10 tips for doing business with European buyers of natural ingredients for health products
The relationships between importers and exporters in the natural ingredients for health products sector are changing. In Europe, legal requirements and documentation requirements are growing. Buyers increasingly negotiate on terms of payment for organic and fair-trade products. Use these ten top tips to help you do business with buyers in Europe.
Contents of this page
- Study international guidelines and European legislation
- Formulate a clear and specific product offering
- Consider infrastructure and logistics in agreements with buyers
- Be realistic and transparent about prices
- Use modern technology for data collection and processing
- Set out terms for trade
- Support a strong company image
- Work with partners
- Be honest and always substantiate your claims
- Provide clear and adequate information and documentation
To be successful in Europe you will need to understand international guidelines and European legislation. You will also need to know about the national regulations and legislation in the countries you are targeting.
European legislation changes quite regularly. To stay informed you can use the following approaches:
- Check with European associations for their interpretation of the legislation texts.
- Ask buyers for any changes in their specification. However, note that not all buyers are up to date
- Ask the authority in charge. Food Safety Authorities can give advice on how to deal with new legislation.
- Contact consultancy firms that assess legislation and advise companies on how to comply. They will be able to help, but at a cost.
Especially the Novel Food legislation is an important regulation in trade with European companies that buy natural ingredients for health products. On 1 January 2018, a new Novel Food regulation came into force. Check the website of the European Commission for Novel Food for information about:
- the new Novel Food legislation, including the main differences with the old legislation
- Authorisation for Novel Food
- Novel Food catalogue.
Over the last 10 years the United Nations (UN) has developed international guidelines to increase harmonisation of the procurement and processing of raw materials. These include:
- ISO Standards (such as ISO 26000 on social responsibility or ISO 31000 on risk management)
- Hazard Analysis and Critical Control Points (HACCP), see Codex Alimentarius or ISO 22000 on food safety management
- World Health Organization (WHO) guidelines (Good Agricultural and Collection Practices, plant monographs).
Moreover, the European Commission has developed guides to Good Practices.
These and other international guidelines have been turned into Standard Operating Procedures (SOPs) and Work Instructions (WINs). You can adopt these as part of your business’ key operations.
Adapting and improving your production processes according to SOPs and WINs will improve your chances of success on the European market.
- See our study on buyer requirements in the European natural ingredients for health products sector for a good overview of international guidelines, rules and European Union legislation.
- Have a look at Codex Alimentarius for information about international food standards.
- Check the website of the European Trade Helpdesk for more detailed information about European legislation and requirements for your specific product.
- See the website of the World Health Organization (WHO) for information about Good Practices (GxPs), mainly Good Agricultural Collection Practices (GACP) and Good Manufacturing Practices (GMP).
- Read more about ISO Standards, such as ISO 22000, 31000 or 26000.
- Comply with current international and national regulations and legislation. Introduce recommended SOPs in your company.
- To comply with requirements and guidelines, adapt and improve your production processes.
- Tell your clients all about the improvements you have made and your familiarity with international requirements.
- Ask your clients if they expect you to comply with any specific legislation to start/continue working with you.
Formulating a clear product offering is crucial when you want to do business with European buyers. It is also key to listen to your buyers and what they need.
Make sure you make a good impression on your buyers. Consider developing information that you can adapt to their individual specifications. It shows you have done your research, and that you have listened to your buyers’ specific requirements.
Your product offer should include information on:
- Price, including prices for specific qualities
Be sure also to include:
- Botanical names of your product
- Product documentation demonstrating that your product complies with international standards
- Certifications and evidence that you operate according to SOPs
- Information on product availability (year, location)
- Batch number – according to samples sent
- Transparent costing and pricing
- Terms of payment
- Delivery terms
- Explain which standards your products and processes meet.
- Explain your position on Risk Management.
- Demonstrate your commitment to corporate social responsibility (CSR).
- Explain your costing and pricing and any contributions you make to rural income.
- Put a time limit on your offer.
- Use international terminology for trade information, including payment and delivery terms.
When doing business with European buyers you need to offer realistic terms. Make sure you do not over-promise.
Be realistic about logistics. In your promises and agreements with buyers do not forget to include details and costs of:
- infrastructure (road, port, telecommunication or internet)
- services for transport from freight agencies (for example customs agents)
- export consultants.
You’ll need to learn how to manage the movement of your natural ingredients through the global supply chain.
