Market Brief for Tara Gum.

An introduction to the European market for Peruvian exporters. sippo.ch

Title Language Report Content

Market Brief for Tara Gum An introduction to the European market for Peruvian exporters. English The PeruBiodiverso (PBD) project aims to improve the rural communities life quality through sustainable biodiversit y use. The PBD Project is funded by the State Secretary for Economic affairs SECO and the German Cooperation Deutsche Gesellschaft fr Internationale Zusammenarbeit GIZ as well as by national counterparts (MINCETUR, PROMPERU and MINAM). Within the scope of the National Biotrade Promotion Program (PNBP, in Spanish) PBD aims at promoting and supporting the creation and consolidation of Peruvian biotrade businesses based on native biodiversity as an incentive for conservation, applying environmental, social and economic sustainability issues. The PBD Phase I run from September 2007 to June 2010 followed by phase II from July 2010 to March 2013. The Phase II involves 3 components and 7 action lines described in the following chart. Component 1 Action Line 1 Action Line 2 Component 2 Action Line 1 Action Line 2 Component 3 Action Line 1 Action Line 2 Action Line 3 Market Access Access to International Markets Gastronomy and Hotel Management Production Supply Productivity and Quality Applied Investigation and Technology Innovation Normative Framework and Advocacy Legal Framework International Regulation Diffusion and Awareness

The Action Line Access to International Markets of the first component was entrusted to the Swiss Import Promotion Program SIPPO. In this context, for the following three products Market Briefs were produced with the aim to introduce the European market to Peruvian biotrade companies: Tara gum Sacha Inchi Dehydrated organic and fair trade certified Physalis

Authors

ProFound Advisers in Development Lange Smeestraat 55 3511 PV Utrecht The Netherlands www.ThisIsProFound.com

Coordinated by

Osec Zurich - Business Network Switzerland the implementing organization of SIPPO (Swiss Import Promotion Programm)

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Table of Contents.
1.
1.1 1.2

Product description ...................................4

International registration.......................................... 5 Import tariffs ............................................................ 5

5.
5.1

Commercialisation channels in Europe . 13

Trade channels for tara gum ................................. 13

6. 2.
2.1 2.2

Marketing and buyer requirements ........ 15

Product requirements............................................ 15 Supply chain management ................................... 16 Standards and certification schemes .................... 16 Legislative ............................................................. 16

European market environment .................6

Market trends .......................................................... 6 Market segments .................................................... 7

6.1 6.2 6.3 6.4

3.
3.1 3.2

Price ........................................................10
Price factors and pricing........................................ 10 Price structure ....................................................... 10

7.
7.1 7.2 7.3

Promotion............................................... 18
Recommendations for promotion .......................... 18 Trade fairs ............................................................. 18 Buyer list ............................................................... 18

4.
4.1 4.2 4.3

Competitor analysis ................................ 11

Existing competitors .............................................. 11 New entrants ......................................................... 11 Substitutes ............................................................ 11

8.

Glossary ................................................. 19

Market Brief for Tara Gum |

1. Product description
The plant Caesalpinia spinosa (Molina) Kuntze, or tara is a native plant species in Peru. The local name in Europe is spiny holdback. Table 1.1: Taxonomic classification by USDA Classification Kingdom Subkingdom Superdivision Division Class Subclass Order Family Genus Species Synonyms Plantae Tracheobionta Spermatophyta Magnoliophyta Magnoliopsida Rosidae Fabales Fabaceae Caesalpinia Caesalpinia spinosa Poinciana spinosa Molina Caesalpinia pectinata cavanulles Caesalpinia tinctoria HBK Tara spinosa Tara gum is the powder obtained by grinding the endosperm of the seeds of the shrub Caesalpinia spinosa. Tara gum consists of polysaccharides of high molecular weight composed mainly of galactomannans. Table 1.2: EU specifications for tara gum Criterion Loss on drying Ash Acid insoluble matter Protein Starch Source: USDA (http://www.plants.usda.gov), 2008 Apart from Caesalpinia spinosa, 6 other species grow in Peru. C. ancashiana Ulibarri, C. cassioides Willd., C. decapetala (Roth) Alston, C. glabrata Kunth, C. pulcherrima (L.) Swartz and C. trichocarpa Griseb. El cliz asimtrico, con el spalo abaxial ms desarrollado y con los dientes del pice notorios, en combinacin con la alta densidad de espinas (especialmente en las ramas ms jvenes), son buenos caracteres para reconocer C. spinosa en Arsenic Lead Mercury Cadmium Heavy metals (as Pb) Not more than 3 mg/kg Not more than 5 mg/kg Not more than 1 mg/kg Not more than 1 mg/kg Not more than 20 mg/kg Specification limit Not more than 15% Not more than 1.5% Not more than 2% Not more than 3.5% Not detectable In the food industry, tara is sometimes referred to as Peruvian carob. The properties of tara are similar to that of carob beans and guar gum, which are widely used in the EU. Per (Factsheet: Datos botanicos de Tara, Botconsult, 2009). Refer to the herbarium in Lima for more botanical information. The fruit of Caesalpinia spinosa is a flat yellow to orange pod up to 10 centimetres long and 2 centimetres wide. Every pod contains up to 7 round seeds with a diameter of 5 to 7 millimetres. The colour of the seeds is dark red when mature.

