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WHAT FUTURE FOR ESSENTIAL OILS
INTRODUCTION
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Some facts.
The world production of essential oils can be estimated above 150 000 tons for a value of
± 6 billion USD
It has more than tripled since 1990 : 45 000 T and increased by 50% since 2007.
According to several economic analysis, this growth will continue and the expectation for
years 2020s is about 370 000 T for a value of > 10 billion USD.
If you put these figures in perspective with the total world commodity production, E.O.
production is quite small.
The world agricultural production covers about 1.6 billion Ha whereas E.O. production
covers about 600 000 Ha from which F&F uses 250 000 ha, i.e. 0.016% compare to food
production!
E.O.’s farmers are about 1 million vs 1 600 million world farmers, i.e. 0.06% compare to
food farmers.
Main commodity crops :
- corn : abt 1 billion T,
- wheat : 728 000 000 T ,
- rice : 472 000 000 T,
- palm oil : 59 000 000 T,
- cocoa or rubber : 4 000 000 T
The first 3 essential oils (orange, mint and lemon) represent about 100 000 T all together
which is more than 2/3rd of the total production.
They are the industrial E.O.’s crops.
All other E.O.s are produced in small farms or collected from forests:
- Patchouli, Litsea, Citronella, Eucalyptus globulus, Clove leaf …1 000 to 10 000T
- Vetiver, Geranium, Ylang Ylang, Nutmeg, Lavender… : 50 – 400 T
Today, the Industry currently uses about 150 E.O.s instead of 300 + in the past.
The main markets are :
- Food & drinks : 35%
- Fragrance, cosmetics & aromatherapy : 29%
- Household : 16,6%
- Pharmaceuticals : 16%
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WHAT ARE THE ISSUES
1/ DECREASE OF THE AGRICULTURAL LANDSCAPE:
All over the world, the massive extension of urbanization is destroying cultivable fields.
Many years ago, when visiting citrus producers in Sévilla - Spain, I was taken to the last
orange orchard still in production in the very center of the city. Since then, it disappeared
like many others around the city.
The same in Calabria where the Bergamot orchards have been cut down to allow the
extension of urbanization and tourism along the Messina straight. The production had to
move inside the country, in remote areas in the southern part of Calabria.
In Reunion Island, the production of Geranium oil has disappeared mainly for the same
reason.
In fast growing countries like China and India, this will be a major problem in the future.
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2/ RURAL EXODUS.
In 2007, and for the first time in the history of mankind, urban populations have
exceeded those in rural areas. According to a study published by the FAO in June 2006,
an estimated 800 million people have abandoned the country for the city over the last 50
years.
In many producing countries, the young generations leave the farm to the city to study
and get a job. Many farms will stop producing when the present owner retires.
Globally, the handwork will vanish.
This is for instance the case in Bulgaria where they need between 3 and 4 000 pickers
during one month to collect the rose flowers and cannot find enough.
In Ivory Coast, the workers in the palm, rubber or citrus plantations come mainly from
Burkina Fasso. During the civil war 2004-2014, they had no more handworkers.
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3/POLLUTION & CLIMATIC DISORDERS or DISEASES.
If some of the old catastrophes disappeared with the progress, like for instance the
regular floods in China after the building of the 3 Gorges dam, we are still facing a lot of
disasters in producing countries, such as :
- Haiti : Earthquake in January 2010 and Matthew Hurricane in October 2016
- Madagascar : Ivan typhoons in 2008 (1 600 km2 of cultivated crops were destroyed) and
Enawo typhoon in 2016 (30% loss on the vanilla crop)
- Nepal : earthquake in April, 2015
- Domenica : Tropical storm Erika in August 2015 (no more Bay oil).
More generally, the climatic disorders tend to last much longer, like in Indonesia who had
endless heavy rains all over 2016
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On top of this, we see the propagation of new diseases that badly affect productions:
- the “Citrus greening” in Florida where the citrus production decreased by more
that 30% between 2012/13 and 2015/16
- The “lavender disease” caused by a bacteria : stolbur phytoplasme carried by an
insect the cicadelle. In 10 years, half the world production has been lost and the
French production decreased from 85 T to 30 T
4/ POLITICAL RISK
Production is also affected by political troubles.
