Entering the European market for liquorice extract

To enter the European market for liquorice extract, you must meet mandatory requirements set by the European Union. At the same time, also consider meeting common additional requirements that European buyers and niche markets have, as this will help you access the European market. The European market for liquorice extract is divided into four segments, providing different channels you can enter through. When entering the European market, you will face competition from other countries, companies and products. Prices of liquorice have increased in recent years, and that trend is predicted to continue in the coming years.

1. What requirements must liquorice extract for cosmetics comply with to be allowed on the European market?

What are mandatory requirements?   

As an exporter of liquorice extract in a developing country, your liquorice extract can only be exported to the European cosmetics market if you comply with the European Union’s (EU) mandatory legal requirements for natural ingredients for cosmetics. Non-compliance can prevent your liquorice extract from entering the European market.

EU Mandatory Requirements

• As an exporter of liquorice extract from developing countries, your products must comply with several EU regulations to access the European market. These regulations include: Cosmetic Regulation (EC 1223/2009) is the central regulatory framework for cosmetic products for the European market, covering the safety and effectiveness of cosmetic products. It is especially advisable to focus on Chapter 3: Safety Assessment, Product Information File, Notification. Claims concerning sunscreen products have specific requirements.
• Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH)
• EU Commission Regulation (EU) No 655/2013 requires claims for a cosmetic product (explicit or implicit) to be supported by sufficient and provable evidence.
• The EU has packaging and labelling requirements for chemicals based on the Globally Harmonised System of Classification and Labelling of Chemicals (GHS) outlined in its Classification, Labelling and Packaging (CLP) Regulation (EC) 1272/2008.
• In regards to the labelling and packaging regulation, you need to include relevant hazardous symbol (see Figure 1) because liquorice extract is classified as hazardous on the label.

Figure 1: Hazard label for liquorice extract

Technical Documentation

To comply with the EU’s legal requirements, European buyers of liquorice extract for cosmetics need a well prepared technical dossier. This is also essential in order to meet mandatory regulations when exporting to the EU, as a well prepared technical dossier demonstrates the traceability, sustainability and quality of liquorice extract you use in your products. You must therefore provide a well-prepared, up-to-date technical dossier to European buyers of your liquorice extract.

The technical dossier should include:

• Technical Data Sheet (TDS),
• Safety Data Sheet (SDS)
• Certificate of Analysis (COA)

Convention on Biological Diversity (CBD)/Access and Benefit-Sharing (ABS)

To export liquorice extract to the European market, you must comply with the requirements on using plant resources agreed under international treaties and protocols within the Convention on Biological Diversity (CBD). This is because the CBD is a part of EU law and your own country is likely to be a signatory, meaning you need to comply in order to meet your country’s laws as well.

The Nagoya Protocol’s Access and Benefit-Sharing (ABS) provides guidelines for accessing and utilising genetic resources and traditional knowledge and the fair and equitable sharing of benefits. Similar to the CBD, European companies need to comply with ABS legislation. ABS is also likely to be a part of your country’s regulations. As an exporter of liquorice extract to the cosmetics sector, make sure you abide by ABS.

In recent years, there is growing consumer awareness and demand for more environmentally-friendly products, and this trend is set to continue. This is leading European buyers to seek ethically sourced ingredients, something which is likely to become more important in the future.

What additional requirements do buyers often have?

Quality requirements

European buyers of liquorice extract for cosmetics are increasingly demanding liquorice extract they buy to be of the finest quality. Interviews with European buyers revealed that quality can be more important than price. To meet this demand, your liquorice extract should be pure and free of any additives and heavy metals, along with having standardised levels of its content of active components with conditioning properties.

The quality of liquorice extract depends on its composition, especially the content of glycyrrhizin or glycyrrhizic acid. These components are used to produce active ingredients used in personal care products and toiletries. Glycyrrhiza inflata’s glycyrrhizin content is usually between 7.5 and 8.0 percent and in glycyrrhiza glabra it is usually between 5.5 and 6.0 percent. You should therefore provide European buyers with liquorice extract within the appropriate levels of glycyrrhizin content.

