Exporting liquorice to Europe

Contamination

Producers of liquorice (extracts) must minimise contamination of their product during growing, processing, packaging, transport and storage. They must not make excessive use of chemicals and safeguard hygiene in their facilities. In the liquorice trade, contamination by Ochratoxin A is a major concern and European importers test for residue levels vigorously.

3. What additional requirements do buyers often have?

Food safety certification

As food safety is a top priority in all European food sectors, you can expect many players to request extra guarantees from you in the form of certification. Many European buyers require certification of a HACCP-based food safety management system.

The most commonly used food safety management systems in the Europe are:

• Food Safety System Certification (FSSC22000);
• British Retail Consortium (BRC);
• International Food Safety (IFS) and
• Safe Quality Food (SQF).

ISO 22000/FSSC 22000 is most relevant for suppliers of ingredients which will be further processed. BRC, IFS and to a lesser extent SQF require more advanced management systems. They are particularly relevant for suppliers of end-products to retailers.

Kosher and Halal certification

Although actual European demand for Halal and Kosher products is small, demand for certification of compliance against these religious standards is increasing. Certification allows food manufacturers to use the ingredients in Halal and Kosher products and prevents exclusion of these target groups.

Certification is particularly relevant for extracts such as liquorice, because their status as halal or haram (i.e. not allowed) is often considered questionable.

Halal certification for liquorice requires processing procedures according to Islamic law. Extraction must be done without the use of alcohol. Certified Halal products must also be kept separated from “impure” products, such as products from pigs. A unified standard for Halal does not yet exist. Select a certifier accredited by the World Halal Council for recognition of your certificate in Europe.

Documentation

Buyers need well-structured product and company documentation. Buyers generally require a Certificate of Analysis (CoA), a detailed Technical Data Sheet (TDS) and a Safety Data Sheet (SDS).

4. What are the requirements for niche markets?

Certification of sustainability

A small, but growing group of European buyers require third-party certification of sustainability. Particularly organic certification is gaining relevance.

To market liquorice in the Europe as ‘organic’, you need to prove that you are not using any forbidden chemicals in your production system and that you are only applying organic processing methods. An accredited certifier must audit your facilities and issue the certificate. These requirements are specified in the European Union Regulation 834/2007.

5. Which European markets offer opportunities for exporters of liquorice?

Imports and production

Scarcity in the market for liquorice extract provides opportunities for new suppliers

• Demand for liquorice roots is constantly increasing in Europe. Transparency Market Research forecasted a global market growth of 4% annually between 2017 and 2025. Europe accounts for around a quarter of the global market. Production of MAG sweeteners (Mono Ammonium Glycyrrhizinate) from liquorice is the major driver behind market growth.
• In the coming years, some scarcity can be expected in the European liquorice market. China, which was traditionally an exporter of roots and extracts, is becoming a net importer. This is not only caused by an increase in demand, but also by diminished supplies in China. Most liquorice roots are wild-harvested and the country has been draining its resources. As a comparison, in the 1990’s China exported 8,000-10,000 tons of liquorice (both roots and extract), whereas exports dropped to around 3,500 tons in 2006 with imports rising to over 4,000 tons. This development influences the availability of liquorice extracts for use in Europe.
• The French company EVD and German companies Hepner & Eschenbrenner, Norevo and CE Roeper supply most of the European market for liquorice extract. However, a large part of their supplies comes from extraction facilities in countries outside Europe. Spain and Italy produce a significant amount of roots, but total output of liquorice extract is no more than a few hundred tonnes.
• Although liquorice roots are grown in a large area stretching from Iran to China, large-scale extraction is limited to China and Iran.
• Northwest European countries are estimated to account for most European imports of liquorice for use in food applications.

Exports

6. What trends offer opportunities on the European market for liquorice?

New Product Development

Liquorice is increasingly being used to produce Mono Ammonium Glycyrrhizinate (MAG). Although current MAG production is small, the use of MAG as a masking agent in products sweetened by stevia has much growth potential. Mafco, (US) one of the largest MAG suppliers, markets its MAG under the name Magnasweet.

