U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT U.S-PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT (AMD) ‘A situation analysis study for chillies oleoresin extraction, focusing on stakeholder’s identification, potential oleoresin investors, feasible zone for grant implementation and potential markets”
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U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
U.S-PAKISTAN PARTNERSHIP FOR
AGRICULTURAL MARKET DEVELOPMENT
(AMD)
‘A situation analysis study for chillies oleoresin extraction,
focusing on stakeholder’s identification, potential oleoresin
investors, feasible zone for grant implementation and
potential markets”
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Chili World Wide: The native land of Chili is considered to be Mexico with
secondary origin in Guatemala.
Chili imparts pungency and color to the dishes.
It is an important ingredient in day to day curries, pickles and chutneys.
It is also a rich source of Vitamin A, C, E and P assists in digestion.
It also prevents heart diseases by dilating blood vessels.
It is also called as hot pepper, red pepper, cayenne pepper, capsicum, etc.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
World Chili Production - Tones: Country 2013 2004-13
(Average)
% Share (Average)
India 1,376,000 1,238,084 40%
China 300,000 261,934 8%
Peru 164,000 156,877 5%
Thailand 156,000 154,485 5%
Pakistan 150,000 138,587 4%
Others 1,316,134 1,182,762 38%
Total 3,462,134 3,132,731 100%
Source: www.faostat3.fao.org
Data relates to Red and cayenne pepper, paprika, chilies (Capsicum frutescence;
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Rejections by EU – 2004 - 2015: 94 consignments of Pakistani
commodities (including
Chilies, rice etc.) were
rejected due to Aflatoxin
contamination during last
decade.
Source: NAPHIS, MNFSR, GOP.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Red Chili in Pakistan: o Locally renowned varieties are Dandi cut (Longi, Nagina etc) and
Hybrid (Skyline etc.). This year (2015-16) hybrid : Dandi cut had been sown with the ratio
of 1:3.
o Total Area = 62,742 Hectare (Sindh shares 83%)
o Total Yield per Hectare = 2.32 Tons
o Total Production (Dry) = 145,856 Tons (Sindh shares 88.8%)
o Estimated domestic consumption = 75% of total production.
o Export of Red chilies = 2,281 Tons (Rs. 569 millions)
o Import of Red chilies = 5,668 Tons (Rs. 559 millions)
Source: Fruit, Vegetables And Condiments Statistics Of Pakistan, MNFSR, GoP.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Issues with Pakistan Chili: o Unavailability of quality seeds (disease free).
o Substandard Nursery development.
o Inappropriate transplantation from Nursery to the field
o Traditional picking practices
o Poor Quality due to Aflatoxin produced as a result of;
Poor drying practices
Unhygienic practices
Mixing of old & new crops
Improper storage at farm level
Injudicious use of pesticides and fertilizer application
o Unawareness of local consumers and growers about chili quality
o Poor control over quality and pricing
o Less financial and technical support to chili growers
o Non availability of appropriate storage infrastructure
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
What is Oleoresin
Oleoresin capsicum:
Obtained from the longer, moderately pungent Capsicum used in the production of red chili. Commercial red chili oleoresins are mainly used as a spice supplied in pungency ratings between 80 000 and 500 000 Scoville units (approximately 0,6-3,9 % capsaicin w/w) and a wide range of color
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Paprika extract:
Obtained from varieties of C. annuum from which paprika powder is produced. It has a high colour value, but little or no pungency. Commercial paprika oleoresin is available in different colour strengths up to 150 000 colour units (equivalent to 10.8% total carotenoids).
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Chili Oleoresin: Oleoresins are extracted natural aromatic liquid containing
essential oils and resin.
Obtained by the solvent extraction of the chilies through supercritical CO2 or solvent-solvent extraction method.
Oleoresins are highly concentrated and hence provide a very economical method of flavoring.
Easier to control for quality, cleaner than the equivalent ground chilies.
An excellent solution to overcoming the issue of chili aflatoxins.
Give rise to opportunities for entering more lucrative international markets.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Chili Oleoresin World Market: • The global oleoresin market is expected to
reach USD 1.69 billion by 2022.
• India exported chili oleoresin worth USD 38.44 million with total quantity of 2.48 tons.
• China is the largest buyer of chili oleoresin accounting for exports worth USD 35.04 million followed by South Korea and United Kingdom USD 2.34 million and USD 0.29 million respectively.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Global Growing Popularity of spices: Various studies show that there is increasing trend in use of
spices like:
– 80% increase in interest in spicy foods in the USA
– around 60% in Europe Middle East & Africa,
– 45% in Asia Pacific and
– 40% in Latin America
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
China as potential market for Pakistan
• China market can be a big potential for Pakistani Oleoresin in future. As currently china is importing a huge amount of oleoresin from India and most of the trade is being done by air which no doubt is an expensive way of transport. China Pakistan economic corridor would be cheapest way to trade between Pakistan and China. And if can tap this potential we would have edge over all world as being the most economical for China i.e around 65% cheaper in transport than the world.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Future Global Market Trend
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Supply chain analysis of Pakistan
The agro-ecological suitability of the southern zone of the country to the production of chilies has resulted in the raising of 89.7 % of total production from Sind. Punjab produces 6.3 % and Balochistan 3.4 %. KPK contributes only 0.6 % of total production. In Punjab, the main chili producing areas are Kasur, Okara, Pakpattan, Sahiwal, Multan, Sheikhapura, Khanewal, Vehari and Bahawal Nagar. In Sindh, main chili producing areas are Mirpurkhas, Hyderabad, Badin, and Sanghar. In KPK, the main chili producing areas are Mohmand Agency, Bajour, Dir and Kohat. In Balochistan, the main chili producing areas are Killa Saifullah, Khuzdar, Loralai and Musa Khel.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Chilli Growing Area in Pakistan
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Land holding trends in Pakistan
0%
10%
20%
30%
40%
50%
60%
70%
< 10 10 to 20 20-40 40-80
Punjab
Sindh
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Pakistan market: Following companies imported around 60 Tons of Oleoresins in 2015 and 2016
1. National Foods
2. Shan Foods
3. Mitchell,s Fruits Farms
4. Mehran Foods
5. NAURAUS (PVT) LTD.
6. RAKAPOSHI
TRADERS
7. CORNISH FOOD INDUSTRIES
8. STANDARD CHEMICAL CO
9. AHMED FOODS PVT LTD
10. W.WOODWARD PAKISTAN (PVT.) LTD
11. ADIL & CO
12. SAFEER CORPORATION
13. UK TRADERS
14. AL KARIM CORPORATIO
N
15. YOUNGS (PVT) LTD
16. ALLIED AXIOM CHEMICAL (PVT) LTD
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
INTRODUCTION TO OTHER SPICES
1. BLACK PEPPER (PIPER NIGRUM)
Extraction
Essential oil by steam distillation from the dried & crushed peppercorn.
Description and History
A very important stimulant in the treatment of certain digestive disorders,
constipation, loss of appetite. It helps cold and can be used as a sexual tonic,
might help in diarrhea, flatulence, pains, and poor circulation. As a
Carminative it can be added to foods. Occasionally used in blends for
energetic enhancement. Used for toothache and externally for joint and
muscle aching.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
2. CARDAMOM (ELETTARIA CARDAMOMUM )
Extraction
The oils are distilled from the Plants.
Description and History
The Cardamom of commerce consists of the dried ripe fruit of Elettaria
Cardamomum. There are two varieties of this species.
1. Var. minuscule Burkhill, also called Alpha Minor.
2. 2. Var. Bita Major, also called Elettaria major, or Long Wild Cardamoms.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
3. CASSIA (CINNAMOMUM CASSIA)
Extraction
Essential oil by steam distillation from the Plant.
Description and History
Cassia are contains medicinal qualities similar to cinnamon but its smell
is sweeter and more pleasant. It is used to give colors to many perfume
blends. In certain areas the primitive distillation apparatus, still used,
contains copper piping which gives a red tone to the oil. Rare because it
comes from China and Vietnam .