European buyers usually prefer odourless and colourless extract in liquid or spray-dried form, so you should meet their preference. Furthermore, European buyers often have other specific preferences and requirements for liquorice extract, and you should meet these when they do. You should train your staff and suppliers to make sure they are able to ensure the quality of liquorice extract throughout its entire supply change.

Quality consistency is important to European buyers of liquorice extract because it is central to the manufacturing of cosmetic products. They prefer a standardised, high-quality product across all orders in packaging that is suitable to each order’s volume, for example, polythene-lined boxes that can hold 25 kilograms for an order of that size.

European buyers regularly test products they purchase to ensure they meet their requirements. For example, a European importer of liquorice extract said in an interview for this report: ‘before we order and import the extract, we test and analyse them’. Another importer said: ‘all imported products are tested and if they are not up to the required standard, then they are sent back’. Therefore, do not contaminate your liquorice extract with foreign substances. 

Quality management standards

European buyers of natural ingredients for cosmetics increasingly use quality management standards when assessing the credibility of prospective exporters. As an exporter, adopting quality management standards gives you credibility because it demonstrates your commitment and ability to deliver high-quality products. Adopting quality management standards can also help to show your ability to comply with mandatory requirements, giving your company a positive image in the European market. 

You should therefore consider adopting quality management standards to increase the quality of your liquorice extract and make it more appealing to buyers. Examples of quality management standards include ISO 2200 and ISO 9001:2015 by International Organization for Standardization and Food Safety System Certification (FSSC) 2200. Other common guidelines you should consider following include Hazard Analysis and Critical Control Points and Good Agricultural and Collection Practices. Sepidan Osareh Co. is an example of an Iranian exporter of liquorice extracts doing this well.

Labelling and packaging

You also have to consider meeting additional labelling and packaging requirements that European buyers commonly have. This includes listing the following on your product documentation and labels in English unless asked otherwise:

• International Nomenclature Cosmetic Ingredient (INCI) name and product name
• Name and address of exporter
• Batch code
• Place of origin
• Date of manufacture
• Best before date
• Net weight
• Recommended storage conditions
• Organic certification number along with the name/code of the certifying inspection body if you export organic liquorice extract.

European buyers of liquorice extract require high-quality liquorice extract, thus consider preserving the quality of your liquorice extract by doing the following when it comes to packaging:

• Using polythene-lined boxes, aluminium, lined or lacquered steel containers, as they do not react with the components in liquorice extracts.
• Ensuring packaging materials such as boxes and containers are clean and dry before liquorice extract is put into them.
• Filling headspace of packaging materials with gases, such as nitrogen or carbon dioxide as they do not react with liquorice extracts constituents.
• Consider recycling or re-using packaging materials, for example by using boxes and containers made of recyclable materials such as metal. This is because environmental sustainability is becoming increasingly important for European buyers.

Payment terms

Payment is central to all trade and presents risks to everyone involved. Before trading with European buyers do risk assessments of available payment terms. As an exporter of liquorice extract minimise your risks whilst working to meet the needs of European buyers.

There are several methods of payment. However, for both importers and exporters, Letters of Credit (LC) are considered to be the safest payment term. This is because an LC lets both parties contact a neutral arbitrator, usually a bank, to resolve any issues. For the exporter, the chosen bank is a guarantor of full payment as long as goods have been dispatched. In such instances, to avoid further losses, exporters should find new buyers and pay for the return of dispatched goods.

Based upon their needs, importers and exporters can choose from several LC payment terms. These include standby, revocable, irrevocable, revolving, transferable, un-transferable, back to back, red clause, green clause and export/import. For exporters, standby LC is considered the safest, with it being frequently used in international trade. This is because it provides security to both importers and exporters who have little trading experience with each another. Other payment terms include cash in advance, documentary collections and open account.

Delivery terms

Before agreeing delivery terms with European buyers you must carefully consider three important factors: delivery time, volume and cost. This is because failure to meet agreed delivery terms could end your trading relationship with European buyers.