Ivory coast : more than 1500 ha of bergamot and 5000 ha of Lemon have been planted in
that country in the 80’s. They should have produced ± 100 T bergamot oil and 500 T
lemon oil. Because of permanent conflicts between ethnizes and political parties, the
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proper maintenance was never ensured and production did not exceed 15 T bergamot
oil (5 to 10 tons on average) and 50 T lemon oil (25 T on average). From 2004 to 2014, the
civil war stopped all the production and only a few orchards survived. Today the
production is insignificant.
5/ SWITCH TO FOOD CROPS
In the last 10 years, constant price fluctuation pushed farmers to switch to food crops
which requested less production cost and work and offered more steady and immediate
return.
In 2006, when visiting the geranium fields in Binchuan, I saw many fields already
replanted with Orange trees or Grape vines which are cash crops once in production.
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The grapes are packed directly in the vineyard going directly to the supermarket. Today,
the production of geranium is more or less half what it used to be.
Ivory coast : most planters have switched to palm trees or rubber trees plantation which
is much more secure than citrus.
In Madagascar, farmers always favor various food cultures like rice, letchi, black pepper,
cloves, and only distill when price is good enough.
6/ SUPPLY & COST OF ENERGY
Another major problem we are going to face in the near future is the availability and cost
of energy to produce E.O.s.
In the Comores, there is nearly no more wood available for the distillation of Ylang Ylang.
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In Madagascar, the number of rustic stills used for Clove leaf oil can be estimated around
10 000. This means that they need to burn approximately 750.000 m3 of wood every year
to produce 1 500 T of Clove leaf oil. The wood is cut freely in the wild forest. Just to give
you an idea, this quantity means about 15 000 Ha of 5 years old Eucalyptus Robusta per
year or 10 000 Ha of 5 years old Acacia Mangium. In other words, to ensure the constant
supply of wood from one year to another, you need to plant something like 75 000 Ha of
trees If there is no long term planting program for the production of this oil, either it will
collapse or distillers will have to use fuel or alternative energy which will considerably
impact the price.
7/ COMPLIANCE WITH REGULATION
Since beginning of the years 2000, the new regulation started restricting the use of
essential oils though they are commonly used since ages in the Chinese medicine or the
Indian Ayurveda and many other sectors and countries
It started with the allergens in 2002 which was the reason for the foundation of EFEO –
the European Federation of Essential Oils.
Because of this regulation, several end users decided to change their formulas and asked
their suppliers of perfume not to use substances containing allergens any more.
Then came REACH which, I suppose, all of you know by now. The dead line for
registration is June 2018.
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Small producers or importers will not be able to afford the registration costs and
procedure, and there is a major risk that several E.O.s will simply disappear.
Pesticides are another concern: their detection is more and more accurate and a lot of
oils cannot be used anymore, not only for food but also in perfumery. The education of
farmers is a long process and may take years. In the meantime as a consequence, organic
products are booming, but quantity remains quite small
8/ SYNTHETIC REPLACEMENT
Synthetic molecules have replaced the natural ones, like Citral or Anethol and might
soon do it like for menthol
- Menthol Natural : 30 000 T which price went up from USD 15 in 2010 to USD 30/40
in 2012
- Menthol synthetic: 1 000/2 000 T at USD 20 in 2010 to 5 000/8 000 T at USD 15/20
in 2012
The development of synthetics is linked to the supply situation of raw materials.
For instance, when Indian Sandalwood oil started to become a real problem and nearly
disappeared in the 70’s - 80’s, many synthetic alternatives came up on the market, which
are now currently used in many products.
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9/ INDUSTRY CONSOLIDATION vs RAW MATERIAL PRODUCERS
From 2004 until 2016, the market share amongst the Top 11 raised from 59% to 74% due
to M&A (see the table from Leffingwell published in Perfumer & Flavorist - May 2017).
