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Menthol exports: Is India’s dominance under threat?

India’s menthol exports have steadily grown since the mid-2000’s and the country has become a dominant player in the global market. However, the rise of the synthetic menthol market poses a potentially daunting challenge due to its cost advantage. 

  • The global menthol market is on course to cross a market value of US$ 1.2 billion by the end of 2030, indicating a CAGR of 4% during the forecast period.
  • India recorded an export value of US$ 317.29 million in 2021, with a CAGR of 4% between 2017 and 2021. However menthol exports have witnessed sharp decline by 34% YoY to reach US$ 170.15 million in 2022-23
  • Growth in demand is attributed to the rapid expansion of pharmaceutical companies along with the surge in demand for natural menthol in pharmaceutical industry, particularly cough syrups, analgesic balms, and foot sprays.
  • However the market is threatened by the rise of synthetic menthol, which is able to substitute natural menthol in several applications owing to its cost advantage.

mint_tpci

Image Credit: Pixabay

Menthol (Mentha Arvenis) is a chemical that’s naturally found in peppermint and other mint plants. The herb is used in medicines, cosmetics, scenting of tobacco products, flavouring of food and beverages and in making perfumes, thereby fuelling its demand in these sectors. 

Along with increasing demand for menthol for the production of its by-products, the global menthol market is on course to cross a market value of US$ 1.2 billion by the end of 2030, indicating a CAGR of 4% during the forecast period.

The Indian menthol crystal market was valued at US$ 111.55 million in 2021 and is likely to grow at a CAGR of 6.71% in value terms, over the forecast period 2022-2028 and is expected to reach US$ 172.97 million by 2028. 

The growth is attributed to the rapid expansion of pharmaceutical companies along with the surge in demand for natural menthol in pharmaceutical industry, the increased demand of production of cough syrups, analgesic balms, and foot sprays. Additionally, the rapid pace of urbanization in India, improving living standards, and rising disposable income leading to demand for natural plant-based health and cosmetics are expected to fuel the growth of Indian menthol crystal market in India. Moreover, a surge in demand for natural menthol crystals in the F&B industry as a flavor and fragrance agent in food products such as chewing gum, candy, confectionery and flavor and fragrance agents in a beverage are influencing the Indian menthol crystal market.

Menthol cultivation in India

Indian farmers cultivate mint crops in Zaid season between Rabi and Kharif season and it earns them more income than their main cereal crops. Many big land owners are shifting towards mint farming because of good returns. India is the world leader in the production and export of Mint oil and its products, with an approx. capacity of 40,000 tons and a share of around 80-85% of world production.

Menthol is cultivated in large areas of the Indo-Gangetic plains of Uttar Pradesh, which is the largest mint producing state with 75% share of total production. Madhya Pradesh and Bihar have a combined share of 15%, Uttarakhand grows 5% of menthol and the remaining 5% is grown in Haryana and Punjab combined.

India’s production has been increasing over the years and has the potential to grow even more with increasing demand in the global market.

Production and area under menthol in India

Year Area (‘000 Hectares) Production (‘000 MT)
2018-19 334 34
2019-20 328 44
2020-21  359 47

Source: Department of Agriculture & Farmers Welfare

Menthol export trends_tpci

Source: Ministry of Commerce and Industry

Being the largest producer of menthol, India has maintained its dominance in the market for more than two decades now, with an approximate share of 41% of total exports in 2021. It was followed by Germany and China with 18.4% and 15% share respectively.

ndia's top 5 export markets_TPCI

Source: Ministry of Commerce and Industry

India’s largest export market was China, with a value of US$ 204.02 million in 2021-22 and a negative YoY growth of 7.43% in 2021-22. It accounts for a share of 68.32% in total Indian menthol exports. China was followed by the US (US$ 18.60 million, decline by 22.14% YoY); Japan (US$ 11.13 million, growth of 20.52% YoY); Singapore (US$ 10.74 million, decline of 5.39% YoY) and Netherlands (US$ 8.85 million, decline of 13.18% YoY). 