Clean labels

European consumers avoid products with ingredients that they perceive as unnatural or products with health warnings. Products with a high dosage of glycyrrhizic acid sometimes carry a health warning on the label for patients with high blood pressure. Certain studies have shown that the consumption of glycyrrhizic acid can increase blood pressure.

Exporters of liquorice extract can offer a solution to food manufacturers by offering them liquorice extract with a low glycyrrhizic acid content of less than 6%.

7. Through what channels can you sell liquorice on the European market?

Market channels

Figure 3: Major market channels for liquorice extracts

Source: ProFound, 2017

Only few companies extract liquorice

European extraction companies still play a role in the processing of liquorice. They can either produce the extract or process the extract (e.g. spray drying). However, most liquorice is imported as extract, because processing near its source lowers costs.

Importers play a vital role

Manufacturers in Europe focus on their production and Research & Development activities. They are not very interested in sourcing directly from developing countries. They prefer to source from European importers and processors who can supply small quantities at frequent intervals.

Market segments

Table 1: Major food segments and applications for liquorice

Northern and Southern Europe present two different markets

• Demand for organic certified liquorice is estimated to be small. Moreover, Italian companies present strong competition in this niche.
• North European countries and especially Scandinavian countries (Norway, Sweden, Finland and Denmark) often use liquorice in (salty) confectionery in a dosage of around 4%. South European countries frequently use more pungent and strong liquorice in pastilles in a dosage up to 50%.

8. What are the end market prices for liquorice?      

Prices remain on a high level

• In May 2016, liquorice prices averaged € 6.2 /kg. Prices for liquorice have been relatively stable in the past year with good availability of liquorice roots.
• The prices of liquorice depend on the economic and political situation in the Middle East, which is the main source for liquorice root for food applications. Changes in the political situation may cause large fluctuations in prices.
• Decreasing availability of liquorice from China may push prices upwards in the long-term.
• Chinese liquorice from generally fetches higher prices than Iranian liquorice, as domestic demand for Chinese liquorice is strong and because it contains a higher concentration of glycyrrhizic acid.
• Organic certified liquorice extract can fetch up to twice the price of conventional liquorice extract.
• The following price breakdown shows which costs and margins are applied to liquorice extract before it reaches the end-user.

Figure 4: Price breakdown for liquorice extract, mark-ups in %

Based on Full Container Loads from Central Asia to European importer
Source: ProFound, 2015

Price breakdown

• If agents are involved, they typically receive a commission of a few (2-5) percent. However, their actual profit margin strongly depends on volumes sold and gross margin. They will normally lower their gross margin for big volumes.
• Importers add up to 50-60% to the value of the product if they need to break a container load into smaller lots.
• Processors, such as the ones producing MAG, and blenders can add up to a few hundred percent depending on their activities, such as R&D, fractionation and blending.

9. What competition do I face on the European liquorice market?

Less competition from China opens the market for new players

• European producers of liquorice root do not offer much competition, as labour costs for collection are high. Root collection takes place mainly in Central Asia (Iran, Turkmenistan, Afghanistan and China).
• Most extraction facilities are located in Iran and China. However, Chinese liquorice manufactures are increasingly directing their sales towards the domestic market.
• Turkmenistan is an emerging supplier of liquorice extracts.
• Chinese liquorice extract is most appreciated by the pharmaceutical industry, as it contains the highest percentage of Glycyrrhizic Acid. China mainly grows Glycyrrhiza inflata and Glycyrrhiza uralensis.
• European buyers prefer to build long-lasting relationships with their suppliers, as switching costs are high.
• Liquorice extract has a unique flavour profile and is difficult to replace. Therefore, food manufacturers continue to buy liquorice extract even when prices are high.
• Liquorice roots can become scarce and expensive if they are over-harvested. As roots are wild-collected, harvesting is difficult to control, which puts supplies at risk.
• Although collection of liquorice roots is very accessible, extraction of liquorice requires significant investments.

Main sources

The following trade fairs are good to visit if you want to learn more about the European market and meet potential buyers:

• Food Ingredients Europe (http://www.figlobal.com/fieurope/)
• SIAL (http://www.sialparis.com/)
• Anuga (http://www.anuga.com)
• Biofach (http://www.biofach.de)

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