1. Delivery time - As an exporter, you should understand that European buyers prefer shorter delivery times. Air cargo is usually faster than sea freight. Air freight is also more reliable in regards to on-time delivery. It is important to note delivery times are likely longer because of the global COVID-19 pandemic, with reasons for this including forced quarantine measures and restrictions on the movements of goods.
2. Delivery volume/quantity of order - The volume of your order is an important factor to take into consideration when choosing a mode of transport. Larger quantities are often cheaper to ship by sea. With smaller volumes, air freight can be less expensive, as margins get smaller.
3. Cost of delivery method - It is estimated that sea freight is usually 4-6 times cheaper than air freight. This applies to larger volumes. It is not likely that price of your cargo will increase substantially, if you increase the volume. Be aware, due to the COVID-19 pandemic the cost of air freight is increasing; this is likely to change once passenger flights are fully operational.

The COVID-19 pandemic has created logistical challenges for exporters in developing countries. These challenges are expected to continue for the foreseeable future, as governments attempt to tackle the pandemic by implementing different measures. 

Disruptions to global supply chains because of import and export restrictions on goods, as well as quarantine and lockdown measures implemented by governments are key challenges for exporters, according to importers interviewed for this report. Delivery costs are also increasing, particularly in air freight due to flight cancellations. According to a European importer interviewed, the cost of transporting liquorice ‘especially (by) air freight has gone up drastically since corona’.

What are the requirements for niche markets?

Organic and fair trade

There is a growing demand for certified raw materials on the European cosmetics market. At the same time a growing number of cosmetic products and raw materials are being certified according to natural and organic standards. Two of the leading organic standards are:

• NaTrue
• COSMOS

There are over 10 other natural and organic cosmetic standards in Europe; they include Demeter and Organic Farmers and Growers.

Fair trade is also becoming popular among European cosmetics manufacturers, as the environmental and social attributes of sustainability are becoming increasingly important. Examples of fair trade standards include:

• Fairtrade international
• Ecocert Fair Trade and Fair for Life
• FairWild, which attests the use of sustainable collection, social responsibility, and fair trade principles.

2. Through what channels can you get liquorice extract on the European market?

More than 90 percent of liquorice extract is used in the food, pharmaceutical and tobacco industries. The use of liquorice extract in the cosmetics industry is fairly small; liquorice extract imports for cosmetic products comprise less than 5 percent. The European supply chain of liquorice extract is well-established. However, the majority of liquorice extract is not used in the cosmetics industry. Liquorice is mainly marketed in the European market as an ingredient for cosmetics, food and pharmaceutical products. The majority of liquorice extract is brought into the European market by traders.

How is the end market segmented?

The European liquorice extract market can be segmented according to end users.  These include the cosmetic, food, health products and pharmaceutical and tobacco industries. Figure 2 ‘examples of liquorice extract products on the European market’ shows the end-market segmentation of liquorice extract on the European market.

Figure 2: Examples of liquorice extract products on the European market

Source: Various

Cosmetic industry

Cosmetic formulators use liquorice extract because of its wide range of properties. Liquorice extract is classified as bleaching, emollient, skin conditioning, smoothing, soothing and perfuming. It can be used in personal care products designed for specific segments. The extract is used as:

• Antioxidant
• Lightening Whitening Agent
• Purifying Agent
• Anti-aging Agent
• Anti-inflammatory
• Antimicrobial

It is used in skin-lightening personal care products. The active parts are called glabridin, and isoliquirtigenin. The amount of glabridin in liquorice extracts varies between roughly between 4 and 40 percent.

Liquorice extract soothes the skin, which makes it ideal for sun-care cosmetics. Its anti-inflammatory and calming properties help ease sunburn damage. It is also used in anti-ageing cosmetics because it contains several anti-ageing properties. The extract also contains glycyrrhetic acid and flavinoids that have antioxidant and regenerative properties.

The extract can also be used in products for treatment of dermatitis, rosacea and eczema. The extract is mostly used in formulation with a concentration of 4-10 percent. It is mainly used in topical skin care products. Liquorice root extract and liquorice derived ingredients can be used in hair care products. It is estimated that the cosmetics sector accounts for less than 10 percent of the liquorice extract market in Europe.