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1.1 International registration

1.1.1. Harmonised System Tara gum does not have its own code in the Harmonised System. Tara gum is registered by customs as part of the product group Mucilage and thickeners whether or not modified, from vegetable product, not elsewhere specified. The HS code of this product group is 130239. The Peruvian tariff code for tara gum is 1302391000. 1.1.2. Nomenclatures

Tara gum is an approved food additive within the Codex Alimentarius Commission (Codex) system with INS (International Numbering System) number 417. The INS was developed to provide an agreed international numerical system for identifying food additives in ingredient lists as an alternative to the declaration of the specific name which is often lengthy and a complex chemical structure. Thus, 417 is the number used on food labels in Europe. It is shown as E417, where E stands for Europe. Note that the INS is an identification system and does not imply toxicological approval by Codex. The CAS (Chemical Abstracts Service) number is 39300-88-4. The EINECS (European Inventory of Existing Commercial Substances) number is 254-409-6.

1.2 Import tariffs

Imports of tara gum are unrestricted. A 0% import tariff applies in both the EU and EFTA.

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2. European market environment

2.1 Market trends
The market for natural gums has just passed a period of great instability. In 2011, due to strong increases in demand from the oil drilling industry, prices for guar gum exploded (+400% in one year) and availability plummeted. The oil drilling industry uses guar gum as a controlling agent in oil wells to facilitate easy drilling and prevent fluid loss. The scarcity of guar gum had a profound impact on the thickeners market. Many food and beverage manufacturers used substitutes in new products or tried to replace guar gum by cheaper alternatives. This offered particularly good opportunities for tara gum, locust bean gum and xanthan gum, which have similar functional properties. The price increases were a major factor behind the recent increase in tara imports to Europe. Between 2007 and 2011, exports by Peru increased by 35% annually. Table 2.1: Peruvian exports of tara gum to Europe, in US$ million, 2011 Imports France Germany Spain Italy Netherlands
SIICEX, 2012

consumer preferences which affects the market for tara gum is the preference for low-fat and low-calorie foods. Gums, such as tara gum can be used in fat-replacement systems and have consequently become of interest to food manufacturers. This trend is expected to continue to shape demand for at least several years, as several European governments have taken policy measures to fight obesity. Traders of gums can profit most from this trend by providing complete and accurate information about the characteristics and appropriate use of gums in fat-replacement systems. Sources providing information on fat replacement by gums include Food Technology magazine (1999, Vol. 53, No. 8: http://www.dict.uh.cu/Bib_Dig_Food/ift/ft/ft53/08-99-p&t-ing.pdf) and http://hubpages.com/hub/Fat_Replacement_Products. The fat replacement capacity also makes tara an interesting ingredient for nutraceuticals, such as weight management products. 2.1.2 Natural

Change 2010-2011 59% 28% 37% 17% 81%

623 567 504 357 328

Another change in consumer preferences with implications for tara gum is the natural trend. Increasing concerns about the safety of food together with a higher appreciation of products from nature and a growing environmental consciousness have made natural products more popular. These natural products also include foods with additives. A large number of food manufacturers respond to this demand for natural products by substituting synthetic ingredients and ingredients which are perceived to be synthetic by consumers (e.g. Microcrystalline Cellulose) with natural ingredients. Again, traders have an important role in informing and advising food manufacturers about natural gums. The market for organic tara gum is small, but growing. Importers indicate that the availability of organic tara gum is limited and that organic tara gum offers an answer to the specific requirements of specialised organic food producers. The natural trend, which is visible in the food sector is also recognizable in the cosmetics sector. Cosmetics manufacturers are increasingly using natural ingredients in their products. However, interviews with traders of tara gum made clear that the cosmetics sector is not particularly interesting for exporters of tara gum. The market is very small and cosmetics producers only need

Currently, prices for guar gum are coming down. This is expected to ease demand for tara gum in the short-term. Nonetheless, longterm market development will be positively influenced by fat replacement, demand for natural ingredients and sustainability. 2.1.1 Fat replacement

