Can Farmers Produce Enough Cloves to Meet the Demand?
The Spice of Asia and Africa
Clove is an herb that is widely used in the culinary, medicinal and cosmetic area for its unique aroma and nutritional contents. Mostly grown in South Asia and East Africa, cloves have long been used in its dried flower buds form as a spice.
Clove flowers are picked when still in buds and then dried to be used in culinary and cosmetic industries.
They are frequently used as flavoring agents mainly in Asia. The top importers of cloves, Singapore, Indonesia, India, Vietnam and the United Arab Emirates, import clove to use as a culinary ingredient. The overall import in Vietnam has been regularly increasing for the past 5 years at a rate of 12.1% annually. In 2016, Vietnam imported 6.2M metric tonnes of cloves, an increase of 7.71% of that of the previous year. It is unlikely that Vietnam’s imports of cloves to decline in the near future as Pho is the preferred breakfast in not only in Vietnam but also in many of the Southeast Asian countries.
Cloves are an ingredient used in the everyday food of major importers featured above. (source: Tridge)
Cloves are not only popular in their use in culinary of Asian cuisines but also acknowledged in their use in cigarettes. Indonesia’s cigarette industry is heavily dependent on cloves, with 90% of the cultivated cloves are forwarded in manufacturing cigarettes.
In the recent years, the supply has been tight due to adverse weather conditions in many of the major producing countries such as Madagascar and Indonesia. Nonetheless, the market is expected to grow as the European Union is becoming a promising operator for the industry.
Natural Hazards Threatens Clove Production
Top exporters of Cloves are Madagascar, Singapore, Tanzania, Comoros, Indonesia, and Brazil. Madagascar holds 26% of the world export shares, taking the lead in the overall export. Of the total production volume of 108.5 thousand metric tonnes in 2016, Madagascar produced 20.8 thousand metric ton, with Tanzania and Indonesia having produced 8.9 thousand metric tonnes and 139.5 thousand metric tonnes respectively.
Major clove exporters. Madagascar takes the lead (source: Tridge).
A major setback hit Madagascar's clove production in 2005. The production declined from 18K tonnes in 2004 to 9.8K tonnes. After 10 years of a consistent production yield, Madagascar's faced another major decline of 4.77% in 2016 due to a severe drought. It is forecasted that Madagascar’s clove production will stay low or even decrease as Madagascar is still on the recovery from drought and cyclone Enawo.
After a huge fall in 2006, Madagascar has been in a slow, yet successful recovery (source: Tridge)
Tanzania, 3rd largest clove producer, was also severely impacted by a natural disaster that plunged production yield by 5.61%. Tanzania was affected by a heavy flood in January 2016, which hampered successful clove harvest in September, October, and November. Despite adverse conditions, however, the market outlooks are promising as clove remains strong in Tanzania's spice industry. The Tanzanian spice industry has joined hands with international companies in the technology sector that will promote the successful emergence of agriculture and latest technology. Tanzania expects a growth of CAGR of 10.1% by 2018/19.
The Indonesian Government Declares War on Cigarettes
Although the market for cloves is growing, the production of the goods is likely to take a plunge in Indonesia. Despite its reputation for holding 77.3% of the overall production, the projected outlook for the following years is dim. Unexpected rainfall in the major producing regions such as Java destroyed the crop production in 2017.
Another obstacle for Indonesia is the hike in cigarette taxes. Indonesia is not only the world's largest clove producers but also the top consumers. Indonesia consumes a high a percentage of cloves, mainly through clove cigarettes, also known as Kreteks.
The Indonesian government has long been in a battle to reduce the spiking tobacco smoker population in the country.
In 2016, consumption of cloves amounted to 80 thousand metric tonnes, producing 450B clove cigarette sticks. This has caused a persistent government intervention of high excise tax on cigarettes in order to prevent serious health issues related to smoking. In the beginning of 2018, a new average excise tax of 10.04% on cigarettes came into effect, forecasting a decline in clove cigarette production.
In contrary to such downfall, the Indonesian clove market is confident. The Kreteks market in Indonesia is rapidly going global. In 2017, Japan Tobacco Inc. made a major move and purchased Indonesian clove cigarette makers and purveyors(Karyadibya Mahgardhika and Surya Mustika Nusantara) worth $1B. This deal will not only allow Japan to grow in their cigarette markets but also will prove to be an advantageous step for Indonesia, especially with the increased tax on cigarettes domestically. Additionally, the demand for cloves has been growing in Europe. Europe has seen a 5% rise per year in demand for cloves as the demand for ethnic food has been booming incoherent with the rising multinational and immigrant population. It is predicted that around 2.0M citizens of non-EU nations have immigrated to Europe in 2016, directly affecting the increase in authentic dishes. This will be a critical factor driving the clove market.
Contact Us:
Editor: Wonjung Yun / wonjung.yun@tridge.com
Sourcing Team Expert: Elly Lee / eunjeong.lee@tridge.com
Or request for quotation through: https://www.tridge.com/inquiry
References
2. https://www.cbi.eu/market-information/spices-herbs
4. https://www.indonesia-investments.com