Chapter 8. Marketing

8.1 Products

8.1.1 Grades

The sorting and grading of Siam benzoin according to size in Lao PDR was described earlier in Chapter 5, section 5.3.5. The grading criteria used in Viet Nam for Siam benzoin and in Indonesia for Sumatra benzoin almonds are similar. In Lao PDR the grades are given a simple letter or number designation, e.g. A-D or 1-4. The friable nature of the benzoin, particularly after it has been freshly harvested, means that it has a tendency to break into smaller pieces through physical attrition during its transport from the village to Vientiane and the repeated handling that it receives. The proportion of the smaller grades therefore increases at each stage of its handling and eventually accounts for the larger part of the year’s crop. After cleaning and grading at the exporter’s warehouse, there is typically around 10% of each of the two higher grades (A & B) and 35-40% of each of the lower grades (C & D). The large price differential between the top and bottom grades means that the process of physical attrition leads to an overall devaluation of the product.

8.1.2 Quality

Quality is clearly a key factor in determining the price which the exporter is able to get for benzoin. In order to see if there might be ways in which the quality of Lao benzoin can be improved it is necessary first to understand the factors which influence quality.

If the same grades of Siam and Sumatra benzoin (comparable size, colour and purity) are compared, the former commands a much higher price than the latter. There are therefore two aspects to quality: 1) intrinsic quality, which is a reflection of the chemistry of benzoin; 2) the quality which is determined by its extraction and the treatment and handling of it subsequent to exudation from the tree. Since Siam benzoin from Lao PDR (at least, that intended for export) does not have the wide variation in types that the Sumatran has, the discussion here is focused mainly on benzoin almonds, which both Indonesia and Lao PDR produce.

8.1.2.1 Intrinsic quality

The intrinsic quality is genetically determined at the species, provenance and individual tree level. Thus, benzoin from Styrax tonkinensis (Siam benzoin) is different to that from S. benzoin (Sumatra benzoin). Within a species, however, it is possible for resin from different natural populations, as well as individual trees within the population, to have different chemical (and therefore different sensory) characteristics.

Benzoin collected from different areas is said to have different properties. Benzoin from Luang Prabang province, Lao PDR, is claimed to have a stronger odour than that from other areas. When the FAO project trees are old enough, resin samples should be collected for analysis from individual trees from the provenance trials. If significant differences exist, then it may be possible to take advantage of these differences and select superior germplasm for planting. An Indonesian extractor of benzoin stated that odour strength varies between different parts of Sumatra, although in this case it is possible that the benzoin comes from different species. Jafarsidik (1986) states that benzoin from S. parallelonurum grown in Dolok Sanggul is a better quality than that from S. benzoin grown in Pangaribuan, Pahae and Sidilalang.

Even the same tree can yield resin of different qualities. Sometimes this is simply because the larger pieces of resin are picked off the tree first and the smaller, dirtier pieces are collected on a second visit to the tree. But in Sumatra, as noted in Chapter 6, section 6.5.1.4, white and coloured forms of benzoin are apparently exuded from the same tree, although it is not clear under what conditions they are produced.

8.1.2.2 Methodological influences on quality

The manner in which the tree is wounded can also affect the quality of resin obtained by tapping, either as a result of the particular system of tapping which is used or as a result of different standards of workmanship with which it is applied. If sufficient care is not taken when making the cuts in the tree, then it may not be easy to remove the hardened benzoin subsequently without also removing pieces of bark to which it is attached. In Indonesia, more resin seems to be allowed to run down the tree - rather than being trapped between the cut bark and the stem - than in Lao PDR, and is subsequently scraped off the tree, rather than picked; this results in a poor quality benzoin.

The length of time that the resin remains on the tree before it is collected, and the climatic conditions which prevail during this time, affect the quality of the benzoin. Although the resin has to be left on the tree a sufficient time to dry and harden, the longer it is left, the longer it is open to the degradation by sun and rain.

