Distribution channels

For the EU, please refer to the two CBI Market Surveys “Natural Ingredients for Cosmetics Market in the EU” and “Natural Ingredient for Pharmaceuticals Market in the EU.” According to the CBI Market Surveys, the most important trade channels for most developing country producers will be agents, importers, wholesalers and brokers, either with or without processing facilities. This means that an ingredient exporter is more likely to succeed by selling to an intermediate processor or distributor in the EU supply chain than trying to sell directly to an end-user finished product manufacturing company. Different types of traders can be distinguished. Enterprises based in the producing countries are mainly involved in the sale and export of large quantities of local products. Enterprises based in consuming countries are concerned with imports and supply of the domestic market. Wholesalers/distributors may also process raw plant material or conduct 2nd step processing of essential oils, natural colorants, vegetable saps and extracts and vegetable oils and fats, or other processing industry may perform that function. Although some industrial users have their own purchasing department, traders and brokers still fulfill important functions, since they are well informed about the EU market. The most important trend in the trade structure is the increased focus on traceability, as a consequence of GMP requirements.[1]

For the U.S. market, please refer to the ITC Market Brief “The United States Market for Natural Ingredients Used in Dietary Supplements and Cosmetics.”[2] The U.S. cosmetic and/or dietary supplement product manufacturer’s buyer, in most cases, purchases natural ingredients from a range of different supplier types. For example, botanical raw materials, fresh or dried, in whole or cut forms, may be purchased directly from herb farms or from companies or individuals specializing in wildcrafting. Essential oils may be purchased directly from distillers, and extracts and oleoresins from commercial extraction houses, and so on. It is important to note that many herb farms in the U.S. also import and distribute various natural ingredients from foreign farms and wild collectors and/or enter into contract grower arrangements in order to have certain crops grown (or collected) that require other climates.

Smaller product manufacturing companies will often purchase their natural ingredients from wholesale distribution companies that may offer some value-adding capabilities such as cutting and sifting, particle sizing, granulation, blending, as well as laboratory analysis with certificate of analysis documentation. On the other hand, many wholesale distribution companies might only purchase the ingredients from the primary producers, then re-pack into smaller containers, re-labeling them in order to not disclose their sources.

Here below are five examples of possible natural product trade flows from an ingredient’s origin in the developing country to the final consumer in the U.S.:

  1. Farm or Wild Harvester in Developing Country -> Value-Adding Company (e.g. extraction house or oil distiller) or Import/Export Trader in the Developing Country -> U.S. Import/Export Trading Company -> Processor (cutting, sifting, repacking) and/or Bulk Ingredient Distributor -> Consumer Product Manufacturing Company -> Consumer Product Wholesale Distribution Company -> Retail Store -> Consumer.
  2. Farm or Wild Harvester in Developing Country -> Value-Adding Company or Import/Export Trader in the Developing Country -> U.S. or European Processor (cutting & sifting, extraction, laboratory analysis) -> U.S. Consumer Product Manufacturing Company -> Consumer Product Wholesale Distribution Company -> Retail Store -> Consumer.
  3. Farm or Wild Harvester in Developing Country -> Value-Adding Company or Import/Export Trader in the Developing Country -> Direct to U.S. Consumer Product Manufacturer (with value-add capabilities such as extraction, bottle filling and labeling) -> Consumer Product Wholesale Distribution Company -> Retail Store -> Consumer.
  4. Farm or Wild Harvester in Developing Country -> Direct to U.S. Extraction Company -> U.S. Consumer Product Manufacturer -> Consumer Product Wholesale Distribution Company -> Retail Store -> Consumer
  5. Farm or Wild Harvester in Developing Country -> Direct to U.S. Consumer Product Manufacturer (with value-add capabilities such as milling, extraction and final packaging) -> Consumer Product Wholesale Distribution Company -> Retail Store -> Consumer.

In many cases, U.S. natural product marketing companies have no production capabilities and, therefore, have their products manufactured entirely by a contract manufacturing company. The product marketing company may specify the grade and quality of natural ingredients for their finished consumer products, and they may even specify the ingredient supplier from whom the contract manufacturer must purchase the ingredients. More often, however, the contract manufacturer is entrusted to purchase the natural ingredients based on their own criteria and best relationships. In such cases, it may be more important for the natural ingredient producer to develop a relationship with the contract manufacturer than with the product marketing company.

