market insights for indonesian spices - the spice...

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Market insights for Indonesian spices

Indonesia is one of the largest global producers of spices; the

EU is one of the largest global markets for spices. This module

addresses the dynamics between these two players, identifying

trade patterns, (sustainability) trends, market channels and

other aspects which will help Indonesian exporters access the

EU market more successfully.

This tailored CBI Market Intelligence addresses sector-wide themes for spices,

but has a special focus, both quantitatively and qualitatively, on the following

products: nutmeg, cinnamon, cloves and turmeric. These spices were selected

during a pre-research phase which identified potential opportunities for

Indonesian exporters.

A special focus is also drawn to sustainable markets and initiatives for spices

(both niche and mainstream), as well as health & wellness aspects which are

relevant for this sector.

Indonesian production of spices

In the past, Indonesia attracted merchants from all over the globe seeking

possibilities to make fortune in the international spice trade. The archipelago is

still one of the world’s largest spice-producing countries, having earned the

reputation of ‘the Spice Island country’. Regarding the spices selected for this

study, Indonesia clearly plays a leading role worldwide.

Indonesia was the second largest global producer of the product group

‘nutmeg, mace and cardamons’ in 2011, at 22 thousand tonnes, slightly

behind Guatemala (23 thousand tonnes, consisting mostly of cardamons). Both

Indonesian and Guatemalan production decreased since 2007. India, the third

largest global producer, saw its production increase significantly in the same

period.

In the case of cinnamon, Indonesia is by far the largest global producer,

having reached a production of 93 thousand tonnes in 2011. China and

Vietnam are also significant producers of cinnamon, at respective production

volumes of 67 and 20 thousand tonnes in 2011. Whereas both Chinese and

Vietnamese production increased significantly since 2007, Indonesian production

experienced a decline of 2.3% on an annual basis.

Indonesia is also the dominant global producer of cloves, with a total

production volume of 75 thousand tonnes in 2011. Madagascar’s production

reached 6.8 thousand tonnes in the same year, making it the second largest

global producer. Tanzania followed closely behind, at 6.7 thousand tonnes.

Madagascar’s and Tanzania’s production declined at an annual average rate of

nearly 10% since 2007, whereas Indonesian production declined more modestly,

at 1.5% yearly.

The product group ‘spices not elsewhere specified’, which includes

turmeric, was dominated by Indian production. In 2011, India’s production

Tailored market intelligence: EU market insights for Indonesian spices


volume amounted to 1.5 million tonnes, more than 10 times larger than the

volumes produced by the second and third largest producers worldwide:

Bangladesh (128 thousand tonnes) and Turkey (114 thousand tonnes).

Indonesian production was much more modest, at 3.1 thousand tonnes in

2011, which represented an annual decline of 25% since peak year 2009.

The general decline in Indonesian spice production can be attributed to a

number of reasons. The Asian crisis, in the late nineties, and the collapse of the

Indonesian currency contributed to the negative impact on the price of

Indonesian spices. Due to low prices, high investments and slow return (e.g. it

takes cinnamon trees around 15 years to grow to the point of collection),

farmers gradually abandoned spice production in favour of more profitable

crops, such as chilli, potatoes, cocoa and rubber (Tripper, 2010 and industry

sources).

Table 1: World’s largest producers of selected spices, in 1,000 tonnes, 2011

Product Main producing

countries

Production in

2011,

in 1,000 tonnes

2007-2011

change, in %

nutmeg,

mace &

cardamons

Guatemala 23 -3.9%

Indonesia 22 -1.9%

India 17 4.9%

cinnamon Indonesia 93 -2.3%

China 67 5.1%

Vietnam 20 3.0%

cloves Indonesia 75 -1.5%

Madagascar 6.8 -9.1%

Tanzania 6.7 -9.1%

spices n.e.s.,

incl. turmeric

India 1,525 8.4%

Bangladesh 128 2.3%

Turkey 114 8.6%

Indonesia 3.1 -5.8%

Source: FAOSTAT, 2013

Recently, the Indonesian government has directed their policies toward the

revival of the Indonesian spice industry; e.g. rehabilitating and expanding

existing spice fields. According to Jakarta Post (2013), ‘Indonesia is seeking to

more than triple its spice exports in 2015 to take advantage of the world’s

growing spice trade, a move that could see it revive its glory years as a world

renowned spice exporter.’

Sustainable production of spices in Indonesia

It is not possible to determine the exact volumes of sustainably-produced spices

in Indonesia. Whereas production figures give a rough indication of organic

crops, fair trade production data are not available. Data for production of

Rainforest Alliance-certified spices are not available either, since it is a newly

introduced sustainability standard for spices. Read more about it under the

section ‘EU market trends for spices’.