Their market size is now 25.4 billion USD vs 17.7 billion in 2004.
They are becoming bigger and bigger whereas producers remain quite small. The gap is
growing considerably which makes these end users more vulnerable and obliges them to
reconsider their purchasing strategy.
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HOW TO ADDRESS THESE ISSUES
1/ EXTENSIVE PLANTATION WHERE POSSIBLE.
To produce an equivalent aggregate of crop production in the world in 2012 required
only about 32% of the land needed in 1961 (see table here-under).
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This shows that it is possible to compensate the general decrease of agricultural
landscape by agricultural improvements.
As an example, started in 1999, the huge TFS plantation program of Sandalwood trees in
Australia over 20 years, with more than 2.6 million trees planted covering 6 500 ha, is
now offering a widely sustainable source and a second life to this oil.
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The same for Oud oil in Thailand where a forestry group planted 40 000 Aquilaria trees in
2006 to offer a sustainable source of oud oil
In Madagascar, our company QUIMDIS has launched a 5 years planting program of
25 000 Clove trees distributed for free to several villages around Tamatave which had
been devastated by the 2008 typhoon. This brings work and income to the local
population while enhancing the resources so as to secure the supply to our customers.
2/ YIELD IMPROVEMENT :
This is probably were there is the best perspective for producers of raw materials.
IFF initiated several mechanization programs for some of their major products: Vetiver,
Blackcurrant, Orris and Narcisse which gave excellent results.
From 30 kg Narcisse flowers harvested manually they obtained 1 000 kg harvested
mechanically, per day per man
In Ivory Coast, some old citrus producers who took good care of their orchard reached
easily 30-40 T of Lemon and Bergamot fruits per ha whereas the average in that country
is as low as 10-15 T, due to lack of maintenance.
Not enough to cover the expenses !
The selection of species can also give good results, both in term of quantity or quality:
in the 90’s, the Indian company KEVA made a selection of one particular Patchouli plant
that they extensively reproduced by tissue culture and distributed it to the farmers. This
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specy had a better yield in oil and a stronger well appreciate earthy note compare to the
present one which has a gurjun note.
All this certainly helps the farmers and their family to get better income and keep
producing instead of migrating to the city.
3/ SUPPORT FROM THE STAKEHOLDERS
As we have seen, the major end-users are becoming vulnerable and need to support the
raw material producers together with all the stakeholder of the F&F industry.
This support can be proposed under different forms :
- Partnership (like Chanel for the Jasmin and rose in Grasse)
- Investment in plantations
- Long term contract or crop financing (this is what QUIMDIS does in Ukraine for the
coriander seeds or in Madagascar for the Black Pepper)
- Technical and agronomy support
- Organization of the production
- Setting processing plants near the production centers (Givaudan and IFF in
Madagascar for the Eugenol and derivatives, Symrise and Takasago also in
Madagascar for the vanilla)
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We can observe that the positions started to change a few years ago, between 2008 and
2012, when the supply of most raw materials became a problem and the prices went sky
rocketing :
- Clove leaf oil : EUR 5-6 in 2010 to EUR 18 in 2011,
- Nutmeg : USD 80 in 2011 to USD 120 in 2012
- Patchouli : USD 35 in 2007 to USD 150 in 2008
- Orange : USD 2 in 2010 to USD 7 in 2011
Producers discovered that there was no longer upper limit to prices as it was admitted
since ages, and users found that they could survive with such high prices;
4/ DISEASES
When the lavender disease started propagating, the producers and users of lavender
decided to gather and finance researches to eradicate the disease. Chanel, Givaudan,
L’Occitane and many others contributed to funding these researches together with the
lavender research center CRIEPPAM.
Regarding citrus greening, no cure has been found yet, in spite the USDA allocated a
budget of USD 31.5 million to expand research. Several experimental treatments are
being experienced with antibiotics, penicillin G sodium and biocide 2.2-dibromo-3-
nitrilopropionamide.
