure 2 shows the leading importers in Europe.

The United Kingdom, Germany, Spain and France have large food industries and are the most important end-markets for oleoresins in Europe. The Netherlands, Belgium and Ireland are major re-exporters. The ports in Belgium and the Netherlands are important entry points for imports to (north-western) Europe.

Link to CBI.EU learn the full figure chart.

Major drivers behind the growth of the European oleoresin market include

  • substitution of synthetic ingredients by natural ingredients
  • the growing demand for flavourings in general and especially for ethnic foods
  • replacement of salt.

See the section on trends for more details.

Market developments for specific oleoresins

Your short-term opportunities in the European market for specific oleoresins depend largely on the size of the crop being used as raw material. For example, crop failures in major source countries can suddenly change the global market situation.

Cardamom oleoresin

Currently, the opportunities on the European market for cardamom oleoresin are quite good. Harvests in Guatemala have been relatively small for two consecutive years. Guatemala is the main source country of cardamom. However, oleoresin extraction takes place in India and Sri Lanka.

Availability is lower than in years with good harvests. Problems with thrips (insects feeding on the oil) will result in lower extraction yields. Nonetheless, supplies from the existing suppliers are still sufficient to prevent scarcity on the European market.

Nutmeg oleoresin

This is not the best time to enter the market for nutmeg oleoresin in Europe. In 2016, supplies of nutmeg oleoresin were relatively strong and sufficient to meet European demand. For European buyers, the situation is much better than in the previous decade.

Previously, supplies of nutmeg were very low as a result of hurricanes striking major nutmeg producer Grenada and diseases afflicting Indonesian nutmeg trees. Oleoresin producers in India and Sri Lanka are to a large extent dependent on nutmeg imports from these other countries. Therefore, India and Sri Lanka supplied little nutmeg oleoresin during that period. In 2015, supplies of nutmeg and its oleoresin increased again as the newly planted trees in Indonesia started to bear fruit.

Next year, an expected slow-down in production in major nutmeg source country Indonesia may cause somewhat lower supplies. The lower production is the result of heavy rains, but also of producers currently stepping out of the market due to the low prices today.

Pepper oleoresin

Availability of pepper oleoresin is fluctuating. After the last crop, availability was good. However, due to droughts in Vietnam and heavy rains in Sri Lanka lower supplies are expected in the near future. This may open up opportunities for new suppliers.

Paprika oleoresin

India and China are the major source countries of paprika for oleoresin extraction. Due to low prices since 2013, farmers in these countries are switching to other crops and supplies of paprika and the oleoresin are decreasing. This makes it a good moment for new suppliers to step into the market.

The European Food Safety Authority’s approval of a preparation containing paprika oleoresin for use as a feed additive for chickens may stimulate demand for paprika oleoresin in the coming years.

TIPS

  • Consider the cyclic nature of oleoresins markets when trying to export to Europe. After a year with low supply and high demand, you can expect many new entrants, which will cause oversupply and lower prices. Check price developments of the past five years to identify price cycles and determine the best time to enter the market.
  • Latin American producers of cardamom can add value to their products by extracting the oleoresin. This is not yet being done.

3 . European industry increasingly using natural ingredients

European food and flavouring manufacturers are increasingly looking for ways to produce foods and flavourings from natural ingredients. Oleoresins are some of their most important natural ingredients. The wide variety of oleoresins gives them numerous possibilities to formulate new or improved natural foods and flavourings.

The challenge for European manufacturers is to produce consistent natural flavourings. Compared to synthetic ingredients, oleoresins can vary in quality. This may affect the taste of the end product. Therefore, food and flavouring manufacturers have very strict specifications for oleoresins. You must comply with these strict specifications to gain access to the European flavourings market.

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4 . Sustainable production becomes a necessity to enter the market

Sustainable production is rapidly becoming a crucial requirement for access to the mainstream market in Europe. Until recently, only frontrunners in niche markets for ethical products (e.g. Fairtrade) had requirements on sustainability. Now, leading food manufacturers in Europe are also turning to sustainability. Leading flavouring manufacturer IFF, for example, writes in its sustainability report of 2015: ‘We are assessing our supply chain for vulnerable raw materials and developing and advancing policies to ensure its long-term resiliency.’

Many European buyers such as IFF are demanding more transparency in their supply chains. They often use questionnaires for suppliers or they use platforms such as the Supplier Ethical Data Exchange (SEDEX). SEDEX is an online platform where you can make information about your production available to buyers. Suppliers must increasingly provide the requested information to prevent losing buyers.