Changes in consumer preferences are causing food manufacturers to constantly adapt their food formulations. A current trend in

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small quantities. Direct imports by cosmetics producers are negligible or even non-existent. 2.1.3 Sustainability

Tara gum is also applied to control the release of flavours, prevent particle sedimentation or droplet creaming, induce gelation, improve the emulsification of oils and stabilise foams. 2.2.1 Food applications of tara gum

Sustainability has become a major focus of the European food industry in recent years, making it essential for suppliers of gums to comply with this trend. Consumers are increasingly attracted to Increase your opportunities: Exporters can facilitate the substitution of synthetic ingredients by tara by supplying information on the application of tara. Organic certification can result in access to an interesting niche market for organic tara gum. Adopt measures to improve the sustainability of your production system: energy reduction, reduction in water use, proper waste management. ingredients produced from raw materials which are sourced sustainably. Sustainable sourcing is a particularly strong trend in commodity markets. However, an increasing amount of food manufacturer s is positioning their entire companies, instead of single products, in the market for sustainably produced food. This type of positioning also requires sustainable sourcing of additives. Sustainability in the supply chain is expected to become a major risk management strategy for many European companies in the next years.

The main market for tara gum is the food industry. The exact share of the food industry in tara gum purchases is not known. However, the fact that uses other than food applications are hardly mentioned by industry sources, indicates that the food industry dominates the market. Moreover, according to SRI Consulting, food applications account for 90% of the global market for hydrocolloids, which include gums, such as tara.Tara gum is used in many food and beverage applications, including water based flavoured drinks, liquid milks, frozen dairy desserts, breads and bakery products, processed fruit and vegetables, mixed foods, prepared dishes, condiments, sauces and many other products. Food manufacturers are interested in tara gum for its functional attributes. The main reason for many food manufacturers to use gums, such as tara gum is their cost efficiency compared to other stabilizers such as starches or gelatine. Gums are used at levels below 1% and often even below 0.1%. Although the cost per kg is high compared to other stabilizers, the actual cost of use in the final product is often lower. Tara gum has synergistic effects when used in combination with kappa-carrageenan, xanthan gum and agar, comparable to LBG. In the combination, tara gum increases gel strength and makes the gel less prone to syneresis (liquid separating from a gel on standing). Combining tara gum with xanthan gum produces long-term suspensions giving potential for use in salad dressings, mayonnaises, sauces and comparable products. Other subtle synergistic effects of tara gum are shorter flow characteristics and improved mouthfeel. Some examples of tara gum applications are given hereafter. In frozen desserts, tara gum provides a fat-like texture (rich butter

2.2 Market segments

Tara gum has many different types of applications. It is used in food, cosmetics, pharmaceuticals, oil drilling, etc. This survey only discusses the major segments: food and cosmetics. Tara gum is a thickener and stabilizer. Tara gum produces highly viscous solutions, even at 1% concentration. Tara also has synergistic effects when used in combination with other gums, such as guar gum or Locust Bean Gum (LBG) to produce improved gel and colloid stabilities and properties.

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mouthfeel) and heat-shock protection by helping to prevent ice crystals. In the meat industry, tara is used to replace meat by water. In a study by the National Agricultural University La Molina in Peru, it was shown that the use of 0.28% tara gum allows for a 15% decrease in meat content in sausages through binding water (+27%). Tara gum is also commonly used in fruit preparations. For more detailed information about product applications, you are advised to contact the technical experts of tara gum importers, which are listed in section 7.3 or order the Handbook of hydrocolloids by G.O. Phillips and P.A. Williams (http://www.woodheadpublishing.com/en/book.aspx?bookID=1478) The following table shows the size of total trade in the segments where tara gum has most potential.

such as reduction of viscosity or loss of mouthfeel. Gums offer a good solution. Related to the value of tara as a fat replacer is the value of the dietary fibre content. Tara gum is a source of dietary fibre with very little if any caloric value added. Food manufacturers are interested in the possibility to claim a higher amount of dietary fibres when they use tara gum. Tara gum has to compete with many other gums. It is important to realize that the food formulation determines which type of gum a manufacturer will use. Gums perform differently in mixtures with other ingredients. Moreover, the temperature needed for the preparation of the food can also influence gum performance. Blends of different gums or blends of gums with other ingredients, which combine into unique properties, are also a common solution. For example, Equacia is a blend of gum Arabic with wheat fibres, from the leading gum Arabic importer Nexira. 2.2.2 Consumer market