European buyers are interested in infrastructure that is ecological as well as economical. You will also need to show that you work responsibly and sustainably.
- Strive for sustainable logistics by using the best practices guide from CLECAT (European Liaison Committee of Common Market Forwarders).
- Learn and understand the major stages, relationships and terminology used in international logistics and supply chain management.
- Get a good understanding of international logistics. Join international networks like the Transportation and Logistics Council (TLC) or the Council of Supply Chain Management Professionals (CSCMP).
- Check the website of the International Chamber of Commerce for more information on Incoterms rules. Include these terms on your offers.
- Specify the costs of transportation and the risk of loss and damages before entering into a buyer-seller agreement.
- Read about intermodal freight issues at Eurift, the European Reference Centre for Intermodal Freight Transport.
When setting your prices, European buyers expect you to also consider the prices you pay for purchasing raw materials and natural ingredients. But they also expect you to take the social and economic impact on rural income in your sourcing region into account. Contributing to sustainable development is an important factor in doing business in Europe. Use clear and verifiable statistics to show your impact as a sustainable supplier, such as number of jobs supported or number of acres protected.
Production costs of raw materials and ingredients are at the forefront of discussions about sustainable supply chain development.
Keep in mind that you may have additional costs if buyers ask for certification proving physical, chemical and microbiology analysis, pesticide residues, identity, safety and efficacy or the absence of genetically modified organisms (GMOs). Include these cost factors in your pricing.
Therefore, when sourcing your raw materials, it is important to consider where they come from and how much you are paying for them. This will help improve margins to support your business. However, you must not neglect the aspects of sustainable supply chain development.
Think about your contributions to the community and small and medium-sized enterprises (SMEs) in rural areas. Read more about corporate social responsibility (CSR) on the European Commission’s website.
Be realistic and transparent about prices at the farmer/collector level. This will help you to protect your resources and help rural areas sustain their production. This is part of a socially-responsible and sustainable strategy, which will work well for the longevity and reputation of your business.
- Use the website of the European Commission for more information about corporate social responsibility (CSR). Also see the ISO 26000 Standard on social responsibility for more information.
- Maintain realistic purchase prices at the farmer level. Promote corporate social responsibility all the way along your supply chain.
- Gather data on the costs at source and use these to establish transparent costing and pricing.
- Include certificates of analysis and other evidence of the quality and sustainability of your products.
If you use modern technology in your business practices it may be easier for you to improve quality and traceability, as well as to add value to your natural ingredients. This will help you to stand out from the competition.
Some examples are:
- Tailor-made, pre-harvest and post-harvest technology;
- Hand-held/mobile devices for wild collection and cultivation (this facilitates on the spot documentation and inspection). See the Agri-Technology services from Koltiva (Indonesia) as an example. Linking data collection to process and product documentation or using centralised data processing provides tailor-made information packages to auditors, facilitating their inspection.
- Allocate sufficient human resources to quality control and quality assurance.
- Develop your own traceability system with support of the Global Traceability Standard for Healthcare or the ISO 22005:2007. Make sure every ingredient can be traced back to the field of production.
- Promote data collection, data processing and documentation as an (future) USP (Unique Selling Point).
Clear terms for trade, shipment and payment are important to build trust with European buyers.
Do your research and get to know your buyers’ expectations. Provide clear and honest information on quality and product pricing. You will need to protect your own interests as well when agreeing on payment terms.
In this sector, there is an increased desire to negotiate on payment terms for organic and/or fair-trade products. Sustainable development standards and fair-trade certification schemes (such as those of Fairtrade Labelling Organizations and FairWild) have developed specific systems of advance payments and premium fund mechanisms.
Advance payments are increasingly viewed as a collaboration on risk. The issue of advance payments in the trade of natural ingredients is currently being re-evaluated. The traditionally strong position of the buyer is changing as natural ingredients on the European market become scarce.
- Adopt transparent costing.
- Ask potential buyers what their expectations are on terms of trade, specific product standards and certifications.
- Have a look at these eleven ways to build and sustain trust in doing business on the Business Wisdom website.
Consumers in Europe want high-quality products. They also want to know more about where those products are coming from, to assure them they are doing some good while buying a product. This means that buyers are on the lookout for products with a story to tell.