European buyers are also engaging more with their suppliers to improve long-term relationships. For example, they provide technical assistance to improve product quality or production yields.

TIP

  • You can benefit most from the increasing engagement of European buyers by sharing information regarding your needs. Request advice on farming and distillation techniques, measures to improve the sustainability of your business and other types of support.

Stricter legislation limits opportunities for niche products

Supplying small amounts of new oleoresins to the European market is becoming more difficult. Stricter legislation (EC 1334/2008) has made it more difficult to have new flavourings approved. They need to go through a costly application procedure. A positive decision from the European Food Safety Authority is required on the safety for use as a flavouring.

Furthermore, the legislation on Registration, Evaluation and Analysis of Chemicals (REACH) puts an increasingly higher administrative and financial burden on suppliers inside and outside Europe. To ensure food safety, they must implement systems for analysis, registration and other checks and controls. Companies that are able to achieve economies of scale are in a better position to cope with these burdens than small companies.

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Ethnic foods are gaining popularity

Ethnic foods, such as Indian, Thai and Mexican food, are gaining popularity in Europe, in particular north-western Europe.

Oleoresins from spices are interesting ingredients for food manufacturers to create such ethnic foods. For example, food manufacturers can use pepper oleoresin to mimic the use of fresh pepper.

TIP

  • Search for manufacturers of ethnic foods or importers of ingredients for ethnic foods. Show them how to apply your oleoresin to create ethnic food flavours.

5 . Salt reduction proves to be a challenge

Many Europeans consume more salt than is healthy for them. Media attention for this health concern is raising consumer awareness of salt consumption. Therefore, demand for products containing less salt is strong. In response, many food manufacturers aim to reduce salt in their products. As they do not want to compromise on taste, they use other ingredients to mask the salt reduction. Several oleoresins, such as cardamom oleoresin can provide this function.

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6 . With which requirements must oleoresins comply to be allowed on the European market?

Buyers in the European Union have strict requirements for natural food additives. You will only be able to successfully market your product in Europe when you comply with these requirements. See our study on buyer requirements for natural food additives (including oleoresins) for a detailed analysis of these requirements. They deal with the following topics.

  • Food safety – traceability, hygiene and control
  • Contamination
  • Adulteration
  • Classification, Labelling and Packaging (CLP)
  • Substances allowed in the European Union
  • Extraction solvents
  • Liability
  • Food safety certification
  • Kosher and halal certification
  • Documentation
  • Samples
  • Payment and delivery terms
  • Sustainability
  • Certification of organic production

Restrictions on the use of extraction solvents

It is important that you have a thorough understanding of requirements on topics listed above. Moreover, European Union legislation and buyer preferences for the use of extraction solvents are of particular concern in the oleoresins market.

The European Union permits use of the following solvents for oleoresin extraction in compliance with good manufacturing practices (GMP):

  • propane
  • butane
  • ethyl acetate
  • ethanol
  • carbon dioxide
  • acetone
  • nitrous oxide.

In parts II and III of the legislation (Directive 2009/32), you will also find a list of extraction solvents for which conditions of use are specified. For example, the European Union permits the use of methanol and propan-2-ol when residues of these solvents in the oleoresin do not exceed the Maximum Residue Level (MRL) of 10 mg/kg. This MRL must ensure that the solvent does not endanger human health. For this reason, the use of hexane is only permitted when the hexane residue is below 1 mg/kg. Hexane can give very good results, but is dangerous and difficult to handle.

European buyers increasingly prefer the use of naturally occurring solvents such as ethanol and carbon dioxide for extraction. This better suits consumer preferences for more natural production of foods. See the section on trends for more information.

Demand for certification of compliance with halal standards is increasing. If you want to obtain halal certification, you often cannot use alcohols for extraction. You will then have to use alternative solvents such as carbon dioxide. In the case of India, halal certification bodies have approved ethyl acetate as halal.

TIP

  • See our study about buyer requirements on the European market for natural food additives for more information about halal certification.

7 . Quality requirements

European buyers determine the quality of oleoresins mainly by physical and flavour aspects. Physical analysis focuses on:

  • microbiological activity
  • oil contents
  • solvent residue (in ppm).

In case of paprika oleoresin, the colour value (CV) reflecting its colouring properties is important. In the case of turmeric, the curcumin content for its colouring properties is the main quality factor. The capsaicin contents that determine how spicy the oleoresin is are also important.