Table 2.2: Turnover from trading activities in relevant segments of leading European markets in 2007, in million Meat Germany France Italy Poland United Kingdom Spain 2,648 1,686 1,505 1,165 849 323 Ice cream 301 456 103 34 11 50 Sauces 811 124 38 46 85 14

Source: Eurostat, 2012 Tara gum could be a solution for many more applications. Currently, a particularly interesting application is the replacement of fats in low-calorie foods. Gums have a wide range of function, including thickening, stabilizing, emulsifying, clouding and flavour encapsulation. These are functions which have often been performed by fats. Food manufacturers often apply these functions of saturated fats to improve the textural and mouthfeel properties of their food formulations. However, consumers are increasingly looking for low-fat and low-calorie foods. This has caused food manufacturers to look for alternatives to fats, as simply removing the fats would result in many changes in the organoleptic qualities of the food,

The niche market for consumer tara gum (<1% of total market) is a very different market from the industrial market. Volumes are much smaller and packaging is much more important. For example, agar-agar is offered in sachets of 2 grams. Another aspect of marketing gums in the consumer market is the provision of recipes. Kalys develops recipes (applications) to promote the use of their gums. The products are sold through specialized retailers (culinary shops) and at cooking lessons. The consumer market for gums is mainly driven by molecular gastronomy. The Spanish cook Ferran Adria is famous for his cooking skills using molecular gastronomy. His recipes are very popular among professional and hobby cooks in many countries. The largest groups of professional and hobby cooks applying molecular gastronomy are found in France, Spain and Belgium. For a better understanding of molecular gastronomy, please refer to Texture: a hydrocolloid recipe collection available at: http://khymos.org/hydrocolloid-recipe-collection-v2.2-screenres.pdf. The consumer market for tara gum is still a niche market requiring extensive business-to-consumer promotion. However, margins are high and there is potential for growth. Note, however, that this

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market will always remain a niche market, due to the limitations of the applications in molecular gastronomy. 2.2.3 Cosmetic applications of tara gum

Gums are valued by cosmetics companies for their emulsifying and adhesive properties. Gums are used by the cosmetics industry for their functional characteristics when synthetic substitutes are not available, less effective or when cosmetics companies want to produce a natural product. In general, gums are mainly used in creams and lotions. However, there is very little information available about the specific uses of tara gum in cosmetic applications. This indicates that the use of tara gum in cosmetic applications is limited. EU importers have shown little interest in marketing tara gum in the cosmetics market.

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3. Price
3.1 Price factors and pricing
3.1.1 Price factors Producers of organic hydrocolloids, such as tara gum may command a price premium of 30% to 40%, according to Dennis Seisun of IMR International (2008).

Profitability of tara cultivation depends for a large part on the utilisation of different products which can be derived from the tara tree. Apart from the gum (endosperm), the tara pods contain tannin (consisting for 53% of gallic acid), which can be used in the leather industry. In the past decade, availability of unprocessed tara pods has increased as a result of tree planting for commercial use. The improved availability has eased the costs of tara pods for tara gum producers. However, other cost factors have increased, notably energy prices. Tara gum producers can control the increase in costs of resources by reducing their need for these resources (e.g. Integrated Pest Management) or improving efficiency (e.g. more efficient machinery). The promotion of low energy use and other measures, as a means to reduce the environmental impact of your production system, offers an added advantage. 3.1.2 Pricing

3.2 Price structure

The price structure of natural gums, such as tara is complex. In many cases, the products first go to an intermediary before they reach the end-user. Depending on the value addition by the intermediary, the price of the product can increase from a few percent to a few hundred percent. The mark-up will be minimal (25%) when the product goes to the end-user through an importer, which only performs administrative work associated with purchasing and selling items (arranging sea transport, customs clearance, local transport, storage, quality control, re-packing, bank charges, sales). The mark-up will be much higher when the product goes through a longer channel involving more intermediaries with more activities. Please refer to Chapter 5 for a detailed analysis of trade channels. For example, some importers actively source by visiting suppliers and advise clients on the application of the products. The importers often sell the product to a processor. The mark-up of the processor also depends on the kind of processing. The (re)cleaning of natural gums does not have to be very costly, but when the processor develops new blends of gums with applications in complex food formulations, value addition will be much higher. Conclusions: Prices will remain strong in 2012 Monitor guar prices European intermediaries may add a lot of value

Market-oriented pricing offers a good pricing strategy in the current dynamic tara gum market. By closely monitoring global market developments, you can anticipate price decreases or increases and release or hold on to stocks. Opportunistic market-oriented pricing may damage your long-term trade relationship with a buyer. Therefore, you are recommended to be careful in your price negotiations with regular customers. Also note that this pricing method requires a relatively large amount of liquid capital in order to finance activities when you are holding on to stocks. Finally, it is important to realise that price elasticity is limited by strong competition from substitutes, such as guar gum and Locust Bean gum. In light of the tightness in the guar gum market, prices of potential substitutes including tara gum are expected to remain firm or even increase further in 2012.

