Orange Oil

Global Market Overview on Orange Oil

Global essential oil production is estimated to grow at a CAGR of 8.8 percent from 2023 to 2027, and it is primarily driven by the growth of a few key essential oils, such as orange oil, mint oils, clove oil, and patchouli oil. Robust growth of end-use industries, such as food & beverage, personal care & cosmetics, and aromatherapy, has translated into an upswing in the demand for the product. The orange segment is the highest contributor in the global essential oils market share, which is estimated to reach $5.7 billion by 2027, at a CAGR of 8.6 percent from 2023 to 2027.

• Global essential oil production is estimated to grow at a CAGR of 8.8 percent from 2023 to 2027

• In terms of demand, Asia Pacific is expected to witness the highest growth of approx. 9 percent from 2023 to 2027

• Orange oil leads the segment by market share of approx. 29 percent and is projected to grow at approx. 8.6 percent/year. The food & beverages segment leads all applications with over 30 percent

• Europe and Asia Pacific lead in terms of market share (over 40 percent) and projected growth (approx. 9 percent/year)

• Growing consumer awareness is a key driving factor for the global essential oil market over the speculated period. A major shift from synthetic to natural additives is seen due to the growth in the organic products industry

• Growing use of essential oil in the preparation of natural flavors and fragrances, on the account of their increasing demand across key end-use industries, is also expected to fuel the market growth

Orange Oil Market Drivers 

Increasing consumer awareness about the medical and relaxing properties of E.Oils are the key driving factors of the market. This trend is supported by various government policies intended at improving the environment.

• High consumer awareness and their increasing demand for natural organic ingredients is expected to increase the demand for E.Oils

• Retail companies are also investing in E.Oil based products, thereby driving demand

• Demand for lemon oil is expected to increase by a CAGR of 10–13 percent per annum until 2025, significantly driven by high consumer awareness

• The cosmetics market in Russia is estimated to reach over $20 billion in 2025. The cosmetics market is an important driver for lavender oil demand

Orange Oil Market Constraints

Weather fluctuation and seasonality, along with quality issues arising due to poor harvesting and processing techniques adopted in the major producing belts are major constraints of the industry

Weather Impact/Seasonality:

• Reduction in number of fruits per tree, reduction in crop size, etc., are caused by unfavorable climatic conditions that is likely to reduce feedstock availability.

• Example, Orange oil prices are likely to hit five year highs as hurricane is likely to hit the Atlantic Ocean putting pressure on orange crops in Florida

Quality Constraints

• Most E.Oils produced in developing countries that invest little in developing the over all production process leads to many supply chain risks and loss of crop yields.

• E.g. Clove leaf oil suppliers in Indonesia are suffering from erratic rains causing leaves not being dry, no fruits or pods on the produce, and low eugenol content. The sieved clove, would decline in volumes this year. Clove oil produced from these would be of low quality, which have caused buyers to look for alternate producers in Madagascar

Surging Production Costs

• Power outages in China, as high electricity demand has disrupted factory operations. High electricity costs could impact cost of production of essential oils from China, such as eucalyptus oil, lavender oil, ginger oil, and tea tree oil.

• Unavailability of labor in European regions could also impact production costs, especially for orange oil.

Lower Supply and Labor Cost

• Collection and processing of raw materials are labor intensive processes as majority of the harvesting regions are developing countries.

• Reduced supply of raw materials, especially spices like clove, cinnamon, etc. puts pressure on the E.Oil market.

End-use Industry Analysis : Orange Oil

• Essential oils are mostly used in the flavor and fragrances industry, and the industry is expected to grow at the rate of 8.8 percent against the demand growth of 6–7 percent. The presence of large volume buyers in this segment may push suppliers to increase their product portfolio.

• The global flavor and fragrance market is expected to grow at a CAGR of 5-6 percent from 2023 to 2027, and it is anticipated to create a similar demand trend in essential oil consumption

• Currently, less than 10 percent of the essential oil is used in the personal care segment. FBT and pharmaceutical industry drives the major share of the essential oil business

• Essential oils are now extensively studied as an alternative for antibiotics in poultry due to apprehensions around the overuse of antibiotics and added health benefits. Example is Cargill's ongoing research of using essential oils derived from thyme, cinnamon and oregano as non-medicated feed additives

Orange Oil: Cost Break up

• The production cost is dependent on the supply of raw materials from major regions, such as the US, the prices are likely to witness an uptrend, due to reduced production of oranges.

• Historically low yields of oranges, due to a disease huanglongbing (citrus greening) impacting oranges, coupled with supply chain issues, could eventually lead to significant price hikes for orange feedstock and orange oil.

• Orange oil production costs are largely dependent on raw material (orange peel) availability, which is dependent on the availability of oranges for processing

• Utilities cost is expensive in key orange oil production regions (US and Brazil), resulting in higher degree of impact from utility charges on orange oil production

• Orange plantation owners are observing an increase in the cost of cultivation. This increase is likely to reflect in the cost of production of orange oil. Drought in key producing regions in Brazil delayed orange harvesting. Also, Florida is witnessing a loss in orange yield, due to bacterial infections

• Amid extremely tight fruit supply in the US, rising demand for fresh orange consumption is likely to lower processing use. Tight orange and orange juice supplies are expected to lower orange oil output, thereby resulting in high prices in the short term