Sandalwood Oil Market Analysis

Sandalwood Oil (Global, 2024)

Introduction

The Sandalwood market is expected to grow in the coming years. The reason for this is the rising popularity of aromatherapy, the growing use of sandalwood oil in various industries, such as cosmetics, pharmaceuticals and food and beverages. It is an essential oil, highly valued for its fragrance and its healing properties. It is a popular ingredient in high-end perfumes and other health and beauty products. The growing trend towards sustainable sourcing and ethical production is also expected to have an impact on the market. The consumers of today prefer to use products that are environment-friendly and socially responsible. The ongoing research on the health benefits of sandalwood oil will also add to its popularity and help it gain a wider acceptance. This report provides an in-depth analysis of the Sandalwood market, with an in-depth study of the market trends, the competitive landscape and the impact of changing consumer preferences.

PESTLE Analysis

Political

In 2024, the sandalwood market was influenced by political factors in the countries producing the essential oil, especially India and Australia. The Indian government imposed a minimum price of one thousand five hundred rupees per kilogram of sandalwood, with the aim of protecting the farmers and encouraging sustainable harvesting. The Australian government tightened export restrictions on sandalwood essential oil. It was now compulsory for all exporters to have a license and to observe the highest standards of environmental and social responsibility. The costs of compliance increased by about twenty per cent.

Economic

In 2024, the price of sandalwood oil will be determined by the market price of the raw material and the demand of the consumers. The average price of sandalwood oil in 2024 is expected to reach 1,200 yen per liter, up 15% from the previous year. It is expected that the demand for fragrances and cosmetics will rise. In addition, after the pandemic, the world economy recovered and the number of people with disposable incomes increased, and it was reported that there was a 10% increase in spending on luxury goods such as sandalwood oil, which directly benefited the sandalwood oil market.

Social

Social trends in 2024 showed a growing preference for natural and organic products. A recent survey indicated that some 65% of consumers prefer products with natural ingredients to those with synthetic. Sandalwood oil was in great demand for use in personal care and beauty products, and in the cosmetics industry. The growing popularity of aromatherapy and alternative medicine had resulted in a 30% increase in the use of sandalwood in health products.

Technological

In 2024, the evaporation of the sandawood has had a great effect on the market. Production has been greatly increased by the use of supercritical extraction, which has increased the yield of oil by about twenty-five per cent. This has enabled the producers to increase their production and minimize waste. In addition, the use of the blockchain to provide greater transparency in the supply chain has taken off. Forty per cent of sandawood producers have adopted this technology to provide the authenticity and traceability that are increasingly demanded by consumers and retailers.

Legal

In 2024, the market for sandalwood oil will be influenced by regulations that ensure the sustainable exploitation of the resources. Some species of sandalwood are already listed as endangered by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). CITES reduces the quota of these species by 50 percent. The producers have had to invest in sustainable exploitation. It is estimated that 15 percent of the production costs are now spent on legal compliance and on the implementation of sustainable exploitation.

Environmental

The main issue in the market for sandalwood oil in 2024 is the environment, particularly the deforestation of the forests and the loss of species. Santalum album in particular is threatened by over-exploitation, which has led to conservation efforts. The demand for sandalwood oil is increasing, and over the past year, one million new trees have been planted to ensure future supplies. But the effects of climate change are being studied, and it is expected that growth rates in certain areas will decline by as much as 20 per cent due to the effects of climate change.

Porter's Five Forces

Threat of New Entrants

The market for sandalwood oil has a medium barrier to entry because of the specialized knowledge required for its cultivation and extraction. The cost of setting up a sustainable supply chain and the regulations for harvesting sandalwood are also deterrents. But the growing demand for natural and organic products could attract new players hoping to take advantage of this trend.

Bargaining Power of Suppliers

The supply of sandalwood is limited, for the trees take a long time to mature and are often subject to strict regulations as to when they can be felled. The price of the wood is therefore high. The suppliers, therefore, have considerable power in the bargaining, and can dictate prices and terms. The increasing world-wide demand for sandalwood oil adds to the power of the suppliers.

Bargaining Power of Buyers

The buyers of sandalwood oil in the market have a moderate power of bargaining. There are many suppliers. The unique properties of sandalwood oil make it desirable for the buyers to have a particular brand or a particular source. But the more suppliers enter the market, the more choices the buyers have. That is why they have the power of bargaining.

Threat of Substitutes

The threat of substitutes is high. There are many essential oils and synthetic fragrances that can be used for similar purposes in aromatherapy, cosmetics and perfumery. These alternatives are available at lower prices, and they could pose a threat to sandalwood oil, especially if consumers change their preferences in favour of the cheaper alternatives.

Competitive Rivalry

The competition in the market for sandalwood oil is keen. There are many established players and new entrants. Quality, price and brand reputation are the main factors that determine success or failure for the companies. The growing demand for natural and organic products has heightened the competition, leading to the development of new marketing strategies and the introduction of new products.

SWOT Analysis

Strengths

• High demand for natural and organic products in cosmetics and personal care.
• Sandalwood oil has established therapeutic properties, enhancing its marketability.
• Strong brand recognition and loyalty among consumers for premium sandalwood products.

Weaknesses

• Limited supply due to overharvesting and strict regulations on sandalwood sourcing.
• High production costs associated with sustainable harvesting and processing.
• Vulnerability to price fluctuations in raw materials affecting profit margins.

Opportunities

• Growing trend towards aromatherapy and wellness products boosting sandalwood oil usage.
• Expansion into emerging markets with increasing disposable income and demand for luxury goods.
• Potential for product diversification into new applications such as food flavoring and pharmaceuticals.

Threats

• Intense competition from synthetic alternatives and other essential oils.
• Environmental concerns and regulations impacting sourcing and production practices.
• Market volatility due to geopolitical factors affecting supply chains.

Summary

The sandalwood market in 2024 will be characterised by a high demand for the product, resulting from a preference for natural products and a desire to benefit from the established therapeutic properties of the oil. But the high cost of production and the shortage of supply will continue to be a major problem. Opportunities for growth will arise from new markets and new applications. But the pressure of competition and the regulations of the authorities could compromise the stability of the market. Strategic thinking will be vital to exploit the strengths of the market and to manage the risks.