10 minute read

MARKET ENTRY

EUROPEAN MARKET POTENTIAL FOR ESSENTIAL OILS

Aromatherapy products including essential oils are gaining popularity in Europe. Growing awareness regarding the benefits of aromatherapy at home and the shift to more natural and green ways to improve and maintain health could be reasons for this surge in popularity. As a result, the demand for essential oils is increasing in Europe. It is expected that this trend will continue, as essential oils offer many beneficial properties and can be used as a complementary treatment to conventional healing methods.

What makes Europe an interesting market for essential oils?

There is a growing demand for niche essential oils in the fragrance and personal care industries. Consumers are demanding high-quality natural products in the European market.

The global luxury perfume market was valued at US$11.7 billion in 2018, expected to grow by a compound annual growth rate of 5.3% to reach US$16.8 billion in 2026. Increasing consumer preference for glamour, style, fashion and fragrance are key drivers for growth. Other drivers include the high purchasing power of target consumers and the high presence of luxury brands across the market.

Artisanal and niche fragrances are also on the rise. They are perceived to be of higher quality, as they use a greater concentration of extracts. Growth is driven by the consumer demand for natural highquality products in Europe. According to Market Data Forecast, the global natural fragrances market is expected to grow at a compound annual growth rate of around 5% to reach US$39 billion in 2025.

Essential oils are mostly commonly used in cosmetic products such as fragrances, skincare products, haircare products and toiletries. There is a growing market for natural and organic cosmetics in Europe; the market was valued at EUR€3.64 billion in 2018. Ecovia Intelligence projects the market to grow at a healthy rate in the coming years. The consumer demand for cosmetics and toiletries which avoid contentious chemicals is expected to fuel market growth. This healthy growth rate corresponds to a robust demand for natural ingredients, providing opportunities for potential suppliers in developing countries.

The demand for aromatherapy products in Europe is also growing, as consumers are looking for alternative ways to treat health conditions. Essential oils have a wide range of properties such as stress-relief, anti-bacterial, soothing, refreshing and invigorating. They can be used to treat or alleviate symptoms of conditions such as indigestion, stress, insomnia, anxiety, depression and eczema. There is a growing trend towards more natural ways of treatment as opposed to conventional medicine. European consumers use alternative healing modalities in a complementary way alongside conventional medicine. This trend generates a demand for essential oils in Europe.

The graph to the right outlines the intraand extra-EU imports of essential oils to Europe, 2015-2019. It shows that there has been a slight dip in the import of essential oils and oleoresin between 2015 and 2019. However, several reports suggest that the import value has increased. The majority of essential oils are used by the food industry.

Higher priced essential oils are usually used in the perfumer and personal care industries. Fragrances, cosmetics, and aromatherapy generate about one-third of the demand of essential oils according to the European Federation of Essential Oils.

The graph above shows the imports of other essential oils (HS code 330129*) to the EU from 2015 to 2019. This category includes essential oils other than citrus, excluding peppermint and other mint essential oils. Frankincense (HS code 33012941) and patchouli (HS code 3301295129) are two examples of oils included in this category. Generally, these are high-value oils used in products such as cosmetics and perfumes.

The graph below shows the volume of imports to Europe decreased by 7.7% from 2015 to 2019. However, over the same period, the value of imports to Europe increased by 21.6% because of growing demand for high-value essential oils. In 2019, more than 42% of imported essential oils came from intra-EU trade, a slight increase from 2015.

Which European countries offer the most opportunities for essential oils?

The countries that offer the most opportunities for suppliers of essential oils, especially patchouli and frankincense, are France, Germany, Netherlands, Spain, UK and Italy. These countries are the largest importers of other essential oils. France, Germany, and the UK have the largest consumer markets for cosmetics as well as fragrances.

Data published by Eurostat in 2019 shows that Germany is the leading European importer of essential oils (HS code 3301), followed by the Netherlands and France. Germany and France are the leading importers in the case of other essential oils (HS code 330129) as well.

Germany

• Leading European importer of essential oils.

• Between 2015 and 2019 the volume of German imports declined 1.3%. However, the value of essential oil imports increased by 26.2% during this period.

• In 2019, Germany’s imports of essential oils from outside of the European Union reached 34.1%, an increase of 1.5% from 2015.

• Essential oils with HS code 330129 accounted for 15.5% of the total volume imported to Germany in 2019.

• The value of high-quality essential oils has increased, thus making it an attractive market for exporters of essential oils in developing countries.

• Germany has the largest natural and organic cosmetics market in Europe, valued at €1.3 billion in 2018.

• Leading importers of essential oils in Germany include SanaBio and Atriplex. SanaBio specialises in organic essential oils.