The total organic agricultural land in the country amounted to 74 thousand

hectares in 2011 (Indonesian Organic Alliance, 2012), representing about 0.1%

of total agricultural land in Indonesia. Spices, specifically, amounted to less than

1 thousand hectares. Export crops, especially those located outside of Java,

make the bulk of organic-certified products in Indonesia.



Indonesian exports of spices

Looking at Indonesia’s spice production in a global perspective provides a good

basis to analyse the country’s role as a supplier to the international market.

Spices are Indonesia’s fourth largest exported agricultural commodity, after

shrimp, fish and coffee. In addition to pepper, the spices selected play an

essential role in making this a highly important sector for the Indonesian

economy.

Indonesia’s nutmeg exports reached 8.8 thousand tonnes in 2012, having

experienced an annual average decrease of 2.8% since 2008. Around 27% of

nutmeg exports were destined to the EU in 2012; the main destinations

worldwide were Vietnam (29%) and the USA (18%). Exports to the EU remained

stable between 2008 and 2012.

Cinnamon exports were the largest among the spices selected, having reached

40 thousand tonnes in 2012. However, Indonesia’s exports decreased at an

annual average rate of 1.3% since 2008. Nearly 20% of Indonesia’s cinnamon

exports were destined to the EU market in 2012, having increased slightly at an

annual rate of 1.5% since 2008. The largest export destination in 2012 was the

USA, accounting for nearly 38% of Indonesia’s exports.

Indonesian exports of cloves reached 5.9 thousand tonnes in 2012, having

increased at a strong annual rate of 8.7% during the review period. Around 11%

of total exports were destined to the EU, also increasing sharply at an annual

rate of 38%. The main export markets in 2012 were India (23%) and Vietnam

(21%).

Turmeric exports by Indonesia peaked in 2010, having reached 6.1 thousand

tonnes and representing an annual increase of nearly 150% in relation to 2008.

Exports declined between 2010 and 2012, to 1.2 thousand tonnes in the latter

year. Overall, turmeric exports had a significant increase of 5.2% during the

review period, accompanying the increasing demand from the Indian market. A

small share of 2.9% of total Indonesian exports were destined to the EU in

2012, which represented a strong annual increase of 24% since 2008.India was

by far the main export destination in 2012, accounting for 38% of Indonesian

exports, followed by Taiwan (21%).

Figure 1: Indonesia’s spice exports, in 1,000 tonnes, 2008-2012

Source: ITC Trademap, 2013

9.8 118.8

43

46

40

4.36.0 5.9

1.0

6.1

1.2

0

5

10

15

20

25

30

35

40

45

50

2008 2010 2012 2008 2010 2012 2008 2010 2012 2008 2010 2012

nutmeg cinnamon cloves turmeric

To the EU



EU imports and exports of spices

Official trade figures do not distinguish between conventional and sustainable

spices. For this reason, it is not possible to determine the exact share of, for

instance, organic or fair-trade certified spices imported into (or exported from)

the EU market.

Imports

The EU does not produce the spices selected for this study, thus depending

entirely on imports from producing countries to fuel its large consumer market

and extensive food industry.

Among the selected products, cinnamon was the largest spice imported into the

EU in 2012, amounting to 19 thousand tonnes / € 107 million. Imports increased

significantly at an annual average rate of 5.5% in volume and 11% in value

since 2008.

Turmeric imports were also quite large, amounting to 12 thousand tonnes / €

20 million in 2012, having increased at an annual rate of 4.5% in volume and

15% in value since 2008. Imports of cloves also increased at a strong rate in

the review period, by 6.3% in volume and by a remarkable rate of 26% in value,

having amounted to 4.0 thousand tonnes / € 31 million in 2012.

Nutmeg was the only selected product whose EU imports experienced a decline

in volumes between 2008 and 2012. EU imports reported an annual average

decrease of 1.5% in volume. In value, however, nutmeg imports into the EU had

a strong growth of 24% annually, thus registering a sharp price hike for this

product, mainly due to adverse weather conditions which affected supply levels.

Figure 2: EU imports of spices, in 1,000 tonnes, 2008-2012

Source: Eurostat, 2013

The Netherlands was the largest EU importer of nutmeg, cinnamon and cloves

in 2012. In the case of cloves, for instance, it accounted for a large share of

37% of total EU imports. The Netherlands is one of the largest spice trade hubs

in the EU, and is an important port of entry for Indonesian exporters into this

market.