There are several ways for you to show your story to your buyers. For example, by explaining what the origin of your product is, and which collectors, producers or farmers are involved. Check the example Pukka Herbs’ successful marketing story on Bibhitaki fruit from India, which is used in an Ayurvedic formula.
Create a strong image for yourself as a company. This has become an almost unavoidable part of marketing in the natural ingredients for health products sector.
By creating a strong company image with stories about the origins of your products you can also improve the image of your country, and get your country on the European buyers’ radar.
- Use labels that show where your products come from.
- Find partners in your country to help promote one national brand. A good example of a fruitful cooperation is the website of PromPeru.
- Get international support from Global Compact, Fairtrade and FairWild
- Get certified and actively involved in Corporate Social Responsibility. Read more about corporate social responsibility (CSR) on the European Commission’s website.
Try to develop a long-term relationship with European buyers by being innovative. Innovation helps you deliver new and better quality constantly.
Innovation is rooted in continual improvement, monitoring and assessment. To be innovative you will need a reliable and skilled workforce as well as documented procedures.
Strategic partnerships with European manufacturers will help to develop your products/ingredients with a focus on European market needs and trends. Such partnerships lower your risks because there is higher probability on the success of the product on the market.
- Only send samples of your products when requested by a buyer and marked as “type” or “lot” samples.
- In your communication with clients, always be polite and answer timely. Frequent communication builds trust. For example, send regular newsletters.
- Find out if your business partners are reliable. You can use the FiBL factsheet for help.
- Build strategic partnerships with European manufacturers for product development.
To be successful in Europe you need to be transparent about what your products are, and where they come from. The only way to convince buyers of your authenticity is by backing up your claims with solid proof.
For example, Peru balsam historically did not originate in Peru. Peru is a re-exporter of this product, importing it from Central America. As a result, it has become known as Peru balsam. These and other products have damaged the natural ingredients sector by providing misleading information.
To avoid this from happening, European buyers look for traceability. For health products you need to prove your product’s identity, safety and efficacy.
You can use Good Agricultural and Collection Practices (GACP) and Good Manufacturing Practices (GMP) to help provide the correct levels of traceability. Documentation of origin is important proof, as is certification for organic and/or fair-trade products.
Organise a third-party audit of your processes and value chain to help substantiate your claims.
It is also important to protect the origins of natural ingredients for health products through access and benefit sharing mechanisms and denomination of origin. In Europe, buyers are now required by law to comply with the Nagoya Protocol which sets out rules on Access and Benefit Sharing.
- Find out what the procedures are in your product’s Country of Origin (CoO).
- Read the European Customs Union easy-to-use rules-of-origin check list.
- Study the United Nations’ Handbook on Rules of Origin by European Union.
- Focus on product quality, including identity, safety and efficacy. Visit the European Food Safety Authority (EFSA) website for information on quality assurance systems based on these essential factors.
- Learn about the International Risk Assessment Dialogue being spearheaded by the Directorate-General for Health and Consumers (DG SANCO) of the European Commission.
- Have a look at the ITC Guide to Geographical Indications (PDF). Also see this page about Geographical indications and traditional specialities on the website of the European Commission.
Providing clear and adequate information and documentation about your company’s products and processes is crucial in a business relationship with a European buyer.
See the International (UN) Standards guidelines and Good Practices (GxPs) for information on how to compile this documentation. Which product (natural ingredient) documentation you need is specifically spelled out in the European Union legislation for medicinal products for human use and food supplements.
Before they can be sold on the European market, all medicinal products in the European Union are subject to a strict testing and assessment of their quality, efficacy and safety.
Once placed on the market they continue to be monitored to assure that any aspect which could impact the safety profile of a medicine is detected and assessed. This monitoring is called pharmacovigilance.
Larger European companies will have to meet new process and product (CSR) documentation requirements. Their suppliers will therefore be asked to make value chain information (by filling buyer questionnaires) and Code of Conducts available.
- Implement the Good Agricultural and Collection Practices of WHO and/or EUROPAM, and the European Commission’s Good Manufacturing Practice Medicinal Products for Human and Veterinary Use.
- Document your discussions at meetings with potential buyers.
- Be clear and concise in your documentation with clearly-defined costs and well-labelled products.
- Use product and process information for marketing your products (see the tip above on formulating a clear product offering).
- Include Technical Data Sheets/Specifications. For more information, see our manual for developing Technical Data Sheets and Safety Data Sheets for natural food additives.
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