Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Market insights for Indonesian spices
Indonesia is one of the largest global producers of spices; the
EU is one of the largest global markets for spices. This module
addresses the dynamics between these two players, identifying
trade patterns, (sustainability) trends, market channels and
other aspects which will help Indonesian exporters access the
EU market more successfully.
This tailored CBI Market Intelligence addresses sector-wide themes for spices,
but has a special focus, both quantitatively and qualitatively, on the following
products: nutmeg, cinnamon, cloves and turmeric. These spices were selected
during a pre-research phase which identified potential opportunities for
Indonesian exporters.
A special focus is also drawn to sustainable markets and initiatives for spices
(both niche and mainstream), as well as health & wellness aspects which are
relevant for this sector.
Indonesian production of spices
In the past, Indonesia attracted merchants from all over the globe seeking
possibilities to make fortune in the international spice trade. The archipelago is
still one of the world’s largest spice-producing countries, having earned the
reputation of ‘the Spice Island country’. Regarding the spices selected for this
study, Indonesia clearly plays a leading role worldwide.
Indonesia was the second largest global producer of the product group
‘nutmeg, mace and cardamons’ in 2011, at 22 thousand tonnes, slightly
behind Guatemala (23 thousand tonnes, consisting mostly of cardamons). Both
Indonesian and Guatemalan production decreased since 2007. India, the third
largest global producer, saw its production increase significantly in the same
period.
In the case of cinnamon, Indonesia is by far the largest global producer,
having reached a production of 93 thousand tonnes in 2011. China and
Vietnam are also significant producers of cinnamon, at respective production
volumes of 67 and 20 thousand tonnes in 2011. Whereas both Chinese and
Vietnamese production increased significantly since 2007, Indonesian production
experienced a decline of 2.3% on an annual basis.
Indonesia is also the dominant global producer of cloves, with a total
production volume of 75 thousand tonnes in 2011. Madagascar’s production
reached 6.8 thousand tonnes in the same year, making it the second largest
global producer. Tanzania followed closely behind, at 6.7 thousand tonnes.
Madagascar’s and Tanzania’s production declined at an annual average rate of
nearly 10% since 2007, whereas Indonesian production declined more modestly,
at 1.5% yearly.
The product group ‘spices not elsewhere specified’, which includes
turmeric, was dominated by Indian production. In 2011, India’s production
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
volume amounted to 1.5 million tonnes, more than 10 times larger than the
volumes produced by the second and third largest producers worldwide:
Bangladesh (128 thousand tonnes) and Turkey (114 thousand tonnes).
Indonesian production was much more modest, at 3.1 thousand tonnes in
2011, which represented an annual decline of 25% since peak year 2009.
The general decline in Indonesian spice production can be attributed to a
number of reasons. The Asian crisis, in the late nineties, and the collapse of the
Indonesian currency contributed to the negative impact on the price of
Indonesian spices. Due to low prices, high investments and slow return (e.g. it
takes cinnamon trees around 15 years to grow to the point of collection),
farmers gradually abandoned spice production in favour of more profitable
crops, such as chilli, potatoes, cocoa and rubber (Tripper, 2010 and industry
sources).
Table 1: World’s largest producers of selected spices, in 1,000 tonnes, 2011
Product Main producing
countries
Production in
2011,
in 1,000 tonnes
2007-2011
change, in %
nutmeg,
mace &
cardamons
Guatemala 23 -3.9%
Indonesia 22 -1.9%
India 17 4.9%
cinnamon Indonesia 93 -2.3%
China 67 5.1%
Vietnam 20 3.0%
cloves Indonesia 75 -1.5%
Madagascar 6.8 -9.1%
Tanzania 6.7 -9.1%
spices n.e.s.,
incl. turmeric
India 1,525 8.4%
Bangladesh 128 2.3%
Turkey 114 8.6%
Indonesia 3.1 -5.8%
Source: FAOSTAT, 2013
Recently, the Indonesian government has directed their policies toward the
revival of the Indonesian spice industry; e.g. rehabilitating and expanding
existing spice fields. According to Jakarta Post (2013), ‘Indonesia is seeking to
more than triple its spice exports in 2015 to take advantage of the world’s
growing spice trade, a move that could see it revive its glory years as a world
renowned spice exporter.’
Sustainable production of spices in Indonesia
It is not possible to determine the exact volumes of sustainably-produced spices
in Indonesia. Whereas production figures give a rough indication of organic
crops, fair trade production data are not available. Data for production of
Rainforest Alliance-certified spices are not available either, since it is a newly
introduced sustainability standard for spices. Read more about it under the
section ‘EU market trends for spices’.