Once it has been collected, the major sources of quality deterioration of benzoin almonds are the repeated handling which the benzoin receives in going from the collector to the exporter, and the conditions in which it is stored, both at intermediate points in the delivery chain and at the exporter’s warehouse prior to shipment. Breakdown of the large pieces to smaller ones, and sticking and compacting of pieces of benzoin or dust and siftings caused by high temperatures, are the main consequences.

Finally, if sufficient care is not taken during storage of the consignment at the exit and entry ports and during shipment to its destination overseas there may be some deterioration in quality. Undue exposure of the container to the sun or a source of heat such as a ship’s boiler should be avoided. These are precautions which the exporter and importer, with the cooperation of the shipping agent and ship’s owner, should attend to.

8.1.2.3 Quality criteria

Size is the principal criterion for grading of benzoin of the almonds type in the producer countries but the question now considered is how the end-user perceives quality, how this relates to size, and what other parameters are used to measure quality.

1) Size and odour properties: The most important properties of benzoin, and the reason it is used by the flavour and fragrance industries, are its sensory or oganoleptic characteristics. These characteristics are not easy to measure in the laboratory since the presence of only trace amounts of some chemicals can drastically affect the odour of a substance. The perfumer’s nose is still the best means of assessing odour quality. However, the superior properties of Siam benzoin over Sumatra benzoin are well-recognized and account for the higher price of the former. Siam benzoin has a rounder, more vanilla-like odour than Sumatra benzoin, which is harsher to the nose.

Given the great price differential between the top and bottom grades of both Siam and Sumatra types of benzoin, it is difficult to escape the conclusion that there are genuine differences in odour properties between them, and that the premium paid for larger sized pieces is not due to their size per se. If the smaller pieces and the dust had intrinsically the same purity and sensory characteristics as the large pieces, then end-users would not be prepared to pay a higher price for the latter. It is reasonable to suppose that the finely divided state of the benzoin dust and siftings promotes oxidation and loss of important volatile constituents, to the detriment of the odour properties.

2) Foreign matter: The presence of foreign matter will clearly also affect quality and smaller pieces of benzoin almonds are likely to have a greater proportion of bark (which has escaped the cleaning process) mixed in with them. Benzoin dust derived from almonds may also have finer extraneous material present (sand, dirt, tiny pieces of bark) and this is a genuine reason for the buyer being unwilling to pay top prices for it. Even if it can be demonstrated that the dust is as pure as the larger pieces of benzoin, there is a natural reluctance on the part of any buyer to purchase material that can not be seen by the naked eye to be clean and free from adulteration. Low grade Sumatra benzoin is dark and dirty, with foreign matter present which is not easily removed from the benzoin itself.

3) Yield: For extractors of benzoin, the extractive yield is important in addition to the odour of the extract. However, the yield is, on the whole, determined by the factors just discussed. Siam benzoin gives higher yields than Sumatra benzoin; clean benzoin gives higher yields than material which contains foreign matter; and benzoin dust gives lower yields than larger pieces.

4) Age and colour: The question of age and colour appears to be clear-cut: the fresher and paler the benzoin is, the better. In Lao PDR buyers are unwilling to pay the same price for benzoin that is a year old that they would for material from the present year’s crop. In the course of storage, there is an inevitable darkening of colour, from the very pale, uncharacteristic colour when the benzoin is freshly harvested, to one which is a tan, sandy colour. Efforts are therefore made to clear stocks of benzoin quickly and to prevent the colour darkening.

However, a leading producer of benzoin extract stated that fresh benzoin has a poor aroma and that if fresh material (Siam or Sumatra benzoin) is purchased it must be set aside to age for 2-3 years. This seemed to be true for a sample of freshly-collected benzoin in Lao PDR; it did not have the characteristic vanilla-like odour of older samples. Once again, therefore, good aroma is seen to be all-important in quality terms. The ideal situation would be to have the pale colour of fresh benzoin combined with the superior odour properties of the aged material.

Although the need to age the benzoin appears to contradict the evidence from the lower prices offered for older stock in Lao PDR, it does, nevertheless, appear to offer a way out for exporters who wish to find a market for such stock.