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
4. CORIANDER (CORIANDRUM SATIVUM)
Extraction
The oil is distilled from the leaves.
Description and History
This fresh herb is also known as cilantro or Chinese parsley, and is a
favourite in Mexican food. The essential oil is produced from the seed, is
an antidote to hot food, very decongesting to the liver, and is a great
reducer of fire and heat in the body. It is thought to be an aphrodisiac
because of its phyto-estrogen content. It`s also a carminative,
stimulating digestion.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
5. GARLIC (ALLIUM SATIVUM) Extraction Essential oil by steam distillation of the roots. Description and History The bulbs or cloves of the common garlic have been used since antiquity, particularly in Mediterranean Countries, as a popular prophylactic and curative against all kinds of intestinal ailments chronic infections of the stomach and the intestines, dysentery, typhoid fever, cholera, etc and even against arteriosclerosis and hyperpnea. Phoenician sailors carried good stocks of garlic on their long sea voyages. Oil of garlic has lately come to be appreciated as a valuable flavoring agent, for use in all kinds of meat preparations, soups, canned goods, and table sauces.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
6. GINGER (ZINGIBER OFFICIANLIS) Extraction The oil is distilled from the roots, plants Description and History Ginger is one of the most commonly used herbs in Ayurveda and Chinese medicine. Because of its digestive properties, it is without peer in cases of illness due to poor absorption and assimilation. Its wonderful for regulating the blood, for motion sickness, weight loss; Its helpful in bringing any condition in to balance. For sea sickness, air sickness, or problems in balance use it on a small circular bandage behind the ear. Light often adds it to her bath on cold mornings and to daily skin massage lotion in the winter.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Product wise share of Oleorsin
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Processing Technology
• Methods and extraction
1. Solvent –Solvent Extraction
2. Super-critical CO2
3. Steam Distilation
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Supper Critical Extraction Method
Worldwide, Supercritical Fluid Extraction (SCFE) Technology has emerged as a superior alternative to the conventional techniques for extraction of natural products in food, pharmaceutical and chemical industries.
Pakistan with its rich botanical resources has very high potential for the use of SCFE to achieve value addition to its traditional export of natural materials in raw form.
Thus use of SCFE technology can help Pakistani industry to gain its share in rapidly growing international market for high quality, value added natural products.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Applications of CO2 extraction unit
• Spice extracts (oil & oleoresin)
• Flavours & fragrances
• Food colours
• Cholesterol free food products
• Food preservatives
• Herbal medicines
• Pesticides (neem)
• Deoiling of fast foods
• Decaffeination (coffee & tea)
• Hop extracts (bitter)
• Nicotine / tar free tobacco
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Challenges
Compared to traditional extraction technologies SCFE is comparatively more capital-intensive due to the requirements of high pressure operation (100-500 bar) and very accurate process control.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Process Diagram
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
CO2 Extraction Unit
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Solvent Extraction
• In this method Oleoresins are obtained from spices by extraction with a non-aqueous solvent followed by removal of the solvent by evaporation.
• Solvent to be used
a. Hexane
b. Acetone
c. ethylene dichloride, or alcohol
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Factors affecting recovery
• Solvent selection
• Particle size of the powder
• Grinding temperature
• Extraction time
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Typical Process Flow
Cleaning and
grinding of Spices
Extraction with
Solvent
Distillation of Extract
Recovery of Solvent
Blending and
Packaging
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Typical Solvent Extraction Plan
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Extraction recovery and analysis results • Recovery %
– Max 14 %
– Min 10%
• Color value
– Standard = 4000-20,000 units
– Local = 22326 units
– Hybrid = 17751 units
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Scoville heat units
– Standard = 240,000 units minimum
– Local = 489574.94 units
– Hybrid = 394675.40 units
Total capsaicin
– Standard = 1.5% min
– Local = 3.05%
– Hybrid = 2.46%
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Business Model • Plant capacity per annum: 300 Tons
• Expected Yield: 10%
• Working days per annum: 300
• Average Chili Buying price: PKR 130/Kg
• Oleoresin Selling Price: PKR 2,500/Kg
• Inflation: 10%
• Depreciation: 5% - 10%
• Asset Replacement: 6th year
• Asset Replacement cost: 50%
• Annual Efficiency: 75% - 85% - 95%
• Discount Rate 12%
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Initial Investment – All figures in PKR
• Oleoresin extraction plant 20,000,000
• Infrastructure 12,000,000
• Standby Generator 500,000
• Furniture & Fixtures 200,000
• IT & other Equipment 400,000
Total 33,100,000
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Financial Assumptions • All CAPEX has been booked in the base year in order to obtain improved
results in first operational year.
• % of depreciation on CAPEX has been accounted for while remaining will be covered through O&M cost and asset replacement cost.
• Conservative approach has been used while calculating revenues.
• Revenues are based on gradual annual increase.
• Revenues and cost has been projected over 10 years.
• To avoid biased results, a percentage of inflation has been accounted for.
• Sensitivity Analysis for 3 scenarios has been performed.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Financial Highlights • All proposed interventions are financially viable and cash positive at the
end of 1st year.
• AMD Grant will serve as the catalyst factor to mitigate the initial investment risk, encouraging long term private sector participation.
• The sector is highly sensitive to cost and sale pricing.
• Shifting toward advance and right technology is the game changer in the whole scenario.
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Projected Profit & Loss Years Operating
Revenue Operating Cost Gross Profit Net Profit
1 53,437,500 40,667,000 12,770,500 10,045,500
2 66,618,750 48,540,155 18,078,595 15,353,595
3 81,901,875 58,014,538 23,887,338 21,162,338
4 90,092,063 63,620,800 26,471,262 23,746,262
5 99,101,269 69,787,689 29,313,579 26,588,579
6 109,011,396 76,571,267 32,440,128 29,715,128
7 119,912,535 84,349,703 35,562,832 31,775,332
8 131,903,789 92,557,832 39,345,956 35,558,456
9 145,094,168 101,586,774 43,507,393 39,719,893
10 159,603,584 111,518,611 48,084,973 44,297,473
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Projected Financial Results • Free Cash Flows:
IRR 59%
Payback Period Year 3
CBR 1.50
• Discounted Cash Flows:
IRR 42%
Payback Period Year 4
CBR 1.28
U.S. PAKISTAN PARTNERSHIP FOR AGRICULTURAL MARKET DEVELOPMENT
Page 1 of 46
Prepared for review by the United States Agency for International Development under USAID
Contract No. AID-391-C-15-00003, U.S.-Pakistan Agricultural MarketDevelopment (AMD) Activity in
Pakistan implemented by CNFA
U.S-PAKISTAN PARTNERSHIP FOR
AGRICULTURAL MARKET DEVELOPMENT
(AMD)
‘A SITUATION ANALYSIS STUDY FOR CHILLIES
OLEORESIN EXTRACTION, FOCUSING ON STAKEHOLDER’S
IDENTIFICATION, POTENTIAL OLEORESIN INVESTORS,
FEASIBLE ZONE FOR GRANT IMPLEMENTATION AND
POTENTIAL MARKETS’
Page 2 of 46
U.S-Pakistan Partnership for Agricultural Market Development
Assignment Title:
‘A SITUATION ANALYSIS STUDY FOR CHILIES OLEORESIN EXTRACTION,
FOCUSING ON STAKEHOLDER’S IDENTIFICATION, POTENTIAL OLEORESIN
INVESTORS, FEASIBLE ZONE FOR GRANT IMPLEMENTATION AND POTENTIAL
MARKETS’2015-2019
Consultants:
1. Dr Fayyaz Ahmad
’ 2. Shahbaz ul Hassan Jafary
USAID Contract
AID-391-C-1500003
Implemented by CNFA
Page 3 of 46
Submitted on: 10th Jan 2017
Page 4 of 46
Table of Contents
EXECUTIVE SUMMARY 6
OVERVIEW OF AMD PROJECT 8
CHAPTER 1 9
1. INTRODUCTION TO CHILI 9
A. HISTORY 9
B. USES OF RED CHILI ...........................................................................................................................9 I. RED CHILI AS A SPICE .........................................................................................................................9 III. OLEORESIN OF RED CHILI ................................................................................................................ 10 C. FOOD QUALITY AND FOOD SAFETY ...................................................................................................... 10 D. VARIETIES .................................................................................................................................... 10
CHAPTER 2 12
2. CHILI CROPPING SYSTEM 12
A. INTRODUCTION TO CHILI CULTIVATION 12
B. MAJOR CHILI PRODUCING COUNTRIES 12
C. NOMENCLATURE IN DIFFERENT PART OF THE WORLD 14
D. LOCAL NAMES IN SUB-CONTINENT 14
E. SEASON OF SOWING IN CHILI CULTIVATION 15
F. PESTS AND DISEASES IN CHILI CULTIVATION 15
CHAPTER 3 17
B. LAND HOLDING TRENDS IN PAKISTAN 17
CHAPTER 4 20
B. PRE-REQUISITE PROGRAMS FOR FOOD SAFETY AND QUALITY 20
C. HACCP BASED FOOD SAFETY SYSTEM REQUIREMENTS 21
I. PRELIMINARY STEPS TO ENABLE HAZARD ANALYSIS 21
1. FOOD SAFETY TEAM 21
Page 5 of 46
CHAPTER 5 23
G. CHINA AS POTENTIAL MARKET ........................................................................................................... 28
CHAPTER 6 33
C. SOLVENT EXTRACTION UNIT ............................................................................................................. 35
II. DESIGN, PACKAGING AND STORAGE 37
CHAPTER 7 38
7. FINANCIAL SUITABILITY OF THE PROJECT.............................................................................. 38 A. SUPER CRITICAL METHOD ................................................................................................................. 38 I. VARIABLE COST STRUCTURE ................................................................................................................ 38
II. INVESTMENTS ............................................................................................................................... 38
CONCLUSION 42
REFERENCES: 43
Page 6 of 46
EXECUTIVE SUMMARY
Situation Analysis
The study was conducted to access the suitability of the Oleoresin extraction in Pakistan.