Another important factor for the oleoresins with colouring effects (paprika and turmeric) is the absence of forbidden dyes. For dyes a certificate from an accredited laboratory has to be provided. Check if the laboratory is acceptable for your buyer.

Many buyers have their own quality requirements. They can differ from those of other buyers depending on their application for the oleoresin. These differences mainly relate to the oil content of the oleoresin, as the flavour profile of the oleoresin is primarily determined by the oil content. You will have to check with your buyers what their specific requirements are regarding oil content.

Generally oleoresins for food must be 100% pure from the named plant. In some cases (like black pepper) it may be advisable to add a small amount of edible oil to the oleoresins in order to make it smoother and more easy to use. However, this needs to be mentioned in the Certificate of Analysis (CoA). When you have mixed your oleoresins, you must label it as a ‘blend of oleoresins’.

In addition to the quality parameters above, buyers of oleoresins for food also consider quality consistency. They prefer a well homogenised product (with the same quality in different containers) and suitable lot sizes (e.g. not small lots with different qualities). Consistency of the quality of oleoresins is important to manufacture foods and beverages with consistent quality, as expected by consumers.

TIPS

  • European buyers expect you to have expertise about the product you supply. For example, you must have detailed knowledge about the origin of the raw materials, production techniques and suitable equipment for processing.
  • Only use pure material (raw material from one type of plant) for extraction. Do not mix in raw materials from other plant species.
  • Make sure that your raw materials are safe in terms of microbiological activity before you start the extraction process.
  • Ensure that plants or plant parts used for extraction are cleaned.
  • Minimise variation in quality within a lot. Follow strict grading and sorting standards for raw materials selection. Variation in physical properties of the raw materials also means the oleoresin content and chemical profile will vary.
  • Research effects of different extraction methods (temperature, pressure, time) on the quality of your oleoresin. Where available, use international specifications as a baseline reference.
  • Achieve higher quality consistency over the year by standardising your product’s quality. You can standardise your product by establishing Standard Operating Procedures (SOPs) for collection/harvesting and processing practices (e.g. timing of harvest). Closely monitor implementation of these SOPs through regular inspections. Offer special benefits to collectors who apply your SOPs.
  • You can also standardise your product by blending oleoresins from different lots.
  • Keep oleoresins at cool temperatures to maintain their quality.
  • Include information on the oil contents, colour value, capsaicin or curcumin contents and the solvent residues in your Technical Data Sheet and specifications. Include test results from accredited laboratories. Accredited laboratories are recognised for their expertise and reliability.
  • See our factsheet for more information about opportunities for exporting turmeric for the European market for health products.

8 . Labelling requirements

You must label your products if you want to export them to Europe. Labelling is required to make your products traceable and ensure safety during transport and storage.

In Europe, oleoresins are considered hazardous chemical substances. You must comply with the Regulation on Classification, Labelling and Packaging of chemicals (CLP Regulation: EC 1272/2008) to ensure that hazards are clearly communicated. On your label, you must include the relevant risk phrases, safety phrases and hazard symbols (examples below).

You can find an elaborate definition of the flammability, risk phrases and safety phrases in Directive 2001/59/EC. The Directive provides technical information for implementing the European Union CLP Regulation.

In addition to complying with CLP Regulation, you must apply the following standard export labelling rules.

Make individual batches traceable with markings on each container. Register them in an administrative system, whether they are produced by blending or not.
Use English for labelling unless your buyer has indicated otherwise.

Your labels must include the following information.

  • Product name
  • Batch code
  • Whether the product is destined for use in food products
  • Place of origin
  • Name and address of exporter
  • Date of manufacture
  • Best before date
  • Net weight
  • Recommended storage conditions

If you offer organic certified oleoresins you must also add the name/code of the certifier and certification number.

Packaging requirements

Always consult your buyer for specific packaging requirements.

Use United Nations approved packaging. This packaging is suitable for the transport of dangerous goods, including oleoresins. Contact your packaging supplier for more information.

