The European market potential for essential oils

Aromatherapy products are gaining popularity in Europe. The reason is that European consumers are looking for more natural and green ways to improve and maintain their health. 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.

1. Product description

Essential oils are chemical compounds extracted from plants that have been used throughout history, with their history being traced back to ancient Egypt. There are several types of essential oils; the most popular essential oils include lavender, peppermint, orange, eucalyptus, tea tree and lemon.

The essence of plant extracts is what makes oils essential, which are mainly obtained through steam and water distillation. Mechanical methods such as cold pressing alongside solvent extraction are other ways of obtaining essential oils from plant extracts.

Essential oils are increasingly being used in aromatherapy products and treatments. Key drivers behind this trend are the health benefits that they provide, which include solutions to skin-related issues, pain management and insomnia. Other health benefits include essential oils that help to alleviate fatigue, anxiety, stress or memory loss, among other things. An article on ScienceDirect describes various other benefits of aromatherapy with essential oils. The essential oils covered in this study are:

Frankincense

Frankincense essential oil is sourced from the Boswellia carterii tree, which is typically found in Somalia and Pakistan. The oil is extracted by steam distillation from the oleo gum resin. It is used in cosmetics and aromatherapy, as it has active and functional properties. Frankincense oil has anti-ageing properties; it is also used to reduce acne and blemish, while it is a remedy for scars, wounds, eczema and stretch marks as well.

In aromatherapy, frankincense oil is used to relieve stress and anxiety, reduce pain and inflammation, boost the immune system and help fight cancer. While frankincense essential oil is traded under HS code 33012941, there are no trade data recorded under this HS code. Trade data of frankincense essential oil are clubbed together under HS code 330129.

Patchouli

Patchouli comes from a plant species in the same family as mint and lavender. There are 3 species of patchouli: Pogostemon Cablin, Pogostemon Heyneanus and Pogostemon Hortensis. Pogostemon Cablin is the one cultivated for its essential oil because of its superior properties.

Patchouli is a brushy herb grown in the tropical regions of Asia. It has a heavy and strong scent. It is usually extracted by steam distillation of the dried leaves. Initially, patchouli was used in the perfume industry, but it is also used now in incense and alternative medicine. Patchouli oil is made using sesquiterpene alcohol, which helps its use in fragrances.

In the cosmetics industry, patchouli can be used in haircare products, skincare products and deodorants. It is mainly used for its conditioning properties. Patchouli essential oil is traded under HS code 3301295129. Trade data of patchouli essential oil are clubbed together under HS code 330129.

Nutmeg

Nutmeg is a ground spice derived from several species of the genus Myristica. Myristica is a dark-leaved evergreen tree that produces nutmeg from its seed and mace from its seed covering.

Myristica trees producing nutmeg are native to Indonesia; they also cultivated in Malaysia, India and the Caribbean. Nutmeg has a strong fragrance and a warm, slightly sweet taste. Nutmeg is frequently refined into an essential oil via steam distillation, after which it is used in the pharmaceutical, health and aromatherapy industries.

In the natural health product industry, nutmeg is used as an ingredient in cough syrup and toothpaste. Nutmeg is widely used for its health benefits, as it has antioxidants and good anti-inflammatory properties. Nutmeg is traded under HS code 3301293. Trade data of nutmeg essential oil are clubbed together under HS code 330129.

Geranium

Pelargonium, commonly known as geranium, is a genus of flowering plants including around 200 species of perennials, succulents and shrubs. Geranium is indigenous to mild and tropical regions of the world.

Geranium is native to South Africa; it is cultivated in African, Central American and Asian countries. Through the process of steam distillation, geranium is refined into an essential oil. As an essential oil, geranium is frequently used in the pharmaceutical, health and aromatherapy industries.

In the natural health products industry, geranium is mainly used as an ingredient for its positive medicinal properties, which include antioxidant, antibacterial, anti-inflammatory, anti-microbial and astringent properties. Geranium is traded under HS code 330121.

The majority of essential oils are used as flavouring in food products. They are also used in cosmetic products, aromatherapy products and pharmaceuticals. Essential oils are typically used in cosmetic products as fragrances in skincare products and perfumes. This report focuses on essential oils and their application in the health product industry.

2. What makes Europe an interesting market for essential oils?

Europe is an attractive market for essential oils from developing countries, as there is a growing demand for aromatherapy products. Essential oils are seen as a more natural way to treat various physical and mental health conditions. European consumers use aromatherapy products as a complementary way to improve their health.