8.1.3 Analysis and analytical parameters

Because benzoin’s end-uses depend mainly on its sensory characteristics and these are not easily quantified, exporters rarely lay down specifications for the raw material. Neither is it expected of them by the importer. The extractor or end-user does usually carry out some analyses to check the quality of a consignment and will take action if it is not what it should be. A detailed examination of the various analyses possible is beyond the scope of this discussion, but results of thin layer chromatography (TLC) analysis carried out on some of the samples of benzoin collected in the field is given below, together with some indication of the other parameters which can be measured.

8.1.3.1 TLC analysis of benzoin samples collected

Thin layer chromatography (TLC) is a means of separating mixtures of compounds into their component parts. It presents a simple visual fingerprint of the sample being analyzed and can be used to check the purity of a substance or its identity with another one. An explanation of the method and the results which were obtained by analyzing 15 samples of benzoin collected are given in Appendix 2. Included were six samples of Siam benzoin of different grades (five from Lao PDR), six of Sumatra benzoin and three of benzoin block The main findings were as follows:

1) The samples of Sumatra benzoin were immediately distinguishable from the Siam samples. The top running spot in the Sumatra samples is assumed to be due to one or more of the cinnamates, which are not present in Siam benzoin. The top running spot in the Siam samples may be due to benzoates, which are also present in Sumatra benzoin but in smaller amounts.

2) Qualitatively, the different grades within each of the two types are the same, but quantitatively there appear to be some small differences. In particular, the freshly collected sample of Siam benzoin has a larger top running spot than the four standard grades, and the bottom grade (grade D, dust) has the weakest, suggesting that there are indeed genuine differences between the grades. It should be noted that vanillin, which is an important aroma constituent of benzoin, was not available to include in the analysis.

3) The sample of Siam benzoin obtained in Bangkok (glassy in appearance) was much poorer quality than the Lao ones (a very weak top spot and more polar material near the origin). Similarly, the sample of Sumatra mixed (low) quality was confirmed as being very poor compared with the standard grades.

4) The presence of damar in the two samples of low quality block benzoin was readily detected. The sample of good quality block benzoin (stated by the company to contain benzoin almonds rather than damar) was confirmed as having no damar present. The benzoin was the Sumatra type.

TLC is thus a simple, rapid method of analysis that can provide useful information when comparing different types of benzoin. It gives an indication of purity and can detect some forms of adulteration.

8.1.3.2 Analytical parameters

Pharmaceutical use of benzoin generally requires compliance with national pharmacopoeia specifications. Examples of eight different specifications are given in Appendix 3. They are listed because they serve to illustrate the differences in quality between Siam and Sumatra benzoin (in terms of acceptable foreign matter or alcohol solubility, for example). Moreover, although designed for a pharmaceutical end-use, some of the test methods may be appropriate in any quality control or certification scheme which might be introduced in Lao PDR.

The parameters most commonly measured, and the limits given in the pharmacopoeias, are summarized in Table 8.1.

Alcohol solubility is important since this gives an indication of foreign matter present (and any alcohol-insoluble organic matter) and a measure of extractive yield. Acid value, ester value and total balsamic acids content can be determined using standard titrimetric methods and are often used by end-users as a means of quality control. For Siam benzoin, balsamic acids are calculated as benzoic acid, while for Sumatra benzoin they are calculated as cinnamic acid. Spectrophotometric measurements of a prepared resinoid are also used by some companies to assess the suitability of the benzoin for their purposes.

Table 8.1 Pharmacopoeia specifications for benzoin ^a

Notes:

a: For references see Appendix 3.

b: Calculated as benzoic acid for Siam benzoin and cinnamic acid for Sumatra benzoin (but see details of Thai and US specifications).

c: Specification refers to benzoin from Styrax benzoin (i.e. Sumatra type) or other species of the same genus (i.e. could include Siam benzoin).