Germany was the second largest importer for these 3 products, not only

indicating the importance of Germany as a European hub for spices, but also as

7.8

7.8

7.3

15

18

19

3.1

3.8

4.0

9.7

11

12

0 5 10 15 20

2008

2010

2012

2008

2010

2012

2008

2010

2012

2008

2010

2012

nutmeg

cinnam

on

cloves

turmeric



the largest consumer market in the region. The German food market amounted

to nearly € 170 billion in 2013.

The situation is slightly different for turmeric. The UK is by far the largest EU

importer and market for this product, due to its large South Asian population

and its influence in the country´s cuisine. There are around 1.5 million people of

Indian descent in the UK, with the highest concentration in the London area (UK

Office for National Statistics, 2011). In 2012, the UK accounted for nearly one

third of total EU turmeric imports, followed by Germany (20%) and the

Netherlands (16%).

Figure 3: Main EU importers of spices, in volume, 2012


Indonesia plays a crucial role in supplying the EU market with the selected

spices. The country was the main DC supplier of both nutmeg and cinnamon in

2012, with respective shares of 78% and 63% of total imports in terms of

volume sourced from DCs. It was also the third largest DC supplier of cloves to

the EU market, accounting for 21% of total imports.

Competing suppliers in the EU market

In addition to being the second largest DC supplier of nutmeg (6.3% of imports)

and third largest supplier of cinnamon (8.2%), India dominates the EU market

for turmeric. In 2012, the country accounted for no less than 96% of total EU

imports sourced from DCs. Based on these figures, India comes forward as one

of the strongest competitors in the EU market for Indonesian exporters.

Another strong competitor is Madagascar, which accounted for 11% of total EU

imports of cinnamon in 2012, making it the second largest DC supplier of this

product. In the case of cloves, Madagascar accounted for nearly half of total EU

imports in 2012 and was by far the leading supplier. Comoros also plays a

significant role in supplying cloves to the EU market, having accounted for

nearly one fourth of total DC supplies to the EU in 2012.

23%

40%27% 23%

6.6%

7.8%8.8%

10%

9.2%

9.4%

13%

8.1%

31%

24%

18%

19%

20%

27% 23%

37%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Netherlands

Germany

UK

Italy

France

Belgium

Other



Indonesia, 78% India, 6.3%

Vietnam, 6.2%

Other, 9.2%

Indonesia, 63% Madagascar, 11% India, 8.2% Other, 18%

Madagascar, 48% Comoros, 23% Indonesia, 21% Other, 7.8%

India, 96% Other, 4.1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Figure 4: Main DC suppliers of spices to the EU, in volume, 2012


nutmeg

cinnamon

cloves

turmeric

Exports

The Netherlands is the dominant re-exporter of spices in the EU. For all

selected products, the Netherlands accounted for over 40% of total EU re-

exports in 2012, re-affirming its essential role as Europe’s trade hub for spices.

Germany also plays a significant role as a re-exporter of spices, accounting for

1% to 16% of the exports of each of the selected products. With the exception

of nutmeg and turmeric, where Italy and the UK are more prominent, the

country ranked second among the largest re-exporters of spices in 2012.

Other large re-exporters in the EU are France (accounting for 5% to 8 % of

total exports) and Belgium (5%-13%). With the exception of turmeric, France

was among the four highest re-exporters of spices in the EU, which was also the

case for Belgium regarding cinnamon and cloves re-exports.

Germany is by far the leading destination for the EU’s re-exports of spices. The

country accounted for the largest shares among all selected products, having

the largest role among nutmeg (24% of total exports) and cinnamon (20%).

The explanation can be found in Germany’s massive food market, which

accounts for around 15% of the total European market (Food For Thought FFT,

2012/2013).

The UK and France, which also represent important consumer markets and

food industries in Europe, were also among the most important destinations for

the EU’s re-exports of spices (see Figure 6).



Figure 5: Main EU (re-)exporters of spices, in volume, 2012


Figure 6: Main destinations for EU exports of spices, in volume, 2012


EU market for spices

There are no available figures related to EU consumption of specific spices. For

the purpose of this study, apparent consumption (imports - exports +

production) is calculated in order to indicate the largest EU consumers for the

selected spices.

Note that apparent consumption figures should be handled with care; it is an

estimate of spices available for both consumption and industrial demand, not

their real consumption or industrial use. Data on spices which are in stock, for

instance, are imprecise. Among other limitations, there are inaccuracies related

to unregistered intra-EU trade, since apparent consumption is based on trade

figures.