Europe is prospective for you as an exporter of essential oils from developing countries. It has a growing market for aromatherapy and essential oils. According to Data Bridge, the European aromatherapy market is expected to reach USD 3.59 million by 2027. The market is expected to grow at a compound annual growth rate (CAGR) of 9.56 percent between 2020 and 2027.

The demand for aromatherapy products in Europe is growing, as consumers look for alternative ways to treat health conditions. Essential oils have a wide range of properties such as stress-relieving, 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.

According to the World Health Organization, around 25% of the European population suffers from depression and anxiety each year. Up to 50% of chronic sick leave in Europe is because of depression and anxiety, putting a strain on the European economy.

Figure 1 shows differences in the mental illness share of populations in selected European countries. It shows that anxiety and depression rank high. In countries such as the UK, Sweden, France and Germany, conditions, including anxiety and depression, have a double-digit share. Because of increasingly stressful lifestyles, this share is expected to rise in the near future. The trend presents an opportunity for you as an exporter of essential oils from developing countries, as essential oils and aromatherapy are often used by consumers to improve their overall mental well-being.

There is a growing trend towards more natural ways of treatment as opposed to conventional medicine. European consumers also use alternative healing modalities in a complementary way alongside conventional medicine. This trend generates a demand for essential oils in Europe.

It is shown in figure 2 and 3 that the volume and value of essential oils imported to the EU increased between 2016 and 2020. This reflects the increasing demand for natural products on the European market. The majority of the essential oils imported to Europe goes into the food industry. It is also shown that almost two thirds of essential oils imported to Europe are from Extra-EU trade.

Geranium is traded under HS code 330121. Unfortunately, there are no trade data recorded under this HS code.

There is a growing opportunity for suppliers of essential oils from developing countries to export to the European market. The import data show that the demand for essential oils has grown on the European market. While the market for the most popular essential oils such as orange, peppermint, lemon is very competitive, there is an opportunity for suppliers from developing countries to export niche essential oils that are traded under HS code 330129.

By supplying essential oils such as frankincense, patchouli, sandalwood, ylang-ylang, nutmeg, cajeput and cassia oil, exporters from developing countries can grab the attention of European buyers. Exporters from developing countries can gain a market foothold, since most of these oils are not produced in Europe. It is shown that the volume and value of essential oils with HS code 330129 increased over the last few years.

According to industry sources, the demand for geranium essential oil is also increasing. In aromatherapy, geranium is used to reduce feelings of stress, sadness, fatigue and anxiety. As European consumers seek more natural treatments for mental health issues, the popularity of geranium and its use in aromatherapy are expected to rise.

The health benefits of essential oils are a major reason for the growing demand for aromatherapy products in Europe. Increasing health consciousness among European consumers, the demand for greener and more natural products, as well as the rising rates of chronic and mental illness in Europe are forecast to stimulate the demand for aromatherapy products in Europe.

3. Which European countries offer the most opportunities for essential oils?

The countries that offer the most opportunities for suppliers of essential oils are France, Germany, the Netherlands, the UK, Spain and Italy. These countries are the largest importers of other essential oils. France, Germany as well as the UK also have important processing and consumer markets.

France

Table 1: Imports of essential oils (HS code 3301 and 330129) to France, 2016–2020

Source: Eurostat

France is the leading importer of essential oils in terms of value. The imports of essential oils with HS code 3301 and 330129 increased between 2016 and 2020. More than 60 percent of imports of essential oils with HS code 3301 and 330129 come from outside of the European Union trade imports (extra-EU). It is expected that this trend will continue in the future.

France is known for its strong production and processing industry of essential oils. Figure 4 shows production of lavender essential oil in France between 2012 and 2018. It shows that France is an important supplier of lavender essential oil in Europe. However, the market for essential oils in Europe cannot be met by supply coming from Europe alone. There are therefore opportunities for producers in developing countries that can supply essential oils. Essential oils with HS code 330129, including frankincense, patchouli and nutmeg, represent an important part of French imports.

France has a robust market for aromatherapy products. Puressentiel, Phytosun (Omega Pharma) and Le Comptoir Aroma (Laboratoires Gilbert) are some of the leading manufacturers of essential oils as well as aromatherapy products. Aromatherapy products are available in pharmacies across France, making them more accessible to consumers. Leading importers of essential oils include Elixens and SNPM Huiles Essentielles. Many fragrance companies are based in France; they include Robertet and Mane.

