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Which trends offer opportunities on the European spices and herbs market?

Takes 17 minutes to read

The European demand for spices and herbs is growing. This fact is mainly due to trends such as healthy living, interest in new tastes and convenience. Due to high prices and a sense of scarcity, European buyers are continuously looking for new suppliers. You can find opportunities on smaller or niche markets focusing on special varieties, improved quality and sustainability. However, you should comply with strict requirements for quality, food safety and traceability to enter the European market..


1 . Growing demand for spices

European imports of spices and herbs from developing countries have grown significantly in recent years, by 6.1% annually between 2012 and 2016 (see Figure 1). The global spices market is expected to grow by 5.1% between 2017 and 2021.

The European market for spices will continue to grow, but due to the maturity of the industrial sector, the European growth is slower than in other regions according to Market Watch.

Most direct European imports come from developing countries (97% of the total imported volume). The positive market conditions therefore make it possible for you to benefit directly. Volume-driven, uniform product markets could provide opportunities, but competition is higher and margins are lower on such markets.

As a small to medium-sized enterprise, you will find good opportunities in supplying so-called speciality spices and herbs that are traded in smaller volumes. Examples that could be interesting are:

  • special varieties (e.g. Mexican chillies, Tellicherry peppercorns);
  • a focus on product characteristics (e.g. better colour and taste);
  • customisation according to buyer’s preferences (e.g. very coarse grinding);
  • sustainability.

Tips:

  • Directly target countries that now rely mostly on other European countries for their supply (countries other than the Netherlands, Germany, the United Kingdom, France and Belgium). These countries might, however, require further processing, packaging, smaller volumes and other services.
  • Focus on local or regional markets as well, such as the Asia-Pacific region. This area is projected to grow at an annual growth rate of 7% from 2015 to 2020, the fastest-growing market for spices in the world.

2 . Growing popularity of ethnic food

The demand for ethnic food is rising in Europe. Reasons for this increase include the growing multicultural population in Europe and the fact that Europeans are travelling more and more to exotic destinations. As a result, the demand for spices and herbs used in exotic cuisine is also rising.

At this moment, the following tastes are especially popular:

  • Chinese (pepper, ginger, anise);
  • Indian food (curry, chillies, cardamom);
  • flavours of Thai food (cassia cinnamon, cloves, nutmeg);
  • Vietnamese cuisine (ginger, chillies, fennel, pepper).

The ongoing search for new tastes by cooks, food manufacturers and consumers will ensure that the market for spices and herbs continues to grow. This situation is the case on western European markets as well as in regions such as southern and eastern Europe, where the demand for ethnic food is still small.

Smaller food processors, retailers and brands specialised in ethnic food are strong forces on the growing market for ethnic food. However, large retailers and multinationals are also increasingly active on this market.

It is easiest for you to supply to smaller processors, retailers and specialised brands, as these parties are less demanding in terms of food safety, service and volume. They often import directly from developing countries and have close relations with their home country, making it easier for you to connect with them.

The size and composition of ethnic communities differ strongly by country, so opportunities will also be different. For instance, within western Europe, there are large differences between:

  • the United Kingdom (Indian, Pakistani and Bangladeshi);
  • the Netherlands (Indonesian, Turkish and Moroccan);
  • Germany (Turkish);
  • France (Moroccan, Algerian, other communities in north Africa, French-speaking countries in west Africa).

It is also important to realise that ethnic food tastes vary by region, country and even buyer. Indian food in the United Kingdom tastes different from that in Germany, and uses different ingredients and mixes.

Tips:

  • Be aware that the demand for specific spices and herbs differs by country. When selling composite products such as spice mixes, you might have to adjust your product to the region or even the buyer to which you are selling. See our fact sheet on Spice and herb mixtures and other fact sheets such as pepper, dried ginger, cloves or nutmeg for more information.
  • If you want to learn more about the European market for ethnic food, please see the following paid studies by Market Research and Mintel.
  • See the McCormick Flavour Forecast 2017 for more information on the latest global trends in taste.
  • There are specific trade fairs for ethnic food in Europe. Ethnic Food Europe is a good example. The exhibitors’ list provides interesting trade leads.