Having that in mind, Figure 7 shows the five largest EU consumers of the spices

selected in this study: nutmeg, cinnamon, cloves and turmeric, where 1

represents the largest market and 5 represents the fifth largest market for each

spice. The different spices are coded in different colours.

Figure 7: Largest EU markets for spices, ranking 1 to 5, in volume, 2012

20% 21% 22%16%

6.6%

22%

13% 6.0%8.2%

7.1%7.0%11%

14%16%

12%21%

40%46% 49%

42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Netherlands

Italy

Germany

France

Belgium

UK

Spain

Other

42%53% 57%

50%

6.6%8.2%

5.4%

7.6%

6.1% 7.5%

6.1%

10%

8.1%

7.4%6.7%

9.2%

8.0%

10%6.3%

5.6%

24% 20% 17% 16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Germany

UK

France

Austria

Belgium

Netherlands

Italy

Poland

Other

nutmeg

cinnamon

cloves

turmeric



Total EU apparent consumption of nutmeg in 2012 amounted to 4.6 thousand

tonnes. The largest EU market for nutmeg is Germany, which accounted for over

30% of total EU apparent consumption in 2012 (in volume), followed by the

Netherlands (19%), the UK (13%), Belgium (8.3%) and France (7.5%).

Germany was also the largest market for cinnamon in 2012; it accounted for

20% of total EU apparent consumption of 12 thousand tonnes. The UK is also a

large consumer of cinnamon, having accounted for 19% of the total EU market,

followed by the Netherlands (10%), Spain (7.6%) and Sweden (5.0%).

Total EU apparent consumption of cloves amounted to 2.5 thousand tonnes in

2012, whereby far the largest market in terms of volume was the Netherlands

(30%), followed by Germany (21%), the UK (11%), France (10%) and Poland

(4.7%).

The UK is by far the largest EU consumer of turmeric, having accounted for

35% of the EU’s apparent consumption of 8.4 thousand tonnes . Germany

(24%), France (12%), the Netherlands (5.7%) and Poland (5.5%) complete the

list of largest EU consumers of turmeric.

The EU market for sustainable spices

Obtaining data on sustainable markets for spices in the EU is difficult. Not only

are figures scattered throughout various sources, but these sources often lack

specific information covering the product group ‘spices’.

In this section, we address the organic and fair trade markets in the EU, which

are niche markets for spices. For information on sustainability within the

mainstream market for spices, refer to ‘A boost of sustainability in the

mainstream market’, in the section ‘EU market trends for spices’ below.

The European market for organic products in 2011 was € 21.5 billion, an

increase of 9% compared with 2010 (€ 19.7 billion), in terms of retail sales. The

fruit & vegetable was the leading organic segment in terms of sales, accounting

for nearly 30% of the total European market in 2011. The dairy segment is also

an important segment, having accounted for over 20% of the European organic

market in 2011.

The EU country with the largest consumption of organic food & beverages is

Germany, at € 6.6 billion, followed by France (€ 3.7 billion), the UK (€ 1.9

billion), Italy (€ 1.7 billion) and Austria (€ 1.1 billion). In terms of per capita

consumption, the most prominent European country in 2011 was Switzerland (a

non-EU member state), at € 177 annually. Among EU member states,

Denmark’s per capita consumption was the highest, at € 162 annually, followed

by Luxembourg (€ 134), Austria (€ 127), Lichtenstein (€ 100) and Sweden (€

94) (FiBL-AMI IFOAM, 2013).

Although the figures above do not reveal the exact market for organic spices in

the EU, they do point toward the concentration of important organic markets in

(North) Western Europe.

Regarding the fair trade market, figures are only available for FLO-certified

products (please refer to the module ‘Compliance with buyer requirements for

Indonesian spices’ for more information on FLO). In 2011, the UK was by far the

largest market for FLO-certified products in the EU (and worldwide), at € 1.5

billion. The UK accounted for around 30% of total global sales (at the retail

level), followed by the USA (21%). Other large markets in the EU are Germany

(€ 400 million), France (€ 315 million), Ireland (€ 159 million), the Netherlands

(€ 147 million) and Sweden (€ 134 million). An important non-EU market within

Europe is Switzerland, with retail sales amounting to € 265 million in 2011.



Spices and gluten-free diets

The naturally gluten-free aspect of spices creates a strong

interest of European consumers suffering from gluten

intolerance (celiac disease) or from those who simply

avoid gluten intake. The prevalence of celiac disease in

Europe ranges between 0.5% and 1.0% of the total

population, with highest incidence in Ireland, Italy and

Sweden.