The demand for essential oils is likely to continue to grow on the French market. France has a strong domestic demand; the country is also a major re-exporter of essential oils to other European countries. Exporters of essential oils are likely to find the French market attractive.

Germany

Table 2: Imports of essential oils (HS code 3301 and 330129) to Germany, 2016–2020

Source: Eurostat

Germany is a leading importer of essential oils in terms of volume. The country reported an increase in the imports of essential oils with HS code 3301 in terms of volume, but value remained stable. This implies that prices of essential oils have decreased in the last 5 years. Imports of essential oils with HS code 330129, under which frankincense, patchouli and nutmeg are traded, decreased slightly in the last 5 years. However, the value increased by almost 100 percent, which indicates an increase in the price of other essential oils (HSC 330129) in the last 5 years.

Germany has a robust processing industry and it is an important consumer market. Primavera Life, Taoasis and Neumond are important suppliers of essential oils. These products are mainly available in specialist retailers such as organic food shops and pharmacies. Larger companies such as Primavera Life source essential oils directly. Other smaller companies usually buy from traders and importers. Leading importers of essential oils in Germany include SanaBio and Atriplex. SanaBio specialises in organic essential oils.

Germany is expected to remain an important market for essential oils. Suppliers of essential oils should focus on German traders, especially if they supply organic essential oils. Germany is showing a growing demand for organic products; it has the largest market for organic personal care products and food products. The consumer demand for organic products extends to related product sectors.

The Netherlands

Table 3: Imports of essential oils (HS code 3301 and 330129) to the Netherlands, 2016–2020

Source: Eurostat

The Netherlands is a significant importer of essential oils in Europe. Table 4 shows that the volume of imports of essential oils with HS code 3301 and 330129 increased by double and triple-digit rates in the last 5 years. These figures indicate a substantial increase in prices, which is caused by poor harvests and unfavourable weather conditions. Essential oils with an HS code 33029 imported from outside of the European Union (EU) have an 86% share. This share has been increasing slightly.

Essential oils with HS code 330129 account for almost 12 percent of the share. This share increased in the last couple of years and is expected to continue to do so in future.

The Netherlands is expected to remain an attractive export destination for essential oils. The country is an important re-exporter of raw materials, such as essential oils to other European countries. Important traders of essential oils include IMCD and De Lange.

UK

Table 4: Imports of essential oils (HS code 3301 and 330129) to the UK, 2015–2019

Source: Eurostat*

*Latest available data

UK imports of essential oils decreased in terms of volume and value from 2015-2019. The volume of imported essential oils decreased by 24.8% whilst the 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. Essential oils imported to the UK are usually re-exported to other European countries.

The UK has a large market for aromatherapy products. Important market players include Neal’s Yard Remedies, Tisserand and Absolute Aromas. The UK company Neom Organics produces natural haircare products using certified Organic essential oils.

The demand for essential oils is expected to remain high in the foreseeable future. Brexit (Britain’s exit from the European Union) has disrupted the supply chains for raw materials. It will take time to re-negotiate trade agreements, with will hamper the trade with developing countries. It is expected that the demand for essential oils will remain strong in the UK. You should be aware that your trading relationships with UK importers may be more complicated until trade agreements are renegotiated.

Spain

Table 5: Imports of essential oils (HS code 3301 and 330129) to Spain, 2016–2020

Source: Eurostat

Spanish imports of essential oils with HS code 3301 decreased in the last 5 years in terms of volume, but increased in value. A similar trend was recorded for imports of other essential oils with HS code 330129. This is because of increasing prices of essential oils. Essential oils with HS code 330129 account for around 17% of the total volume and 63% of the total value of essential oils imported to Spain.

Leading essential oils importers in Spain include Grupo Plimon and Chemir. The demand for essential oils is expected to continue to increase in the coming years. Indonesia and China are the most important exporters for essential oils with HS code 330129. There are opportunities for essential oil producers from developing countries.

Italy

Table 6: Imports of essential oils (HS codes 3301 and 330129) to Italy, 2016-2020

Italian imports of essential oils increased in volume and value between 2016 and 2020. The volume of imports with HS code 3301 increased at a double-digit rate in the last 5 years. Over the same period, the volume of other essential oils increased at a single-digit rate, and value increased at a double-digit rate. This indicates increasing prices of imported essential oils with HS code 330129. Most essential oils imported to Italy come from within the European Union (EU).