There are also a number of vertically-integrated natural product companies in the U.S. Several natural product companies own and operate their own farms or have contract grower arrangements for some of their natural ingredient supply requirements.  Other US natural product companies also own and operate foreign farms, have joint ventures with foreign farms, or contract with foreign growers for specific crops. Finally, it is also important to realize that some of the leading cosmetic and dietary supplement consumer products in the U.S. market are actually manufactured in Europe. These foreign natural products are re-labeled for the U.S. market and distributed by the foreign company’s U.S. sales and marketing division, or through a subsidiary, or by a company that has obtained exclusive sales and marketing rights for the U.S. In the case of European natural products being distributed in the U.S., the natural ingredient producers and exporters in developing countries will need to develop relationships with the product manufacturer’s buyers located in Europe rather than with the product marketers in the U.S.

It is difficult to succeed in the very competitive U.S. market for natural ingredients without maintaining a strong presence inside the U.S.; sales, marketing, warehousing, technical support, etc. Selling into the US market from abroad can be a competitive disadvantage for many reasons including:

  1. buyer’s expectations of readily available technical support, as needed, from the ingredient vendor’s scientific and technical affairs staff;
  2. buyer’s preference to take delivery of contracted ingredients, as needed, on a just-in-time basis;
  3. buyer’s expectation that a vendor can “quickly” remedy a problem, for example by re-working a problem ingredient or by immediately shipping a different, new lot of the same ingredient that is in-stock.

Foreign suppliers who do not have their natural ingredients warehoused inside the U.S. and ready for immediate shipment may lose out on both spot-buying opportunities as well as on fixed annual contracts that may be awarded by just-in-time buyers. Models of successful foreign suppliers of natural ingredients include those who have set up, at a minimum, sales and marketing offices in one or more locations in the U.S. staffed by seasoned U.S. natural products industry veterans who have several years of experience in the U.S. ingredients market. Foreign suppliers who staff their U.S. sales and marketing offices with personnel from the company’s country of origin may be less successful than those who can afford to attract and hire experienced individuals who already have a successful track record and their own valuable connections to key industry buyers and to other decision makers such as new product development, quality control, and research and development managers who are also generally involved in ingredient selection and vendor qualification and approval steps along with the purchasing manager.

Some successful foreign natural ingredient suppliers operating in the U.S. also keep sufficient inventories ready-to-ship, either at a consolidation warehouse / shipping service company or they may lease or own their own warehouse and shipping facilities in the U.S. If inventories run too low prior to the next ocean container arrival, in the interest of customer service some vendors will airfreight a less-than-container-load purchase order directly to the customer in order to not take a chance on losing the business. Some of the more successful foreign ingredient suppliers also have some scientific & technical staff working in their U.S. offices in order to assist customers with product development and/or to help troubleshoot when there are ingredient problems at any stage of production.

Foreign ingredient suppliers who do not have the resources available to maintain their own warehousing and/or sales & marketing operations inside the U.S. may also succeed by developing a strategic relationship with an appropriate, well-positioned American company, for example by granting the American company exclusive rights to distribute their range of natural ingredients to the U.S. market. This is not an uncommon arrangement and there are many examples of full-service U.S.-owned wholesale distribution companies whose catalogues are dominated by the offerings of several different foreign natural ingredient suppliers.


  1. ProFound Advisers in Development, in collaboration with Jones A and Dürbeck K. CBI Market Survey: The natural ingredients for cosmetics market in the EU. Rotterdam, Netherlands: Centre for the Promotion of Imports from Developing Countries (CBI). September 2006.
  2. Brinckmann J. The United States Market for Natural Ingredients used in Dietary Supplements and Cosmetics with Highlights on Selected Andean Products. Geneva, Switzerland: International Trade Centre (ITC) UNCTAD / WTO and BioTrade Facilitation Programme (BTFP) UNCTAD / ITC. 2003.
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