Global market for Oleoresin is increasing very rapidly due to its ease of handling, transportation,
meeting food safety requirements and diversified use in ready to eat products like food,
pharmaceuticals and other applications. Chili Oleoresins are most widely used for their color and
pungency characters in variety of products especially in food. Currently India is the largest
producer of Oleoresins and most of its production is exported all over the world.
Proposed Solution
Pakistan is equally suitable for taping this potential as similar agro-climate prevails here as in
India. Sindh and Punjab are the famous Chili producing areas of Pakistan. There is a big gap in
both domestic and international market for Pakistan. Major food processing companies having
their setups in Pakistan are currently importing Oleoresins from India and other countries and in
near future, China with the courtesy of CEPAK will be a big market for Pakistan as well. The initial
analysis and survey conducted showed that the varieties being grown in Pakistan both local and
hybrid are very much capable of meeting the international requirements in terms of Pungency
and color value. The Local variety Kunri gave very promising results where as the hybrid variety
“Skyline0-2” was also found equally good for the purpose. Two most widely used methods for
extraction of oleoresins are Supercritical and solvent extraction methods. The first one is more
efficient in terms of quality of the product and is more sophisticated in Operations but heavy
initial capital investment is required, where as the later one in comparatively cheaper as per
initial investment is concerned but the quality is not as comparable to the supercritical. Mostly
used method is solvent extraction due to its low initial capital investment.
Implementation
In Pakistan, Sindh has been the major producer of Chilies, followed by Punjab and
Baluchistan. According to the Pakistan Crop Reporting Services Statistics, in the year 2011-12
Pakistan produced 40,414 tons of red Chilies on around 24,776 hectares, out of which Sindh had
a production share of about 24,113 tons from an area of 13,853 thousand hectares, with an
average yield of 1.74 tons per hectare. In Sindh, a small town of Kunri, once called the “Chili
capital of Asia” alone produces 55% of the province’s entire produce. Other cultivation hubs are
Mirpur Khas, Sanghar, Badin, Tando Muhammad Khan, Khairpur, Shikarpur, and Ghotki. The
main varieties from Kunri are desi, mexi, and nageena while talhari, a winter variety, comes from
Badin.
Page 7 of 46
The dried Chili industry in Pakistan has previously been one of the major success stories for
smallholders in semi-arid areas under low-tech irrigation. Smallholders often lack the means to
improve their crops with modern methods, and dried Chilies have added to their annual income.
However, during the past 10 years, food safety regulations have come into play in international
markets with the result of limiting the participation of Pakistani dried Chilies.
Oleoresins are extracted natural aromatic liquid containing essential oils and resin. They are the
concentrated liquid form of the spice/herbs/plants and reproduce the character of the
respective spice and spice oil fully. They are obtained by the solvent extraction of the powdered
dried spices with the subsequent removal of solvent or through the supercritical CO2 extraction
method. Oleoresins are highly concentrated and hence provide a very economical method of
flavoring products. They are also easier to control for quality, cleaner than the equivalent ground
spices and are more stable when heated. The main products in a spice oleoresin plant are
oleoresins of Chili, pepper, ginger and turmeric. The co-products are the corresponding spice
oils, which are widely used in food and pharmaceutical industries.
An excellent solution to overcoming the issue of Chili aflatoxins prevalent in Pakistan is opting for
Chili oleoresin production, which not only appreciably reduces the chances of aflatoxin infection
but also standardizes the product, giving rise to opportunities for entering more lucrative
international markets. Oleoresins provide a more complete flavor profile than essential oils.
Further advantages are the concentration at source of the product and the minimizing of color
losses (capsanthin breakdown).
To provide an alternative market and confront the issue of aflatoxin in Chilies and other
horticulture products produced in Pakistan, AMD proposes to mobilize private sector investment
in the commercial extraction of oleoresins from fresh products with a critical focus on Chilies. In
order to equip the Pakistani Chili industry and provide an alternate viable business solution, AMD
is considering supporting the investors in establishing oleoresin extraction plant to streamline
the supply chain, optimize profit margins, increase participation of women entrepreneurs, and
ultimately make Pakistani HV/OSV sector more profitable and more competitive.
AMD will support the private sector to establishment of a modern processing plant in Sindh
for oleoresin extraction through a matching grant with the objective of spurring private sector
investment in this new value addition technology and further linking them with the local and
international high end markets for increased profit margins on sustainable grounds. It has the
potential to result in spin-off investments after success has been demonstrated. AMD will also
link the extraction plant with high-end processors, red Chili grower associations and their
members to ensure sustainable supply. It is important to note that since the same technology
can be employed for the extraction of essential oils from other plant products and spices, the
program considers this venture to be extremely profitable and self-sustainable.
Page 8 of 46
Projected Outcome
The objective of this assignment is to provide technical input and assistance to the AMD
team to conduct a situation analysis study on oleoresin extraction and to write a report outlining
a proposed business model with the financial feasibility of an oleoresin extraction facility in
Pakistan to be used by the AMD team for further designing and development of Chilies Oleoresin
matching grant.
OVERVIEW OF AMD PROJECT
The U.S.-Pakistan Partnership for Agricultural Market Development (AMD) activity in Pakistan is a
USAID funded activity implemented by CNFA with the goal of supporting the development of
Pakistan’s commercial agriculture, particularly through improving the ability of Pakistan’s
agriculture and livestock sectors to meet both international and domestic demand and
requirements in targeted product lines in citrus, mango, high value/off season vegetables and
livestock. AMD envisions transforming the four targeted product lines into efficient, private
sector-led value chains that deliver competitive products to domestic and export markets. AMD’s
targeted training, matching grants, and technical assistance will leverage private sector
investment and encourage innovation. Together, these approaches will support upgrading,
streamline supply chains, optimize profit margins, increase participation of women
entrepreneurs, and ultimately make Pakistani meat, HV/OSV, citrus and mango more profitable
and more competitive.