Italy has the third-largest natural and organic cosmetics market in Europe, valued at EUR 425 million. There is a growing market for natural and organic cosmetics. Italian consumers are becoming more aware of the environmental impact of cosmetic ingredients. Leading natural and organic companies include L’Erbolario and Helan.

The most attractive countries for essential oils exporters are Western European countries. These countries import the largest volumes of essential oils. Almost all of them recorded an increase of imports between 2016 and 2020.

Countries such as France, Germany, Spain as well as the UK have robust processing industries and have some of the largest consumer markets. France, Germany and the Netherlands are important exporters of essential oils to other European countries.

4. Which trends offer opportunities on the European market?

Rising awareness of environmental issues is leading consumers to demand higher levels of transparency and traceability in the supply chains for their natural health products. As a consequence, consumers are demanding more environmentally friendly and ethical products. The demand for essential oils is also driven by the growing popularity of aromatherapy in Europe.

Growing importance of sustainable production

There is a growing demand for the transparency and traceability of supply chains in the natural product industry. This trend is driven by increasing consumer awareness and demand for environmentally friendly products. Sustainable production of frankincense and patchouli essential oils is becoming important.

Boswellia carterii trees are dying because of over-harvesting. Since frankincense production is the main source of income for some disadvantaged communities in mountainous regions of Somalia, the famers are under economic pressure. As a result, multiple cuts are made to trees and they are not given the usual 1-year resting period. Moreover, the increasing demand for frankincense essential oil pushes up the prices, putting pressure on farmers to produce more.

This situation leaves Boswellia trees vulnerable to insect attacks and decreases their germination rate. Such unsustainable practices could have severe consequences for frankincense oil production. A recent study published by Nature Sustainability concludes that frankincense production will decrease by half in the next twenty years and Boswellia woodlands around the world will shrink by 90% in 2070.

Suppliers of frankincense from developing countries should adopt sustainability schemes, such as FairWild or Organic certification. One of the disadvantages of FairWild certification is that it requires constant monitoring and is rather data-intensive, which could be difficult to comply with in rural communities that produce frankincense. Organic certification could improve the production methods of frankincense and increase traceability.

Producers of patchouli essential oil are also faced with many sustainability challenges, which include agricultural practices, climate change, soil nutrient depletion and vulnerability of farmers. There are various sourcing partnerships in place that enable sustainable sourcing of patchouli. These partnerships have been introduced by Givaudan and Firmenich. Firmenich sources its patchouli from Indonesian essential oil supplier Indesso.

Around 70% of the global nutmeg production is in countries threatened by climate change. Nutmeg is native to Indonesia; it is also cultivated in Guatemala. These countries are 2 of the largest producers of nutmeg. Both Indonesia and Guatemala are ranked in the top ten countries most exposed to climate change according to the CCEI. As a result, there are challenges to the future sustainability of nutmeg.

Other key factors affecting the sustainable production of nutmeg include poor agricultural practices, uncontrolled use of pesticides, poor waste-water management and inadequate labour conditions.

Geranium is native to South Africa. The South African Department of Agriculture, Forestry and Fisheries warns about a number of factors putting the future sustainability of germanium at risk. They include several infectious fungal and bacterial diseases, alongside viral diseases.

Sustainability practices in the essential oil industry will become more important in the coming years. Suppliers of essential oils should adopt sustainable production practices and/or certification schemes.

Growing popularity of aromatherapy in Europe

According to Data Bridge Market, the European aromatherapy market is predicted to be worth USD 2.73 billion by 2024, an increase from USD 1.33 billion in 2016. The market is projected to show a compound annual growth rate of 9.5% up to 2024.

A major driver behind this growth is rising consumer awareness of the health benefits of aromatherapy products. Health benefits include aromatherapy used for skin-related problems, pain management, insomnia, cardiovascular and respiratory disorders, and digestion problems. In addition, aromatherapy is used to treat coughs and colds.

According to a survey of the European Agency for Safety and Health at Work, Europeans are increasingly living hectic and stressful lives. Consumers are using aromatherapy to relieve their stress and to help them relax, which is also stimulating the demand for aromatherapy products. Another key driver is that consumers choose to live greener and sustainable lifestyles, which aromatherapy allows them to do.

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

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