Paving the way for emerging markets

This year's Health Ingredients Europe, which took place in Paris last week, saw many of the usual European names and faces, but some visitors will have noticed the presence of emerging markets - not only did the show feature pavillions for Canada, US, China and Ireland, but countries as far afield as Bolivia, Ghana, Russia and Vietnam were present. These emerging markets were brought together under the SIPPO​ stand, the Swiss Import Promotion Programme.

Launched in 1982 to promote "emerging markets and markets in transition", its main aims are to support small and medium-sized companies in their entry to the Swiss and EU markets and reciprocally to offer information to the European import economy on new market sources. To do this, it produces market information for certain business sectors such as textiles, jewellery and agricultural and processed foods.

The organisation is currently preparing a document on functional foods and medicinal herbs, set for publication next year. The aim of this market information is to familiarise producers in emerging markets with European norms, standards, quality requirements and customs regulations, which are some of the strictest in the world. Some of the 'markets in transition' making use of this information include Bosnian and other Eastern European companies supplying wild grown herbs. There are also emerging markets in Ghana providing shea nut and essential oils and plant extracts and Peruvian and Bolivian companies offering herbal extracts.

The emerging markets have much to offer the more mature European market, Dr Franziska Staubli, SIPPO project manager​ told NutraIngredients.com.

"These companies can offer a lot of new products, previously unknown in Europe. Everyone is looking for novel foods at the moment and with the functional food trend, there are many that just haven't been discovered yet."​

She cited a Peruvian company, Cabex, which supplies powdered maca, a vegetable from the potato family which is a staple food in the Andean region but previously unknown in Europe. The product is now gaining recognition for its revitalising properties.

Equally, three of the five Bosnian companies exhibiting at HiE last week have organic certification for their goods. Andelic, a business started in 1996 that produces organic essential oils and medicinal herbs, has both the Swiss organic trade certification (IMO) and is also certified by the Swedish body KRAV. Located about 25 km from Dubrovnik, Andelic organises around 50 families in the area to collect wild herbs. There is also a distillation plant for essential oils, opened in 1999.

"The Bosnian companies more or less started at zero. They now have their own distillation plants and the organic certification which they need. As sales build up they gain confidence and also help the whole region,"​ said Staubli.

"If you only sell raw materials, few others benefit, but with added value products the whole chain will be able to reap some of the rewards."​

Radavan Andelic, director of Andelic​, confirms the need for standards."We now have organic certification from the EU. This is the only way to gain access to the market - you need the papers."​

The result has been a successful entry into the European market. "We currently have customers in France and Germany and we are starting to go into the UK. I think there is good potential in the UK market,"​ he added.

This does not mean that the process is without difficulties. "We face several challenges by selling from Bosnia. The first reaction is usually that we're a country at war! It is hard to export to Europe - many European customers don't believe that we can produce something of quality,"​ he said.

Staubli confirmed that the reputation associated with smaller, non-European producers is still often a negative one. "Lots of European companies have had bad experiences and are cautious about starting business with those from outside the region."​

This is why it all the more crucial that they meet the necessary regulatory requirements. However, given that many western Europe-based producers of health ingredients find the legislation time-consuming and often restrictive to business, regulations are likely to pose a considerable barrier for those outside the European community.

"The biggest challenge facing companies trying to sell finished products in the European market is definitely the European regulations and now the novel foods regulation makes things much more difficult,"​ said Dr Staubli.

"It is also difficult for companies trying to bring their traditional products into Europe where they are completely new. Before they do anything they have to register the product,"​ she added. "I think the regulatory issues in foods and functional foods probably makes this a bigger problem than it would be for other sectors."​

While regulatory issues may prove to be the biggest hurdle, there are additional problems unlikely to be experienced by companies established in Europe.

"Often some of these companies cannot provide the quantities they are asked for in a new order. Or it may be that with a higher quantity, they cannot guarantee the quality of the product,"​ said Dr Staubli.

Then there is the question of simply doing business : "The mentality is very different for many of our participants so we require that they participate in an international trade show at least three times. It is essential that they find out how business is done in Europe. We also prepare seminars on how to behave and how to proceed once they get orders."​

SIPPO set up its organic programme in 1999 and has been promoting medicinal herbs since 2001. The companies participating in the programme need to target a niche market as they cannot hope to compete with the large food giants.

"Remember that these are small and medium-sized enterprises, so we aren't competing with the likes of Nestle - we're going for niche markets."​

Yet while an evolving Europe is seeing a greater number of 'markets in transition', the new businesses also have to face an industry that is undergoing increasing consolidation. When will we see exhibitors at HiE who do not need the SIPPO programme to get there? The fact that SIPPO, which works with various business organisations, chambers of commerce, and distributors, essentially selects businesses based first on Switzerland's political relationships with other countries cannot be ignored.

The early participants in the programme may, however, be able to make some inroads into paving the way. Dr Staubli said that although there had not been as many visitors as expected at HiE, the quality was good. And Andelic confirmed that business at his stand was very healthy. He is also happy to report that the company name is starting to gain recognition.

And SIPPO is certainly playing a useful role. As Andelic puts it:"If you want to help someone you catch him a fish. If you want to help him for life, you teach him how to fish."​