The European liquorice extract market is expected to grow in the coming years. The key driver is European consumers increasingly demanding plant-based natural ingredients. Natural ingredients are gaining popularity in the cosmetics industry.

Europe has one of the largest markets for natural and organic cosmetics in the world. Consumers in Europe are actively looking for natural and organic products. The European natural and organic market is expected to continue to grow at a healthy rate from 2020 to 2023. You should  therefore consider getting certification, such as Nature and/or COSMOS to prove your liquorice extract is natural. Doing so will increase your chances of entering the European market.  

Food industry

The European food industry uses liquorice in confectionary, dairy, beverages and bakery products. This is because of the benefits liquorice provides to these products. For example, in confectionary and dairy products and ice-cream in particular, liquorice is used for its flavour.

Health Products and Pharmaceutical industry

Pharmaceutical companies use liquorice in their products because of its health properties. The health benefits of liquorice include it acting as an anti-viral, anti-inflammatory, anti-microbial, and hepato-protective agent. Liquorice is also used in pharmaceutical products that treat sore throats and coughs, as well as oral care products.

Tobacco industry

Tobacco manufacturers use liquorice extract to add its flavour and smell to tobacco. The tobacco industry also uses liquorice root and its extracts to flavour chewing tobacco.

The tobacco and food and beverage sectors account for around two thirds of the liquorice extract market in Europe. This study deals with liquorice extract used in the cosmetics sector.

Through what channels does liquorice extract end up on the end-market?

Figure 3 shows the export value chain for liquorice extract in the European market. Processing liquorice extract into an active ingredient for the cosmetics industry requires significant financial and human resources, something that most companies will not have access to. This is because expensive technical machinery and a skilled workforce are required to process liquorice extract into an active ingredient for the cosmetics industry.

Importer/Distributor

Thus, European cosmetic manufacturers usually source liquorice from European importers who meet their needs. Liquorice extract is mainly brought into the European market by importers who supply processors or cosmetic manufacturers directly. The German company Norevo is an importer of liquorice extract to the European market and has longstanding experience in sourcing and processing. Liquorice extract is traded on the European market in solid, liquid, granule and spray dried powder forms. Other importers of liquorice extract in the European market include Extraits Végétaux et Dérivés, Ruitenberg BasIQs B.V. and A.ERRE & CO. Import volumes in this channel are usually in tonnes.

Figure 3: Export Value Chain for Liquorice Extract

Source: Ecovia Intelligence

What is the most interesting channel for you?

As an exporter of liquorice to the cosmetics industry, importers/distributors are the most interesting channel for you. This is because European cosmetic companies usually do not source liquorice from developing countries directly as they focus their attention on research and development (R&D) and production. European importers have a wide range of customers across industry sectors. They also provide you with storage facilities. This can be very helpful to you as a small and medium-size exporter of liquorice to Europe.

3. What competition do you face on the European liquorice extract market?

What countries are you competing with?

Many developing countries are already successful in exporting liquorice extract to the European market. These countries often share several key strengths which contribute to their export activities. These strengths include improving infrastructure, governmental support, and favourable climatic conditions for growing liquorice.

Iran

Eurostat data shows Iran was the largest exporter of liquorice extract to Europe in terms of volume in 2019.  Iran has a well-established liquorice industry with 95 percent of its national production exported to foreign countries. One of Iran’s key strengths is its ability to export large volumes of liquorice extract, likely to cause a positive image among European buyers, who often demand large volumes and continuity of supply. European buyers of liquorice extract view Iran favourably, according to a buyer interviewed for this report, for reasons that include good communication, professionalism, and business handling.

The lifting of trade sanctions against Iran has given it a more favourable image amongst European buyers. Indeed, trade between EU member states and Iran has been increasing in recent years. Iran’s other strengths include low production costs and the lifting of international trade sanctions which could make it easier for liquorice extract producers to export to the European market. However, Iran does face challenges, such as international trade sanctions potentially being re-imposed, conflict with neighbouring countries and the United States, political instability and corruption.

China

Eurostat data shows China was the second-largest exporter of liquorice extract to Europe in terms of volume in 2019. The Chinese government implemented several policies to improve and support the development of the Chinese liquorice industry in recent years. However, liquorice exporters in China face challenges which include the inconsistent quality and quantity of liquorice seeds along with large financial investment, since the production cycle takes two to three years.