The total organic agricultural land in the country amounted to 74 thousand
hectares in 2011 (Indonesian Organic Alliance, 2012), representing about 0.1%
of total agricultural land in Indonesia. Spices, specifically, amounted to less than
1 thousand hectares. Export crops, especially those located outside of Java,
make the bulk of organic-certified products in Indonesia.
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Indonesian exports of spices
Looking at Indonesia’s spice production in a global perspective provides a good
basis to analyse the country’s role as a supplier to the international market.
Spices are Indonesia’s fourth largest exported agricultural commodity, after
shrimp, fish and coffee. In addition to pepper, the spices selected play an
essential role in making this a highly important sector for the Indonesian
economy.
Indonesia’s nutmeg exports reached 8.8 thousand tonnes in 2012, having
experienced an annual average decrease of 2.8% since 2008. Around 27% of
nutmeg exports were destined to the EU in 2012; the main destinations
worldwide were Vietnam (29%) and the USA (18%). Exports to the EU remained
stable between 2008 and 2012.
Cinnamon exports were the largest among the spices selected, having reached
40 thousand tonnes in 2012. However, Indonesia’s exports decreased at an
annual average rate of 1.3% since 2008. Nearly 20% of Indonesia’s cinnamon
exports were destined to the EU market in 2012, having increased slightly at an
annual rate of 1.5% since 2008. The largest export destination in 2012 was the
USA, accounting for nearly 38% of Indonesia’s exports.
Indonesian exports of cloves reached 5.9 thousand tonnes in 2012, having
increased at a strong annual rate of 8.7% during the review period. Around 11%
of total exports were destined to the EU, also increasing sharply at an annual
rate of 38%. The main export markets in 2012 were India (23%) and Vietnam
(21%).
Turmeric exports by Indonesia peaked in 2010, having reached 6.1 thousand
tonnes and representing an annual increase of nearly 150% in relation to 2008.
Exports declined between 2010 and 2012, to 1.2 thousand tonnes in the latter
year. Overall, turmeric exports had a significant increase of 5.2% during the
review period, accompanying the increasing demand from the Indian market. A
small share of 2.9% of total Indonesian exports were destined to the EU in
2012, which represented a strong annual increase of 24% since 2008.India was
by far the main export destination in 2012, accounting for 38% of Indonesian
exports, followed by Taiwan (21%).
Figure 1: Indonesia’s spice exports, in 1,000 tonnes, 2008-2012
Source: ITC Trademap, 2013
9.8 118.8
43
46
40
4.36.0 5.9
1.0
6.1
1.2
0
5
10
15
20
25
30
35
40
45
50
2008 2010 2012 2008 2010 2012 2008 2010 2012 2008 2010 2012
nutmeg cinnamon cloves turmeric
To the EU
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
EU imports and exports of spices
Official trade figures do not distinguish between conventional and sustainable
spices. For this reason, it is not possible to determine the exact share of, for
instance, organic or fair-trade certified spices imported into (or exported from)
the EU market.
Imports
The EU does not produce the spices selected for this study, thus depending
entirely on imports from producing countries to fuel its large consumer market
and extensive food industry.
Among the selected products, cinnamon was the largest spice imported into the
EU in 2012, amounting to 19 thousand tonnes / € 107 million. Imports increased
significantly at an annual average rate of 5.5% in volume and 11% in value
since 2008.
Turmeric imports were also quite large, amounting to 12 thousand tonnes / €
20 million in 2012, having increased at an annual rate of 4.5% in volume and
15% in value since 2008. Imports of cloves also increased at a strong rate in
the review period, by 6.3% in volume and by a remarkable rate of 26% in value,
having amounted to 4.0 thousand tonnes / € 31 million in 2012.
Nutmeg was the only selected product whose EU imports experienced a decline
in volumes between 2008 and 2012. EU imports reported an annual average
decrease of 1.5% in volume. In value, however, nutmeg imports into the EU had
a strong growth of 24% annually, thus registering a sharp price hike for this
product, mainly due to adverse weather conditions which affected supply levels.
Figure 2: EU imports of spices, in 1,000 tonnes, 2008-2012
Source: Eurostat, 2013
The Netherlands was the largest EU importer of nutmeg, cinnamon and cloves
in 2012. In the case of cloves, for instance, it accounted for a large share of
37% of total EU imports. The Netherlands is one of the largest spice trade hubs
in the EU, and is an important port of entry for Indonesian exporters into this
market.