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4. Competitor analysis
4.1 Existing competitors
Peruvian exporters of tara gum primarily face competition from other tara exporters. Approximately 80% of global tara production takes place in Peru. The source of tara, the plant Caesalpinia spinosa is also found in Chile, Ecuador and Colombia. The plant is cultivated in China and also in India (Schiaffino, 2004). Tara gum from all of these countries can enter the EU and EFTA duty free. Suppliers of other thickeners also compete with tara gum exporters. Especially suppliers of Locust Bean Gum (LBG) and guar gum compete with tara gum exporters. Locust beans grow on the carob tree which is native to the Mediterranean. The main LBG producing countries are Spain, Portugal, Italy and Morocco. Guar gum is produced in India and Pakistan. In the past year, production of guar gum strongly increased in response to the price surge. LBG and guar gum have similar functional properties as tara gum. However, depending on the food or beverage formulation, other thickeners might also be used instead of tara gum. In that case, the end-product will have significantly different characteristics than the products with tara gum. Therefore, substitution of tara gum by thickeners other than LBG and guar gum is only relevant for new product development. The main suppliers of mucilages and thickeners derived from vegetable products are the Philippines, Norway, Chile, Indonesia and India. All of these countries are major producers of seaweeds used for production of competitive products like carrageenan and alginates. It takes several years before new tara trees start producing Due to increasing expectations of the reliability of supplies in EU trade, many importers are becoming more hesitant to switch between suppliers. Importers strongly prefer long-term business relationships over short-term profits. Even when new suppliers offer better price-quality ratios, importers tend to favour existing business relationships. Switching to a new supplier implies a timeconsuming approval process. The importer will have to request and assess a lot of information on product quality, supply capacity, management, company track record, etc. A thorough assessment is required to make sure that the new supplier is reliable.

4.3 Substitutes
4.3.1 Application

In the food industry, tara gum is said to bridge the gap between guar gum, which is cold water soluble, and LBG, which is insoluble in cold water. Although tara gum is not completely soluble in cold water, it provides high viscosity at low temperatures. Compared to LBG, tara gum delivers the same viscosity at lower concentrations. Moreover, it is more economic in use (20-25%) and the colloid produced is more resistant to high-shear breakdown during processing. Industry sources also indicate a negative characteristic of tara gum. Tara gum is not a good solution for formulations with a pH value below 4. It is important to realize that the competing products have been on the market for a much longer time. Tara gum was only introduced on a commercial scale in the 1980s, while other gums have been on the market for centuries. In that sense, the market for tara gum still has to develop. Industry sources indicate that the market for tara gum is currently developing fast. However, it should be noted that tara gum cannot replace all other hydrocolloids. Tara gum is primarily a substitute for LBG, which has a market share of around 2%. Therefore, demand for tara is strongly related to the market for LBG. Importers indicate that demand for tara gum went up in 2006-2007, because supplies of LBG were low. Demand for tara gum was negatively affected when supplies of LBG recovered. Importers switched back to LBG, as the price/performance ratio of LBG was better and they prefer to trade with European partners. Some importers say that users have already been switching back to LBG since two or three years.

4.2 New entrants

In the future, tara may also be produced in countries other than Peru, Chile, Colombia and Ecuador. According to the World Agroforestry Centre, Caesalpinia spinosa is also native to Bolivia, Cuba and Venezuela. Additionally, the plant is cultivated in Ethiopia, Kenya and notably Morocco. Industry sources say that tara gum can also be produced in countries where Locust Bean Gum is grown as production conditions for tara and LBG are similar. Producers of LBG are said to switch to tara when prices for tara are high. However, any attempt to produce tara in these countries will be hampered by the long maturation period for Caesalpinia spinosa. 11 | Market Brief for Tara Gum

Substitution by guar gum is currently a minor threat. High prices of guar gum favour the use of tara gum by food and cosmetics manufacturers. 4.3.2 Availability

