The global agarwood chip market was valued at USD 9,462.39 million in 2023. It is estimated to reach USD 16,551.74 million by 2032, growing at a CAGR of 6.41% during the forecast period (2024–2032).
Agarwood chips are a source of continuous demand in this industry since they are believed to have health benefits and are utilized in traditional medicine across Asia and the Middle East. This is expected to propel market growth. Moreover, agarwood products are in high demand in areas with high visitor traffic since they frequently draw travelers looking for genuine cultural experiences.
Highlights
Agarwood chips, sometimes called oud chips or agarwood incense chips, are tiny wood fragments made from the Aquilaria tree. The distinct scent that these chips emit when burned as incense makes them extremely valuable. Agarwood is traded for chips, oil, logs, and dust, among other things. Agarwood is among the most expensive woods in the world because of its scarcity and the difficult extraction process. Under the Convention on International Trade in Endangered Species of Wild Fauna and Flora, agarwood is protected as an endangered species.
Agarwood chips are utilized in the production of agarwood oil, incense, fragrances, and traditional remedies. Agarwood has been used for centuries in various cultures due to its fragrant properties. It is especially common in traditional Middle Eastern, Indian, and Southeast Asian incense and perfumery. Its rich, complex, and deep scent profile makes it a popular ingredient in perfumes, essential oils, and incense blends. Since agarwood oil is increasingly used to make perfume and medicine due to its unique scent, the market for agarwood chips has grown over the past 20 years.
Global demand for agarwood products has been rising steadily in recent years. The increasing demand for high-quality incense and fragrance ingredients, the growing market for premium incense, and the growing appeal of natural and luxury fragrances all contribute to this surge in demand. For example, the musky scent that permeates some parts of Mecca and Medina also fills the streets of Saudi Arabia, Qatar, and many other Arab nations during Eid. It originates from Oudh or scented oil. Considering its price, this perfume—among the priciest in the world—is also called liquid gold. In Kerala, the highly endangered tree species that is used to make oudh is gaining popularity.
Agarwood, also called oudh, is produced by certain trees in the genera Gyrinops and Aquilaria. These trees develop an aromatic, resinous antibody called agar due to a fungal infection. The inner parts of the tree are chopped into chips that can be burned or smoked for fragrance, while other parts are processed to make oil. The increased demand for agarwood can also be attributed to its cultural significance in different regions. Therefore, in order to meet the increasing demand for agarwood on the market and simultaneously address conservation concerns regarding the endangered Aquilaria trees—the source of agarwood—agarwood cultivation and sustainable harvesting efforts have increased in tandem.
Illegal logging seriously threatens the agarwood chip market, endangering the environment and the economies that depend on this trade. Because of the high demand for agarwood chips and their fragrant qualities, unsustainable harvesting methods have resulted in deforestation and biodiversity loss. Illegal loggers frequently use lax laws and enforcement practices to operate with impunity. Two persons were detained by the CISF on July 20, 2023, at the Indira Gandhi International (IGI) Airport for smuggling 55 kg of agarwood worth Rs. 1 crore and ten lakh.
Shelim Ahmed Talukder was named as the accused by a senior CISF official. He was taken into custody just before he was scheduled to board a flight to Bangkok. This illicit activity not only undermines conservation efforts but also deprives neighboring communities of necessary resources and feeds the destructive cycle of environmental degradation. Therefore, quick action is needed to put an end to this destructive practice and promote the sustainable management of agarwood resources.
The market for agarwood chips is undergoing a revolution thanks to technological developments that improve quality and efficiency at every stage of production. Recent advancements in artificial agarwood induction technology have resulted in the production of efficiently induced agarwood resin when compared to traditional methods. These technologies include mechanical, bio-inoculants, chemical inducers, biological and chemical inducers combinations, and in vitro plant tissue culture. Moreover, cutting-edge extraction techniques like molecular distillation and supercritical fluid extraction optimize the extraction of valuable compounds while reducing their negative effects on the environment.
For instance, through Fundnel, an ECF platform operator registered with the Securities Commission Malaysia, DAdvance Agarwood Solutions Sdn Bhd (DAAS), a Malaysian agarwood biotech company, successfully raised USD 436,000 (RM1.9 million) through an equity crowdfunding (ECF) campaign. As per the company's vision, they are continuously working to refine their vaccine technology to achieve greater resin yields by extending the synthesis period from 18 to 24 months and to further establish Malaysia as a leading producer of agarwood. The industry is moving toward sustainability and global competitiveness due to these advancements. Such factors create opportunities for market growth.