Global sales of gluten-free foods are expected to reach

US$4.3 billion by 2015, according to a recent analysis by

Datamonitor, thus indicating growth opportunities for

products which comply with this profile.

Nutmeg, cinnamon, turmeric and cloves are naturally

gluten free. However, it has been reported that cinnamon,

for instance, might be cross-contaminated. Most spice

companies are aware of the sensitivity of this issue, so

they make sure to label their products properly in order to

fully inform consumers who have special dietary needs.

Regarding specific sales of FLO-certified spices, figures are only given in terms

of volume. The product group ‘spices & herbs’ amounted to only 255 tonnes in

2011 (worldwide), down from 408 tonnes in 2010, marking a decrease of 38%.

In addition, it is estimated that 66% of these products are also organic-certified,

revealing a strong correlation between ecological and social certification within

this sector. Nonetheless, these figures also reveal that the market for Fairtrade-

certified spices represents an insignificant share of the total EU market.

You can read the full FLO Annual Report (2012) here.

EU market trends for spices

Multicultural populations, ethnic cuisines

The EU represents a very interesting market for Indonesian spices such as

turmeric, cinnamon, nutmeg and cloves. The large share of ethnic populations in

European countries1 and the rising popularity of ethnic cuisines among

Europeans have made these specific spices very popular.

The EU is estimated to have around 1 million South East Asians2. Additionally,

ethnic food accounts for nearly 1% of the European food market (Food

Navigator,2011), of which Asian products accounts for the largest share.

Culinary traditions of the East have inevitably

infiltrated into the European market . Spices, which

are an inseparable part of these cuisine, can be found

from everyday food to special dishes prepared in

restaurants. From the cinnamon over a cup of

cappuccino and the nutmeg on haricots and mashed

potatoes, to the cloves and turmeric in most of the

oriental chicken recipes , these spices are extensively

used as taste additives all around Europe.

Taking into account the size of the market due to the

strong ethnic presence, but also due to the rising

popularity of ethnic cuisines among Europeans (as

well as the incorporation of spices into traditional

European dishes), spices which are native to

Indonesia are expected to remain popular.

Spices and the European quest towards a

healthier lifestyle

The increase in European consumers’ dietary

requirements and food awareness have established a high demand for healthy

food. As such, consumers are including healthier items to their food intake in

order to achieve a more balanced diet. The market for spices accompanies these

related trends, supported by many scientific studies which have brought the

benefits of spices to light.

Turmeric is one of the most praised spices when it comes to health benefits.

Recent studies indicate that this spice has the potential to prevent certain

diseases and minimise inflammation. It is believed to lower insulin response,

1 The Eurostat has carried out an interesting statistical study on the foreign populations of

different European countries, which can be accessed here (a graphic representation can be

found here). This study can reveal where most ethnically mixed populations lie in Europe,

also indicating the most interesting markets for ethnic foods.

2 Indonesians represent an especially important ethnic group in the Netherlands, where

they account for 2.4% of the population (Maastricht University).



thus reducing the effects of high-fat meals (James A. (Jim) Duke (2007) and

American Society for Nutrition).

Cloves are also praised in terms of their vitamin, mineral and fibre content.

Scientific studies have also indicated that this spice has highly beneficial, health-

promoting antioxidants (University of Texas MD Anderson Cancer Centre in

Houston).

Additionally, ongoing studies for cinnamon indicate that it can help combating

diabetes and in lowering blood pressure. So far, two specific studies (which can

be accessed here and here) have shown that including cinnamon in your diet

might actually help towards that direction.

Like all the above-mentioned spices, nutmeg also has assumed health benefits

that are many and varied. Nutmeg contains many plant-derived chemical

compounds that are known to have anti-oxidant, disease preventing, and health

promoting properties. Nutmeg is also assumed to have antibacterial properties

that can help rid the body of dangerous microorganisms (University of

Chulalongkorn in Bangkok).

The increasing attention that Europeans are paying to a healthier lifestyle has

influenced the growing demand for spices. Encouraged by an array of scientific

studies which are propagated by the food industry, consumers are

progressively incorporating more spices into their everyday diets.

From taste to health – medicinal properties as a marketing

tool

Europeans have long used exotic spices in their cuisine mainly as a

taste additive. In recent years, companies importing or trading

spices have partly shifted their attention from the taste aspect of

spices to their use as a health food.

Leading companies in the spices sector, such as McCormick

(www.mccormick.com), no longer focus solely on the taste of the spices in their

marketing campaigns, but also emphasize that spices can be used as part of a

healthy balanced diet. Additionally, companies in the food processing sector

create an extra twist to their products by adding spices such as turmeric, not

only promoting their ethnic characteristic, but also bringing attention to their

health properties as ancient medicinal spices.