Despite the strong natural trend, tara gum still faces fierce competition from synthetically produced gums and thickeners which have undergone non-natural processing. The competition from these substitutes is largely the result of supply chain problems when using natural gums. The production of natural gums is subject to climatic conditions. Bad climatic conditions can lead to small harvests and a shortage in supply. Manufacturers need a constant and reliable supply of ingredients. Sudden shortages can lead to production problems, which are harmful to sales and relationships with buyers. Another competitive advantage of synthetic gums over their natural counterparts is their homogeneity and quality consistency. Natural products are sometimes derived from different botanical sources and can vary a lot in quality. In conclusion, synthetic gums pose a severe threat to natural gums, such as tara, if suppliers of the latter do not stabilise their supplies and do not guarantee quality consistency. The substitution of gums is accelerated by the increasing scale of operations of many EU ingredient suppliers. The ingredient suppliers follow developments in the food and cosmetics industries which are consolidating. The larger companies put more emphasis on stability of supply in terms of both quantity and quality and are developing a strong preference for synthetic substitutes. Conclusions: Your competition mainly consists of suppliers of other types of thickeners Securing stable supplies forms a major barrier to new entrants Guar gum and LBG are the primary substitutes of tara gum Synthetic thickeners remain a threat as long as you do not have a system in place to ensure reliable supplies

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| Market Brief for Tara Gum

5. Commercialisation channels in Europe

5.1 Trade channels for tara gum
5.1.1 Most suitable trade channel Gums enter the EU mostly through specialised importers, concentrated in Hamburg, Germany (A2 Trading; C.E. Roeper; Willy Benecke) and France (Cargill; Starlight Products; Kalys). Direct trade with end-users in the food and cosmetics industries is not possible as many end-users require small quantities, which cannot be imported cost effectively, or do not have the means to import the products themselves (quality control, logistics, customs). Importers and often agents handle this business. The number of importers handling gums in the importing countries has declined considerably in the past 10 to 20 years. The decline is partly the result of consolidation in the industry. End-users of gums can have a wide variety of problems with food formulations, which require gums. The variance in the problems requires that solutions are tailor-made. Traders in the EU therefore gather information on the food formulation of the end-user in which the gum (blend) will be used and on the manufacturing process. The information is then used to find the correct gum solution. In fact, EU processors continuously carry out research to develop new thickeners, which appeal to consumers and meet the expectations (and detailed product specifications) of food manufacturers. The EU processors have the intrinsic knowledge of the EU food market, necessary to identify demand for new or improved products. This expertise is difficult for companies in developing countries to obtain, because the distance to the EU food market is much larger, both physically and in terms of business links. Also, up-to-date knowledge of food legislation requirements in far-away export destinations is not always easy to obtain. Research is furthermore needed to develop thickeners which are low-cost but still retain their functional properties under specific conditions (e.g. light, heat and acidity). Establishing communication with the food manufacturers, needed to transfer the required knowledge, is often easier for EU processors than for developing country exporters. One way for Peruvian exporters of tara to overcome the barriers of reputation, technical expertise and/or supply variability is to use EU-based traders and agents. The proximity to the market and close contact with buyers allows traders and agents to serve as a bridge between the distant exporter and the EU market. Agents, which never own the products, can help to outsource processing and/or provide extra services to the end-users. Those services are usually technical solutions for end-users. For example, a food manufacturer requiring improved mouthfeel and stability of its food formulation may get advice from the agent on the application of tara. The current trend amongst end-users in the gum market is to skip the blenders and deal directly with the producers or importers. The end-users no longer accept to rely on blenders for their supplies of gum blends. Blenders create blends without disclosing the information on the composition of the blend to the end-user. This makes the end-user completely dependable on the blender as it is a costly process to find another solution. In the past, some blenders used this advantage to increase their prices without negotiating

5.1.2 Roles of importers and processors Many of the importers combine their import activity with processing (e.g. analyzing, purifying, spray-dyring, blending). Other importers sell the products on to specialized processors, blenders or directly to end-users. Gums are processed on large scales by various companies in the EU. Consequently, most demand for unprocessed gum comes from the facilities of these processors. There are no importers which have specialised in the supply of the cosmetics market. Importers focus on the food market and sometimes find extra customers in the cosmetics market. 13 | Market Brief for Tara Gum

with the end-users. Since recently, end-users are increasingly asking for the formulations of gum blends and purchase the gums themselves. The blending process is also done by the end-users or is outsourced to blenders. The effect of the trend described above is a decreasing number of blenders. Another development is concentration of the industry. Due to the consolidation in the food and cosmetics industries in the EU, trade in natural ingredients for these industries is concentrating. Companies in the trade of natural ingredients are increasingly producing both conventional and organic product lines, and are offering ingredients destined for the cosmetic and food sectors. The expansion offers the companies economies of scale.