Nevertheless, European buyers have reported in interviews that the quality and reliability of Chinese liquorice extract is good, with one buyer saying that China’s product ‘quality is good and reliability is excellent’. However, one buyer revealed that timely communication can be an issue when doing business with Chinese exporters. The COVID-19 pandemic is making it difficult to import Chinese liquorice extract to the European market. One European importer said that ‘in all aspects it has been challenging’, including because of personnel unavailability, increased delivery costs and longer correspondence times. 

Turkmenistan

Turkmenistan is a major supplier of liquorice extract to Europe with Eurostat data showing it was the third largest exporter of liquorice extract to Europe in terms of volume in 2019. A key driver behind this is the Turkmenistan government making large investments to develop its liquorice extract industry in recent years. For example, investments to introduce new technologies and construction of new industries to improve the quality of processing liquorice root to meet international standards.

The Turkmen government is helping exporters find new markets, for example working with the International Trade Centre (ITC) to establish an online trade facilitation portal, which help Turkmen exporters to enter the European market. However, political instability, corruption and poor standards on human rights, labour conditions, and unethical supply chains are challenges Turkmenistan exporters face. Thus, European buyers may perceive Turkmenistan to have many trade risks when sourcing liquorice extract.

India

Eurostat data shows India was the fourth-largest exporter of liquorice extract to Europe in terms of volume in 2019. India offers ideal conditions for liquorice extract growth, particularly the North-West of India, with its sub-tropical climate. Another of India’s strengths is its government providing grants along with other assistance for the cultivation of liquorice. India’s other strengths include governmental support and polices, and low costs. In general, Europeans perceive India favourably. One reason is that Indian companies are doing well in Europe. Indian companies also speak English for business, which makes business easier for European buyers. It could become easier for Indian liquorice extract producers to export liquorice extract to the European market.

European buyers of liquorice extract generally view India favourably, however according to one buyer there can be ‘challenges in terms of assuring the quality that you buy’. The COVID-19 pandemic has created several challenges for European buyers of liquorice extract, including limited supply ‘because there was a lockdown for a couple of months’, according to buyers. Lockdown measures have also led to longer delivery times, which according to a European buyer has made it ‘tough because products that were to be sailed off could not be dispatched’. Increased delivery costs, especially air freight are another challenge.

Uzbekistan

Eurostat data from 2019 shows Uzbekistan is the fifth-largest exporter of liquorice extract to Europe in terms of volume. Uzbekistan has the essential requirements for liquorice cultivation, which include favourable conditions for growing, processing, and exporting liquorice. Uzbekistan’s government has been supporting the country’s liquorice industry in recent years, including issuing resolutions for the establishment of liquorice plantations, subsidies, and exemptions from several fees, taxes, and payments.

These efforts may make it easier for exporters of liquorice extract from Uzbekistan to enter the European market. However, challenges facing Uzbekistan’s agricultural industry include poor soil fertility, inefficient use and degradation of land, and poor water irrigation systems. European buyers perceive Uzbekistan favourably thanks to good communication, professionalism, and handling of business, according to a buyer interviewed for this report.

Thailand

Eurostat data shows Thailand was the sixth-largest exporter of liquorice extract to Europe in terms of volume in 2019. However, Thailand exports comparatively lower volumes of liquorice extract to the European market than the other countries featured in this section. This is a key challenge to Thailand’s liquorice industry, which may prove difficult to compete with countries such as Iran and China which produce and export larger volumes of liquorice extract. This is likely to influence European buyer perception, particularly those buyers that require larger volumes and look for continuity of supply.

Other countries

Eurostat data shows that a number of developed countries export and re-export liquorice extract. These include Germany, France, Slovakia, United States, Netherlands, Italy, and Israel.

What companies are you competing with?

A number of established companies in developing countries are successful in exporting liquorice extract to the European market. These companies market themselves as being able to deliver high-quality liquorice extract to the European market, and are able to meet common buyer requirements as well as those for niche markets. By doing so, these companies look reputable and have credibility with European buyers.