This relatively new marketing tool used by companies is part of an interesting

dynamics in the European spice market. One the one hand, it is a response to

the increasing trend over the health properties of spices (see trend ‘Spices and

the quest towards a healthier lifestyle’) and, on the other hand, it is part of an

effort to shape a new image of spices in the European market.

Contamination in spices

Aflatoxin contamination in spices has received great

attention in the European market, where many alerts

have been issued on this subject. Aflatoxins are a

naturally occurring toxin and pose significant threat to

human health since they are potent carcinogens,

mutagens and teratogens. Accordingly, the EU has

taken certain measure and has enforced strict

guidelines when it comes to imported products that

could potentially be contaminated.

More specifically, the European Spice Association (ESA)

has, in response to the rising concern on this contamination, prescribed certain

limits for Aflatoxin found in food ingredients for the member countries. In



addition, an European spice audit took place in Indonesia in 2012 ( the final

report can be accessed here), where nutmeg produced for EU exports was

assessed on its Aflatoxin levels. The objective was to assess the systems in

place to control Aflatoxin contamination in spices intended for export to the EU.

According to the World Spice Organisation, nutmeg is widely used by

manufacturers in food application and medicine as whole spices, oils and

oleoresins, and is facing severe quality issues, and rejection at ports due to

Aflatoxin contamination. Aflatoxins have negative health effects, and reduce the

marketability of the produce, particularly in international trade (due to stringent

standards of permissible limits).

A sustainability boost in the mainstream market

Sustainability has become a major focus of the European food industry in recent

years, making it essential for Indonesian exporters of spices to accompany this

trend. Although sustainability in the production and trade of spices has

historically not received much attention from the food industry, this is changing

steadily.

One of the main efforts for the sustainability of the spice sector was born within

the Sustainable Trade Initiative (IDH), in the Netherlands. IDH brought together

the major players in the spices sector in order to increase the sector’s

sustainability. The specific objectives of the Sustainable Spices Initiative (SSI)

are:

• 2013: to have a globally accepted mainstream sustainability standard

established for spices.

The Sustainable Spices Initiative has selected Rainforest Alliance as

the collaborator to adapt the Sustainable Agriculture Standard (SAN) to the

spices production. This was announced during the 2012 World Spices Congress

in Pune, India.

• 2015: to have a 20% share of all pepper imported in the EU produced

according to the established sustainability standard.

• 2015: to have a 10% share of 3 other spices imported into the EU from

Vietnam, Indonesia, India or Madagascar produced sustainably.

The focus of the SSI in the first phase (2012-2015) will be on 7 spices: pepper,

chilies, ginger, turmeric, vanilla, clove and cassia (cinnamon). Vietnam, India,

Indonesia and Madagascar will be the focus countries in this phase.

Further market trends for spices can be found in CBI’s Market Intelligence on

Spices and Herbs: Trendmapping.



EU market segments for spices

The market segments for spices is described in CBI’s Market Intelligence on

Spices and Herbs: Channels and Segments, and it is further adapted for the

purpose of this study.

The EU market for spices can be divided into 3 distinct segments, depending on

the type of product:

The premium segment refers to high quality spices and exotic varieties, usually

traded in very small volumes and at very high values. These spices are

associated with strict quality standards regarding grade, taste, colour, etc. This

segment also covers niche markets for spices which are certified according to

organic, fair trade and other high-end standards such as Forest Garden Products

(FGP). Spices in this segment are rarely processed into food products, and are

normally sold in retail packages in specialised shops (gourmet shops, organic

supermarkets, fair trade shops). A small share of organic spices, especially, is

used by organic food processors.

The middle range segment refers to standard quality spices, usually traded in

larger quantities and accompanying market prices. Spices belonging to this

segment are usually sold in mainstream retailers or are further processed in the

food industry. This segment also commands strict quality controls, especially for

spices which will be marketed in retail channels. Large retailers often demand

specific quality standards (e.g. ISO, British Retail Consortium). The newly

introduced Rainforest Alliance (RA) standard fits within the middle range

segment , since it covers the mainstream market. RA-certified spices are

expected to be mainly marketed in retail channels, and not further processed

into food products. The RA logo has high consumer visibility, and spices usually

account for a small share of a final food product.

The low price segment refers to spices which are sold at higher volumes and at

lower prices, due to their lower quality, i.e. lower oil content, faded colour, weak

taste/aroma, low weight class, etc. Low quality can be intrinsic to the raw

material, but often results from inappropriate handling, such as poor drying

techniques. Lower quality spices are usually used by the food processing and

other industries (e.g. oil extraction), or are sold in retail channels at competitive

prices.