8.1.4 Brand names

The quality of block benzoin is determined not only by the qualities of the damar and benzoin used in its preparation but by the proportions in which they are mixed. The almost limitless number of permutations of benzoin quality, damar quality and ratios of the two in the mixture gives rise to a large number of different types of block benzoin, all with different qualities. Defining their quality would be no simple task and manufacturers in Singapore do not attempt to do so. Different producers have different recipes, which are proprietary information, and it is therefore impossible (and for the companies themselves, undesirable) to have a meaningful system of grading which relies solely on letters or numbers. Instead, there has evolved a large number of brand names that are registered by the producer but may be assigned for exclusive use by a trader. There are no specifications for the brands, but both importer and end-user know from experience which one suits their own requirements, presumably taking advice in the first instance from the producer or exporter.

The following list illustrates some of the brand names used in Singapore for block benzoin of commerce: A1; AAA; Aeroplane; Arrow; Baby; Bee; Bridge; Butterfly; Camel; Cannon; Crocodile; Crown A1; Deer; Double key; Dragon fly; Eagle globe; Eye; Flower; Flying bomb; Flying eagle; Globe; Hand; Jade seal; Leopard; Oak tree; Palm; Pigeon; Pistol; Pomegranate; Rake; Shark; Shuttlecock; Spear; Squirrel; Stork; Tank; Tiger; Tower; and Turkey.

8.1.5 Adulteration

The deliberate inclusion of damar in block Sumatra benzoin is practised in Indonesia. Damar is considerably cheaper than benzoin and readily available within the country. It may serve a functional purpose by acting as a binder to enable the block to be made, and the block itself is a convenient form in which to transport and handle the benzoin.

In India, samples of benzoin from the local market have been found to be adulterated with pine rosin but this is almost certainly a problem peculiar to India.

Lao exporters have not reported any complaints from customers regarding perceived adulteration, nor have they complained about receiving adulterated benzoin themselves from traders and agents within Lao PDR. Sumatra benzoin is sometimes adulterated with vanilla to pass it off as Siam (using relatively cheap synthetic vanillin rather than natural vanilla extract).

8.2 Channels of distribution

The benzoin industry is one in which the product must pass through many hands in going from collector to exporter. Although the road infrastructure in Lao PDR is improving, the difficult nature of the terrain and the distance of many villages from roads or navigable rivers, still makes the task of transporting fragile goods like benzoin slow and arduous. Even if the village is near a road, the villagers may not have the means of transporting the benzoin other than on foot, and this may entail a day’s travel. A second best to motor transport may be a bicycle. Out of necessity, the job is taken on by people with greater resources at each stage to see that the goods reach their final destination, the exporter. Occasionally, the exporter resorts to air freight to transfer benzoin quickly from a regional center such as Luang Prabang to Vientiane in order to meet an export order.

At the beginning of the chain there are a large number of people involved in benzoin collection. These collectors sell their production to a smaller number of village traders who, in turn, sell it to a still smaller group of other, larger traders who act as agents for the exporters. The situation is illustrated schematically in Figure 8.1.

The exporter’s agent is not tied exclusively to the exporter, and he may choose to sell his purchases through other channels. This can include making cross-border sales to the People’s Republic of China or Viet Nam. The advantage of this to the agent is that he does not pay tax on the sale and, in the case of China, he can take the opportunity if he wishes to buy cheap, Chinese-made goods and transport them back to Lao PDR for subsequent resale.

In practice there may be more or fewer stages in the chain than is indicated in Figure 8.1. At the village level, individual families who have chosen to collect benzoin may sell their production to a village middleman or they may sell it directly to the exporter’s agent. In exceptional circumstances it is even possible for the exporter to buy directly from the village. The choice is often determined by the personalities of the various market participants and the outcome of previous years’ transactions.

8.3 Prices

8.3.1 Producer prices

The price of benzoin is critical to collector, trader and end-user alike. If the price paid to the collector is not attractive enough then he may prefer to undertake more profitable activities. The trader (whether a middleman or an exporter) tries to maximize his returns by buying at as low a price as possible and selling at the best price he can get. The importer or end-user likewise wishes to purchase benzoin at a favorable price.

The price at the point of export is clearly influenced by the number of middlemen in the chain between the collector and the exporter, as well as the exporter’s own costs. Each member of the chain will introduce a mark-up on the buying price, reflecting the costs incurred and the profit margin. These costs include a number of things in addition to the purchase price, their magnitude (and relevance) reflecting the trader’s position in the chain: transport; marketing; storage; insurance; cleaning and sorting; bank (or other lending institution) interest charges; packaging; and overheads.

