Spices: trends on the world market.
Over the last several years prices of almost all spices, and particularly pepper, have gone down dramatically, primarily because of excess supply. In many cases market prices have been below production costs. This pattern is likely to continue for another two to three years. The result will probably be lower levels of production, which in turn may help to raise prices somewhat over the medium term.
The major markets for spices are the United States, Germany, Japan and certain Middle East countries. International sales to these markets have shown a continual upward trend in recent years.
The United States is the world's largest importer of spices. Its foreign purchases in 1991 (including spice herbs, mustard and sesame seeds) came to 242,719 tons, valued at $395 million, compared with 239,960 tons ($385 million) in 1990. The Canadian market for spices is relatively small, importing approximately 12,000 tons annually.
Since 1976 countries in the European Community (EC) have purchased a larger total quantity of spices from foreign sources than the United States, although the latter is still the world's leading individual importing country. In 1991 the EC countries as a group imported 203,483 tons of spices, valued at $423 million. Germany is the principal market in Europe and the second world market after the United States. Germany accounts for over one third of total spice imports into Western Europe. In 1991 these amounted to 63,731 tons, at $137 million. Next in line are France and the United Kingdom, which imported 31,600 tons and 27,100 tons, coming to $68.3 million and $44.4 million, respectively, in 1991. Although the Netherlands is a relatively small market for spices, Rotterdam, along with Hamburg, and, to a lesser extent, London, are the main European spice trading centres. Large quantities are trans-shipped from these points to other European destinations.
Among other European markets, the principal importers are Austria, Sweden, Norway, Finland and Switzerland. Sweden and Finland are major consumers of cardamom.
Countries of eastern Europe are important outlets for certain types of spices. These markets import significant quantities of pepper from India and pimento (allspice) from Jamaica under bilateral agreements. Although the buying pattern of these countries has fluctuated considerably recently, demand for spices over the longer term shows strong potential.
In recent years, markets in the Middle East, in particular Saudi Arabia, have accounted for a substantial and increasing share of the spice trade, in terms of value, largely because of considerable imports of cardamom and pepper. These markets hold a share of over 80% of total world consumption of cardamom. Morocco, Algeria and Libya are large purchasers of pepper, but demand in these three is closely tied to price levels.
In the Asian and Pacific region, the major spice importer is Japan, the third largest market for spices in the world, followed at some distance by Australia and New Zealand. India is the world's largest producer and overall consumer of spices. Although domestic consumption in Singapore and Hong Kong is small, the importance of the former, in particular, in the entrepot trade of spices still remains considerable. Pepper, mainly from Indonesia and more recently from Viet Nam, passes through Singapore to the main consuming markets. It is estimated that around one fifth of the pepper entering international trade moves through Singapore.
Although Indonesia is a major producer and exporter of a number of spices, such as pepper, cassia, nutmeg and ginger, it is also the largest user of cloves for the "Kretek" cigarette industry. During the last few years, however, clove production in Indonesia has increased, enabling the country to be self-sufficient. Indonesia now sells cloves on the international market.
Latin American countries, in particular Mexico, are significant importers of cinnamon and cassia.
By and large, most importing countries are not spice producers. Exceptions exist, however, and among them are Hungary (which produces paprika), Spain (paprika and saffron), the Netherlands and Denmark (caraway), Iran (cumin), Morocco (coriander and cumin) and Brazil (pepper).
Estimated trade in individual spices '000 tons Pepper 130-135 Capsicum(1) 60-65 Spice seeds 60-65 Cinnamon and cassia(2) 33-35 Ginger (dry) 15-20 Turmeric 15-20 Nutmeg and mace 12-15 Cardamom 9-10 Curry powder 8-10 Cloves(3) 7-8 Pimento (allspice) 3-4 Vanilla 2-3 Saffron .03-.05 1 Including trade in paprika, chillies and cayenne pepper. 2 Cassia accounts for around 90 % of the figure. 3 Excluding imports into Indonesia, Hong Kong and Singapore. Source: ITC estimates.
Although spices are traded in a variety of forms, an estimated 80% to 85% are marketed in the whole, unground state. The remainder are sold ground and as spice essential oils or oleoresins. Ground spices consist mainly of paprika, curry powder and a range of spice mixtures. The volume of consumer-packed spices entering international trade, particularly those packed at the origin, is still small compared with the total trade in spices. In recent years, however, trade in processed spices (ground and/or mixed) in bulk has gained momentum.
The importance of individual spices differs from one importing country to another. Pepper is the principal spice imported into most markets, in terms of both volume and value. The only exceptions are Finland and Saudi Arabia. Next in line is the capsicum group, consisting of paprika (the leading item), chillies and cayenne pepper. Nutmeg, mace, cinnamon and cassia also feature prominently in spice imports into Western Europe and North America, while pimento (allspice), concentrated in the Caribbean and Central American region, is a major import item into East European countries.
The table at left shows the relative importance of different spices that are traded on the international market.
Fazli Husain is an ITC market development officer. This article is based on a paper that he wrote, contained in Proceedings of the Third Meeting of the International Spice Group Meeting, just published by ITC.
