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The role of Italian export in eastern Europe market of Pasta

Introduction Main goals This report aims to be a complete and accurate analysis of the pasta market in Eastern Europe, and to show how three of the most important italian pasta exporters were able to penetrate in this market. We will also show the possibility of growth of this market and his development for years to come.
Some informations about Russia and Poland I decided to analyze these two countries because, as I will explain in more detail below, historical and political reasons led the people to have similar food consumption. However, beyond other differences much more pronounced (like the geographical size or the number of inhabitants), both countries have a market characterized by the importation of pasta from Italy almost identical. Yet a country is a member of the EU, the other not. One enjoys the privileges of Europe treaties and has no duty. The other keeps the ruble and taxes and tariffs influence over the consumption of imported products.
1.2.1) Russia The collapse of the Soviet Union has brought about great changes in Russia. The economy was centrally planned and has now become a global market. The economic reforms in 1990 have privatized industry factory, except for some strategic sectors such as energy and defense. To know the real power of Russia, I´d like to show you that this country is the largest exporter of natural gas in the whole world, the second oil exporter and the third exporter of aluminum steel. This makes Russia an economically strong country, but weak about fluctuations on the variability of commodity prices. After a long economic crisis (1998), the economy began to grow on average 7%. However, the recent global crisis influenced heavily the new middle class. The Central Bank of Russia used a third of its 600 billion U.S. dollars in international reserves to avoid the crisis and stabilize the ruble. The government has also spent $ 200 billion for a rescue plan to increase liquidity in financial sector and aid for Russian companies. In 2010 happens disastrous situation from the environmental point of view, with a severe drought and wildfire in central Russia that have reduced agricultural production, leading to a ban on wheat exports for the year, and increase in other sectors, such as manufacturing and retail trade (but the growth is really slow).
1.2.2)Poland. In 1990, Poland has begun a policy of economic liberalization and today is one of the most active transition – economies. Before 2009, GDP had grown by about 5% per year, mainly due to inflows of EU funds. GDP per capita is still below the EU level, but it is among the most high in the Baltic states. Unfortunately, EU membership was blocked by the unemployment rate to 11.8% for the year 2010 and for inflation to 4.2%, above the upper limit of the target audience of the National Bank and the deficit of public sector budget went to 7.9% of GDP, for the crysis events. The country’s potential held back by lack of modern infrastructure, an inefficient commercial court, a code of hard work and too much bureaucracy.
Russia
Poland
GDP (purchasing power parity) [1]
$2.229 trillion (2010 est.)
$2.147 trillion (2009 est.)
$2.331 trillion (2008 est.)
$721.7 billion (2010 est.)
$698.6 billion (2009 est.)
$687 billion (2008 est.)
GDP – real growth rate:
3.8% (2010 est.)
-7.9% (2009)
5.2% (2008)
3.3% (2010 est.)
1.7% (2009 est.)
5.1% (2008 est.)
GDP – per capita (PPP):
$15,900 (2010 est.)
$15,300 (2009 est.)
$16,600 (2008 est.)
$18,800 (2010 est.)
$18,200 (2009 est.)
$17,800 (2008 est.)
GDP – composition by sector:
agriculture: 4.2%
industry: 33.8%
services: 62% (2010 est.)
agriculture: 3.9%
industry: 31.8%
services: 63% (2010 est.)
Labor force – by occupation:
agriculture: 10%
industry: 31.9%
services: 58.1% (2008
agriculture: 17.4%
industry: 29.2%
services: 53.4% (2005)
Unemployment rate:
7.6% (2010 est.)
8.4% (2009)
11.8% (2010 est.)
11% (2009 est.)
Population below poverty line:
13.1% (2009)
17% (2003 est.)
Investment (gross fixed):
18.9% of GDP (2010 est.)
19.5% of GDP (2010 est.)
Public debt:
9.5% of GDP (2010 est.)
8.3% of GDP (2009 est.)
50.5% of GDP (2010 est.)
46.4% of GDP (2009 est.)
Inflation rate (consumer prices):
6.7% (2010 est.)
11.7% (2009)
2.4% (2010 est.)
3.5% (2009 est.)
Industr. production growth rate:
8.3% (2010 est.)
6.5% (2010 est.)
Exports:
$376.7 billion (2010 est.)
$303.4 billion (2009 est.)
$160.8 billion (2010 est.)
$142.1 billion (2009 est.)
Exports – partners:
Netherlands 10.62%, Italy 6.46%, Germany 6.24%, China 5.69%, Turkey 4.3%, Ukraine 4.01%
Germany 26.06%, Italy 6.84%, France 6.78%, UK 6.38%, Czech Republic 5.85%, Netherlands 4.14%
Imports:
$237.3 billion (2010 est.)