Germany was the second largest importer for these 3 products, not only
indicating the importance of Germany as a European hub for spices, but also as
7.8
7.8
7.3
15
18
19
3.1
3.8
4.0
9.7
11
12
0 5 10 15 20
2008
2010
2012
2008
2010
2012
2008
2010
2012
2008
2010
2012
nutmeg
cinnam
on
cloves
turmeric
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
the largest consumer market in the region. The German food market amounted
to nearly € 170 billion in 2013.
The situation is slightly different for turmeric. The UK is by far the largest EU
importer and market for this product, due to its large South Asian population
and its influence in the country´s cuisine. There are around 1.5 million people of
Indian descent in the UK, with the highest concentration in the London area (UK
Office for National Statistics, 2011). In 2012, the UK accounted for nearly one
third of total EU turmeric imports, followed by Germany (20%) and the
Netherlands (16%).
Figure 3: Main EU importers of spices, in volume, 2012
Source: Eurostat, 2013
Indonesia plays a crucial role in supplying the EU market with the selected
spices. The country was the main DC supplier of both nutmeg and cinnamon in
2012, with respective shares of 78% and 63% of total imports in terms of
volume sourced from DCs. It was also the third largest DC supplier of cloves to
the EU market, accounting for 21% of total imports.
Competing suppliers in the EU market
In addition to being the second largest DC supplier of nutmeg (6.3% of imports)
and third largest supplier of cinnamon (8.2%), India dominates the EU market
for turmeric. In 2012, the country accounted for no less than 96% of total EU
imports sourced from DCs. Based on these figures, India comes forward as one
of the strongest competitors in the EU market for Indonesian exporters.
Another strong competitor is Madagascar, which accounted for 11% of total EU
imports of cinnamon in 2012, making it the second largest DC supplier of this
product. In the case of cloves, Madagascar accounted for nearly half of total EU
imports in 2012 and was by far the leading supplier. Comoros also plays a
significant role in supplying cloves to the EU market, having accounted for
nearly one fourth of total DC supplies to the EU in 2012.
23%
40%27% 23%
6.6%
7.8%8.8%
10%
9.2%
9.4%
13%
8.1%
31%
24%
18%
19%
20%
27% 23%
37%
16%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
nutmeg cinnamon cloves turmeric
Netherlands
Germany
UK
Italy
France
Belgium
Other
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Indonesia, 78% India, 6.3%
Vietnam, 6.2%
Other, 9.2%
Indonesia, 63% Madagascar, 11% India, 8.2% Other, 18%
Madagascar, 48% Comoros, 23% Indonesia, 21% Other, 7.8%
India, 96% Other, 4.1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Figure 4: Main DC suppliers of spices to the EU, in volume, 2012
Source: Eurostat, 2013
nutmeg
cinnamon
cloves
turmeric
Exports
The Netherlands is the dominant re-exporter of spices in the EU. For all
selected products, the Netherlands accounted for over 40% of total EU re-
exports in 2012, re-affirming its essential role as Europe’s trade hub for spices.
Germany also plays a significant role as a re-exporter of spices, accounting for
1% to 16% of the exports of each of the selected products. With the exception
of nutmeg and turmeric, where Italy and the UK are more prominent, the
country ranked second among the largest re-exporters of spices in 2012.
Other large re-exporters in the EU are France (accounting for 5% to 8 % of
total exports) and Belgium (5%-13%). With the exception of turmeric, France
was among the four highest re-exporters of spices in the EU, which was also the
case for Belgium regarding cinnamon and cloves re-exports.
Germany is by far the leading destination for the EU’s re-exports of spices. The
country accounted for the largest shares among all selected products, having
the largest role among nutmeg (24% of total exports) and cinnamon (20%).
The explanation can be found in Germany’s massive food market, which
accounts for around 15% of the total European market (Food For Thought FFT,
2012/2013).
The UK and France, which also represent important consumer markets and
food industries in Europe, were also among the most important destinations for
the EU’s re-exports of spices (see Figure 6).
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Figure 5: Main EU (re-)exporters of spices, in volume, 2012
Source: Eurostat, 2013
Figure 6: Main destinations for EU exports of spices, in volume, 2012
Source: Eurostat, 2013
EU market for spices
There are no available figures related to EU consumption of specific spices. For
the purpose of this study, apparent consumption (imports - exports +
production) is calculated in order to indicate the largest EU consumers for the
selected spices.
Note that apparent consumption figures should be handled with care; it is an
estimate of spices available for both consumption and industrial demand, not
their real consumption or industrial use. Data on spices which are in stock, for
instance, are imprecise. Among other limitations, there are inaccuracies related
to unregistered intra-EU trade, since apparent consumption is based on trade
figures.