An example of a common type of packaging:

TIPS

  • For details on packaging materials, see the European Federation of Essential Oils on transport of dangerous goods.
  • Preserve the quality of oleoresins by using containers made from a material that does not react with constituents of the oleoresin (e.g. food-grade plastic, lined steel, aluminium).
  • Do not re-use packaging materials. Do not use detergents if you must clean containers or working materials. They may contaminate the oleoresin because of residues. Only use water or alcohol and let the containers or working materials dry carefully.
  • If your oleoresin reacts with air in the container, this may result in quality deterioration during storage and transport. Fill this headspace with a gas that does not react with constituents of the oleoresin (e.g. nitrogen or carbon dioxide).
  • Facilitate recycling of packaging materials by European buyers. For example, use containers made from recyclable material (e.g. metal).
  • Store containers in a dry, cool place to prevent quality deterioration.
  • Keep organic certified oleoresins physically separated from conventional oleoresins.

9 . What competition will you be facing on the European oleoresins market?

Technological barriers

Because of relatively high technological barriers to access the market competition is lower in the oleoresins market compared to the essential oils market. Solvent extraction requires highly skilled staff and special expensive equipment. Only few new players can make the necessary investments. Actually, most investment concentrates on existing oleoresin industries. India already accounts for an estimated 50% of the global oleoresin industry and its role continues to grow.

Link to CBI.EU learn the full figure chart.

Replacement by fresh and dried spices

Oleoresins are complementary to the use of fresh and dried spices. However, in some segments for gourmet food or raw food (i.e. minimally processed), manufacturers prefer fresh or dried spices. Compared to such products, oleoresins are often easier to use for food manufacturers. Oleoresins are used in small amounts and have a high uniformity in flavour. The use of oleoresins enables manufacturers to standardise the flavour profile of a product and improve quality consistency.

Oleoresins are also heat-stable and easy to store. They are not susceptible to microbiological contamination and have a much longer expiration period than fresh or even dried spices. Manufacturers in the mainstream segment of the market for processed foods (especially meat) generally appreciate these characteristics. The cost of use is often their main purchasing criterion. They want to know how much each option (fresh, dried, oleoresin) costs per end product.

Competition from biotechnology

A lot of progress is being made in the development of biotechnology for flavourings production. This is mainly because of the natural trend. For example, several flavouring manufacturers (e.g. Givaudan, Mane) and biotech companies have developed biosynthesis of vanillin (the substance that gives vanilla its typical flavour). Their vanillin is natural according to European Union legislation (1334/2008), which allows enzymatic and microbiological processes.

As a consequence, natural vanillin made using biotechnology competes directly with natural vanilla extracts. The only benefit that remains for natural vanilla producers is that natural vanilla contains many more components than vanillin. Certain buyers prefer the flavour profile of natural vanilla to that of just vanillin.

Need for product distinction

New suppliers to European buyers will generally need to do more to distinguish themselves from the competition. Three options to do so are:

  • a unique flavour profile
  • organic certification
  • a provenance story (stories about the origin and production of your oleoresin).

Food and flavouring manufacturers are constantly looking for unique flavours to develop new products. They are particularly interested in new types of oleoresins when documentation (Safety Data Sheet) for that product is ready. This is ambiguous, as European buyers want to introduce new products, but do not want to make the necessary investments in documentation. They are increasingly making suppliers responsible for providing documentation.

Provenance stories will become particularly interesting in the long term. European buyers want to know where and how you produce oleoresins. They can use this information to gain understanding of the sustainability of their supply chains. In some cases, manufacturers use these stories to show consumers how they are improving the sustainability of their business.

10 . Which channels can you use to put oleoresins on the European market?

Flavourings are the primary market segment for oleoresins. Flavouring manufacturers use oleoresins as raw materials for a wide variety of flavourings. They create flavourings for sauces, marinades, bakery products and many other products.

Foods are the secondary market segment for oleoresins. Especially manufacturers of meat products, such as sausages, frequently use oleoresins as ingredients. Instead of using marinades from flavouring manufacturers, some of them prepare their own marinades from oleoresins and other forms of spices (e.g. dried spices). Several manufacturers of mayonnaise, sauces, marinades and pickles also use oleoresins as ingredients instead of products from flavouring manufacturers.

Oleoresins usually pass many different intermediaries before they reach the consumer. Importers and ingredients suppliers add value to the product through their logistics services. Flavouring manufacturers and food and beverage manufacturers add value by transforming the product.

Target importers

If you want to export oleoresins to Europe, it is best to target importers of raw materials (e.g. oleoresins) for the food industry. These companies are specialised in the import of a wide range of raw materials for flavouring manufacturers and other users such as fragrance manufacturers.