$191.8 billion (2009 est.)
$167.4 billion (2010 est.)
$146.4 billion (2009 est.)
Imports – partners:
Germany 14.39%, China 13.98%, Ukraine 5.48%, Italy 4.84%, US 4.46%
Germany 28.08%, Russia 8.65%, Italy 6.5%, Netherlands 5.59%, China 5.27%
Debt – external:
$480.2 billion (2010 est.)
$467.2 billion (2009)
$252.9 billion (2010 est.)
$239.6 billion (2009 est.)
1.3)Some information about the industries 1..3.1) Barilla S.p.a. Barilla S.P.A. is an international food company founded in 1877 in Parma. The company is still privately held, and remains in family ownership and control also today. Barilla_pasta_logo.svg.png
Barilla Group control multiple brands. The most famous are: Mulino Bianco, Pavesi, Voiello, Alixir, Wasabrod, Misko, Filiz, Yemina and Vesta. The Group has several production plants all over the world: in Italy, Greece, France, Germany, Russia, Sweden, Turkey and United States, but the central office remains in Parma.
Barilla Pasta produces various kinds of pasta and bakery products; is one of the world’s leader in pasta, with 25% of the US market and 40% of European Market. Barilla produces 4,000 tons of dried pasta annually in over 120 shapes and sizes. It is also the leading seller of bakery products in Italy. After the acquisition of the Swedish company Wasa, Barilla became the world’s major producer of flatbread.
The Group has 16,000 employes, control 20 different brands and has a turnover of 4.5 billion euros. This market giant produce every year 3´000´000 tons of food products.
In East Europe, the group is present in different countries: according to the website information, is present in Poland from 1999 with the brands Wasa, Barilla and Mulino Bianco.
In Russia is present a bakery plant, and 880 people works there. Barilla set his presence in Moskow from 2003 and sell products like Barilla, Harry´s and Wasa.
In Sweden the society is present since 1999, with offices, production plants and a mill. 545 employees works for the group in Filipstad, and create food for brands Wasa and Barilla.
1.3.2)Pasta Zara Pasta Zara S.p.A. Italian food is specialized in the production of pasta, founded in1898 with factories in Riese Pio X (TV) and Muggia (TS).
The company is the leading exporter of pasta in the world and the second in terms of production. Exports represent 95% of the market for Pasta Zara, and 13.5% of meals eaten in the world is Zara, in 2009 has sold 208,000 tons of pasta. Actually exports to 97 countries and increased sales particularly in Asian markets, America and Russia. In its continued growth, Pasta ZARA has launched an industrial development plan with the aim is to increase the production capacity from current 208,000 tons per year to about 320 thousand tons by 2015. It works about 300 people in his factory, and is one of the few italian companies that succesfully survived the recent financial crisis.logozara.png
Pasta Zara has also been active for years an interesting collaboration with the Italian chefs, and is an active social life of its region by promoting a number of sporting and culinary events, as well as sponsoring several youth sports teams.
1.3.3) De Cecco It was founded in 1886 in Fara San Martino by Filippo Giovanni De Cecco. His father, Nicola De Cecco, a few years ago produced flour in a small local mill. As early Filippo De Cecco had the insight to properly dry the pasta so that they can maintain and withstand the long journeys to America. The current factory in Fara San Martino was built in the early 70’s when that age was no longer able to produce the quantities required by the market. In 1950 it was rebuilt in Pescara on the industry model of the former mill town from the years 20 and almost completely destroyed during World War II. Industry Pescara De Cecco is called “Mill and De Cecco pasta and is a public limited company controlled by the parent “F.lli De Cecco di Filippo Fara San Martino SpA. De Cecco pasta produces water-based and durum wheat, although the laws in many countries allow the use of blends based on durum wheat and wheat flour that are called semolina. Pasta De Cecco has spread to 90 countries around the world including Italy, Great Britain, Japan, United States, and France for over 100 years. It has recently started exporting in Mongolia. logo_home.png
The pasta market in east Europe 2.1) What is pasta Pasta is a so popular food for many reasons: its nutritional value, taste and convenience. This is a healthy and important part of a balanced diet (such as mediaterranea).