Figure 8: Market segmentation for spices in the EU

Segments Types of product

Premium

• high quality • exotic varieties • certified spices: niche markets (organic, fair-trade

etc.)

Middle range

• standard quality spices • possible Rainforest Alliance certification:

mainstream market

Low price

• lower quality spices, in terms of oil content, colour, taste, weight class etc.

EU trade channels for spices

The distribution channels for cinnamon, turmeric, cloves, nutmeg and other

spices produced in Indonesia are similar.



Figure 9: Trade channels for Indonesian spices in the EU market

Spice production

Indonesia is estimated to have a total of 17 million small farms which produce a

wide range of food and non-food products (IFAD). As such, spices are mainly

produced by smallholders, who often sell their products to village collectors.

These collectors build up higher volumes from different farms, until they can sell

them to either the domestic primary processing industry and/or spice exporters.

The drying process of spices is usually done at this later stage, in appropriate

facilities; small farmers are susceptible to weather conditions and might not be

able to perform the drying correctly.

In some cases, smallholders are part of cooperatives, whereby they work

together with other farmers in reaching sufficient volumes for further processing

or exports. Some cooperatives also perform a degree of primary processing

(e.g. grinding) themselves, before the product is passed on to exporters, often

via local traders.

Large plantations play a small role in the production of spices in Indonesia, and

many are government-owned. They are excluded from the trade channels

depicted in Figure 9.

Spice processing

Usually, turmeric is exported in ground form, thus going through primary

processing before it is shipped to European markets. Cinnamon, on the other

hand, is exported both as sticks, without further processing, or in powder.

Nutmeg can also be exported whole or ground, whereas cloves are usually

exported without further domestic processing. It is also possible that the

grinding process for these spices is done on the request of a buyer and

according to their requirements.

Note that the European market still has some resistance toward ground spices

due to fear of adulteration and/or the use of low quality spices. A whole, intact

spice can be easily assessed for quality, which is more difficult for a ground

spice (Intermediate Technology Development Group).



Spices can go through further (secondary) processing before reaching the EU

market. These derivatives can be (essential) oils, oleoresins or extracts which

are mainly exported directly to the European industrial sector. However,

derivatives represent a very different market in terms of players and

requirements, which are outside of the scope of this study. For further

information on these product applications, refer to CBI Market Intelligence on

Natural Colours, Flavours and Thickeners.

Indonesian exports

Up until 2007-2008, Indonesian exports of spices to the EU were monopolised

by a few players. Nowadays, a wider array of small and medium-sized players is

present in the market, but their challenges are manifold.

One of these challenges is related to spice contamination. Few Indonesian

exporters make it through the EU’s regulatory wall; the ever-increasing controls

on maximum aflatoxin levels have disappointed several prospective exporters.

In this respect, India has proved to be a strong competitor in the spices

market: not only does it usually meet the minimum hygienic requirements

demanded by EU buyers, but it also does so at very competitive prices and high

volumes.

In terms of other buyer requirements (e.g. grades), Indonesia also faces

competition from other global suppliers. Buyers of cloves, for instance, have

indicated a preference for products sourced in Madagascar or Zanzibar

(Tanzania) due to the higher qualities offered. For turmeric, not only does India

manage to meet quality and hygiene requirements, but it has created a strong

industry targeting the niche market for organics as well.

EU trade channels

The main trade channels and players within the EU market for spices are

described in CBI’s Market Intelligence on Spices and Herbs: Channels and

Segments. For the purpose of this study, these players are summarised below

and further explained in relation to sustainable spices in the sub-section below.

It is important to keep in mind that, in practice, channels are not clearly divided;

for instance, traders process and food industries import. Spices exported by

Indonesia can reach the EU market through the following players, depending on

the exporter’s capacities in terms of volumes, quality and logistics:

Importers:

• middlemen between exporters and end users of spices (industry or retail).

• usually purchase bulk quantities and, in some cases, perform processing

and/or packaging activities.

• often have long-standing contacts with their suppliers.

• specialised importers: in addition to the above-mentioned characteristics,

they have a focus on the premium segment, consisting of certified (e.g.

organic, fair trade), exotic varieties and/or high quality spices. These

importers usually have a strong emphasis on trust-building with their

suppliers.

• in contrast, Rainforest Alliance certification focuses on mainstream

importers, usually working with wider ranges of products.

• However, note that an increasing number of mainstream importers are

starting to offer assortments of premium spices as well.