Having that in mind, Figure 7 shows the five largest EU consumers of the spices
selected in this study: nutmeg, cinnamon, cloves and turmeric, where 1
represents the largest market and 5 represents the fifth largest market for each
spice. The different spices are coded in different colours.
Figure 7: Largest EU markets for spices, ranking 1 to 5, in volume, 2012
20% 21% 22%16%
6.6%
22%
13% 6.0%8.2%
7.1%7.0%11%
14%16%
12%21%
40%46% 49%
42%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
nutmeg cinnamon cloves turmeric
Netherlands
Italy
Germany
France
Belgium
UK
Spain
Other
42%53% 57%
50%
6.6%8.2%
5.4%
7.6%
6.1% 7.5%
6.1%
10%
8.1%
7.4%6.7%
9.2%
8.0%
10%6.3%
5.6%
24% 20% 17% 16%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
nutmeg cinnamon cloves turmeric
Germany
UK
France
Austria
Belgium
Netherlands
Italy
Poland
Other
nutmeg
cinnamon
cloves
turmeric
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Total EU apparent consumption of nutmeg in 2012 amounted to 4.6 thousand
tonnes. The largest EU market for nutmeg is Germany, which accounted for over
30% of total EU apparent consumption in 2012 (in volume), followed by the
Netherlands (19%), the UK (13%), Belgium (8.3%) and France (7.5%).
Germany was also the largest market for cinnamon in 2012; it accounted for
20% of total EU apparent consumption of 12 thousand tonnes. The UK is also a
large consumer of cinnamon, having accounted for 19% of the total EU market,
followed by the Netherlands (10%), Spain (7.6%) and Sweden (5.0%).
Total EU apparent consumption of cloves amounted to 2.5 thousand tonnes in
2012, whereby far the largest market in terms of volume was the Netherlands
(30%), followed by Germany (21%), the UK (11%), France (10%) and Poland
(4.7%).
The UK is by far the largest EU consumer of turmeric, having accounted for
35% of the EU’s apparent consumption of 8.4 thousand tonnes . Germany
(24%), France (12%), the Netherlands (5.7%) and Poland (5.5%) complete the
list of largest EU consumers of turmeric.
The EU market for sustainable spices
Obtaining data on sustainable markets for spices in the EU is difficult. Not only
are figures scattered throughout various sources, but these sources often lack
specific information covering the product group ‘spices’.
In this section, we address the organic and fair trade markets in the EU, which
are niche markets for spices. For information on sustainability within the
mainstream market for spices, refer to ‘A boost of sustainability in the
mainstream market’, in the section ‘EU market trends for spices’ below.
The European market for organic products in 2011 was € 21.5 billion, an
increase of 9% compared with 2010 (€ 19.7 billion), in terms of retail sales. The
fruit & vegetable was the leading organic segment in terms of sales, accounting
for nearly 30% of the total European market in 2011. The dairy segment is also
an important segment, having accounted for over 20% of the European organic
market in 2011.
The EU country with the largest consumption of organic food & beverages is
Germany, at € 6.6 billion, followed by France (€ 3.7 billion), the UK (€ 1.9
billion), Italy (€ 1.7 billion) and Austria (€ 1.1 billion). In terms of per capita
consumption, the most prominent European country in 2011 was Switzerland (a
non-EU member state), at € 177 annually. Among EU member states,
Denmark’s per capita consumption was the highest, at € 162 annually, followed
by Luxembourg (€ 134), Austria (€ 127), Lichtenstein (€ 100) and Sweden (€
94) (FiBL-AMI IFOAM, 2013).
Although the figures above do not reveal the exact market for organic spices in
the EU, they do point toward the concentration of important organic markets in
(North) Western Europe.
Regarding the fair trade market, figures are only available for FLO-certified
products (please refer to the module ‘Compliance with buyer requirements for
Indonesian spices’ for more information on FLO). In 2011, the UK was by far the
largest market for FLO-certified products in the EU (and worldwide), at € 1.5
billion. The UK accounted for around 30% of total global sales (at the retail
level), followed by the USA (21%). Other large markets in the EU are Germany
(€ 400 million), France (€ 315 million), Ireland (€ 159 million), the Netherlands
(€ 147 million) and Sweden (€ 134 million). An important non-EU market within
Europe is Switzerland, with retail sales amounting to € 265 million in 2011.
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Spices and gluten-free diets
The naturally gluten-free aspect of spices creates a strong
interest of European consumers suffering from gluten
intolerance (celiac disease) or from those who simply
avoid gluten intake. The prevalence of celiac disease in
Europe ranges between 0.5% and 1.0% of the total
population, with highest incidence in Ireland, Italy and
Sweden.
