Promoting Sustainability in the Value Chain of Natural Bisabolol, a Brazilian Rainforest Product
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Authors: Promoting Andrew Clark Sustainability Nancy Khweiss Lina Salazar in the Value Leona Verdadero Chain of With Special Collaboration Natural from: Ana Paula Bisabolol, Malavazi & Pietro Rodrigues a Brazilian May 2011 Rainforest School of International and Public Affairs, SIPA Product at Columbia University Acknowledgements This report was done with special collaboration from the Instituto de Relações Internacionais of the Universidade de São Paulo (USP). We would like to thank Professor João Paulo Cândia Veiga for his inputs, and recognize the effort in the field of Ana Paula Malavazi and Pietro Carlos Rodrigues, students at USP. Their presence in Brazil was determinant for the success of this project. For opening its doors and availability in teaching us about the alpha-Bisabolol industry, we want thank Eduardo Roxo, Director of Operations at Atina Ativos Naturais (Atina). A note of appreciation and admiration to our Faculty Advisor, Scott Martin, for his guidance and advice. At SIPA, a special thank you to Eugenia McGill and Melissa Giblock for their support and coordination efforts. To the Instituto Estadual de Florestas (IEF) in the state of Minas Gerais, thank you for your key contributions. Executive Summary “Promoting Sustainability in the Value Chain of Natural Bisabolol, a Brazilian Rainforest Product” was elaborated by second year students from the Masters of International Affairs and Public Administration (MIA and MPA) at the School of International and Public Affairs (SIPA) in Columbia University. As part of the concentration in Economic and Political Development (EPD) a team of four students developed a research project around the value chain of alpha-Bisabolol, a natural component obtained from the Candeia tree that grows in Southeastern Brazil. Alpha- Bisabolol is highly demanded by cosmetic companies for its natural properties. The project was developed in collaboration with the Instituto de Relações Internacionais of the Universidade de São Paulo and the Brazilian company Atina Ativos Naturais Ltd. Being a producer of alpha-Bisabolol, Atina was the reference to analyze the market and the social dynamics that surround alpha- Bisabolol. With the aim of providing the reader with a clear idea of the complexity behind this component, this report will be divided in nine main chapters. Section 1 will introduce the reader to the topic. It will give a brief explanation of the goals, the problematic, and our approach. Some details about the client will be given in section 2. To put the reader in context, section 3 will describe Brazil and the State of Minas Gerais as our physical focus. Detail will be provided about the Candeia tree, the cosmetics industry, and the market of alpha-Bisabolol in particular. Additionally, this section will examine the regulatory and environmental frameworks. After explaining the objectives and methodology in parts 4 and 5, respectively. Section 6 will give a detailed analysis of the value chain. The reader will find several maps of the industry that will help him understand what are the main actors, what are their interests, the opportunities, the constraints, and the challenges. There will be a specific explanation of each link of the chain: input supply, loggers, producers, distributors, and end market. The recommendations will be presented in section 7. They are divided according to their role in regards to sustainability or smallholder upgrading. Finally, the conclusions will be shown in section 8 Table of Contents 1. Introduction ..................................................................................................... 2 2. Client Agency ............................................................................................... 3 3. B a c k g r o u n d ........................................................................................................ 4 3 . 1 Local Context .......................................................................................................... 4 a. B r a z i l ................................................................................................................................. 4 b. Minas Gerais ............................................................................................................... 5 3 . 2 Extraction of a l p h a - Bisabolol in Brazil ............................................. 8 a. The Candeia Tree (Eremanthus Erythropappus) ...................... 8 b. A l p h a - B i s a b o l o l ..................................................................................................... 10 c. T h e Cosmetics Industry in Brazil ......................................................... 11 d. A l p h a - Bisabolol. Market Characterization .................................. 13 3 . 3 Regulatory Framework .................................................................................. 14 a. Domestic level ........................................................................................................ 15 b. International level .............................................................................................. 16 c. Certifications and Standards ................................................................... 20 3 . 4 Environmental Context .................................................................................. 25 a. B r a z i l ............................................................................................................................... 25 b. Mata Atlântica ......................................................................................................... 26 c. The Case of Candeia ......................................................................................... 27 4. O b j e c t i v e s ......................................................................................................... 30 5. Methodology .................................................................................................... 31 5 . 1 D a t a C o l l e c t i o n .................................................................................................... 31 A. Desk Research (Secondary Data Sources) ............................................................ 32 B. Field Interviews (Primary Data Gathering) ............................................................. 33 5 . 2 Value Chain Mapping ...................................................................................... 34 5 . 3 Analysis of Opportunities & Constraints ........................................ 35 6. A n a l y s i s .............................................................................................................. 35 6 . 1 Porter’s 5 Forces Evaluating the Strength of Different Industry Forces ............................................................................................................... 35 6 . 2 Value Chain Analysis ...................................................................................... 39 6 . 2 . 1 Map of Relationships in alpha - Bisabolol Value Chain .. 39 6 . 2 . 2 Map of Industry Relationships ............................................................ 41 6 . 2 . 3 Description of Value Chain Actors ................................................. 42 a. Input supplier ........................................................................................................ 42 b. L o g g e r s ......................................................................................................................... 46 c. P r o d u c e r s ................................................................................................................... 47 d. Distributors ............................................................................................................. 50 e. End Market: Skincare & Cosmetic Product Manufacturers .................................................................................................................... 53 7. Recommendations ....................................................................................... 58 7 . 1 Smallholder Upgrading ................................................................................. 59 7 . 1 . 1 Increase Farmers’ Bargaining Power through Cooperative Formation and New Market Linkages ............................ 59 7 . 1 . 2 Niche to Niche Industry Alignment ................................................ 63 7 . 1 . 3 Raising Consumers’ Awareness ......................................................... 65 7 . 2 Promote the sustainability of the Candeia Tree in the a l p h a - Bisabolol and Candeia oil Supply Chain ...................................... 70 7 . 2 . 1 Regulatory and Environmental Auditing and Reporting 70 7 . 2 . 2 Financial Incentives Program for Compliance by the IEF alongside Increased Penalties for Illegal Deforestation A c t i v i t i e s .................................................................................................................................. 74 8. C o n c l u s i o n ........................................................................................................ 77 9. Team Organization ..................................................................................... 78 1 0 . R e f e r e n c e s ....................................................................................................... 80 1 1 . A n n e x .................................................................................................................... 86 Exhibit 1. Logic Framework .................................................................................................