Conclusions: Importers which combine importing and processing are the most common market channel European intermediaries play a major role in helping food manufacturers to use tara gum

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| Market Brief for Tara Gum

6. Marketing and buyer requirements

6.1 Product requirements
6.1.1 Product specifications Although many importers will analyse samples themselves, access to laboratory analysis is valuable. Monitoring of your products quality serves to prevent non-compliance to buyer requirements. 6.1.2 Packaging, marking and labelling

The product specification of the EU for tara gum are shown in table 1.2. Tara gum is available in viscosities of 2,500 to 6,000 cps (1% concentration). However, in the EU, only two grades of tara are traded. The medium viscosity grade offers 4,500 cps in a 1% concentration. The high viscosity grade offers 6,000 cps in a 1% concentration. It is important to realize that importers also assess the variance in viscosity in the gum supplies. Normally, the variance of a batch of high viscosity grade should be between 5,500 cps and 6,500 cps. A smaller the variance is better. Producers can improve the homogeneity of tara gum viscosity by milling at low temperature. Conventional hulling of the seeds involves acid treatment or roasting. The roasting can alter the product characteristics. Additionally, many producers use stone grinding, which also generates high temperatures. New technologies enable low temperature hulling and milling, resulting in a more homogeneous product. Moreover, such technologies also reduce the need for cooling water, which in turn reduces the risk of bacterial contamination. Another aspect of quality is mesh size. Importers often prefer finer mesh sizes, as these will result in better dispersion. Additionally, importers also value the origin of the gums. Gums from different origins can differ in transparency level and molecular changes in their applications. Differences in quality aspects, such as viscosity and mesh size for tara gum powder, should be minimal between batches. This can be realised by grading the raw material and separating processing of different grades. Batch sizes are also an important indication of the quality consistency that suppliers can offer. Larger batch sizes (>10 tonnes) indicate a better quality consistency. Larger batch sizes also have the advantage that the importer has to perform less analyses. Quality control analysis

The packaging of tara gum should preserve the organoleptic qualities of the gum, such as colour and viscosity. Gums are hygroscopic and should therefore be packaged in waterproof material. Tara seeds can be packaged in paper bags, cartons or jute bags. Tara gum powder is normally packaged in multi-wall paper bags with a plastic (e.g. polyethylene) lining. The required marking mostly depends on the specific requirements of the importer. Information that is often required includes date, supplier name, address, product name, net weight, if the product is intended for food use, grade, recommended storage conditions. The information should be in English and using EU measures (e.g. grams). Quality labels, such as a label for organic products or Kosher or Halal products could also be put on the packaging. 6.1.3 Documentation

Depending on the sourcing methods of the importer, documentation might be important and elaborate or obsolete. Some importers prefer to visit companies from which they have received interesting offers, while others prefer to gather documentation which proves that the company can meet their requirements. Documents required by most gum importers include: Certificate of origin Certificate of analysis (stating amongst others if the product is foodgrade, that the product is allergy free and the amounts of heavy metals) Technical data sheet (TDS) Material Safety Data Sheet (MSDS) GMO-free certificate Health certificate Certificates that show compliance with third party standards, such as HACCP, GMP or ISO 9000 A packing list and a bill of lading are also required for the transport of tara products.

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Buyers generally prefer payments through open accounts. However, due to high risks for the supplier, other terms of payment are common. Cash-Against-Documents (CAD) and letters of credit are both used for payment of the goods. Some importers prefer CAD, as it is a faster payment method for them.

SA8000 is one of the most well-known voluntary global standards to ensure social accountability. SA8000 includes standards in the form of a Code of Conduct. The codes are based on the ILO Conventions and on other human rights Conventions. 6.3.3 GMP and GACP The Good Manufacturing Practice (GMP) and Good Agricultural and Collection Practice (GACP) state the minimum quality and hygiene requirements. These standards are binding for UN member states and have to be incorporated in their legislation. 6.3.4 Fairtrade Fair trade certification does not offer significant benefits to tara gum producers. Tara gum is used in low concentrations as additives in composite food products and offers limited possibilities for labelling to food manufacturers.

6.2 Supply chain management

Buyer requirements regarding supply chain management are becoming increasingly strict. This is particularly relevant for tara, because many potential importers have little confidence in the supply of tara. Supplies of tara gum should be stable. This implies that production should be planned and controlled as much as possible. In the case of wild-collected tara, a natural resource management system should be in place to secure supplies. It could also imply that buffers are kept. The quality should be consistent.

6.4 Legislative
Legislative requirements are the minimum requirements which must be met by tara gum exporters marketed in the EU and EFTA countries. Products which fail to meet these requirements are not allowed on the EU and EFTA market. The EFTA States, with the exception of Switzerland, take part in the European Economic Area (EEA). This means that Liechtenstein, Norway and Iceland follow EU food legislation in general. The main differences between EEA and Swiss legislation applicable to dried physalis is shown in Table 6.1.