Page 9 of 46
CHAPTER 1
1. INTRODUCTION TO CHILI
a. History
Chili is originated from the Latin American tropical regions of the South (New Mexico and
Guatemala) approximately 7500BC. The Mexico is considered the native home of Chilies.
Portuguese’s prior to 1585 brought hot Chilies from Brazil to Indo-Pak subcontinent.
The origin of Red Chili is marked by an interesting history. It all started by two mistakes when
Christopher Columbus thought he had sailed to India, whereas in 1492 he had actually
discovered the America’s, the New World. For this reason he believed the bushes with the
pointed red berries to be Chili, or Piper Nigrum, from South East Asia. The existing name Chili
was now adopted for a plant never seen before in the Old World. The Chilies were however a
good substitute for the highly priced black Chili and were successfully introduced for production
in Europe, whereas for black pepper this had not been possible due to climatic conditions.
The Spanish and Hungarian products traditionally produce around 100-150 ASTA on a ‘whole
pod’ basis. The most important factors influencing ASTA levels are variety, soils and nutrient
level, water availability and climate factors such as total rainfall, rainfall distribution, light
intensity and temperature variation. It is however impossible to quantify these factors. The
higher the ASTA value the higher the value of the fruit. On the contrary, the higher the
concentration of capsaicin, the substance responsible for the level of pungency, the less desired
the product and the lower the value of the fruit. The aroma, especially as in fruits from
Hungarian varieties, may command a premium.
b. Uses of Red Chili
i. Red Chili as a spice
The word ‘Red Chili ’is Hungarian and the Hungarians ‘invented’ the use of the red, dried and
ground Chili as a food ingredient. The Red Chili used for spices has a thin wall which facilitates
drying, but this makes them less crunchy and therefore spice varieties are less attractive for
fresh consumption. Nowadays, the use of Red Chili powder has spread all over the world.
Production of ready-to-use Red Chili powder requires the highest possible care during
production. Red Chili powder producers cannot sell directly to supermarkets and retailers,
because it is sold within a (very) large assortment of herbs and spices which supermarket buyers
prefer to buy as a whole, usually in special shelves and racks. Hence powder producers have to
sell in bulk to specialized wholesalers, who repack, store and subsequently distribute to retailers.
ii. Red Chili as a colorant
As already mentioned, the value of the Red Chili is in the color of the product, more than its
taste. Red Chili s derive their color in the ripe state mainly from carotenoid pigments, which
range from bright red (capsanthine, capsorubin and more) to yellow (cucubitene); total
carotenoid content in dried Red Chili is 0.1 to 0.5%. A distinct red color makes Red Chili wanted
as a natural colorant in the food and pharmaceutical industry. Colorants usually sold to
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specialized wholesalers and occasionally directly to the food or pharmaceutical industry. The
market value depends on the color intensity measure in ASTA. The minimum acceptable level is
180 ASTA, the maximum 350. Red Chili for colorants can be sold as compressed whole pods
(with or without the stem) or as flakes (pods, usually broken, without seed list and seed)
iii. Oleoresin of Red Chili
Oleoresin of Red Chili (ORC) is extracted from Red Chili powder. ORP producers buy either
dried whole Red Chili, dried Red Chili flakes (without the seeds) or Red Chili powder. The active
coloring ingredient is only 5-10% of the weight of Red Chili powder and it is increasingly used as
a substitute for it. ORC is a liquid and therefore, it substantially reduces the need for (expensive)
manpower for accurate dosing and transportation of ingredients inside the food or
pharmaceutical factory. Also essential is the minimizing of color losses (capsanthin breakdown).
The color loss in Red Chili oleoresin is reduced to approximately 1-2% per year only as opposed
to 2-4% per month in compressed whole pods and up to 5% per month in Red Chili powder.
These color losses are caused by oxidation and are greatly influenced by exposure to oxygen,
light and heat. ORC saves cost and is clearly the future for Red Chili colorants. The very high
value of ORC makes it attractive for Pakistan, as its competitive disadvantage of being landlocked
and having high transportation cost, hardly affects the C&F cost price.
a. Oleoresin capsicum: obtained from the longer, moderately pungent Capsicum used in the
production of red Chili. Commercial red Chili oleoresins are mainly used as a spice supplied in
pungency ratings between 80 000 and 500 000 Scoville units (approximately 0,6-3,9 % capsaicin
w/w) and a wide range of colour.
b. Paprika extract: obtained from varieties of C. annuum from which paprika powder is produced. It
has a high colour value, but little or no pungency. Commercial paprika oleoresin is available in
different colour strengths up to 150 000 colour units (equivalent to 10.8% total carotenoids).
c. Food quality and food safety
Since 1990,s food industries have become very demanding regarding product quality and
safety. In paprika, aside from the regular requirements for clean spices, levels of aflatoxin,
microbiological and pesticide contamination are strictly monitored. Further the trade has
become increasingly competitive whereby processors can only afford to be in business by using
high quality and efficiently operated, processing equipment.
d. Varieties
Chili varieties grown in Sindh are Ghotki, Loungi, Talhar and Sanam. The Ghotki variety is
grown in Ghotki, Khairpur, Shikarpur and Kotri in February and March. The fruits of this variety
are thin long, straight, or curved with little quantity of seeds inside. It is an early variety and
farmers get good price for this variety. Loungi is grown in Mirpurkhas, Nawabshah, Sanghar and
Tharparkar districts. This variety is familiar with growers because they get more prices. Its yield
potential is 35-50 maunds per acre. Talhar is grown in Badin, Thalhar and Tando Muhammad
Khan and some areas of Hyderabad. This is a late variety. Nursery is raised in June, July and
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transplanting done in August. Its fruits are long, thick, just like finger and straight. Fruits are less
pungent if supplied in green stages. Its yield potential is 80-100 maunds per acre. Sanam is
mostly grown in Karachi division, but is successfully grown in Mirpurkhas and Hyderabad
districts, also. This is grown both in winter and summer. Its fruits are long and cylindrical. The
collection and selection of Chili germplasm for resistance to diseases, tolerance to low and high
temperatures, high yield with good fruit shape and color should be the main goal
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CHAPTER 2
2. CHILI CROPPING SYSTEM
a. Introduction to chili cultivation
The Chili is a fruit of plants belongs to the family of "Solanaceae" and genus of "Capsicum".
The Chili is also being termed as "Chili Chili" in many parts of world. Chili is one of the most
important and the largest produced spice crop in Asia. The fruit is actually called "Chili" and is
used as a spice in a variety of cuisines all over the world in different forms as green Chilies, dried
red Chilies as a whole or in the form of powder. Basically, Chilies contain capsaicin, which gives a
strong burning tangy sensation when eaten and the red colour is because of the presence of
pigment capsanthin. Generally, Chilies are valued based on their high pungency and colour.
Production of Chili is very high in Asian countries due to high consumption. Commercial
cultivation of Chili is very much successful and one can expect decent profits in Chili farming due
to its market value in local areas and international markets (export market). Most of the people
think that Chili is native to India but it is originated from 'South America" and these were brought
to Asia by Portuguese at the end of 15th century. India is the largest producer, consumer and
exporter of Chili. Chilies can be grown in open fields, greenhouses, polyhouses, under shade
nets, pots, containers, even in back yards. The quality and production would be high if they are
grown in controlled environment such as greenhouses. Chilies can also be grown successfully in
hydroponic system.
b. Major Chili Producing countries
Major Chili growing countries are India, China, Ethiopia, Myanmar, Mexico, Peru, Vietnam,
Pakistan, Ghana, and Bangladesh. India tops among all of these in exporting Chilies. Among
these India is the largest grower of spices with 1492,000 Tons in 2014 and Pakistan produced
145,856 Tons of Chilies and peppers in 2014.