3 . Tight supply leads to high prices for most spices

There has been an overall trend of increasing prices on the global market for spices and herbs. The increase is mainly due to a growing demand while production stays behind. Figure 2 illustrates the general increase between 2009 and 2016.

Saffron is an exception. The prices of saffron have decreased slowly over the years, which could be caused by the illegal trade and the production of fake saffron around the world.

In addition, the European import prices of vanilla increased significantly between 2012 and 2016 (by 55% annually). This fact is mainly due to production problems in one of the main producing countries, Madagascar. The index of vanilla rocketed from 100% in 2012 to almost 700% in 2016. As a result, the data for vanilla were not included in Figure 2.

Looking ahead, it is questionable whether the supply will be able to keep up with the demand. New plantings of spices and herbs might not be able to satisfy the global demand and replenish low stock levels.

A structural challenge is to find new farmers. Despite the high prices, many young people are not interested in cultivating spices and herbs.

Industry experts expect prices to remain high or in some cases to continue to grow. The large price drops that we saw in the past are not expected to occur again in future.

It is interesting to see that the European demand has continued to grow despite the high prices. Spices and herbs are minor but important ingredients that contribute little to the total cost of the food in which they are used. The demand is relatively unaffected by price changes.

With a stable economic outlook, the European market will provide excellent opportunities for you to increase profitability and invest in your own company.

Tips:

  • Keep yourself up to date on the global supply situation and prices. In this way, you can determine your competitive position and find the right moment to sell.
  • Make sure that you have a good overview of short- and long-term price developments as well.
  • See ITC’s Market Insider, Nedspice, Zobian and Public Ledger (paid service) for crop and price reports.
  • See our fact sheets for more product-specific prices and sources, as well as information on price developments. For example, you can consult our fact sheets on cinnamon, cardamom, pepper, vanilla, dried ginger, chillies or cloves.
  • Use sector experts in your network to complement price information.
  • See our study of Exporting vanilla to Europe for more information about the import price fluctuations on the vanilla market.

4 . European buyers look for compliant suppliers

 The requirements of European buyers for quality, food safety and sustainability are among the strictest in the world. Only a small share of the total global spice and herb crops are compliant with European Union requirements.

Due to the high prices, there is also increased fraud with spices and herbs (e.g. cumin with peanut shells, oregano with olive leaves), causing major concerns for European buyers. European buyers have serious problems with finding sources for the products that they need.

Moreover, requirements are continuously becoming more strict. In 2015, for example, new legal requirements were introduced for polycyclic aromatic hydrocarbons (PAHs) for smoked spices and herbs as well as stricter requirements for ochratoxin A (OTA) for pepper, capsicums, nutmeg, mace, turmeric, ginger and mixtures.

European buyers are continuously looking for suppliers that can meet the strictest requirements. This fact can provide opportunities for you as an exporter. European buyers are looking to establish long-term relationships with reliable suppliers. They are also looking to source from other suppliers in order to complement and secure their supplies, including smaller suppliers.

In addition, European buyers are moving closer to the source of supplies in order to control their supply chain. They want to know more and more about the origin of their products as they are working towards a more traceable supply chain. In some cases, they will even want to know from which field their products come. In other cases, having the right papers (e.g. test reports, steam sterilisation certificates) is sufficient for buyers.

Some buyers are looking to work directly with farmers, avoiding middlemen that add no value. This development could offer opportunities for you, but it may also threaten your own position in the supply chain.

Because of increasing supply scarcity, exporters can easily sell their products on the world market. As a result, exporters are not always interested in supplying to strict European buyers. With the growing global demand, the influence of European buyers will decrease further.

At the same time, countries outside of Europe are adopting stricter requirements for food products as well. The Codex Alimentarius Commission is holding talks to harmonise global spices standards further. Various producing countries have submitted proposals for standards, including:

-       India (standards for dried chilli, ginger and garlic);
-       Egypt (standards for basil and coriander);
-       Indonesia (standards for nutmeg);
-       Nigeria (standards for cloves and ginger).

It will still take years for such harmonisation to take effect. It is clear, however, that it is increasingly important to focus on quality and food safety, whether or not you want to supply to the European market.