Figure 8.1. Schematic representation of marketing channels

To a greater or lesser degree the costs are made up of different components: labour, materials, financial services, rent, warehouse and office overheads, depreciation, etc. A detailed analysis of these aspects and quantification of marketing margins at each stage of the chain is outside the scope of this discussion, but it would merit attention in any further study.

Knowledge of the price that can be expected for potential cash crops is a major factor in determining which one(s) the villager chooses to produce. In the case of benzoin, however, the decision is not an easy one to make. There is no single, fixed price and no mechanism for announcing prices in advance. Indeed, the agent is usually unable to give advance notice of prices because he only buys from villagers when he himself receives an order from the exporter or another trader, and this is often very close to the start of the collecting season.

Different villages or individuals adopt different strategies for arriving at their decision. In large part, the price obtained by an individual or someone else in the village the previous year will influence the decision. If no one in the village tapped trees the year before, then they may have to rely on information from neighbouring villages, or the farmer may decide, in any case, to tap the trees as an insurance. Once tapped, the farmer then has to make the decision as to whether to harvest the benzoin about 5 months later. He may decide to pick only the larger pieces from the best-yielding trees first and see what price he is offered, or he may wait to see what other villagers are paid before committing himself. If he is unhappy with the price he may hold on to the benzoin to see if a better offer is made or he may store it for sale at a later date.

Recent past experience is not encouraging for the benzoin collector. Prices (per kg) paid to the village trader for mixed benzoin by one middleman have fallen over the last 4 years:

The price to the collector may be as low as 1,200 kip per kg. For an average harvest of 10 kg per family (a figure typical in Ban Kachet, Luang Prabang Province), this means 12, 000 kip in cash income.

The above prices are only indicative. Undersupply encourages an increase in price in an effort to persuade those who have stocks of benzoin to release them. There is evidence that this occurred in mid-1997.

8.3.2 Export prices

Apart from sensory and other functional considerations, the relative prices of Siam and Sumatra benzoin determine to a large degree the particular end-use to which each is put, e.g. the dose levels which are employed, the extent of blending of the two types, the use of cheaper alternatives, etc. Export prices for the different types and grades of benzoin are detailed in this section. Reliable time series for prices are not available, making it difficult to judge trends. In a few cases, prices quoted by one source have been significantly different from those quoted by another one for comparable grades. Such differences are not easily explained. The prices given below are the most reliable but should be regarded as indicative only.

In the case of Lao exports, only a few tonnes of benzoin are shipped at a time. Sharing a container with other goods, the ocean freight cost is relatively small and FOB approximates to C & F. A Singaporean exporter quoted about US$ 65 per tonne for shipment to Europe. One Lao exporter quoted around US$ 200 per tonne for transport Vientiane-Bangkok and US$ 300 per tonne for Bangkok-Marseilles, which seems rather high.

8.3.2.1 Siam benzoin

Lao PDR: Typical recent export prices to Europe are as follows:

Using these figures and the proportions of each grade indicated in section 8.1.1, the average export price of benzoin is approximately US$ 10 per kg.

Viet Nam: Prior to 1990, when NAFORIMEX had a monopoly on sales, the average FOB price for the different grades was US$ 7-8 per kg. The range of current prices is stated as:

8.3.2.2 Sumatra benzoin almonds

Two Singapore sources quoted US$ 8-9 and US$ 7-12 per kg for benzoin bought from importers in Singapore. A third Singapore source pays S$10 per kg (ca US$ 7.40) for average grade almonds.

Prices for specified grades imported into Singapore (price per kg, FOB Medan, 1997) are:

One Indonesian exporter claims to buy mixed benzoin for Rp 24,000 per kg (ca US$ 10) and after cleaning and sorting to sell three grades of almonds for US$ 10-15 per kg FOB Belawan. This seems very high compared with prices for Siam benzoin.

