By Arno Maierbrugger
The luxurious aromatic smell of Oud, a perfume made from tropical agarwood prevalent in Southeast Asia, is highly valued in the Middle East for its sweet, woody, aromatic and complex scent. It is bought as a popular gift or for personal use, with GCC countries being considered the fastest growing market in the world for Oud perfumes. Saudis alone spent about $1.65bn last year on Oud-based perfumes, accounting for half of overall spending on the incense among GCC (Gulf Co-operation Council) citizens, market research shows. Demand usually skyrockets during Eid festivities, and a small off-the-shelf 12-gramme Oud oil bottle can reach prices of up to $800 apiece, depending on quality, origin and brand name. But little is known about the fact that consumers cannot only spend on the luxury fragrance, but also invest into it. Due to the rarity of the raw material, agarwood, the difficulty of harvesting it and the ever-rising demand for Oud oil, investing into agarwood plantations has become an attractive, albeit not widely-known opportunity. In fact, Oud oil is among the most expensive perfume ingredients in the world, with its value estimated as 1.5 times of the comparable value of gold. Only some other very rare ingredients such natural whale ambergris, real deer musk, Italian iris roots or pure Tahitian vanilla come close to the value of Oud. One of the largest agarwood plantation operators worldwide is Singapore-based Asia Plantation Group. It maintains agarwood plantations mainly in Thailand and Malaysia, exports the valuable raw material via Singapore to the main markets Saudi Arabia, UAE, Japan and Taiwan, as well as increasingly to European luxury perfume manufacturers – such as French firm Fragrance Du Bois, known for its exquisite Oud perfume creations –, and also operates an agarwood distillery to extract pure Oud oil. The company uses patented methods to cultivate agarwood and deliver the ingredient to create Oud oil that has been independently certified as grade A+. According to the Food and Agriculture Organisation of the UN, the value of agarwood exported from Singapore alone has been estimated to exceed $1.2bn per year. Investment in such operations seems quite rewarding. By the early 1990s, agarwood had been harvested to near extinction in Southeast Asia and know relies on sustainable plantations in protected natural forests. However, only 35% of global demand is being met by the agarwood producing countries, according to the Forest Research Institute of Malaysia. Another company offering investment opportunities in agarwood is Thailand-based Treedom Group, a company that operates more than 30 plantations in south-eastern Thailand and claims to be the market leader for Oud oil in terms of exports to Middle Eastern markets. “Oud oil is very popular in the Middle East as it is one of the main ingredients in many cosmetics and fragrances. This results in an increase in demand for Oud oil in the Middle East yet there are only a few countries in the world that have perfect growing conditions for planting agarwood trees,” says Andrew Steel, Treedom Group’s CEO. The company offers three to six-year so-called Forward Purchase Agreements as an investment vehicle into agarwood involving the sale and buyback of trees to individual and corporate investors. Earlier this year, Treedom Group opened an office in Dubai and launched a certified Shariah-compliant investment product called Oud Asset Agreement. This high-yield investment plan includes feedstock packages used to produce Oud oil and can yield profit from 20% annually, the company states. This certainly spices up the already sweet smell of such an investment.
Bangkok
