The Market for Chillies in Europe

More than 40% of the world’s chilli imports are to Europe, making it the second largest importer in the world (after Asia). About 70% of these come from developing countries; however, there are also opportunities for chilli peppers to be grown in Europe. Romania, the leading European producer of chillies, produces more than 47,000 tonnes a year, followed by Hungary and Spain. These countries benefit from warmer summer climates which make them more suitable than countries in Northern Europe. The demand for chillies, on the other hand, is strong throughout Europe, with Britain alone importing more than 12,000 tonnes of chillies each year.

While chillies are grown in many parts of Europe, Asian producers are much more competitive in pricing, due to low labour and land cost. Furthermore, Asian producers are incentivised to sell abroad in Europe, rather than locally in Asia, due to the huge price advantage offered by the European market. Chillies in Asia were sold on average at 1.2 to 1.6 euros per kg in 2018, whereas Germany imported chillies at an average of 3.5 euros per kg. Even accounting for transport costs, this is a very significant difference, meaning Asia will continue to import heavily to Europe, maintaining its large market share.

Meanwhile, demand in Europe continues to grow. Between 2014 and 2018, demand for chillies increased by a stable 6%. This is not just because popularity of chillies is growing, but also because people are becoming more aware of different types of chilli, and where they come from, generating further interest in exotic chilli flavours. Due to a rise in immigration into Europe, and a more diverse demographic, the European population has been much more willing to try international cuisines. This growth in demand at each price has led to a rightward shift of the demand curve, raising the price even further.

As shown in the diagram, the price elasticity of demand for chillies is also quite low: -0.120. This is because chilli is a fairly low priced good in the first place. In Europe, where incomes are quite high, an increase in price has quite a small impact on the demand for the chillies. Furthermore, there isn’t really a suitable substitute for chilli that would be popular.

While more chilli is being consumed in Europe, there has also been a trend towards a lower chilli heat level. Also, consumers are increasingly demanding ‘Clean Label’ chilli, which uses only natural ingredients and sustainable practices. These trends would advantage European producers in the future, since European chilli is generally more moderate in heat level and more likely to have sustainable practices in place than producers in Asia.

On the whole, the future for the chilli market looks bright, with great potential in Europe.