8.3.2.3 Block benzoin

Prices vary according to quality/brand. Typical ranges quoted by two sources for export prices from Singapore for block benzoin are shown below (manufactured in Singapore but bought and exported by other traders), price per kg, FOB Singapore, 1997:

8.3.2.4 Benzoin extract

Prices per kg for hard extract (FOB Belawan, 1997):

With regard to these prices, one source stated that Siam benzoin extract is 30-40% higher in price than Sumatra extract. Another source (a flavour and fragrance manufacturer) stated that they buy hard Sumatran extract for US$ 5-8 per kg.

8.3.2.5 Damar

The availability of low-cost damar in substantial quantities from Indonesia is a compelling reason for using it as a filler in the production of block benzoin. The low prices of all grades of damar compared to those of benzoin are illustrated below (price per kg, FOB Belawan, 1997):

8.4 Promotion

The problem of Lao exporters wanting to increase their sales but having little or no access to market intelligence in order to try to do so is discussed in Chapter 9, section 9.7, since the problem is not restricted to exporters of benzoin. Attempts by benzoin exporters to negotiate long-term contracts with their established customers have been unsuccessful in the past. Importers prefer to retain a free negotiating position and not be tied to a contract price. Some exporters have tried notifying their customers of the stock position with respect to the different grades, with an indication of price and the enclosure of samples, to encourage orders. However, this does not always elicit a response. In general, and with a limited customer base, the exporters are obliged simply to wait for orders, with no certainty as to if and when they will be received.

8.4.1 Market prejudices

Importers of Siam benzoin in Singapore and Indonesia who do not buy directly from Lao PDR are sceptical that Lao exporters can supply benzoin of the required quality; they are also believed to be a business risk. This prejudice against primary producers is not uncommon. Importers often prefer to deal with middlemen in Singapore, Hong Kong or some other intermediate destination, who they feel are more attuned to modern business practices and are less of a risk. If there is a dispute over a shipment the importer feels it is likely to be settled more quickly through a middleman than having to deal with a supplier at origin. Singaporean traders stated that buyers of Sumatra benzoin likewise preferred to deal with them rather than Indonesian exporters.

In seeking increased sales Lao exporters will have to overcome both the hesitance of existing customers to change existing practices, and the reluctance of potential new customers to do business directly with Lao PDR. In the latter case, the reluctance can only be overcome by a gradual process of confidence-building measures designed to first attract, and then retain, new customers.

8.4.2 Quality certification

Certification, although concerned with quality assurance, is relevant here because an important reason for its introduction would be to try and overcome the prejudices referred to above.

As an expression of the seriousness and good intentions of the Lao exporters, and as a demonstration to potential new customers of the ability to produce benzoin of acceptable quality, the concept of certification has some merit. In essence, each consignment of benzoin to be exported would be tested and given a certificate as evidence that it was of the quality stated. Such a scheme, if mandatory for all exports of benzoin, would have the added advantage of enabling the exports to be recorded for statistical purposes.

Before initiating such a procedure it would be necessary to decide which parameter(s) should be selected for testing, and to analyze a sufficient number of representative samples of the different grades to know the range of results expected for good quality benzoin. A reasonable limit could then be set for each grade that would enable all such similar samples to be accepted, while excluding unacceptable samples outside the limit.

A parameter important to an extractor of benzoin is alcohol solubility, which is one of the specifications in many pharmacopoeas. A limit in these terms can be expressed as a minimum percentage alcohol solubility (e.g. 95%) or a maximum percentage alcohol-insoluble matter (e.g. 5%). It would therefore be of practical value to the extractor or end-user, as well as being an indicator of purity. It is also a parameter which can easily be measured without the need for expensive equipment. Visual inspection to ensure that the sample conformed with the stated grade (size) would be necessary in addition to measurement of alcohol solubility.

An institution capable of undertaking certification is the Food & Drug Quality Control Center in Vientiane. The laboratories are clean, spacious and well-equipped, and the Center undoubtedly has the facilities and competence to do the work. It also confirmed that its role as a government laboratory could include that of certification.

Some of the other points to be considered before deciding whether to adopt certification are discussed in Chapter 10, section 10.4.7.