A professional website with well-prepared content is a major strength for exporters. The website will usually have sections informing prospective buyers about the company itself, how it sources and processes its liquorice extract, and offer technical details, certifications and standards, accompanied by professionally taken photographs. Another key strength for exporters is that they are willing and committed to meeting buyer specifications and meet their needs.

Iranian companies

Sepidan Osareh Co. is a leading Iranian company. One of its key strengths is that it exports International Organization for Standardization (ISO) certified liquorice extract. Specifically, its liquorice extract meets the ISO 9001 standard which demonstrates quality and ISO 14001 which demonstrates environmental standards. Sepidan Osareh Co has its own laboratories where it tests its liquorice extract to ensure its quality and safety; this is important as it adds credibility to its claims. This is another of its key strengths.

Chinese companies

Sino-Nature is a well-established Chinese company exporting liquorice extract to Europe. Sino-Nature’s key strength is its ability to export high-quality Ecocert and USDA Organic certified liquorice extract. Another of Sino-Nature’s key strength is its commitment to upholding Corporate Social Responsibility standards concerning environmental and social standards. For example, providing equal job opportunities to women and having an environmentally friendly liquorice production process.

Indian companies

Marudhar Impex is an established Indian exporter of liquorice extract to the European market. One of its key strengths is its ability to export GMP-certified liquorice extract, which demonstrates that it has been manufactured according to good quality standards. Marudhar Impex’s liquorice extract is also ISO 2200:2005 certified, which is a popular additional buyer requirement among European buyers.

What products are you competing with?

Liquorice extract is used in anti-ageing cosmetics because it contains anti-ageing properties. These include smoothing properties that reduce the appearance of wrinkles along with enhancing the appearance of dry and damaged skin. Liquorice extract is also used in sun care cosmetics because the glycyrrhetinic acid found in it has anti-inflammatory and soothing properties which help to alleviate damage caused by sunburn.

Kigelia africana

Kigelia africana is a product competing with liquorice extract because it contains anti-ageing properties. Kigelia africana’s strengths include its marketing potential as an exotic and new ingredient in the European market. It also has proven effectiveness on several anti-ageing properties, such as tightening and generally increasing skin firmness. However, compared to liquorice extract the weaknesses of Kigelia africana include the fact that formulators are less familiar with it, it does not have an established supply chain, and lower availability levels.

Figure 5: Kigelia africana

Source: Alibaba

Centella asiatica

Centella asiatica is another product competing with liquorice extract because it has anti-ageing and anti-inflammatory and soothing properties. Centella asiatica’s other strengths include it being an established product, its proven effectiveness on several aspects of its anti-ageing properties, its anti-inflammatory properties, and it having a well-established supply chain. However, a weakness of Centella asiatica is that it is a product without a strong social responsibility story.

Figure 6: Centella asiatica

Source: Alibaba

Morus alba

Morus alba, more commonly known as mulberry is another product competing with liquorice extract because it contains anti-ageing and anti-inflammatory and soothing properties, with this being its key strengths. According to industry sources, formulators are less familiar with mulberry compared to liquorice extract; this is one of its key weaknesses.

Figure 7: Morus alba

Source: Alibaba 

4. What are the prices for liquorice extract on the European market?

Increasing demand in the global market is driving prices of liquorice extract up. Prices of liquorice extract have increased in the last few years. According to industry sources, the FOB wholesale price of liquorice is about €7 to €8.50 per kilogramme. There is also a difference between various liquorice extracts depending on their composition. The amount of glabridin in liquorice extracts affects the price. It is expected that the price of liquorice will increase further in the near future.

Interviews with European buyers and importers of liquorice extract suggest that the market price of liquorice extract increased during the COVID-19 pandemic. This is due to the disruption the pandemic is causing to supply chains, increasing transportation costs, as well as delays in receiving orders. Disruptions to supply are expected to continue because of lockdown and quarantine measures introduced during the COVID-19 pandemic.

Figure 8: Estimated price breakdown of liquorice extract products in the European market

Source: Ecovia Intelligence

This study was carried out on behalf of CBI by Ecovia Intelligence.

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