Brokers and agents:

• bring suppliers and buyers together without actually purchasing the product.

• work on the basis of a commission (0.5-2%).



• have a broad knowledge of the market.

• can be an interesting channel to avoid trading risks when:

o you do not have enough knowledge or experience in the European market

o working with an unknown buyer o placing a very specialised spice into the market, for which buyers are

difficult to find. • Brokers and agents are active in all market a segments for spices.

Grinders, processors, blenders, packers

• purchase spices in bulk, at high volumes and strict quality and logistical

requirements.

• often consist of one single company which performs the cleaning, grading,

grinding, blending and packaging activities.

• usually sell ground or processed products to industrial users.

• occasionally produce end products and supply the retail and/or catering

sectors directly.

Industrial sectors (e.g. food processing)

• only suited for suppliers who can meet high industrial standards in terms of

service level (e.g. consistent and timely delivery), quality (e.g. food safety)

and volume.

• usually source spices from importers or grinder/processors; only in some

cases directly from producing countries – often related to large plantations.

Retailers / catering sector

• it is highly uncommon for spice exporters to reach the retail or catering

sector directly.

• however, large retailers are increasing their influence over producers,

making the chain for spices as short as possible (i.e. bypassing

intermediaries).

• In order to supply directly to retailers, not only do exporters need to supply

consistent volumes in a short lead time (to avoid large stocks), but also need

to meet very strict quality requirements for end products.

Final users of spices in the EU roughly account for the following shares:

• food processing industries: 55-60%, either directly or as essential

oil/extract. Other industrial uses for spices are: fragrances, colourings,

supplements, etc.

• retail sector: 35-40%

• catering sector: 10-15%

EU trade channels for sustainable spices

Mainstream market

The trade channels for sustainable spices in the mainstream market do not differ

significantly from the above-mentioned structure. However, companies involved

in sustainability efforts have stronger emphasis on transparency and traceability

along the chain.

Importers, grinders, processors and retailers committed to sustainable principles

in the spice sector usually have their own codes of conduct. These codes

encompass social and environmental requirements, which are combined with

frequent audits and traceability systems to monitor implementation and

progress.

International standards which demonstrate safe and fair labour conditions at the

spice processing level, such as the Business Social Compliance Initiative (BSCI,

www.bsci-intl.org) and the Supplier Ethical Data Exchange (Sedex,



www.sedexglobal.com), also play a role in the sourcing strategy of some

European companies committed to sustainability. Read more about these and

other standards in ‘Compliance with buyer requirements for Indonesian spices’.

In the spectrum of sustainability standards in mainstream markets, Rainforest

Alliance (RA) is the only one which currently applies specifically to spices3. RA-

certified spices can be traded by importers, processors, grinders and packers

equally, as long as this operator has achieved SAN/Rainforest Alliance Chain-of-

Custody certification (www.rainforest-alliance.org/agriculture/certification/coc).

As mentioned previously, RA-certified spices are expected to be mainly

marketed in retail channels, and not further processed into food products.

Niche markets

The trade channels for sustainable spices partly follow the general structure

described above. However, the range of relevant players for Indonesian

exporters dealing with certified spices is narrower than what is offered by the

conventional market.

Markets such as organic and fair-trade certified spices (and even more so for

high-end certifications such as Forest Garden Products) are very small compared

to the mainstream market, which does not provide enough room for a multitude

of players. In addition, all operators along the value chain for organic and/or

fair-trade certified products must be certified as well; certified chains are usually

shorter (i.e. specialised traders act as a ‘one-stop shop’) and more transparent

(i.e. in terms of tracing the product from the resource to the market).

Being mostly related to lower volumes and higher prices, these niche products

are usually suitable to the retail market (mainly specialised retailers or speciality

shelves in mainstream supermarkets), and not the industrial sector (e.g. food

processing).

In this respect, certified products usually reach the market through the

intermediary role of a specialised importer, which has knowledge, experience

and capacities to handle these products. It is often the case that these importers

also carry out primary processing activities (e.g. grinding) and/or re-package

the spices for retail sales.

A list of certified operators for organic and fair trade certifications can be found

below:

• Organic-bio and Greentrade - interesting (non-exhaustive) databases for

operators in the organic sector

• Fairtrade Labelling Organizations International (FLO)

• Ecocert Fair Trade

• IMO Fair for Life

This survey was compiled for CBI by ProFound – Advisers In

Development

Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer

3 The spectrum of standards might be broadened in the future, depending on market

developments for spices and on the demand for specific standards.

market insights for indonesian spices - the spice...

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