The inventor of pasta is still unknown: legends says Marco Polo imported from the east, while for others the differences between western and eastern pasta are too great, and they think that the Etruscans were the first to prepare pasta. There are two kind of pasta: fresh or dried. The dry consists of semolina, which is produced by grinding kernels of durum wheat. Sometimes other grains are also used. The semolina is mixed with water to form a dough. Usually, the fresh pasta is prepared by adding eggs too. You can enrich the mixture with other ingredients such as spinach, tomatoes and saffron to change its color. The dough is kneaded until it reaches the right consistency, and then is pushed (extruded) through a metal disk with holes. The size and shape of the holes in the disk determine what shape of pasta will be. When the pasta reaches the right length, is cut with knives. The paste is then sent through large dryers which circulate hot, moist air to slowly dry the pasta. The pasta is then packed in bags or boxes. The fresh pasta instead should be consumed within a few days of preparation, without the stage of drying. The most popular type of pasta in the world is spaghetti.
2.2) Similarity and differences between east and west market The differences between these two “worlds” are very marked. In west side, pasta is the most common food ever, on the other, at best, a simple seasoning. Export pasta in these countries does not mean selling a product, means to make them share as a lifestyle. Some Italian companies there are trying, even now.
2.2.1) Russia and Poland Pasta Market Historical reasons (including the three partitions of Poland in 1772, 1773 and 1775) and social behaviours urge me to consider the current pasta market of Russia and Poland as similar in many aspects, both unique, but distinct from those of Western Europe.
These two markets, so similar to consumer preferences, have one big difference: Poland is a member of the European Union, and as such have access to products faster and cheaper, in the case of Russia, but the products are burdened with duties and exchange rates.
The Russian and Polish food market is highly fragmented and there is not a single monopoly; the top 10 retailers only reach a market share of 10 percent (datas from 2006). In these two countries, traditional trade detail shop are common, in Russia still remain the ‘Soviets’ (small independent stores), representing three quarters of total food sales. However, in both countries are becoming more modern retail chains. Hypermarkets and supermarkets are growing rapidly. Most of them have started business in Moscow and are now slowly expanding into other regions. The centerpiece of the food market and based for all foreign companies wishing to spread throughout the country is the area of Moscow and St Petersburg. The degree of success for future expansion can be examined by the successful sale of their products at the increasingly large middle class and upper-middle in these cities. The most important fair in this area is World Food Moscow, held annually in September. The fair is an international fair, the bigger and largest in central and eastern Europe. Manufacturers who want to introduce their products and brands in the Russian market must participate to this event (with nearly 1,300 exhibitors and 60,000 visitors, most of them are international wholesalers and retailers of food).
Prices are not set by law, but vary from region to region. This is due to differences in income and cost of living across the country. Russians spend a higher percentage of their income than consumers desserts in many other countries. In 2007 the total consumption was 1.1 million tonnes.
About taxation, the prices of modern retail stores are subject to a 18% value added tax (VAT) flat rate which can make it difficult to compete.
Import tariffs can vary from 5-20 percent depending on the product and the country is imported from has the status of most favored nation. In the case of Italy, the nominal tax rate is 20 per cent.
Poland does not have these problems because it adheres to the Schengen Treaty and E.U. and the goods may be imported without tariffs.
In general, corruption and bureaucracy are the major obstacles to doing business in Russia. However, the Russian government abolished many requirements and simplified import licensing and reduction of existing non-tariff barriers, the accession to the World Trade Organization. Food companies who want to import into Russia must apply for certification by the Russian Agency for Health and Consumer Rights, which confirms the safety and quality standards.
In these countries, where for historical and social reason consumption of pasta is naturally very small, extensive marketing campaigns are needed, a lot of patience and creativity to support the business.
It ‘s very interesting to note that the lack of duties has facilitated the export of pasta in Poland. But what we can analyze from Russia? If we apply corrections to the data due to distortions and normalize the population, we get very similar fuel consumption. So is it true that the duties will not affect this business?
No, for one simple reason: in Russia imported pasta is a luxury item. It is certainly not a few rubles on the price that discourages the wealthy citizens of Moscow from buying Italian products. Because the larger part of these products is sold in Moscow. and St. Petersburg, the remaining part of Russia is not a consumer of Italian products. A reduction of duties could encourage the spread of pasta between other groups of the population, while businesses might think of high – gamma products for rich citizens.
2.2.2) West-Europe pasta market In the Europe of the east, the pasta is a well- known food. Its nutritional and organoleptic characteristics make it an excellent food, balanced and healthy for human consumption. In fact, the pasta is also at the base of the Mediterranean diet.
Production volumes is estimated at 3.2 million tones, and continues to grow. The italian market in 2009 represented about 1.5 million tons, worth about 2.7 billion euro.
Approximately 52% of national production is exported. In 2009, Italian pasta companies have increased their export volumes of around 1, 35%.
