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What competition do you face on the European market for oilseeds?

Takes about 6 minutes to read

Complying with buyer requirements is essential if you want to be competitive on the European market for oilseeds. Besides meeting legislative requirements, buyers also expect you to meet their specifications regarding volume, quality and certification. These specifications can vary according to the segment you target. Having a differentiated product will give you a competitive edge. Establishing long-term relationships with buyers will lead to opportunities if you offer high-quality products and services. 


1 . Market Entry ‘What are the opportunities and barriers when I try to enter the market?’

Meeting requirements is crucial

Complying with the minimum legislative requirements of the European Union poses a significant challenge to exporters of oilseeds. Suppliers often underestimate the level of control imposed by European authorities regarding food safety, which can lead to border rejections and damage your reputation. The European Union presents the strictest food safety standards worldwide, and laboratory testing used to detect non-compliance is becoming ever more sophisticated.  

In addition to official border controls, European buyers are also increasingly vigilant when it comes to compliance with legislative and additional market requirements. These can be related to quality parameters, food safety and certification. 

Buyers will closely monitor supplies and will not accept deliveries which do not correspond to their minimum specifications / expectations. Cases of non-compliance may have serious implications for buyers with food safety authorities and consumers. The consequences will also affect you as a supplier and can harm your business relations. 

The market entry process for developing country exporters of oilseeds is highly influenced by their target segment: 

    • Speciality/niche segment (lower volume, higher value): In this segment, volume and prices are not the most important aspects. The competitive edge of suppliers lies in (very) high quality and unique varieties, or may be presented in terms of certification (organic, fair trade) and other sustainability aspects. 

      Tips:

      • Follow European health control procedures strictly. One of the most common problems faced by oilseed exporters is contamination (e.g. aflatoxin in groundnuts and salmonella in sesame seeds). Therefore, you should learn and comply with the maximum contamination levels allowed by the European legislation.

      • See our study about buyer requirements on the European oilseeds market for more details on contamination levels and other legal requirements such as pesticide residues. 
      • Learn about common problems faced by suppliers during border controls and adopt appropriate measures to avoid them. On the website of the Rapid Alert System for Food and Feed (RASFF), you can browse through various border rejections and alerts for specific oilseeds under category ‘nuts, nut products and seeds’.  
      • Consider getting certified for quality management. If you are a new exporter to the European market, certifications for quality control and traceability can be a proof of reliability for your potential buyers.  
      • Further information about certification can also be found in our study about buyer requirements on the European oilseeds market. Note that quality management certification may be a prerequisite for some buyers, whereas other buyers may be willing to pay a higher price for your product. 
      • Explore opportunities in niche, certified markets such as organic and fair trade. Opportunities in certified supplier markets may overcome the problem of scale in the initial stages, as buyers of certified products may be willing to buy smaller quantities than in the conventional sector. It is also the nature of these markets that buyers are more likely to work with the supplier to develop certification and capacity. 
      • Do not neglect the presentation of your business story. In the initial stages, a good story (social impact, history, quality, code of practice) may help overcome a lack of certification. 

      2 . Product Competition: ‘What are substitute products?’

      Product substitution: different levels in different industries

      The level of product substitution in the oilseed sector varies significantly per end-user industry:  

      Bakery and confectionery 

      European importers trading in food-grade oilseeds handle a mix of products, functioning as a one-stop shop for their customers:  

      • food manufacturers; 

      • retailers;  

      • catering professionals.  

      For the bakery sector, importers usually handle a standard range of five oilseeds:  

      • linseeds/flaxseeds;  

      • Sesame seeds;  

      • Sunflower seeds; 

      • Poppy seeds and  

      • pumpkin seeds.  

      As such, these oilseeds do not actually compete with each other. They complement each other as individual products in a wider range. Important aspects in this industry are product purity, appearance, size and uniformity.  

      In terms of functionality, however, substitution represents a stronger threat within the oilseed sector.  

      For instance, chia seeds emerged in the last few years as an alternative vegetable source of Omega 3. This has affected the position of linseed in the bakery market, as well as packaged linseed sold for direct human consumption.  

      Despite the market limitations of chia seeds in terms of high prices and Novel Food restrictions (see our study about the European market for chia seeds), as well as other interesting products such as hemp seeds, the product offers an interesting proposition in terms of convenience, health and taste neutrality when compared to linseeds.  

      In addition, chia seeds are also allied with strong marketing campaigns emphasising their origin and health properties.  

      Food manufacturing  

      Within the food manufacturing industry, product substitution generally represents a weak force, but that might depend on whether the oilseed is an essential part of a food product or not.  