Compliance with quality and food safety standards is also a strategy for adding value. Due to supply insecurity, products that comply with European Union requirements often fetch a higher price.

Tips:

  • Invest in quality and food safety. As requirements on the European market and your local market are becoming stricter, strive to make continuous improvements.
  • Ensure that you continue to add value in your supply chain by working together with other exporters and farmers in your region. It is very interesting for buyers if you can organise farmers and ensure their compliance with buyers’ requirements. It might also be hard for you to supply a full container (minimum order size), but this situation could be possible when working together. Further areas of collaboration include collection, quality testing, storage and transport.
  • See our study of Buyer requirements in Europe for spices and herbs for more information.

5 . Growing awareness of sustainability

 European buyers pay more and more attention to their responsibility for the social and environmental impact of their activities. The most important issues that European buyers are concerned with include:

-       child labour;
-       healthy and safe working conditions;
-       respecting labour laws;
-       paying minimum wage;
-       correct use of pesticides (if only to meet the legal limits for residues, so-called maximum residue levels).

While sustainability used to be an issue on niche markets only, it is now high on the agenda of the entire sector.

The most important European players are collectively working on making the spices and herbs supply chain more sustainable. One example is the Sustainable Spice Initiative, with members such as Unilever, Olam and Verstegen. The sales of certified sustainable products are also growing on the European Union market.

In the coming years, sustainability will become an even more important topic in front-running regions such as western and northern Europe. At the same time, sustainability will also receive increased attention in southern and eastern Europe, as well as in developing countries.

The sustainable segment provides excellent opportunities for small and medium-sized exporters to set themselves apart. Whether you are successful depends on your approach, ambition and level of professionalism. It takes significant effort over a long period of time to be successful on this market. Nevertheless, small steps can already be taken towards a more sustainable approach.

It is important to realise that sustainability is still developing within the spices and herbs sector. Issues that would have given you a competitive advantage a few years ago are now considered common. Opportunities shift and it is important to move along with developments.

Tips:

  • If you want to become more sustainable, start by addressing the most important issues mentioned above. From there on, look at more strategic choices. Determine with which core values you want to work (e.g. social, environmental or both).
  • Monitoring your performance on sustainability through audits, verification or self-verification is a way to be rewarded for your efforts, either by opening up new markets and/or by receiving a price premium.
  • Work together and build strong relationships with your buyers and suppliers. Look for European companies that can help to invest in the training and certifying of farmers. Work with NGOs, national and international governmental organisations to attract capital.
  • Sustainability can provide opportunities for you locally as well as regionally, since sustainability is becoming more important all around the world. The quicker you move onto the market for sustainable products, the larger your competitive advantage will be.
  • For more information, read our study of the Market for sustainable spices and herbs in Europe.
  • See our study of Buyer requirements in Europe for spices and herbs for more information on certification and other related topics.

6 . European consumers looking for convenience

The demand for easy-to-prepare and ready-cooked meals is increasing in Europe. European consumers are spending less and less time on preparing meals due to their busy schedules, while the number of single households is increasing.

Easy-to-prepare and ready-cooked meals rely on spices and herbs to retain and enhance food flavour (e.g. ready-to-use spices and herbs, seasonings and condiments).

In addition, these products increase the demand for crushed and ground spices and herbs, as well as spice and herb mixtures. Branch association Food and Drink Europe identified convenience as a key innovation trend in the European food sector. As a consequence, the demand for processed spices and herbs will continue to grow.

For you as an exporter from a developing country, the growing market for processed spices and herbs provides some opportunities. Grinding and crushing is already taking place on a large scale in developing countries, thanks to low wages as well as improved processing facilities and detection techniques. Imports of crushed and ground spices accounted for around 10% of all imports from developing countries in 2016 (see Figure 3 below).

As part of the growing demand for processed spices and herbs, the market for spice and herb mixtures is also growing. In 2016, about 13% of imports of spice and herb mixtures originated in developing countries. However, the market remains small and European processors are strong competitors. For this reason, your best chance is selling to buyers who are specifically interested in specialised ethnic food which is processed and/or packed in the country of origin.

