Essential Oils Incubator Project

With its abundance of raw materials and natural ingredients like castor beans, lemon grass, among others, Jamaica is well poised to manufacture quality products that are suitable for hair, skin and body care; for both the local and export markets.

Research done by the JBDC revealed that there is a demand for the export of essential oils globally, especially with the increase in interest in aromatherapy. The research also showed that Jamaica has the potential to develop an import-substitution strategy for essential oils that could yield great returns for the island. Additionally, the United States of America, France, Canada and the United Kingdom exhibit the greatest demand for essential oils.

Project Details

Project Partner

Ministry of Industry, Investment & Commerce (MIIC)

Recognising the deficit in appropriate production spaces, the JBDC Essential Oils Incubator Project is designed to help entrepreneurs in the industry further capitalise on its potential. The principal underpinning of this project is that the development of the essential oils industry will through the agency of a manufacturing incubator, support critical development objectives of the Government of Jamaica, including: export development, import substitution, rural development and the generation of employment.

Essential Oils Incubator Facility constructed and equipped with appropriate technology to increase the extraction and commercial sale of essential oils locally and internationally

The Essential Oils Incubator Project is a three-pronged approach to the public sector led growth of the Essential Oils industry. At its core is the expansion of the manufacturing capacity of agro-processors which will ultimately boost job creation and revenue earnings through domestic sales and export. Jamaica’s position of being a ‘high value niche producer’ rather than staking out a competitive edge as a volume producer in the global marketplace is highly dependent on being able to produce to the required international standards.

Small firms are often limited in their abilities to achieve this due to the substantial initial investment required to develop certified production facilities. The establishment of the certified incubator space therefore provides the advantage of enhancing the export capacity of exporters as production is done to global standards and certification and quality production and assurance systems will consistently be implemented.

To substitute local consumption of essential oils, to the value of US$200,000 in the first year of operation, increasing to US$300,000 in Year 4

The second prong of the project relates to the development of a strategy for import substitution and the export of essential oils. The analysis of import volumes for essential oils based on the data provided by the Statistical Institute of Jamaica (STATIN) indicate figures of anywhere between US$25m to US$50m of imports of these oils for use in the food, aroma (tourism and domestic market segments) and other diverse uses.

To export essential oils produced by the facility resulting in foreign exchange earnings of US$1.0M by Year 4 of project implementation

Research conducted by the International Trade Centre (ITC) shows that the total untapped export potential of essential oils from Jamaica stands at US$1.6 bn. The export potential indicator is based on supply and demand which is projected into the future based on GDP and population forecasts, demand elasticities and forward-looking tariffs. France, United States of America and United Kingdom were highlighted as the markets with greatest potential. The demand for the various countries is based on projected imports, the future tariff advantage in the target market and the bilateral distance as compared to the average distance over which the target market usually imports the product.

Given the size of the equipment and forecast usage at maximum production, it is predicted that through value added manufacturing, the project could earn US$1.0M by YR 4 in foreign exchange. Earnings from the initial facility could facilitate the establishment of a second incubator which would increase import substitution to US$1.5 m and export capacity to US$5.0m by YR 4.

Increase employment and capacity building for community(ies) engaged in essential oil production.

1500 persons benefitting and 4,000 been impacted indirectly by Year 4
40 new earning opportunities created within the 1st year of operation
20 agro-processors trained in Year 1

The stimulation of entrepreneurship within and in communities surrounding the incubator is one of the defining outcomes of the Essential Oils Incubator Project. The Rural Agricultural Development Authority (RADA) estimates that over 80 agro-processors operate within the project site and its surrounding areas. Some of the main challenges facing these entrepreneurs are limited access to production spaces, high cost of international certification of production facilities and processes, decreasing levels of efficiency and competitiveness against a backdrop of rising operational costs, limited understanding of market access requirements and low-cost competitiveness in the context of rapid innovations within the global market.

The project will provide shared incubator space to new and existing agro-processors. It will house the appropriate technology for the extraction of essential oils making it available and accessible to these agro-processors, through training their knowledge and production skills will be enhanced and employment opportunities will be created directly and indirectly through the backward and forward linkages.

Capacity building will be offered to 20 existing agro-processors and interested candidates in areas related to product development, good manufacturing practises, supply chain management and business development skills. It is anticipated that at least 15 of the 20 persons trained will transition into becoming clients of the facility by the end of Year 1. Through backward and forward linkages another 1500 persons will benefit and 4,500 persons will be impacted indirectly by Year 4. Through the stimulation of other industries, 40 new earning opportunities will be created within Year 1 of its operation.

The relationship with producers for the use of the incubator will be governed by contracts tailored to the individual needs of each agro-processor. Tenants are to be selected by the JBDC based on approved transparent criteria, a minimal rental fee will cover accommodation and pro-rated fees for common services such as security, insurance, training, sales and marketing.

The agro-processors will exit the incubator based on the nature of the business and time needed to stabilise the start-up business. An incubation period would be pre-determined depending on the incubator and the types of businesses that the incubator can accommodate. Agro-processors may specialise in a single product or a range of closely related products consistent with the available facilities.

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