Such importers also supply oleoresins directly to a relatively small number of food manufacturers. Particularly manufacturers of meat products, mayonnaise, sauces, marinades and pickles frequently purchase oleoresins directly from importers instead of through flavouring manufacturers.

Importers generally source their products from different countries. They need different sources for supply security. For example, when one source has a disappointing harvest, importers can turn to their other sources. The bulk imports from different sources and stocking by importers serve as a buffer in the market. This buffer function protects food and flavouring manufacturers from market volatility and makes importers indispensable.

Exports to flavouring manufacturers

European flavouring manufacturers are engaging more often with suppliers in developing countries. This is driven largely by their need for a sustainable well-documented supply of strategic indispensable ingredients. Instead of purchasing their raw materials (i.e. oleoresins) from importers, they source them directly.

European companies need very high supply security. To achieve consistency in supplies, they often turn to large-scale contract farming. They also work with oleoresin exporters who obtain their raw materials through contract farming. This gives them maximum control over production in terms of both quantities and quality. Alternatively, when production is fragmented and small-scale, local traders often play an important role in organising and consolidating production.

In general, flavouring manufacturers who source directly also continue to purchase from European importers. They source through different channels to secure stable supplies in case of a supply problem with one of their sources.

No direct trade with food manufacturers

European food and beverage manufacturers purchase their flavourings from specialised flavouring manufacturers or from European importers. They do not purchase oleoresins directly from suppliers in developing countries for the following reasons.

  • They increasingly need more complex flavours. This helps them differentiate their products from products of their competitors. They rely on flavouring manufacturers to do research and develop new products. For example, flavouring manufacturers develop unique low-cost flavours which retain their functional properties under specific conditions (e.g. heat and acidity).
  • They increasingly demand tailor-made products for use in very specific product formulations. This requires close collaboration with flavouring manufacturers to exchange technical knowledge.
  • They require high quality consistency. This is often achieved through fractionation and isolation of chemical constituents of oleoresins. These processes require high-tech equipment and skilled staff. These are often unavailable in developing countries.

11 . What are the end-market prices for oleoresins?

Prices of oleoresins differ widely. An important factor determining the price is the oleoresin yield of the raw material. Black pepper oleoresin yields, for example, are relatively high, at 3–4%. Yet extraction of many other raw materials yields only 0.1–1% oleoresin.

The diverging oleoresin yield is also reflected in the prices of the oleoresins. Pepper oleoresin currently fetches prices of around USD 55 per kilogram, while cardamom oleoresin prices are around USD 145 per kilogram.

Prices of raw materials are another determining factor. Changes in the raw material’s availability can have a significant influence on the price of the oleoresin. Natural disasters, poor harvests or changing regulations are common causes of raw material shortages. These shortages result in strong price increases.

Table 1: Price developments in USD for selected oleoresins, third quarter 2016
Product Price per kg (Free On Board) Development
Cardamom oleoresin $145 Prices are increasing as a result of increasing labour costs
Nutmeg oleoresin (40% oil content) $30 Prices are low with some signs of future increases
Paprika oleoresin (100,000 color value) $25–28 Prices increased by 25% in the second quarter of 2016, but are expected to come down again
Pepper oleoresin $55 Prices are increasing somewhat due to unfavourable climate conditions in major source countries
Turmeric $110 Prices increased step by step to the current level and are expected to remain stable
Source: Meschede, 2016

Value addition by importers

Importers and agents typically add a percentage to prices of essential oils for their customers. The margin of importers covers costs for airfreight, handling (incl. clearance) and quality control. The percentages added by importers and agents are smaller for big lots of high-value oils than for small lots of low-value oils. For example, importers only add a margin of a few percent to lots of more than 50 kg of high-value cardamom oleoresin. In comparison, their margin on lots of less than 50 kg of low-value paprika oleoresin can be up to 30%.

TIPS

  • Minimise costs by sourcing suitable raw materials with a high essential oil content and high concentration of volatiles. This will help you become price-competitive. The shape, size and appearance of raw materials are irrelevant. However, costs of high-grade raw materials can be many times higher than costs for low-grade raw materials.
  • Monitor harvests of raw materials in major production countries to anticipate price developments for your specific oleoresin. Check the reports of the International Trade Centre for updates on price developments.
  • Build strong relationships with your buyers. It will help you reduce the impact of global price drops for your product. Buyers are commonly more willing to pay a little extra to their preferred suppliers when prices are low.
  • Technical Data Sheets for natural ingredients.
  • Also see our studies on the European market for spices and herbs.