• Germany has a significant cosmetics and perfume industry, with fragrance sales reaching €2.6 billion in 2019.

Source: Eurostat, German imports of essential oils (HS code 3301 and 330129), 2015–2019

France

• France is a leading European importer of essential oils in terms of both volume and value.

• Rise in the imports of essential oils from 2015 to 2019.

• In 2019, 36% percent of essential oils imported to France came from other European countries, an increase of 9.1% from 2015.

• Essential oils with HS code 330129 accounts for 41.1% of France’s total essential oils imports. In terms of value, this share is nearly 70%.

• Increasing French imports of essential oils in volume and value means France offers good opportunities to exporters of essential oils from developing countries.

• France has a significant fragrance industry which achieved revenues of US$2.3 billion in 2020 and is expected to grow by a compound annual growth rate of 1.1% until 2025.

Source: Eurostat, French imports of essential oils (HS code 3301 and 330129), 2015–2019

Netherlands

• Significant European importer of essential oils.

• Between 2015 and 2019 the volume and value of Dutch imports of essential oils increased.

• Volume increased by nearly 106% while value increased by almost 206%.

• In 2019, essential oils imported from outside of the European Union had a share of nearly 84%, a drop of more than 4% percent from 2015.

• Essential oils with HS code 330129 accounts for more than 12%.

• This share has increased in the last few years and is expected to continue in the coming years.

• The increasing volume and value of essential oil imported mainly from outside of the European Union makes the Netherlands an attractive market for exporters in developing countries.

• Has a growing market for natural and organic cosmetics, valued at €66 million in 2018 and growing every year.

• The Netherlands is an important re-exporter of raw materials, such as essential oils, to other European countries thanks to its strategic position as an entry point for raw materials.

• The Netherlands is expected to remain an important importer of essential oils from developing countries.

• Important traders of essential oils include IMCD and De Lange.

Source: Eurostat ,Dutch imports of essential oils (HS code 3301 and 330129), 2015–2019

Spain

• The volume and value of Spanish imports declined between 2015 and 2019.

• Essential oils imports from outside of the EU accounted for a 66.4% share of Spanish imports in 2019, a 13.2% decrease from 2015.

• Essential oils with HS code 330129 account for nearly 44% of the total volume and more than 65% of the total value of essential oils imported to Spain.

• The Spanish natural and organic cosmetics market was valued at €69 million in 2018.

• Spain’s fragrance industry achieved revenues of more than US$1.3 billion in 2020, and is expected to grow by a compound annual growth rate of 3.5% to 2025.

Source: Eurostat ,Dutch imports of essential oils (HS code 3301 and 330129), 2015–2019

UK

• UK imports of essential oils declined in terms of volume and value between 2015 and 2019.

• The volume of imported essential oils shrank by 24.8% while value decreased by 12.7% over this period.

• The share of essential oils imported from outside the EU was 67.2% in 2019, an increase of 3.2% from 2015.

• Essential oils with HS code 330129 make up 24% of the total volume.

• The total sales value of fragrances in the UK was estimated at £1.74 billion.

• Although the volume and value of UK imports of essential oils dropped from 2015 to 2019, the demand for essential oils for personal care products is expected to grow.

• However, Brexit is likely to disrupt the supply chains for raw materials.

Source: Eurostat ,British imports of essential oils (HS code 3301 and 330129), 2015–2019

Italy

• Italian imports of essential oils increased in volume and value between 2019 and 2015.

• The volume of imports grew by 29.5% while value increased by 22.9% over this period.

• In 2019, 13.4% of Italian imports of essential oils came from outside the EU, a 3.6% drop from 2015.

• Essential oils under HS code 330129 accounts for nearly 32% of the total volume imported.

• Most essential oils imported to Italy come from within the EU.

• Italy has the fourth-largest cosmetics market in Europe, valued at €10.1 billion in 2019.

• Italy has the third-largest natural and organic cosmetics market in Europe, valued at €425 million in 2018.

Source: Eurostat ,Italian imports of essential oils (HS code 3301 and 330129), 2015–2019

Competitive Landscape

The Europe Essential Oils Market has some of the prominent players operating namely Young Living Essential Oils, Rocky Mountain Oils, LLC, Robertet SA, Givaudan, Sensient Technologies Corporation, and the Eden Garden among others.

Owing to advancements in technology and cost of capital the entry barriers are high and are likely to maintain low competition among industry participants. In terms of strategy, major players are vying on new product development, with intensive focus on R&D that will enable them to establish a strong hold in the European market.

Source: Mondor Intelligence

A strategy for sales into the EU markets is essential. While these dominant industry players continue to evolve, the competition among market newcomers is growing. Like all attractive opportunities a strong business strategy and export plan is essential.