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Figure 2.1: Showing area harvested for Chili in Top producing countries of the world
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Figure 2.2: Graph showing Chili production of top 10 countries in the World
c. Nomenclature in different part of the world
Chili (English), Chilischote (German), Poivre de Guine (French), Capsicum Annum L. (Latin),
protection measures etc. All these factors in turn stem from lack of funds and technical know-
how. Our recent study showed that for Chili growing is majorly located in Sindh and Punjab
where the land holding trend is quite different. 60 percent of the land holders in Sindh possess
between 40 to 80 acers or more than 80 acers, where as in contrast it is different in Punjab
where it is less than 10 percent. Small land holder i.e less than 10 acers in Punjab are more than
50% as compared to Sindh where it is below 10 percent.
Figure 3.2 Land holding trend in Punjab and Sindh
0%
10%
20%
30%
40%
50%
60%
70%
< 10 10 to 20 20-40 40-80
Punjab
Sindh
Page 19 of 46
Figure 3.3: Figure showing comparison between area harvested and yield since 2000
Page 20 of 46
CHAPTER 4
4. FOOD SAFETY AND QUALITY MANAGEMENT SYSTEM
a. Food safety and Quality situation in Pakistan
Globalization has added to the complexities of the food supply chain, making issues like food
safety, quality and logistics even more tortuous than before. What is needed is a comprehensive,
‘farm-to-fork’ approach to food safety. Food producers, processors and manufacturers are
turning to food safety management systems (FSMSs) as effective tools to manage this problem
all over the world.
With the rise in outsourcing, food and food products are being sourced from around the
world, making the supply chain very complex. The challenges of an already complex supply chain
increase when conflicting interests of various stakeholders across the value-chain come into
play. What is needed is a comprehensive ‘farm-to-fork’ approach to food safety.
Since no food manufacturer can guarantee food safety on its own and cannot take over the
food safety guarantees of its upstream suppliers, certification standards play a key role in
ensuring food safety. Independent third parties or certification organizations make the necessary
audits of the companies and suppliers involved during the entire value chain and issue a
certificate to confirm a successful audit.
In Pakistan only large scale industries and the industries exporting their products abroad are
interested in food safety systems due to customer requirements for export or corporate policies.
But what we require is to understand the importance of food safety systems in real sense i.e not
only to get the certificate but to implement the system at its best. A fully implemented food
safety system will ensure a safe and quality product from ‘farm-to-fork’. This will also reduce
product loss during processing and storage and also shelf life of the product will be more than
conventional practices.
On the other hand education and awareness is needed to be created among the consumer of
Pakistan so that they could ask for a safe and quality product from a certified source. This
practice can also encourage the industries to adopt the food safety systems.
Food safety systems which can be adopted from, ‘farm-to-fork’ are GLOBALGAP, SQF 1000,
ISO 22000:2005, HACCP, IFS, BRC.
b. Pre-Requisite Programs for Food Safety and Quality
The company has to establish, implemented and maintain PRP(s) to assist in controlling
(a) possibilities of introducing food safety hazards in the product through the work environment,
(b) biological, chemical and physical contamination of the product(s) including cross contamination
between products and
(c) Food safety hazard levels in the product and product processing environment.
The PRP(s) are
(a) Appropriate to the company needs with regards to food safety
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(b) Appropriate to the size and type of operation and the nature of the products being
manufactured or handled
(c) Approved by the food safety team
(d) All statutory and regulatory requirements related to above points are fulfilled
Company has considered the following in documented PRPs
a) Construction and layout of the buildings and associated utilities;
b) Lay out of the premises, including workspace and employee facility;
c) Supply of air, water, energy and other utilities;
d) Supporting services, including waste and sewage disposal
e) The suitability of equipment and its accessibility for the cleaning maintenance and preventive
maintenance.
f) Management of purchased materials (e.g raw materials, ingredients, chemicals and packaging),
supplies (e.g water, air, steam, and ice), disposals (e.g waste, and sewage) and handling of
products (e.g storage and transportation)
g) Prevention of cross contamination
h) Cleaning and sanitation
i) Pest control
j) Personal hygiene
k) All other aspects as appropriate
Company has to develop a verification plan and all the modification after verification are
recorded and maintained
c. HACCP based Food safety System requirements
i. Preliminary steps to enable hazard analysis
1. Food Safety team
The company has to appoint a food safety team which has a combination of multi disciplinary
knowledge and experience in developing and implementing the food safety management
system. This includes but not limited to the company’s products, processes, equipments and
food safety hazard within the scope of the food safety management system.
2. Product characteristics
The company needs to establish and maintain a documented description of raw materials,
ingredients and product-contact materials needed to conduct the hazard analysis, including the
following;
(a) Biological, chemical and physical characteristics;
(b) Composition of formulated ingredients, including additives and processing aids;
(c) Origin;
(d) Method of production;
(e) Packaging and delivery methods;
(f) Storage conditions and shelf life;
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(g) Preparation and/or handling before use or processing
(h) Food safety-related acceptance criteria or specifications of purchased material and ingredients
appropriate to their intended uses.
(i) All the regulatory and statutory food safety requirements related to above mentioned points are
identified and fulfilled.
3. Intended Use
Company has to establish, maintain and update a document which has the intended use,
expected handling of the end product and all other unintended but reasonably, expected
mishandling and misuse of the end product.
4. Flow Diagrams
Company has to establish, maintain and update flow diagrams for its products. Flow
diagrams provide a basis for the possible occurrence, increase or introduction of food safety
hazard.
Flow diagrams are clear, accurate and sufficiently detailed. Flow diagrams are as appropriate,
including the following the sequence and interaction of all steps in the operations;
- all outsourced processes and subcontracted work;
- where raw materials, ingredients and intermediate products enter floe ;
- where reworking and recycling takes place;
- where the products, intermediate products, by-products and waste are releases
or removed. 5. Identification and Traceability
The company needs to make provision for identifying status of products, where applicable,
by suitable means throughout product realization. Goods are stored in marked areas identifying
the type of goods. Different areas are designated to store conforming and nonconforming goods.
Goods ready for delivery are stored in Dispatch section.
The company’s products are uniquely identified in the form of finished products as follows:
Monogram/name.
Product name, Weight, Ingredients etc.
Barcode and Batch Code
Manufacturing date, Expiry date
The traceability of products is done according to demand sheet or gat pass in the form
customer complaint handling at the stage of finished products by Manager Food Safety
Assurance.
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CHAPTER 5
5. OLEORESINS OF RED CHILI
a. Global Market
The global oleoresin market is expected to reach USD 1.69 billion by 2022, according to a
new report by Grand View Research, Inc. Increasing flavors demand is expected to remain a key
driving factor for global oleoresin market over the forecast period. Shifting consumer
preferences towards natural ingredients over synthetic flavors is also expected to have a positive
impact on the market growth. Oleoresins are widely used in treating cancer, stress and back pain
owing to its antioxidant and anti-inflammatory properties which is expected to help in its market
development further. The global oleoresin market size was USD 449.4 million in 2015. Owing to its high temperature applications along
with favorable solubility characteristics, oleoresin is widely used as a flavoring agent in the food industry. Growing
market demand for packaged spices and spice mixes in food applications has assisted the overall market growth.
They mostly have their applications in salad dressings and coloring pickle products. They are mainly suited for high
temperature applications which consist of baking and frying. Besides, they are used widely as an additive in food
industry due to its solubility characteristics. Oleoresins are mostly preferred because of their microbiological
advantages, uniformity in flavor and aroma, ease of storage and transport.
Factors such as growing population, dynamic lifestyle, and increase in a number of fatal diseases across the globe
are anticipated to positively impact the market. These extracts are also used in pharmaceutical industry for
treatments related to back pain, distress and cancer. Oleoresin commonly derived from certain spices such as
turmeric and paprika are not only intended for their flavor but also for their intense coloring properties they offer.