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5/ NEW MARKETS
An alternative to food crops can be proposed to the farmers with the emergence of new
applications / markets in cosmetology, pharma, animal feeding.
As an example, the use of Clove leaf oil derivatives is booming with new applications such
as animal feeding to replace antibiotics banned in 2008 in EU.
The global consumption is now over 5 000 T which the production cannot always supply.
New plantations have been made in Madagascar (as we have seen) and in Indonesian
both to supply the strong demand of Clove buds for the Kretek tobacco industry in this
country as well as the increasing need of Eugenol and derivatives.
In Madagascar, more than 1 500 Ha of Artemisia Annua have been planted in the last 9
years for the extraction of Artemisinine which is massively used as anti-malaria. This
employs about 10 000 independent farmers.
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6/ ENERGY
To stop or decrease deforestation, several programs are being initiated in the Indian
Ocean islands.
In the Comores Islands a program is being implemented by an NGO to improve the fire
place in order to reduce the distillation time and consequently the quantity of wood
burnt.
Madagascar : a project is under discussion with the Minister of Environment and
International Funds. The project consists in renovating the (10 000) rustic stills and then
reduce the distillation time by half to save 35% of wood while getting a yield 10% higher.
This project will result in a massive reduction of the quantity of wood to burn, from
750 000 m3 to 450 000 m3, needing 9 000 Ha Eucalyptus Robusta vs 15 000.
7/ REGULATION
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Nowadays a better relationship has been established with the authorities whether in EU
or in USA. A constructive dialog is ongoing between IFRA and EFEO with the EU
Commission and ECHA, to ease as much as possible the implementation of current
legislations and balance the new ones based on the ratio : cost / benefit.
Regarding pesticides, new natural solutions appear that may prevent farmers or planters
to use them. This is the case of methyl eugenol which is an insect attractant. However, its
use is a bit complicated as it is very difficult to differentiate insects attracted in the traps
and avoid killing the pollinating ones like bees.
CONCLUSION
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Essential oils are probably at a cross road.
The market is demanding and should keep on growing, not only on traditional uses but
also on new markets which seem to offer a huge potential.
However the production may not be able to cope for the reasons we have mentioned
above.
For many years, the market was supplied “as it comes” and “when available”.
Nowadays, it’s not possible anymore and the supply security has become a necessity.
Under the pressure of urbanization, regulation, climate or political uncertainty,
production cost, many small producers may disappear.
The good news is that, facing this situation, end users cannot just let it go and are more
and more willing to support the producers of the raw materials they need for their
manufacture.
A new order is appearing in the whole supply chain where end-users are alternatively
supporting both their direct suppliers, whether importers or traders, and/or the
producers at origin.
With internet and congresses, everybody knows everybody. Each ring of the chain now
has to play a role and find his place in this new order.
All companies need to bring something new or special, whether getting more involved
into production or work on the products to supply material ready to use to their
customers.
The sustainability of our raw materials has become a major concern and the whole supply
chain has no choice but being proactive.
This is what is requested by L’Oréal in their 2020 program :
<<By 2020, 100% of our strategic suppliers will be participating in our supplier sustainability programme. • All
strategic suppliers will be evaluated and selected on social and environmental performance. • All strategic
suppliers will have completed a self-assessment of their sustainability policy with our support. >>
The same way REACH regulation obliged users, importers and producers to
communicate in order to get a complete information on their product both ways, and
know better what they put on the market, the new order will create new opportunities
for the stakeholders to cooperate closer and more openly so as to ensure a sufficient
supply of raw materials on the long term.
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Bibliography :
CCPARM – Comité des plantes à parfum, aromatiques et médicinales – « Essential oils, an increasing world market » - Dec 2016
Dominiques Roques : « Essential Oils : in search of a new balance in a fast changing agriculture – EFEO AGM 2012.
Max Roser : Land Use in Agriculture – Our world in data
John Leffingwell & Patrick Newton : “Diversifying F&F growth” in Perfumer & Flavorist May 2017