Global sales of gluten-free foods are expected to reach
US$4.3 billion by 2015, according to a recent analysis by
Datamonitor, thus indicating growth opportunities for
products which comply with this profile.
Nutmeg, cinnamon, turmeric and cloves are naturally
gluten free. However, it has been reported that cinnamon,
for instance, might be cross-contaminated. Most spice
companies are aware of the sensitivity of this issue, so
they make sure to label their products properly in order to
fully inform consumers who have special dietary needs.
Regarding specific sales of FLO-certified spices, figures are only given in terms
of volume. The product group ‘spices & herbs’ amounted to only 255 tonnes in
2011 (worldwide), down from 408 tonnes in 2010, marking a decrease of 38%.
In addition, it is estimated that 66% of these products are also organic-certified,
revealing a strong correlation between ecological and social certification within
this sector. Nonetheless, these figures also reveal that the market for Fairtrade-
certified spices represents an insignificant share of the total EU market.
You can read the full FLO Annual Report (2012) here.
EU market trends for spices
Multicultural populations, ethnic cuisines
The EU represents a very interesting market for Indonesian spices such as
turmeric, cinnamon, nutmeg and cloves. The large share of ethnic populations in
European countries1 and the rising popularity of ethnic cuisines among
Europeans have made these specific spices very popular.
The EU is estimated to have around 1 million South East Asians2. Additionally,
ethnic food accounts for nearly 1% of the European food market (Food
Navigator,2011), of which Asian products accounts for the largest share.
Culinary traditions of the East have inevitably
infiltrated into the European market . Spices, which
are an inseparable part of these cuisine, can be found
from everyday food to special dishes prepared in
restaurants. From the cinnamon over a cup of
cappuccino and the nutmeg on haricots and mashed
potatoes, to the cloves and turmeric in most of the
oriental chicken recipes , these spices are extensively
used as taste additives all around Europe.
Taking into account the size of the market due to the
strong ethnic presence, but also due to the rising
popularity of ethnic cuisines among Europeans (as
well as the incorporation of spices into traditional
European dishes), spices which are native to
Indonesia are expected to remain popular.
Spices and the European quest towards a
healthier lifestyle
The increase in European consumers’ dietary
requirements and food awareness have established a high demand for healthy
food. As such, consumers are including healthier items to their food intake in
order to achieve a more balanced diet. The market for spices accompanies these
related trends, supported by many scientific studies which have brought the
benefits of spices to light.
Turmeric is one of the most praised spices when it comes to health benefits.
Recent studies indicate that this spice has the potential to prevent certain
diseases and minimise inflammation. It is believed to lower insulin response,
1 The Eurostat has carried out an interesting statistical study on the foreign populations of
different European countries, which can be accessed here (a graphic representation can be
found here). This study can reveal where most ethnically mixed populations lie in Europe,
also indicating the most interesting markets for ethnic foods.
2 Indonesians represent an especially important ethnic group in the Netherlands, where
they account for 2.4% of the population (Maastricht University).
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
thus reducing the effects of high-fat meals (James A. (Jim) Duke (2007) and
American Society for Nutrition).
Cloves are also praised in terms of their vitamin, mineral and fibre content.
Scientific studies have also indicated that this spice has highly beneficial, health-
promoting antioxidants (University of Texas MD Anderson Cancer Centre in
Houston).
Additionally, ongoing studies for cinnamon indicate that it can help combating
diabetes and in lowering blood pressure. So far, two specific studies (which can
be accessed here and here) have shown that including cinnamon in your diet
might actually help towards that direction.
Like all the above-mentioned spices, nutmeg also has assumed health benefits
that are many and varied. Nutmeg contains many plant-derived chemical
compounds that are known to have anti-oxidant, disease preventing, and health
promoting properties. Nutmeg is also assumed to have antibacterial properties
that can help rid the body of dangerous microorganisms (University of
Chulalongkorn in Bangkok).
The increasing attention that Europeans are paying to a healthier lifestyle has
influenced the growing demand for spices. Encouraged by an array of scientific
studies which are propagated by the food industry, consumers are
progressively incorporating more spices into their everyday diets.
From taste to health – medicinal properties as a marketing
tool
Europeans have long used exotic spices in their cuisine mainly as a
taste additive. In recent years, companies importing or trading
spices have partly shifted their attention from the taste aspect of
spices to their use as a health food.
Leading companies in the spices sector, such as McCormick
(www.mccormick.com), no longer focus solely on the taste of the spices in their
marketing campaigns, but also emphasize that spices can be used as part of a
healthy balanced diet. Additionally, companies in the food processing sector
create an extra twist to their products by adding spices such as turmeric, not
only promoting their ethnic characteristic, but also bringing attention to their
health properties as ancient medicinal spices.