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Tips:

  • Only consider crushing, grinding, blending and packing after you have taken value-adding steps such as cleaning and quality improvement. These last types of added value are easier to achieve, require less financial investment and earn you an interesting premium (usually around 5%).
  • For more information, see our studies on crushed and ground spices and herbs and consumer packed spices and herbs.

7 . Healthy living

Healthy living is one of the most important trends in Europe. Unhealthy food ingredients such as salt, sugar and synthetic additives are increasingly replaced by natural ingredients such as spices and herbs. An example is what Unilever and Schwartz are doing in this context.

Because of this trend, consumers want to know exactly what they eat. They expect clear labels on the product that they buy, indicating the exact ingredients and possible allergens. To this end, clean labelling and gluten-free labelling are gaining popularity, also on the spices and herbs market.

Another important trend is that the per capita consumption of meat in Europe has stabilised and is even decreasing in some European countries (see this article on meat consumption in Europe for more information).

A decreasing meat consumption means that the demand for other food products will grow, including products which imitate the taste of meat or which have a similar nutritional value. This so-called meat substitute market is expected to grow globally by 6.4% per year between 2014 and 2019.

Consumers often choose meat substitutes for sustainable motives. Many sustainable issues such as climate change, animal welfare and health are related to meat consumption. There are opportunities for sustainable spices and herbs (especially organic) in the meat substitute segment.

Tips:

  • Target buyers in the growing healthy living, vegetarian and meat substitute segments, or develop products and ingredients to be sold on these markets. This strategy requires substantial product and market development, so work closely with buyers and sellers. Determine whether you can also service your local market with these products.
  • Ask buyers for their recipes or look at recipes that are already on the market. Be aware that the price of salt is significantly lower than most ingredients. As a result, the cost price of your product might increase when substituting salt with spices and herbs.
  • Talk to buyers and visit trade fairs to obtain more information about the vegetarian food market. Veggie World is a European trade fair specifically aimed at this market.
  • Refer to the database of the Dutch blender Verstegen for ideas on vegetarian and vegetable spice mixes.
  • Allergen-free spices and herbs can be an interesting niche market. Several companies are already active in this market segment, such as Dutch Spices and EHL Ingredients.
  • Check the website of the Food Standards Agency in the United Kingdom to learn more about up-to-date labelling standards; for example, regarding gluten-free labelling.

8 . Fluctuating exchange rates

Exchange rate fluctuations are an important factor in international trade. International spice and herb prices are often quoted in US dollars. The value of the euro has fallen significantly in relation to the US dollar and other currencies during recent years. This situation makes it more expensive for European buyers to purchase.

Fluctuating exchange rates especially affect buyers that have long-term contracts with their suppliers in which price agreements have been made. Given the scarcity on the world market, buyers will still want to work with long-term relationships, but they might postpone purchases in hopes of a better exchange rate.

Tip:

Steam sterilisation increasingly important

European buyers are increasingly demanding steam-sterilised spices and herbs, as these products meet the strict requirements for microbiological contamination. Unfortunately, other types of contaminants such as pesticide residues and mycotoxins are not sufficiently affected by this treatment.

If you can use steam sterilisation on your spices and herbs at the source, you can earn a small premium. Investment in sterilisation facilities can be very costly, however (up to € 1 million). Be aware that some European importers will only perform the sterilisation themselves and thus will not rely on you for this service.

A downside of steam sterilisation is that it has a negative effect on the volatile oil content of spices and herbs, which is what produces their flavour. European buyers would switch to other methods if they were equally safe, acceptable to consumers and not too expensive.

At the moment, there are no alternatives to steam sterilisation that meet the requirements of buyers. However, research is being done, including the project commissioned by the European Union to GreenFooDec.

Tips:

  • If you do not have the means to invest in sterilisation facilities, look for local companies that can provide this service for you.
  • Steam sterilisation is only useful if you also take food safety into account with drying, storage, processing, packaging and transporting.
  • Keep in mind that mycotoxins and other contaminants are insensitive to sterilisation. Make sure that you check for these contaminants in all steps of the chain.
  • Stay up to date on developments in steam sterilisation. Any investment should be carefully considered. If better technologies are developed, steam sterilisation will become a less interesting option for buyers.

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