Growing confectionery & baked food products demand in developed regions is presumed to aid the overall market
shortly. Changing dietary trends and food consumption patterns are expected to aid the confectionery & baked food
along with beverages demand.
Oleoresin extraction process involves huge investments in the preliminary stages, making the entry barriers high for
new entrants in the industry. India held over 50% of the overall production in 2015. Growing preference for natural
ingredients over synthetic colors and flavors among consumers are also expected to benefit the demand. Rising raw
material prices due to pesticide usage and reduction in cultivable land in recent past may have negative impact on
the market.
Current and Likely consumers of Oleoresins
Current users of imported paprika products are principally confined to the manufactured food sector, beverage and
food service sector. This sector continues to have growth of prepared foods, including, processed meats and
sausage, pizza and salsas foodstuffs. This sector is also dominated by major multinational corporations.
Consumption of foods using such additives for flavor and colorings is likely to increase reflecting such changes to
eating preferences and internationalization of cuisines and increasing use of prepared foods and increased use of
natural rather than artificial additives. With increasing concerns about artificial ingredients used in cosmetics and
demand for natural products, pigments and oleoresins from sources such as paprika. The nature of the
manufacturing companies involved in this sector is very wide-ranging, from niche product developers to global
cosmetic brand companies. The main implications are that such demand may be satisfied through targeted
marketing and matching of targeted specification, thus creating a differentiated market opportunity for producers.
At the core of this identification of new customers will be relationships which satisfy demands such as quality,
security and reliability criteria. From a regional perspective Japanese cosmetic industry may well be a prime target (J
Lancaster, 2009).
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The European Food Safety Authority has declared the usage of capsicum oleoresin as a potential feed additive for
chicken for helping them increase their fattening ratio. Such regulations are expected to assist the growth for
oleoresin market over the forecast period.
Several R&D initiatives has been taken to introduce oleoresins for aromatherapy applications. Recent advances are
being made to produce raw material components which are cheaper and are not affected by microbial
contamination.
U.S. oleoresin market volume by product, 2014-2024 (Tons)
High prices of oleoresins are expected to remain a key hindrance for their market
penetration. High initial investment cost may prevent new entrants from entering the market.
Several R&D initiatives have been undertaken by government to unlock potential applications
related to healthcare and to introduce less expensive oleoresins components which are not
affected by microbial contamination. Such trends are projected to create new avenues for
market participants.
The growing sense of scarcity is perhaps the single most important issue in the spice
sector at the moment. In the past decade, prices levels have increased significantly and the
sourcing challenge of buyers has increased. Together with many other changes in the supply
chain the future looks more uncertain than it has done in the past. Therefore, to what extent
scarcity is expected to be an issue for Chilies will be explored in this study. Different scenarios
will provide insights into what the future might hold and which are the related opportunities and
threats for exporters from developing countries.
Scarcity is on the agenda of the entire food sector and stakeholders are taking actions to
ensure future supply. It is clear that all agricultural markets will be directly or indirectly affected
by the effects of an increasingly tight balance between supply and demand. All product markets
however have a different dynamic and some will be more affected than others. In this document
the main question is to what extent scarcity will affect the Chili market in the coming decade (i.e.
2014- 2024). Related to this, the influence of the future balance between supply and demand on
Page 25 of 46
exporters in developing countries will be discerned.
b. Exporters of Oleoresins
Major exporters of Oleoresins are India, Brazil, Indonesia, Sri Lanka, USA, UK, France,
China, Bangladesh
Figure 5.1: Country wise export value of Oleoresin in Year 2015
c. Importers of Oleoresins
Major importers of Oleoresins are USA, UK, Saudi Arabia, China, India, Germany, Japan,
South Koria, Switzerland and others details of import in 2015 is given in below data
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Figure 5.2: Country wise Import of Oleoresin in Year 2015
d. Growing popularity of spicy food
Chilies are increasingly used to add taste, pungency and colour to food. Part of this is fuelled
by increased popularity of cuisines in which spices are widely used (e.g. Indian, Thai and Mexican
cuisine). 80% of the analysts polled by Euromonitor had observed an increase in interest in spicy
foods in the USA, around 60% in Europe Middle East & Africa, 45% in Asia Pacific and 40% in
Latin America (Euromonitor, 2014). The increased popularity of spicy foods will have a significant
influence on the demand for Chilies in regions where it is still relatively low (e.g. Northern
America, Europe, Oceania) as well as in those where it is already high (Asia and Africa). "Paprika oleoresin held over one third of the revenue share in 2015"
Major products include paprika, black pepper, capsicum, turmeric, garlic, ginger, onion, and others. Some other
products include cinnamon, fenugreek, rosemary, savory, vanilla, tamarind, cocoa, mustard, white pepper,
coriander and west Indian bay leaves. Paprika emerged as the leading product segment and accounted for over 25%
of total market revenue in 2015.
Paprika product type produced by extraction of lipids and pigments from sweet red pepper pods find applications in
processed food including snack food seasonings, food coatings, sausage, dressings and dry soluble seasonings. This
is anticipated to spur the demand for paprika oleoresin over the forecast period.
Black pepper helps in stimulating the appetite and also helps people suffering from nausea, dysentery, and
dyspepsia due to its anti-inflammatory and insecticidal properties. Capsicum oleoresin are gaining wide popularity
among law enforcement officers and police agencies due to its usage as pepper spray, which serves as an effective
mechanism to deter any danger faced by individuals.
"Flavor was the largest application segment in 2015"
The major application includes food & beverage, flavors, pharmaceuticals and others. Some other applications
include meat canning, sauces, confectionary, perfumery & soap and as a base in various seasoning applications.
Page 27 of 46
Flavors accounted for over 35% of the overall market and emerged as the leading segment followed by food &
beverages. Growing demand for flavors can be attributed to shifting consumer preferences to participate in diet and
lifestyle management. Spice oleoresins are especially used as a seasoning agent in fast foods.
Oleoresins Chili contain capsaicinoids which are widely used to cure cardiovascular and gastrointestinal diseases.
They contain inherent properties such as analgesic and anti-obesity which is found useful for cancer treatment.
"Europe held over one-third of revenue share in 2015"
European oleoresin market led the global industry with demand share exceeding 30% in 2015. Countries such as
Germany, UK, Romania and Hungary accounted a large share in the regional spice market. Growing consumption of
ethnic foods has resulted in increased consumption in the regional market.
In addition, changing lifestyle coupled with growing consumption of healthy natural food has resulted in a positive
demand in the recent past. These resins used in food and beverages industry are used by a wide range of consumer
groups.
"Few companies hold a large market share of the overall output"
The global oleoresin market is concentrated in nature with fewer companies holding a major share in the industry.
The global industry is expected to witness an increase in mergers, acquisitions and strategic alliances over the next
seven years.
Major companies include Universal Oleoresins,
1. Ungerer & Company,
2. Plant Lipids,
3. Akay, Synthite,
4. AVT Natural Products Ltd,
5. Indo World, Paprika Oleo’s,
6. Paras Perfumers,
7. Ambe Group,
8. Asian Oleoresin company,
9. Cymbio Pharma Pvt Ltd
10. Bioprex Labs.
e. Developing countries catching up to strict buyer requirements:
There is a positive correlation between a country’s income and the restrictiveness of its
import standards on agriculture goods (World Bank, 2013). Therefore, developed countries such
as the EU and the US have strict buyer requirements regarding food safety, quality and
traceability. As an effect of these stringent requirements, industry sources state that trading
prices of Chilies bought by the EU and US can be up to 20% higher. This has two reasons: 1) the
premium paid to farmers and suppliers for maintaining the land, applying Good Agricultural
Practices and Good Manufacturing Practices, better storage; and 2) Stocks are lower, so buyers
have fewer opportunities to source and wait for prices to drop.