| Study Period | 2020-2032 | CAGR | 6.41% |
| Historical Period | 2020-2022 | Forecast Period | 2024-2032 |
| Base Year | 2023 | Base Year Market Size | USD 9,462.39 million |
| Forecast Year | 2032 | Forecast Year Market Size | USD 16,551.74 million |
| Largest Market | North America | Fastest Growing Market | Asia-Pacific |
Based on region, the global agarwood chip market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
North America is the most significant global agarwood chip market shareholder and is expected to expand substantially during the forecast period. The demand for agarwood chips, used to make high-end perfumes and agarwood incense, has risen in North America over the last few years. The North American fragrance market is thriving and expanding rapidly thanks to the introduction of new, upscale, natural scents like agarwood. The North American fragrance market is seeing a rise in niche brands and customized fragrances, which is being supported by shifting consumer preferences and a rise in the demand for natural perfumes. The fragrance industry in North America accounts for 34% of the worldwide market. Moreover, consumers in North America now have easier access to agarwood chips due to the growth of online retail platforms. However, obstacles like legal limitations and rivalry from artificial substitutes continue to exist and impact the market dynamics. Despite these obstacles, the agarwood chip market in North America is expected to grow shortly.
Furthermore, rising disposable incomes, changing consumer tastes toward sustainable and exotic ingredients, and the increasing appeal of Eastern-inspired wellness practices drive the regional market. Based on a McKinsey and Company survey that over 2,000 US consumers completed, the survey demonstrates consumers' growing interest in wellness across six dimensions: health, fitness, nutrition, appearance, sleep, and mindfulness. It also confirms the existence of several trends. The expanded scope of the survey also revealed six noteworthy new trends, which point to a substantial shift in how consumers view wellness. Such factors propel market growth.
The Asia-Pacific agarwood chip market is expanding due in part to the region's rich cultural legacy as well as the growing demand for upscale fragrances and conventional treatments. Agarwood chips are widely used in Asia-Pacific perfumery, incense, and traditional healing practices. They are highly valued for their distinctive aroma and therapeutic qualities. Significant market contributors include Southeast Asian nations, China, Japan, and India. Consider Tripura's efforts to develop the Rs 20 billion agarwood sector. The name agarwood is thought to have come from Agartala, the capital of Tripura, and 1.13 crore Agar trees can be found in the North Tripura district.
Furthermore, government programs supporting sustainable harvesting methods and the preservation of agarwood resources are also influencing the industry dynamics. For example, the Indian government organized a regional workshop for Asian countries on managing the taxa of planted and wild agarwood. Forty delegates from fifteen different countries attended the Asian regional workshop on the management of wild and planted agarwood taxa that Assam hosted from January 19–23, 2015. The majority of the Asian agarwood range States were represented among the participants. These kinds of factors drive growth in local markets.
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The global market is bifurcated into application and distribution channels.
Based on application, the global agarwood chip market is segmented into oil production, incense and fragrance, and others.
The oil production segment dominates the global market. An important factor in the agarwood chip market is oil production, which produces valuable aromatic compounds in high demand across various industries. Essential oils are extracted from agarwood chips using sophisticated methods like solvent extraction and steam distillation. These oils are used in aromatherapy, traditional medicine, and perfumery because of their distinctive scent and healing qualities. The production of agarwood oil is essential to satisfying consumer demand and maintaining the financial sustainability of agarwood cultivation and processing, particularly in light of the increasing demand for natural and sustainable ingredients. Moreover, the international incense, cosmetics, medications, and perfumery market is seeing significant demand for agarwood oil. This has forced the participants to boost their total agarwood chip output to satisfy the expanding demand from various industries.
Based on the distribution channel, the global agarwood chip market is segmented into direct channel and indirect channels.
The agarwood chip market relies heavily on indirect distribution channels because they allow products to be widely accessible through a variety of middlemen. These channels usually involve distributors, wholesalers, and retailers who buy agarwood chips in bulk from producers and then resell them to a wider range of retail locations, including internet marketplaces, specialty shops, and fragrance boutiques. Producers can effectively access a wider range of markets and a more devoted consumer base by capitalizing on the reach and experience of intermediaries. However, consumers can easily obtain agarwood chips through indirect distribution channels, which boosts sales and market penetration.
February 2024 - The Tripura Forest Department is preparing to open a comprehensive Agar market in North Tripura's Kadamtala district. An official statement stated that the goal of this initiative is to support the agar-based industry in the northeastern state.
December 2023 - According to Kumar Dharmasena, Chairman of Pintanna Plantations in Ayagama, Ratnapura, the value of an agarwood (Wallapatta) tree in Sri Lanka will rise to more than Rs. 1 million by 2028 with carefully considered product diversification. He also pledged to use cutting-edge technology to turn Ayagama into the epicenter of agarwood cultivation in Sri Lanka and to turn the final product into perfumes.