This relatively new marketing tool used by companies is part of an interesting
dynamics in the European spice market. One the one hand, it is a response to
the increasing trend over the health properties of spices (see trend ‘Spices and
the quest towards a healthier lifestyle’) and, on the other hand, it is part of an
effort to shape a new image of spices in the European market.
Contamination in spices
Aflatoxin contamination in spices has received great
attention in the European market, where many alerts
have been issued on this subject. Aflatoxins are a
naturally occurring toxin and pose significant threat to
human health since they are potent carcinogens,
mutagens and teratogens. Accordingly, the EU has
taken certain measure and has enforced strict
guidelines when it comes to imported products that
could potentially be contaminated.
More specifically, the European Spice Association (ESA)
has, in response to the rising concern on this contamination, prescribed certain
limits for Aflatoxin found in food ingredients for the member countries. In
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
addition, an European spice audit took place in Indonesia in 2012 ( the final
report can be accessed here), where nutmeg produced for EU exports was
assessed on its Aflatoxin levels. The objective was to assess the systems in
place to control Aflatoxin contamination in spices intended for export to the EU.
According to the World Spice Organisation, nutmeg is widely used by
manufacturers in food application and medicine as whole spices, oils and
oleoresins, and is facing severe quality issues, and rejection at ports due to
Aflatoxin contamination. Aflatoxins have negative health effects, and reduce the
marketability of the produce, particularly in international trade (due to stringent
standards of permissible limits).
A sustainability boost in the mainstream market
Sustainability has become a major focus of the European food industry in recent
years, making it essential for Indonesian exporters of spices to accompany this
trend. Although sustainability in the production and trade of spices has
historically not received much attention from the food industry, this is changing
steadily.
One of the main efforts for the sustainability of the spice sector was born within
the Sustainable Trade Initiative (IDH), in the Netherlands. IDH brought together
the major players in the spices sector in order to increase the sector’s
sustainability. The specific objectives of the Sustainable Spices Initiative (SSI)
are:
• 2013: to have a globally accepted mainstream sustainability standard
established for spices.
The Sustainable Spices Initiative has selected Rainforest Alliance as
the collaborator to adapt the Sustainable Agriculture Standard (SAN) to the
spices production. This was announced during the 2012 World Spices Congress
in Pune, India.
• 2015: to have a 20% share of all pepper imported in the EU produced
according to the established sustainability standard.
• 2015: to have a 10% share of 3 other spices imported into the EU from
Vietnam, Indonesia, India or Madagascar produced sustainably.
The focus of the SSI in the first phase (2012-2015) will be on 7 spices: pepper,
chilies, ginger, turmeric, vanilla, clove and cassia (cinnamon). Vietnam, India,
Indonesia and Madagascar will be the focus countries in this phase.
Further market trends for spices can be found in CBI’s Market Intelligence on
Spices and Herbs: Trendmapping.
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
EU market segments for spices
The market segments for spices is described in CBI’s Market Intelligence on
Spices and Herbs: Channels and Segments, and it is further adapted for the
purpose of this study.
The EU market for spices can be divided into 3 distinct segments, depending on
the type of product:
The premium segment refers to high quality spices and exotic varieties, usually
traded in very small volumes and at very high values. These spices are
associated with strict quality standards regarding grade, taste, colour, etc. This
segment also covers niche markets for spices which are certified according to
organic, fair trade and other high-end standards such as Forest Garden Products
(FGP). Spices in this segment are rarely processed into food products, and are
normally sold in retail packages in specialised shops (gourmet shops, organic
supermarkets, fair trade shops). A small share of organic spices, especially, is
used by organic food processors.
The middle range segment refers to standard quality spices, usually traded in
larger quantities and accompanying market prices. Spices belonging to this
segment are usually sold in mainstream retailers or are further processed in the
food industry. This segment also commands strict quality controls, especially for
spices which will be marketed in retail channels. Large retailers often demand
specific quality standards (e.g. ISO, British Retail Consortium). The newly
introduced Rainforest Alliance (RA) standard fits within the middle range
segment , since it covers the mainstream market. RA-certified spices are
expected to be mainly marketed in retail channels, and not further processed
into food products. The RA logo has high consumer visibility, and spices usually
account for a small share of a final food product.
The low price segment refers to spices which are sold at higher volumes and at
lower prices, due to their lower quality, i.e. lower oil content, faded colour, weak
taste/aroma, low weight class, etc. Low quality can be intrinsic to the raw
material, but often results from inappropriate handling, such as poor drying
techniques. Lower quality spices are usually used by the food processing and
other industries (e.g. oil extraction), or are sold in retail channels at competitive
prices.
