1. Trade segments, channels and structures for Natural Ingredients for Health Products Session 7 Centre for the Promotion of Imports from developing countries 2 May 2015

2. Segments and channels for Natural Ingredients for Health products 1.Trade segments Different ways of segmenting Segments in the European market 2.Trade structures and sectors Different players along the chain Differences Supplier - Buyer 3.Trade channels Diversity Requirements Trends Centre for the Promotion of Imports from developing countries2 May 2015 1

3. Centre for the Promotion of Imports from developing countries2 May 2015 2 Saps and extracts Essential oils & oleoresins Vegetable oils Fruit, seeds Medicinal and Aromatic Plants Producer Buyer requirements Legislative requirements Quality assurance Certification Cosmetic Health products Food Segmenting according to industry sector (1/3) Market

4. Centre for the Promotion of Imports from developing countries2 May 2015 3 Segmenting according to industry sector (2/3) Health Food Food supplements Medicinal food Pharmaceuticals Herbal medicine Veterinary medicine Medical devices Health products

5. Centre for the Promotion of Imports from developing countries 4 2 May 2015 Segmenting according to industry sector (3/3)

6. Centre for the Promotion of Imports from developing countries2 May 2015 5 Different health systems in Europe Western Herbal Medicine (dominant across Europe) Homeopathy (Germany, France, Switzerland, Spain) Traditional Chinese Medicine (TCM) (UK, Germany) Ayurvedic Medicine (UK, Germany) Less common systems Unani Medicine (UK, Spain) Jamu (NL)  What about African Medicine traditions ? Segmenting according to health system

7. Centre for the Promotion of Imports from developing countries2 May 2015 6 Temperate species Also produced in the EU Competition from EU producers (quality, close links to buyers, inside the EU, wild-collection) Competition from other temperate zones (Eastern Europe, Central Asia, Mediterranean DC’s, China, Kenya). Segmenting between (Sub)- Tropical and Temperate (Sub) tropical species Cannot be grown in Europe. EU buyers purchase large quantities Competition from other DCs. Opportunities for established MAPs and less-known MAPs.

8. Centre for the Promotion of Imports from developing countries2 May 2015 7 Bringing segments together Tropical ingredients Sub-tropical ingredients Temperate species Health industry Food industry Focus on Herbal medicine industry Focus on Food supplements

9. Western medicine Centre for the Promotion of Imports from developing countries2 May 2015 8 Interest in new products => (sub-) tropical species Domestic ingredients => Mediterranean herbs Production of temperate species Wild collection Segments in the EU market (Generalization)

10. Centre for the Promotion of Imports from developing countries Increasing market sophistication in Eastern Europe  appearance of new segments (non- western, (sub)- tropical species) Segmentation of the sector in terms of age groups and life cycle stages 2 May 2015 9 Trends in segmentation

11. Centre for the Promotion of Imports from developing countries2 May 2015 10 Producer Trader Processor Manufacturer Trade structure and sectors – A large variety of players

12. Centre for the Promotion of Imports from developing countries2 May 2015 11 Natural ingredients are traded through specialised and general channels Specialised channels exist in different forms: Sector focus: on one, multiple or all sectors product offering: producing extracts OR active principles, or focus on a wide variety of natural and synthetic materials Regional focus: in terms of sourcing or sales Certification focus: organic, FairWild and various fair trade labels Trade channels - Diversity

13. Centre for the Promotion of Imports from developing countries2 May 2015 12 Quality responsibility and Traceability are key Requirement of a stable (high) quality starting material Documentation Supply security Cooperation with research institutions for product identification and new product application Traceability and Quality

14. Centre for the Promotion of Imports from developing countries2 May 2015 13 Extract production shifts to country of origin  Bigger role for DC processors Direct sourcing of manufacturers in country of production Consolidation at all levels of trade channels: Specialization is becoming less common Vertical integration Need for more sustainable costing and sourcing strategies by European buyers Redefinition of role of middlemen as service provider Organic principles applied throughout the value chain (organic as traceability system) What does it mean for SME exporters? Trade channels - Trends

15. Centre for the Promotion of Imports from developing countries 14 DC SME exporter European buyers High diversity Certification? Product portfolio? Segment focus Size and sophistication Different types Trader/Processor/Manufacturer Size Segment/regional focus Certification Trade structure – Selecting your buyer 2 May 2015

16. Centre for the Promotion of Imports from developing countries 15 What is the right segment for you? What is the right buyer for you? 2 May 2015