6.3 Standards and certification schemes

6.3.1 ISO 9000 and 14000 Although not an obligatory standard for producers of food ingredients, the ISO 9000 is strongly increasing in importance in Europe. Companies can obtain a certificate that is valid for three years. Keep in mind that to become ISO 9000 certified means that the whole company must be dedicated to it, and that it takes time and financial resources. The ISO 9000 standards provide a framework for standardising procedures in an entire organisation, regarding quality, health, safety and environmental issues. Furthermore, the best known environmental system is ISO 14000, within which ISO 14001 is specifically aimed to minimize a companys impact on the environment. 6.3.2 ILO and SA8000 The International Labour Organisation (ILO), installed Conventions and Recommendations so that basic human and labour rights are respected within a company. Issues that are addressed in the Conventions are for example minimum wage, minimum age, and discrimination. The ILO is internationally accepted and provides information and guidance to companies regarding human rights.

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Table 6.1: Legislative requirements applicable to tara gum Requirement Description Further information Conclusions: Critical requirements: HACCP Basic documentation (Technical Data Sheet and Material Safety Data Sheet) GACP, GMP Traceability Increasing your competitive edge: Ensuring consistent quality Product documentation and information Implementing a recognized quality management system Natural resource management Organic certification EC 2073/2005

Legislati on applic ation to EEA countries Hygiene of foodstuffs The EEA legislation (HACCP) on hygiene of foodstuffs (HACCP) is legally binding for food processors, and is recommended for farmers (primary production). Microbiological contamination of food The EEA has set microbiological criteria for foodstuffs The EEA has set requirements for the use of food additives EC 852/2004

Additives in food

EC 1333/ 2008

Legislati on applic ation to Switzerland Ordinance on food hygiene Establishes the general hygiene requirements related to food products regarding: production plant, personnel, production processes and microbiological criteria. RS 817.024.1

Tara gum may not be used in jelly mini-cups, which have been banned by the European Commission. The ban was imposed as the jelly mini-cups have shown to constitute a risk for choking.

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7. Promotion
7.1 Recommendations for promotion
When highlighting the properties of tara, one can focus on the natural origin, its viscosifying strength at low concentrations, the high resistance to high-shear breakdown, the synergistic effects when used with other thickeners, its low calorie content and the possibilities for fat replacement. Have your product documentation ready and up-to-date (see Chapter 6 for relevant documentation). Based on this product information, a new buyer of tara gum should be able to assess the features of the product and to easily compare it with substitutes. Documentation is also of major importance when approaching existing buyers. Existing importers are hesitant to switch to new suppliers, as the assessment for the approval is a time-consuming process. Suppliers could greatly reduce the efforts needed by importers, by providing proper documentation. Documents should be easily recognizable and filed in a logical order. Suppliers of tara gum should show importers how they ensure stable supplies to convince them of the reliability of tara gum supplies in terms of quantities. Transparency in the supply chain will help to build trust in the relationships between buyers and suppliers. Certification schemes such as ISO and HACCP serve to prove the reliability of a supplier regarding quantities and quality. English is the most frequently used language in European trade. Although most European trade partners will not be native speakers themselves, the vast majority speaks English fluently. In almost all cases, foreign language skills are essential when entering the European market.

7.2 Trade fairs

The main trade fairs in Europe which are relevant for the promotion of tara gum are: BioFach (http://www.biofach.de) the largest organic trade fair worldwide; highly relevant to meet the main industry players and promote your product in the organic market. Food Ingredients Europe (FI) (http://fieurope.ingredientsnetwork.com) leading trade fair in the food ingredient sector; interesting to meet potential clients in the food industry. Prepare your trade fair participation by producing company and product documentation Prepare representative samples of different qualities (e.g. mesh sizes or viscosity), which you can deliver and indicate in what quantities and with what frequency you can deliver them.

7.3 Buyer list

The EU market for natural thickeners is consolidating, characterised by mergers and acquisitions. The result is that a small and decreasing number of dominant players dictates the market for natural thickeners, particularly in the larger, more mature markets for hydrocolloids, such as xanthan gum and alginates. The consolidation results in fiercer competition for Peruvian exporters and in a smaller number of potential buyers. You can find a list of potential buyers in a separate document.

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8. Glossary
Abbreviation EEA EU EFTA GSP HACCP LBG Explanation European Economic Area European Union European Free Trade Association Generalised System of Preferences Hazard Analysis and Critical Control Points Locust Bean Gum

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Osec Swiss Import Promotion Programme Stampfenbachstrasse 85 Postfach 2407 CH-8021 Zrich Tel.: +41 44 365 51 51 Fax: +41 44 365 52 21 sippo@osec.ch

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