Buyer requirements in developed countries will not ease up. To the contrary, it is likely that
requirements will continue to become stricter as a result of increased detection possibilities and
scientific insights. A recent example is the stricter limit for Aflatoxin A for capsicums (effective
from 1 January 2015) set by the EU.
With the strong economic development and growing awareness of food safety, standards
will also become stricter in countries such as India and China (World Bank, 2013), which are
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important consumers of Chilies. The Indian Spice Board has already pushed towards further
harmonisation of international food safety standards for spices. This means that producing
countries such as India will work more towards complying with stricter limits set by the US and
the EU. The difference between buyer requirements in developed and developing countries is
expected to become smaller but will remain significant. The share of Chilies that comply with
stricter buyer requirements will therefore have to increase.
f. Competitive analysis
Competitive advantage for low cost countries By 2030, real Chinese wages would have
increased by 300% to an average of $ 2,052 per month. Indian wages would increase even faster
(+370%) but will remain relatively low ($ 616 per month). Due to a strong increase of wages
China will become less important as a low cost production location to favour for countries like
India and Pakistan (PricewaterhouseCoopers, 2013). This will benefit countries where wages are
lower and/or are expected to increase less or even decrease: Peru (-1%), Thailand (1%) and
Bangladesh (+67%) by 2030 (Trading Economics, 2015).
The limited availability of land in China and India is increasing prices of arable land. Additional
arable land is more readily available in Latin America, the Caribbean and Sub–Saharan Africa
(OECD, 2014). Sub-Saharan African has vast amounts of uncultivated land – close to half of global
availability, untapped water resources and large scope for improvements in inputs to increase
yields (Deutsche Bank, 2013). As a result it will become more attractive to produce in those
regions in the coming decade.
India exported Chili oleoresin worth USD 38,439,377 with total quantity of 2,472,647. China
is the largest buyer of Chili oleoresin accounting for exports worth USD 35,043,471 followed by
South Korea and United Kingdom which imported Chili oleoresin worth USD 2,335,623 and USD
294,159 respectively.
g. China as potential market
China market can be a big potential for Pakistani Oleoresin in future. As currently china is
importing a huge amount of oleoresin from India and most of the trade is being done by air
which no doubt is an expensive way of transport. China Pakistan economic corridor would be
cheapest way to trade between Pakistan and China. And if can tap this potential we would have
edge over all world as being the most economical for China i.e around 65% cheaper in transport
than the world.
h. Introduction to other spices
1. BLACK PEPPER (PIPER NIGRUM)
Extraction
Essential oil by steam distillation from the dried & crushed peppercorn.
Description and History
A very important stimulant in the treatment of certain digestive disorders, constipation, loss
of appetite. It helps cold and can be used as a sexual tonic, might help in diarrhea, flatulence,
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pains, and poor circulation. As a Carminative it can be added to foods. Occasionally used in
blends for energetic enhancement. Used for toothache and externally for joint and muscle
aching.
Caution
It is Non-toxic, non-sensitizing, Irritant in high concentration due to its rubefacient
properties. Use in moderation only.
2. CARDAMOM (ELETTARIA CARDAMOMUM )
Extraction
The oils are distilled from the Plants.
Description and History
The Cardamom of commerce consists of the dried ripe fruit of Elettaria Cardamomum. There
are two varieties of this species.
1. Var. minuscule Burkhill, also called Alpha Minor.
2. Var. Bita Major, also called Elettaria major, or Long Wild Cardamoms.
Cardamom fruit is official in most pharmacopoeias. However, the United States and the
British Pharmacopoeias confine the definition of cardamom to the decorticated seed only;
moreover, the British Pharmacopoeia requires that the seed must have been recently
removed from the capsules.
Like the spice itself, the essential oil is employed widely for the flavoring of various food
products, such as cakes, confectionery, ginger-bread, sausages, and pickles. It finds use also
in spicy table sauces, curry preparations, and in certain bitters and liqueurs.
Medicinally, the oil is frequently employed as an adjuvant or corrective of tonic, carminative,
and purgative preparations.
3. CASSIA (CINNAMOMUM CASSIA)
Extraction
Essential oil by steam distillation from the Plant.
Description and History
Cassia are contains medicinal qualities similar to cinnamon but its smell is sweeter and more
pleasant. It is used to give colors to many perfume blends. In certain areas the primitive
distillation apparatus, still used, contains copper piping which gives a red tone to the
oil. Rare because it comes from China and Vietnam .
Caution
Its too much used can be irritating to the
skin.
4. CELERY (APIUM GRAVEOLENS L.)
Extraction
Essential oil by steam distillation from the seeds .
Description and History
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Celery is today widely cultivated in the temperate zones as an important garden crop, the
bleached leaf stalks being relished as a popular vegetable. The volatile or essential oil
distilled from Celery seed is used extensively for flavoring purposes. Celery seed located in
Southern France , India , and lately also in California . Use of this oil – Canned soups and
meats, sausages, and particularly in the flavoring of the popular celery salts, celery tonics,
and culinary sauces. Celery seed oil is one of the most valuable flavoring agents, imparting
warm, aromatic, and pleasing notes to food products.
OLEORESIN CELERY :- The so – called Oleoresins of celery have in late years attained ever –
increasing popularity among food producers. These oleoresins are prepared by extracting
celery seed with volatile solvents, filtering and freezing the solutions, and driving off the
alcohol in vacuo. Depending upon the solvent used, the consistency, appearance and flavor
of the resulting oleoresins will vary.
5. CINNAMON (CINNAMOMUM ZEYLANICUM)
Extraction
Essential oil by steam distillation from the Plant.
Description and History
Cinnamon is one of the best oils for circulation, especially during menopause. It improves
sexual function, increases sexual desire, and improves digestion and appetite. Because it
enhances circulation, it is very supportive of the heart. It is empowering to the
will. Cinnamon bark oil has a high percentage of aldehyde and is not recommended for use
on the skin as it can be irritating. Cinnamon leaf oil has a very low percentage of aldehyde
and is more suitable for use in liniments or message oils.
Caution
Do not use in condition of high pitta ; will aggravate bleeding disorders; skin irritant in high
dose; convulsive in high
doses.
6. CLOVE (CAROPHYLLUS AROMATICUS)
Extraction
Clove are actually the unexpanded flower buds of the clove tree.
Description and History
Centuries before Christ, envoys to the Han court of China held clove oil in their mouths to
freshen their breath during audiences with the emperor. Later, the oil was to serve as
a Protective agent against the bubonic plague. Clove oil is one of the most effective
antiseptics known, good for treating infections, especially colds and flu. It is often an
ingredient in commercially available mouthwashes and digestive tonics and will bring a
welcome numbness if applied topically for toothache or sore gums.
Caution
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All clove oils can cause skin & mucus membrane irritations, because of the eugenol content.
Use in moderation, in very less dilution.
7. CORIANDER (CORIANDRUM SATIVUM)
Extraction
The oil is distilled from the leaves.
Description and History
This fresh herb is also known as cilantro or Chinese parsley, and is a favourite in Mexican
food. The essential oil is produced from the seed, is an antidote to hot food, very
decongesting to the liver, and is a great reducer of fire and heat in the body. It is thought to
be an aphrodisiac because of its phyto-estrogen content. It`s also a carminative, stimulating
digestion.
Caution
Except high Vata with nerve tissue deficiency; may cause kidney irritation in high dose, do
not take during pregnancy.
8. FENNEL (FOENICULUM VULGARE)
Extraction
The oil is distilled from the roots.
Description and History
Fennel is another essential oil from the carrot family. It is useful during pregnancy to prevent
morning sickness, and is excellent for the traveler, helping to reduce or prevent sea
sickness. One of the most important carminative oils, it is useful for upset stomachs, gas,
flatulence, indigestion and is traditionally used in Indian restaurants in herb form as an after
dinner promoter of digestion. It has been recommended for reducing stomach acidity and
prevention of ulcers.