Pepper outranks all other spices in household consumption, although nutmeg, cinnamon (cassia), paprika and vanilla are also widely used and are sold through retail outlets.
In the major markets the industrial (food processing) and retail sectors are the principal users of spices.
Spices are required in most segments of the food industry in the leading markets, particularly in the processing of meat, fish, vegetable products, soups, bakery goods, and other prepared and convenience foods. In most cases the meat industry is by far the largest user of a wide range of spices, with pepper in the lead. The consumption of spices in nonfood industries, such as the pharmaceutical and perfumery sectors, is not high and is unlikely to have any significant effect on overall demand. Certain spices such as aniseed, badian and juniper go into the manufacture of gin and other alcoholic beverages. Liquors are also made from spices, for example from Jamaican pimento.
Although the retail sector is still important in industrialized countries, the volume of spices channelled through grocery stores and supermarkets has tended to decline. This is because fewer meals are being prepared at home as more women join the labour force. The growth in the food-processing sector has been at the cost of the retail sector, as families increasingly eat prepared convenience foods.
Another trend has been the tendency of working people, whether in offices or in factories, to eat lunches in canteens, fast-food outlets and restaurants, rather than in the home. The amount of spices used by the institutional (catering) sector is still relatively small, but this is a growth area. In most industrialized countries the institutional sector accounts for about 10% of total spice usage.
In developing countries the consumption of spices is almost entirely confined to households and restaurants. Industrial usage is minimal. Although spices have traditionally been bought in the whole or ground form in the local market, demand for spices in retail packs has increased in recent years.
The table at right gives a breakdown of the usage patterns of spices in over a dozen of the principal markets.
Oils and oleoresins
In the case of spice oils and oleoresins, after an increase in demand in the 1970s, purchases stabilized. More recently, however, because of bacteriological problems with the whole spice and the convenience of using only the extract, oleoresins have developed more applications, particularly in the meat and sausage industries.
A large part of the supplies now originates in developing countries, in particular India.
Developments in the trade
During the last two decades fundamental changes have occurred in the structure of the spice trade, in both exporting and importing countries, which have influenced the pattern of this trade.
End-use pattern of spices % Country Industrial Retail Institutional Belgium and Luxembourg 45 45 10 Canada 55 35 10 Denmark 50 35 15 Finland 40 40 20 France 50 35 15 Germany 50 40 10 Italy 40 50 10 Japan 70 20 10 Netherlands 60 40 a Spain 50 45 5 Sweden 50 40 10 Switzerland 55 35 10 United Kingdom 50 50 a United States 66 34 b Source: Trade estimates. a = included in industrial share; b = included in retail share.
In producing and exporting countries boards have been established to promote the marketing of commodities such as spices. These marketing boards, which have statutory backing in certain countries, have taken measures to increase exports by providing extension services, improved quality control and better coordination of marketing.
Certain institutions have also been set up at the international level to promote spice exports. For instance, the three leading producers of pepper, namely India, Malaysia and Indonesia, formed the Pepper Community in 1972 to promote, coordinate and harmonize activities of the pepper industry. Brazil joined the Community in 1981, and the members now account for about 90% of total world production. The Secretariat, referred to as the International Pepper Community (IPC), is located in Jakarta.
In the past, spice marketing in importing countries was handled by individual merchants. Spices were bought from dealers, either direct or through brokers or agents. Now, however, direct contacts between importers and industrial users, on the one hand, and suppliers in producing countries, on the other, are becoming more prevalent. This structural change in spice trading has also had the effect of blurring functional distinctions. Many of the brokers and agents now trade on their own account as well as continuing to operate as intermediaries. Combined functions are likewise more frequent. For instance, some importers also do grinding and wholesaling, and some grinders have become food processors.
Another change has been the tendency among the larger food chains in industrialized countries to do their own importing, grinding and packing, activities that were previously contracted out.
Quality is the most important factor for successfully exporting spices. Without exception, spices imported into the major markets must comply with phytosanitary regulations, and controls to detect microbiological contamination of the spices, particularly that of pesticide residues, are carried out. Furthermore, with the banning of certain fumigants in Europe and the present reluctance of consumers to accept irradiation, the need to develop suitable processes for removing bacteria from spices is a priority for exporters. Suitable post-harvest handling, storage and packaging methods are required, as well as research and development.
With the exception of vanilla, spices have not had to face competition from synthetics or substitutes. In the case of pepper, however, substitutes have been developed, but they have not yet made inroads into the market of any significance.
The availability of spices in forms other than the 100% natural spice should be monitored. The major spice companies offer a number of alternatives to the natural item. For instance spices in other forms, such as encapsulated spices and spice drops, have started to enter the market, which could influence not only the long-term usage pattern but also the actual amount of spices consumed, particularly in the industrial sector.
These new forms of spice products will probably be marketed alongside the 100% natural product. A strong possibility exists that these products will be introduced in retail outlets in the future.
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|Publication:||International Trade Forum|
|Date:||Oct 1, 1992|
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