Indian menthol monthly exports_tpci

Source: Ministry of Commerce and Industry

India’s total menthol exports were valued at US$ 170.15 million in Apr-Jan, 2022-23, with highest exports to China (US$ 95.49 million) followed by the US (US$ 15.43 million) and Singapore (US$ 9.16 million). However, this represents a significant decline in exports by 34% YoY, led by Japan (-52% YoY) and China (47% YoY) and France (-30.8% YoY).

Challenges in production

Menthol is a highly water intensive crop. It requires 10-12 irrigation cycles to attain maturity stage, and its active growth period coincides with pre-monsoon hot summer months. At the same time, ground water availability is non-uniform and there is less soil moisture. In addition to this, erratic supply of electricity for irrigation may impact the yield.

Due to increasing price and consumption levels of inorganic fertilizers and high labour wage rates, the cost of production of menthol mint has increased continuously. However, the production cost of synthetic menthol mint oil is lower than the natural menthol mint oil. 

Indiscriminate use of chemical fertilizers, inadequate irrigation and improper harvesting and post-harvest management practices affects the shelf-life quality mint oil.

In 2022, severe heat waves hit menthol crop, due to which oil production dropped by almost 40% in Uttar Pradesh, which is the highest menthol producing state. The state usually records a mentha crop production of 25,000 MT to 30,000 MT every year. 

Top 5 exporters of menthol_tpci

Source: ITC Trade Map

India recorded an export value of US$ 317.29 million in 2021, with a CAGR of 4% between 2017 and 2021. It was followed by Germany (US$ 143.29 million, CAGR of 6%); China (US$ 116.61 million, CAGR of -8%); Malaysia (US$ 72.77 million, CAGR of 222%) and the US (US$ 34.63 million, CAGR of 19%)

Top 5 importing markets_tpci

Source: ITC Trade Map

China is the biggest market of menthol in the world, with imports of US$ 311.52 million in 2021 and a CAGR of 10% between 2017 and 2021. It was followed by the US (US$ 86.27 million, CAGR of 2%); India (US$ 65.32 million, CAGR of 56%), Singapore (US$ 40.97 million, CAGR of -2%) and Indonesia (US$ 30.93 million, CAGR of 8%). 

Out of these top importing markets, India has a dominant share of 79.5% in China’s menthol imports. It also  maintains high market shares of 36.5% and 27% in the US and Singaporean markets respectively. However, Indonesia has a relatively low share (13.2%) of Indian menthol imports. China is the leader in this market with a share of 58.4%. Given that China imports heavily from India, the possibility of re-routing exports to Indonesia with/without value addition needs to be explored. 

India imports menthol mostly from Malaysia, which has a share of 63.1% in the Indian market, valued at US$ 41.23 million in 2021. It was followed by Germany with a share of 13% in total menthol imports (US$ 8.51 million) and the US with a share of 8.8% (US$ 5.72 million)

Indonesia is one of the top importing countries of menthol, and China is a major exporter to Indonesia with a CAGR of 2% between 2017 and 2021 followed by Germany. India accounted for a share of 13.2% in Indonesian imports with a CAGR of 17% for the same time period. Being the largest exporter of menthol in the world, India has shown a strong CAGR of 4% in exports (2017-21) whereas, China has recorded a negative CAGR of 8%.

 

 

Source: Ministry of Commerce and Industry

As the graph above shows, India’s export growth to Indonesia is erratic with declines in value registered during 2019-20, 2020-21 and also in the current year. On interaction with industry insiders, it is revealed that the major reason for India not being able to penetrate the Indonesian market is the latter’s preference for synthetic menthol over natural menthol, sourced from markets like Germany, China and Malaysia.

As discussed earlier, market preference for synthetic menthol is largely owing to its cost advantage. India’s own market for synthetic menthol was estimated at US$ 30.4 million in 2021, with a share of 27.22%. It is forecasted to grow at a CAGR of 6.71% during 2022-28. This remains a threat to the growth of the natural menthol market, and if its market penetration continues to grow, may disincentivise farmers from cultivating the crop over the long term.

Comments

  1. Welcome dear Asjad
    Good morning. hope you are doing well.
    Your report on Menthol seems authentic and information worthy.
    we expect similar report on menthol regularly.
    have a nice day ahead.

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