9. GARLIC (ALLIUM SATIVUM)
Extraction
Essential oil by steam distillation of the roots.
Description and History
The bulbs or cloves of the common garlic have been used since antiquity, particularly in
Mediterranean Countries, as a popular prophylactic and curative against all kinds of intestinal
ailments chronic infections of the stomach and the intestines, dysentery, typhoid fever,
cholera, etc and even against arteriosclerosis and hyperpnea. Phoenician sailors carried
good stocks of garlic on their long sea voyages. Oil of garlic has lately come to be appreciated
as a valuable flavoring agent, for use in all kinds of meat preparations, soups, canned goods,
and table sauces.
10. GINGER (ZINGIBER OFFICIANLIS)
Extraction
The oil is distilled from the roots, plants
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Description and History
Ginger is one of the most commonly used herbs in Ayurveda and Chinese medicine. Because
of its digestive properties, it is without peer in cases of illness due to poor absorption and
assimilation. Its wonderful for regulating the blood, for motion sickness, weight loss; Its
helpful in bringing any condition in to balance. For sea sickness, air sickness, or problems in
balance use it on a small circular bandage behind the ear. Light often adds it to her bath on
cold mornings and to daily skin massage lotion in the winter.
Caution
Don’t use if inflammatory skin diseases, high fever, bleeding, or ulcers are present.
11. NUTMEG OIL (MYRISTICA FRAGRANS)
Extraction
Essential oil by steam distillation or water distillation from the dried nutmeg seeds.
Description and History
May be useful in pains, aches, poor circulations, rheumatism, sluggish digestion, impotence,
nervous fatigue, bacterial infection etc. It is said to be very calming. When diffused before
bedtime, nutmeg is said to promote dreamtime. Both oils and oleoresin are used in most
major food categories, including alcoholic and soft drinks.
Caution
Generally non-toxic, non-sensitizing & non-irritant. But use only in moderation only.
However, used in large doses it shows signs of toxicity such as nausea, stupor, and
tachycardia, believed to be due to the myristcin content.
12. TURMERIC (CURCUMA LONGA)
Extraction
The oil is distilled from the Roots.
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CHAPTER 6
6. PRODUCTION TECHNOLOGY OF OLEORESIN
RCO is extracted from Spice Grade Red Chili Powder which is treated with solvents, usually
Hexane. The crude extract is further treated with a polar solvent, usually methanol, to separate
the color (Oleoresin of Red Chili) from the pungent fraction (oleoresin of capsicum). Next, the
solvents are recovered under distillation. The solvent removal is a sensitive operation, which
results in two types of product i.e. solvent at or above 25 ppm and solvent below 25 ppm. For
the factories the first products is the prime product and the second the second grade. Both are
used exclusively by the food and pharmaceutical industries as a substitute of ground spices and
spice tinctures.
a. Methods and extraction
Previous studies associated with the research conducted by the University of Sydney and by
Invetech (report: Commercialisation Potential of Paprika Technology 2004) identified several
extractive systems. These include:
1. Hydrocarbon based solvent
2. Flourocarbon based solvent
3. Super-critical CO2
4. and others
It is premature to speculate on what process is likely to be the most relevant system for any
potential paprika products as this entirely depends upon such factors as:
the regulatory position at the time and the desire to phase out some usages of systems being
seen as damaging to the environment and potential risks in the food chain products,
the particular targeted markets for the products
the specific nature of the paprika grown and pre-processed
the degree and preparedness to further innovate to find new solutions and technologies to
exploit the opportunity.
Also a significant difference will be whether a potential extractive process will be
incorporated into the total venture to make a vertically integrated business unit rather than a
series of separate businesses. Should a vertically integrated business be created it is suspected
there would be a better chance of capturing a greater degree of total benefits available rather
than each phase of business being separate “toll-based” deliveries
b. Supercritical Fluid Extraction (SCFE) Technology
i. Potential of SCFE:
Worldwide, Supercritical Fluid Extraction (SCFE) Technology has emerged as a superior
alternative to the conventional techniques for extraction of natural products in food,
pharmaceutical and chemical industries. India with its rich botanical resources has very high
potential for the use of SCFE to achieve value addition to its traditional export of natural
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materials in raw form. Thus use of SCFE technology can help Indian industry to gain its share in
rapidly growing international market for high quality, value added natural products.
ii. Applications
• Spice extracts (oil & oleoresin)
• Flavours& fragrances
• Food colours
• Food preservatives
• Herbal medicines
• Pesticides (neem)
• Decaffeination (coffee & tea)
• Hop extracts (bitter)
• Deoiling of fast foods
• Cholesterol free food products
• Nicotine / tar free tobacco
iii. Challenges:
Compared to traditional extraction technologies, SCFE is comparatively more capital-
intensive due to the requirements of high pressure operation (100-500 bar) and very accurate
process control. But more importantly, the high premium charged by foreign equipment /
service providers based on novelty of this technology substantially increases costs of SCFE plants,
making the imported SCFE technology economically not attracted
iv. What is SCFE?
SCFE is a two-step process which uses a dense gas as a solvent e.g., carbon dioxide (CO2) for
extraction, above its critical temperature (31oC) and critical pressure (74 bar). The feed, generally
ground solid, is charged into the extractor.
Supercritical CO2 is fed to the extractor
through a high pressure pump (100-500 bar).
The extract laden CO2 is sent to a separator
(60-120 bar) via a pressure reduction valve. At
reduced temperature and pressure conditions,
the extract precipitates out in the separator.
The extract free CO2 stream, leaving the
separator is then recycled to the extractor. In
the case of liquid feed, the extractor is
modified into a column through which feed
and the supercritical CO2 is fed either co-
currently or concurrently
Figure 6.2: SCFE Plant
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Pakistan with its rich botanical resources has very high potential for the use of SCFE to:
• Achieve value addition to its traditional export of natural materials in raw form.
• Gain share in rapidly growing international market for high quality natural products.
However, SCFE is comparatively more capital-intensive, due to the requirements of high
pressure operation (100-500 bar) and very accurate process control. In addition, the high
premium charged by foreign equipment / service providers based on novelty of this technology
adds substantially to the cost of SCFE plants, making the imported SCFE technology economically
non-viable in developing countries like Pakistan. Thus indigenous innovative design,
development and manufacture of SCFE plant & equipment to optimize the capital investment
and availability of technical support services locally, represent the key requirements for in
adopting SCFE in Pakistan.
c. Solvent Extraction Unit
Oleoresins are obtained from spices by extraction with a non-aqueous solvent followed by
removal of the solvent by evaporation. To start with various raw spices are cleaned and then
ground to the required mesh size. Then extraction is undertaken with the help of proper solvent.
Solvents that can be used are hexane, acetone, ethylene dichloride, or alcohol. Extraction is done
by percolation of the solvents at room temperature through a bed of ground spice packed in a SS
percolator. Then the dark viscous extract containing not less than 10% of total soluble solids are
drawn off and distilled under reduced pressure to remove the excess of solvent. The essential oil
is obtained by steam distillation.
A typical flow chart is shown below
Cleaning and Grinding
of spices
Extraction with the help of solvent
Distillation of the extract
Recovery of the Solvent
Blending and packaging
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Therefore the capsicum or chilly oleoresin is a viscous liquid derived by polar solvent
extraction from ground powder of any Capsicum species; there are three types of oleoresin:
paprika (used for colour), red pepper (used for colour and pungency), and Capsicum (used for
pungency).
The main attributes of solvent extraction unit include:
Low flow resistance
Very durable
Require low maintenance
Established and time tested engineering
No marginal deviations in gravities
Ensured complete recovery of product
Fig 6.3 Typical Solvent Extraction Unit
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i. Supplier of Solvent Extraction Unit
1. USA
a. Precision Extraction Solutions Corporate Headquarters 4820