Demand for essential oils in the world is growing. Nepal can benefit from that.

In 2021 the global essential oils (also known as aromatherapy) markets valued at $19.7 billion, up from $ 2,724 million in 2014. Precedence Research, a market research firm, reckons it will reach $34.6 billion by 2030 with a compound annual growth rate (CAGR) of 7.2%. Its growth would be driven by growing usage of essential oils in food and beverage, personal care and cosmetics products. They are also in high demand in the healthcare and pharmaceutical industries. As science points out that essential oils have no major side effects, they stand out from most conventional medicines and drugs. 

Though small, essential oils exports from Nepal are increasing. Between 2010 and 2020, its exports rose from $974 to $5.3 million, making the country the 55th largest exporter of essential oils in the world. And in 2020 essential oils was the 31st most exported product from Nepal. The USA is the largest importer, followed by France, Belgium, Germany, UK and Canada. Of interest among stakeholders and companies are the USA, Germany, France and India. 

The demand in North America is driven by the soaring use of essential oils in the food and beverages and pharmaceutical industries, while the cosmetic industry is increasingly using oils in Europe. 

Oils from Nepal such as timur (rattan pepper), soapnuts, wintergreen (dhasingre), ginger, cardamom, rhododendron (laligurans), orange and many more are in high demand for natural ingredients in food, beauty and personal care, aromatherapy, perfumes and so on. Those oils stand to benefit tremendously from three key areas: premium flavour (natural health food and organic food); premium BPC (Beauty and Personal Care) products; and pharmaceutical (herbal traditional medicines).

Start with flavour. Premium flavour is the largest component whose global value is more than $20 billion as of now. In the US, its sales value runs at more than $50 million. Growing number of Americans, especially millennials and baby boomers, are buying unprocessed fresh and organic food in order to escape, or tackle, obesity. Similarly, French and Germans prefer fresh food and organic beverages with typical (spicy) tastes and herbal teas rather than sweet carbonated drinks. Demand for oils in the Middle East is largely for usage in local dishes and drinks. 

Its demand by the food industry and drink manufacturers will surge, as demand for an increasing variety of food products containing different flavours ( sweet or spicy) and fashionable drinks rises. New cuisines that are appearing in Europe and Asia are using many different spice oils, too.

Oils produced in Nepal can be used widely in the premium flavour. For example, timur and curcuma could be mixed in exotic dishes or ginger and cinnamon (Alainchi) are used in tea and healthy fresh drinks in place of sugar. Wintergreen (Dhasingre) also has a number of uses. It is used in chewing gums, bakery products, alcoholic drinks and many more. In the Western market, spices and taste enhancers in dishes have become more popular than ever before. 

In Asian countries, particularly China, the shift to consuming organic food is new and growing. Its middle class population is expected to reach 854 million by 2035. Chinese are the fastest growing consumers of essential oils. The premium food sales there are expected to surpass the US’s. 

The next key area where oils from Nepal can benefit from is fragrance. According to Statista, a German market and consumer data firm, the global fragrance market is expected to reach $52.4 billion by 2025, up from $45.2 billion in 2020. Fragrances made up for 47% in the German premium BPC market in 2014. It is estimated to grow by 0.9%, while fragrances accounted for 24% of the US market.

Nonetheless, the US and China will be the biggest markets. Regarding premium beauty and personal care (BPC), Nepal oils such as ginger are used in perfumes and hair products, Jatamansi (Spikenard) treats hair loss and hair colour restoration, which is a burning issue among Americans and Europeans. Improvements in quality oversight and regulatory measures in Western countries may help herbal medicine gradually integrate more into modern medical treatments.

The last promising segment for essential oils is the pharmaceutical industry. The growing applications of traditional Chinese medicine as an alternative to modern medicine is driving up demand for aromatherapy. Aromatherapy is getting a boost, as people around the world become aware of its health benefits. It continues to be driven by promotion, social media, and is increasingly becoming mainstream. Also, urbanisation and growing health concerns are the main forces for its surging consumption in Asia. Japan consumes the most botanical medicines per capita in the world.

Developing countries produce more than half of the world's production. Because they have raw materials and cheap labour compared to Western countries. 700 species are used in Ayurvedic, Unani and Siddha medicines in Nepal. Of the total, 250 species are used as medicines, more than 100 species are commercially collected from the wild and exported in raw form mainly to India and the remaining is processed into essential oils.

In 2015 Nepal exported 84% of medicinal and aromatic Plants (MAPs) to India. The country has been traditionally a major consumer of essential oils, fragrances and flavours, and is a promising market for Nepal. Indian companies demand MAPs from Nepal for hand soaps, fabric wash, oral care products, shaving creams and hair care and skin care products and so on. With the rising middle class population, demand for premium flavour and premium BPC products are set to grow. 

Nepal has more than 6,500 plants with aromatic properties. Local communities sell them for income to traders who export those plants to India and China. According to the Nepal Herbs and Herbal Products Association (NEHHPA), about 50% of local communities are involved in the collection and trade of MAPs. MAPs exports contribute an estimated 5% to GDP. It provides revenue to the government, as their collection and permits for exporting are taxed. 

A number of both registered and unregistered producers, traders and companies trade MAPs. The largest of all associations is Jadibuti Association of Nepal (JABAN) with 300 members, including producers, collectors and exporters. The Kathmandu-based Nepal Herbs and Herbal Products Association (NEHHPA) has 52 registered members: 70% are manufacturers and 30% are traders.

Nearly 160 different MAPs are harvested and traded from remote villages to trading centres in India and China (Northern and Southern borders). Exports rose so much, especially the export of Yarsagumba to China, that between 2010 and 2014 the CAGR was 66%. India imported 3,308 tonnes in 2014. But in 2015, exports to China fell to 53 tonnes from 947 tonnes. 

Of all the countries, the US, France and Germany will help propel exports of essential oils from Nepal to corners of the world. Because they are a springboard to other international markets. But the most important of all is that essential oils are produced traditionally in Nepal, making them interesting for international buyers looking for natural oils. It is up to Nepal how it will take advantage of this market with its homegrown plants.