SA market for fragrances growing fast but dominated by imports
JOHANNESBURG – South Africa is a small player in global essential oil production but local producers should take advantage of growing demand with the sector expected to be worth $11.67 billion (R177.40bn) by 2022.
According to Karen Swanepoel, the Southern African Essential Oil Producers Association (Saeopa) director and independent researcher for the UN Industrial Development Organisation, South Africa produces 0.01percent of the total essential oils used and produced globally.
South Africa produces 3 000 tons of the global 150 000 tons mainly in the form of eucalyptus and citrus, with an export value of R7.6 million in 2017.
“If we can produce and export, we can solve this demand in a sector that is growing by 10 percent to 25 percent a year – higher than other commodities,” Swanepoel said.
There are 160 essential oils traded globally. The top 10 oils make up some 80 percent of world trade. World trade in essential oils is divided into two components, referred to as the major and minor oils. Major oils are those oils traded in large quantities, but often lower prices.
The global market of essential oils stood at $6.5bn. Estimates for 2020 were 370 000 tons valued at more $11.67bn by 2022, and with a projected rise by 8.4 percent to 11.3 percent to $15.8bn in 2024-2025. This growth was primarily based on a growing consumer awareness regarding the health benefits associated with natural and organic ingredients in personal care, beverages and household products.
International Trade Centre calculations based on UN Contrade statistics until January 2018 show that the share in value in the country’s cluster exports 2018 of essential oils (whether or not terpeneless, including concretes and absolutes) resinoids was 0.05 percent. Beauty or make-up preparations and preparations for the care of the skin, including sunscreen in 2018 was 0.3 percent. Perfumes and toilet waters (excluding aftershave lotions, personal deodorants and hair lotions) was 0.02 percent.
Swanepoel said that establishing costs in the agricultural community had gone up. However, the industry still remained competitive with vegetables as input costs and the risks were lower. She said that essential oils had a longer shelf life and a faster growing demand had extra benefits.
“Being realistic and considering the disadvantages, there are still high costs to start with the crops due to a lack of skills, projections uncertainty, which the banks do not like, as well as a general lack of information in the sector.
“Smaller hectares tend to not be enough, necessitating one to work in a cluster and collectively have about 25 hectares to justify a one-ton processing unit,” said Swanepoel.
Saeopa said that the South African market for fragrances was growing fast but still dominated by imports. Euromonitor International in April 2016 showed a market more than doubling from R5.3bn in 2010 to R11.5bn in 2015. This was driven by South Africa’s growing middle class and women’s improving career prospects and an expanding number of higher-income women being able to afford premium fragrances.
Swanepoel said part of this growth was simply a reflection of the fact that the depreciation of the rand was inflating import prices as imported products still dominated South African sales.
There were high value products sold predominantly to the international fragrance, cosmetic, flavour and aromatherapy markets. The EU dominates world trade in this sector, despite the fact that in no single country there is a major producer. About 65 percent of world production comes from developing countries.