Figure 8: Market segmentation for spices in the EU
Segments Types of product
Premium
• high quality • exotic varieties • certified spices: niche markets (organic, fair-trade
etc.)
Middle range
• standard quality spices • possible Rainforest Alliance certification:
mainstream market
Low price
• lower quality spices, in terms of oil content, colour, taste, weight class etc.
EU trade channels for spices
The distribution channels for cinnamon, turmeric, cloves, nutmeg and other
spices produced in Indonesia are similar.
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Figure 9: Trade channels for Indonesian spices in the EU market
Spice production
Indonesia is estimated to have a total of 17 million small farms which produce a
wide range of food and non-food products (IFAD). As such, spices are mainly
produced by smallholders, who often sell their products to village collectors.
These collectors build up higher volumes from different farms, until they can sell
them to either the domestic primary processing industry and/or spice exporters.
The drying process of spices is usually done at this later stage, in appropriate
facilities; small farmers are susceptible to weather conditions and might not be
able to perform the drying correctly.
In some cases, smallholders are part of cooperatives, whereby they work
together with other farmers in reaching sufficient volumes for further processing
or exports. Some cooperatives also perform a degree of primary processing
(e.g. grinding) themselves, before the product is passed on to exporters, often
via local traders.
Large plantations play a small role in the production of spices in Indonesia, and
many are government-owned. They are excluded from the trade channels
depicted in Figure 9.
Spice processing
Usually, turmeric is exported in ground form, thus going through primary
processing before it is shipped to European markets. Cinnamon, on the other
hand, is exported both as sticks, without further processing, or in powder.
Nutmeg can also be exported whole or ground, whereas cloves are usually
exported without further domestic processing. It is also possible that the
grinding process for these spices is done on the request of a buyer and
according to their requirements.
Note that the European market still has some resistance toward ground spices
due to fear of adulteration and/or the use of low quality spices. A whole, intact
spice can be easily assessed for quality, which is more difficult for a ground
spice (Intermediate Technology Development Group).
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
Spices can go through further (secondary) processing before reaching the EU
market. These derivatives can be (essential) oils, oleoresins or extracts which
are mainly exported directly to the European industrial sector. However,
derivatives represent a very different market in terms of players and
requirements, which are outside of the scope of this study. For further
information on these product applications, refer to CBI Market Intelligence on
Natural Colours, Flavours and Thickeners.
Indonesian exports
Up until 2007-2008, Indonesian exports of spices to the EU were monopolised
by a few players. Nowadays, a wider array of small and medium-sized players is
present in the market, but their challenges are manifold.
One of these challenges is related to spice contamination. Few Indonesian
exporters make it through the EU’s regulatory wall; the ever-increasing controls
on maximum aflatoxin levels have disappointed several prospective exporters.
In this respect, India has proved to be a strong competitor in the spices
market: not only does it usually meet the minimum hygienic requirements
demanded by EU buyers, but it also does so at very competitive prices and high
volumes.
In terms of other buyer requirements (e.g. grades), Indonesia also faces
competition from other global suppliers. Buyers of cloves, for instance, have
indicated a preference for products sourced in Madagascar or Zanzibar
(Tanzania) due to the higher qualities offered. For turmeric, not only does India
manage to meet quality and hygiene requirements, but it has created a strong
industry targeting the niche market for organics as well.
EU trade channels
The main trade channels and players within the EU market for spices are
described in CBI’s Market Intelligence on Spices and Herbs: Channels and
Segments. For the purpose of this study, these players are summarised below
and further explained in relation to sustainable spices in the sub-section below.
It is important to keep in mind that, in practice, channels are not clearly divided;
for instance, traders process and food industries import. Spices exported by
Indonesia can reach the EU market through the following players, depending on
the exporter’s capacities in terms of volumes, quality and logistics:
Importers:
• middlemen between exporters and end users of spices (industry or retail).
• usually purchase bulk quantities and, in some cases, perform processing
and/or packaging activities.
• often have long-standing contacts with their suppliers.
• specialised importers: in addition to the above-mentioned characteristics,
they have a focus on the premium segment, consisting of certified (e.g.
organic, fair trade), exotic varieties and/or high quality spices. These
importers usually have a strong emphasis on trust-building with their
suppliers.
• in contrast, Rainforest Alliance certification focuses on mainstream
importers, usually working with wider ranges of products.
• However, note that an increasing number of mainstream importers are
starting to offer assortments of premium spices as well.
Brokers and agents:
• bring suppliers and buyers together without actually purchasing the product.