      In traditional products such as tahini, sesame seeds cannot be substituted (and are not substitutable) by any other oilseed, since they are the main ingredient in the product’s formulation.  

      On the other hand, substitution in products such as healthy bars (seed/fruit/nut combinations), where oilseeds are one among many ingredients, may represent a stronger force. The substitution of an oilseed in favour of another can be related to factors such as price, availability, consumer preference or supplier reliability.  

      In reality, however, product development and aspects such as packaging and labelling can be a long and expensive process for a food manufacturer, which makes product substitution less likely.  

      Crushing industry 

      The crushing industry is part of the vegetable oil sector. Here substitution represents a very strong force, due to the following aspects:  

      • price; 

      • availability of supplies; 

      • Health aspects and  

      • public image  

      Tips:

       
      • Provide appropriate and complete documentation of your product properties. Focus on: Product description and code; Origin; Certificate(s) [if applicable]; Production: ingredients, additives, process; Sensorial properties: smell, colour, taste, appearance; Packing: net content, kind of packaging, size, layers; Shelf life; Nutritional values; Analytical properties; Microbiological properties; Allergy list.

      • When introducing a differentiated product to the market, invest in marketing aspects. A strong marketing campaign should emphasise the factor(s) which makes your product stand out. Examples include origin, functionality, background story and exotic variety. However, do not make (health) claims which cannot be substantiated by scientific evidence.

      • See our study about competition on the European market for vegetable oils for more information about the crushing industry. 

      3 . Company competition and position in the supply chain: ‘How much power do I have as a supplier, when negotiating with buyers?’ and ‘Who are my rivals?’

      The power dynamics in the oilseed sector 

      The changing character of the European oilseed market from a ‘commoditised’ to a food ingredient sector has reshaped the relationship between buyers and suppliers over the years (see our study about trends in the oilseeds sector).  

      In the traditional commodity market, buyer power is seen as disproportionally stronger than supplier power. Buyers have access to several suppliers of undifferentiated products, and switch from one supplier to another without excessive costs. Suppliers, in turn, are subjected to strict demands:  

      • low price; 

      • sufficient volume and  

      • timely delivery. 

      In a commodity market, companies from different origins compete against each other with very similar products and services; competition is fierce in terms of offering the best price proposition to buyers.  

      For some products, the market is saturated and supply is abundant. In addition, the retail sector in some European countries exerts more and more pressure to keep prices at the lowest level possible as a result of ongoing supermarket price wars. 

      As the sector transitions to a food-ingredient based one (with a focus on quality and relationships), suppliers such as packing / exporting companies are increasingly gaining control over their supplies and having more sophisticated market information and quality management systems.  

      At the same time, tightening global supplies are increasing the dependence of buyers on (a few) suppliers offering consistent volumes, quality and traceability standards. This leads buyers to focus more and more on establishing long-term relationships with trusted suppliers, often offering higher prices for guaranteed higher quality. 

      In speciality markets, rivalry amongst companies is less intense than in ‘commoditised’ markets. Competition occurs at a different level, where suppliers aim to offer a differentiated product to their (potential) buyers in terms of factors such as quality, variety and traceability. In these markets, supply is usually scarcer and demand is growing, which provides a less hostile competitive environment for companies to develop their businesses.  

      In addition, the power of producers and exporters is influenced by their level of organisation. Suppliers who are organised into cooperatives or associations have a better possibility to engage in lobbying, informational and promotional activities.  

      Tips:

      • Comply with the agreed requirements. 
      • Keep your promises. Any problems or nonconformity should be communicated immediately to your buyer.  
      • Respect legal agreements. Do not default on a sales contract, which will have a great impact on your reputation on the market and will jeopardise future business opportunities. 
      • Develop good market information systems to monitor global market movements in oilseeds, as well as to learn about your competitor’s products. 
      • Think long-term. Selling to the highest bidder is not always the best option. Investing in long-term trade relations can be more profitable.  
      • Develop reliable supply chains to build long-term trade relationships with buyers. Trust is necessary from both the supplier and from the buyer, it takes time and patience to build. Respond promptly (within 24 hours) to emails and questions and always follow up if you have promised to do so. 
      • Build a strong story to promote your company. When based on substantiated facts, a good story can help a supplier in overcoming gaps in certification and in gaining the trust of a (potential) buyer. 
      • Search for sector support associations in your country or region. Consider joining them for extra support on lobbying and promotional activities, as well as information on prices, markets and (potential) buyers.