Centre for the Promotion of Imports from developing countries

Trade segments, channels and structuresfor Natural Ingredients for Health Products

Session 7

2 May 2015

Centre for the Promotion of Imports from developing countries2

Segments and channels for Natural Ingredients for Health products

1. Trade segments• Different ways of segmenting• Segments in the European market

2. Trade structures and sectors• Different players along the chain• Differences• Supplier - Buyer

3. Trade channels• Diversity• Requirements• Trends

2 May 2015

Centre for the Promotion of Imports from developing countries3 2 May 2015

Saps and extracts Essential

oils & oleoresins

Vegetable oilsFruit, seeds

Medicinal and

Aromatic Plants

Producer

Buyer requirements

Legislative requirements

Quality assurance

Certification

Cosmetic

Health productsFood

Segmenting according to industry sector (1/3)

Market

Centre for the Promotion of Imports from developing countries4 2 May 2015

Segmenting according to industry sector (2/3)

Health Food

• Food supplements• Medicinal food

Pharmaceuticals

• Herbal medicine• Veterinary medicine• Medical devices

Health products

Centre for the Promotion of Imports from developing countries5 2 May 2015

Segmenting according to industry sector (3/3)

Centre for the Promotion of Imports from developing countries6 2 May 2015

Different health systems in Europe• Western Herbal Medicine (dominant across Europe)• Homeopathy (Germany, France, Switzerland, Spain)• Traditional Chinese Medicine (TCM) (UK, Germany)• Ayurvedic Medicine (UK, Germany)• Less common systems

• Unani Medicine (UK, Spain)• Jamu (NL)

What about African Medicine traditions ?

Segmenting according to health system

Centre for the Promotion of Imports from developing countries7 2 May 2015

Temperate species • Also produced in the EU• Competition from EU

producers (quality, close links to buyers, inside the EU, wild-collection)

• Competition from other temperate zones (Eastern Europe, Central Asia, Mediterranean DC’s, China, Kenya).

Segmenting between (Sub)- Tropical and Temperate

(Sub) tropical species • Cannot be grown in Europe.

EU buyers purchase large quantities

• Competition from other DCs.• Opportunities for

established MAPs and less-known MAPs.

Centre for the Promotion of Imports from developing countries8 2 May 2015

Bringing segments together

Tropical ingredients

Sub-tropical ingredients

Temperate species

Health industry

Food industry

Focus on Herbal medicine industry

Focus on Food supplements

Centre for the Promotion of Imports from developing countries9

Western medicine

2 May 2015

Interest in new products => (sub-) tropical species

Domestic ingredients => Mediterranean herbs

Production of temperate speciesWild collection

Segments in the EU market (Generalization)

Centre for the Promotion of Imports from developing countries10

• Increasing market sophistication in Eastern Europe appearance of new segments (non-western, (sub)- tropical species)

• Segmentation of the sector in terms of age groups and life cycle stages

2 May 2015

Trends in segmentation

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Pro

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Trader

Processor

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Trade structure and sectors – A large variety of players

Centre for the Promotion of Imports from developing countries12 2 May 2015

Natural ingredients are traded through specialised and general channels

Specialised channels exist in different forms:• Sector focus: on one, multiple or all sectors

• product offering: producing extracts OR active principles, or focus on a wide variety of natural and synthetic materials

• Regional focus: in terms of sourcing or sales

• Certification focus: organic, FairWild and various fair trade labels

Trade channels - Diversity

Centre for the Promotion of Imports from developing countries13 2 May 2015

Quality responsibility and Traceability are key

• Requirement of a stable (high) quality starting material• Documentation• Supply security• Cooperation with research institutions for product identification and

new product application

Traceability and Quality

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• Extract production shifts to country of origin Bigger role for DC processors

• Direct sourcing of manufacturers in country of production• Consolidation at all levels of trade channels: Specialization is becoming

less common• Vertical integration• Need for more sustainable costing and sourcing strategies by European

buyers • Redefinition of role of middlemen as service provider• Organic principles applied throughout the value chain (organic as

traceability system)

What does it mean for SME exporters?

Trade channels - Trends

Centre for the Promotion of Imports from developing countries15

DC SME exporter European buyers

High diversity• Certification?• Product portfolio?• Segment focus• Size and sophistication

Different types• Trader/Processor/Manufacturer• Size• Segment/regional focus• Certification

Trade structure – Selecting your buyer

2 May 2015

Centre for the Promotion of Imports from developing countries16

What is the right segment for you?

What is the right buyer for you?

2 May 2015