• work on the basis of a commission (0.5-2%).
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
• have a broad knowledge of the market.
• can be an interesting channel to avoid trading risks when:
o you do not have enough knowledge or experience in the European market
o working with an unknown buyer o placing a very specialised spice into the market, for which buyers are
difficult to find. • Brokers and agents are active in all market a segments for spices.
Grinders, processors, blenders, packers
• purchase spices in bulk, at high volumes and strict quality and logistical
requirements.
• often consist of one single company which performs the cleaning, grading,
grinding, blending and packaging activities.
• usually sell ground or processed products to industrial users.
• occasionally produce end products and supply the retail and/or catering
sectors directly.
Industrial sectors (e.g. food processing)
• only suited for suppliers who can meet high industrial standards in terms of
service level (e.g. consistent and timely delivery), quality (e.g. food safety)
and volume.
• usually source spices from importers or grinder/processors; only in some
cases directly from producing countries – often related to large plantations.
Retailers / catering sector
• it is highly uncommon for spice exporters to reach the retail or catering
sector directly.
• however, large retailers are increasing their influence over producers,
making the chain for spices as short as possible (i.e. bypassing
intermediaries).
• In order to supply directly to retailers, not only do exporters need to supply
consistent volumes in a short lead time (to avoid large stocks), but also need
to meet very strict quality requirements for end products.
Final users of spices in the EU roughly account for the following shares:
• food processing industries: 55-60%, either directly or as essential
oil/extract. Other industrial uses for spices are: fragrances, colourings,
supplements, etc.
• retail sector: 35-40%
• catering sector: 10-15%
EU trade channels for sustainable spices
Mainstream market
The trade channels for sustainable spices in the mainstream market do not differ
significantly from the above-mentioned structure. However, companies involved
in sustainability efforts have stronger emphasis on transparency and traceability
along the chain.
Importers, grinders, processors and retailers committed to sustainable principles
in the spice sector usually have their own codes of conduct. These codes
encompass social and environmental requirements, which are combined with
frequent audits and traceability systems to monitor implementation and
progress.
International standards which demonstrate safe and fair labour conditions at the
spice processing level, such as the Business Social Compliance Initiative (BSCI,
www.bsci-intl.org) and the Supplier Ethical Data Exchange (Sedex,
Tailored market intelligence: EU market insights for Indonesian spices
Source: CBI Market Information Database • URL: www.cbi.eu • Contact: [email protected] • www.cbi.eu/disclaimer
www.sedexglobal.com), also play a role in the sourcing strategy of some
European companies committed to sustainability. Read more about these and
other standards in ‘Compliance with buyer requirements for Indonesian spices’.
In the spectrum of sustainability standards in mainstream markets, Rainforest
Alliance (RA) is the only one which currently applies specifically to spices3. RA-
certified spices can be traded by importers, processors, grinders and packers
equally, as long as this operator has achieved SAN/Rainforest Alliance Chain-of-
Custody certification (www.rainforest-alliance.org/agriculture/certification/coc).
As mentioned previously, RA-certified spices are expected to be mainly
marketed in retail channels, and not further processed into food products.
Niche markets
The trade channels for sustainable spices partly follow the general structure
described above. However, the range of relevant players for Indonesian
exporters dealing with certified spices is narrower than what is offered by the
conventional market.
Markets such as organic and fair-trade certified spices (and even more so for
high-end certifications such as Forest Garden Products) are very small compared
to the mainstream market, which does not provide enough room for a multitude
of players. In addition, all operators along the value chain for organic and/or
fair-trade certified products must be certified as well; certified chains are usually
shorter (i.e. specialised traders act as a ‘one-stop shop’) and more transparent
(i.e. in terms of tracing the product from the resource to the market).
Being mostly related to lower volumes and higher prices, these niche products
are usually suitable to the retail market (mainly specialised retailers or speciality
shelves in mainstream supermarkets), and not the industrial sector (e.g. food
processing).
In this respect, certified products usually reach the market through the
intermediary role of a specialised importer, which has knowledge, experience
and capacities to handle these products. It is often the case that these importers
also carry out primary processing activities (e.g. grinding) and/or re-package
the spices for retail sales.
A list of certified operators for organic and fair trade certifications can be found
below:
• Organic-bio and Greentrade - interesting (non-exhaustive) databases for
operators in the organic sector
• Fairtrade Labelling Organizations International (FLO)
• Ecocert Fair Trade
• IMO Fair for Life
This survey was compiled for CBI by ProFound – Advisers In
Development
Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer
3 The spectrum of standards might be broadened in the future, depending on market
developments for spices and on the demand for specific standards.