Pasta is definitely one of the key areas of the Made in Italy, but competition with foreign countries, in particular the European Union is very strong.
Despite phenomena of short duration (for example, sales crisis), the Italian pasta continues to be a success in international markets, where consumption is rising everywhere. Overall, they were exported around 1.7 million tonnes of Pasta, worth approximately € 1.7 billion.
In particular, 1 million and 145 thousand tons of pasta were exported to EU countries (4% more than last year) and 514 000 tonnes to third countries.
As regards the geographical distribution of exports in the rankings of the five largest customers, Germany confirms first place with a share of 20% in quantity, followed by France (16%), the United Kingdom (15%), United States ( 7%) and Japan (5%).
In ten years the production of pasta in the world has risen from around 7 million tonnes to around 12 million tonnes. This means that, with about 3.2 million tonnes of production, our country is about 26% of world production of pasta and 75% of the EU at a glance a pasta dish eaten all over the world in 4 – and 3 out of 4 in Europe – is made with Italian pasta.
However, the Italian leadership cannot be taken for granted. New international competitors now face the global market.
The gradual reduction in the number of pasta- makers (consider that in 1970 the companies were 450, now about 150) concerned as an indication of the difficulties in the sector.
The Italian pasta market, right now, suffering considerable difficulty, as demonstrated by the actions of antirust Italian, which cyclically apply sanctions to the main producers.
The Italian market is saturated: the prices are very low compared to the raw material, the number of producers is high and profit margins are very low. But this concern only the Italian pasta. If we add to this the cheap products imported from Spain, but even more from Asia and South America, the situation is really problematic.
Many artisan pasta makers have closed, and the remaining have had to made compromises to maintain an adequate levels of prices. There is no place in the market for new innovations. Focus on new forms or in terms of recipes is very difficult because it is a subject already much exploited. Is possible to focus in increase quality level, but the return of sales compared to the price increase requested is not cheap. Sales are down and prices are strongly influenced by the fluctuation of raw material (such as the recent fire in Russia has led to a shortage of grain in the world). That’s why many companies have decided to invest abroad, in America some of the others in East Europe
2.3) General indicators Country
tons of pasta produced
Italy
3,161,707
Russia
858,400
Poland
150,00
Country
Per capita consuption of pasta (kg)
Italy
26,0
Russia
6,0 (fast grown)
Poland
3,0 (quite stable)
Country
Average selling price (€)
Italy
2
Russia
4
Poland
3
Market shares of Italian companies in the area of pasta in Italy
2.4) Consumers behaviour Italy – West Europe
East-Europe
Pasta is a food for all people
Is healty and cheap
Thousands and thousands of differents brands
Brand name and reputation create trusts
Recipes are usually fresh and “light”, tastefull.
The buyers knows lots of things about pasta, how to prepare the best recipe, a lot of experience of the product.
Is made in Italy
Unlimited existence of different size and shapes
The package is less important than the brand
Possibility of collusion between similar products to keep high prices
The original Made – In – Italy Pasta is an expensive product
When controls are are carried out strictly, the product has a good quality
Only the most famous brands and names can attract a foreign customer.
Expensive marketing campaigns can help selling pasta
Cultural mix of italian pasta and west-Europe products can create unpleasant tastes (Pasta with Vodka sauce)
Lack of basic knowledge. Especially about cooking time!
Fake products are common (unfortunately)
Spaghetti, Macaroni, Lasagne, Fettuccine. No more.
The package must be as distinctive as brand, especially for the expensive products
Fees and taxation keep high prices
Quantity of pasta exported (tons) graph.emf The Italian industry in West Europe As seen above, De Cecco and Barilla are two companies leading her Italian pasta. If we add to Zara, the largest exporter of pasta, we get a great deal of products to be sold in these countries. Each of these three companies has followed a different system, with strengths and weaknesses, which we will analyze in detail.
3.1) Barilla As seen previously, export pasta in these countries is difficult because there is no culture of pasta. Barilla has begun the process of its introduction in the country with the acquisition of two companies operating in different sectors.
We had to remember that Barilla was sold to U.S. multinational W. R. Grace and Company in 1970. For the company the acquisition was very helpful because it help to increase sales and became famous and powerful. But it remains a national pride in foreign hands. In 1979, Pietro Barilla with his sons repurchase it. Initially, to inject liquidity in the difficult moments of the 80 and 90, the Barilla became partner with Walter Wurth, chairman of Oerlikon Buhrle, a major Swiss company producing weapons. It’s probably the first international Italian food company: it begins acquisition of several foreign companies in the same industry, such as the Greek Misko (1991), the Turkish Filiz (1994) and Sweden’s Wasa (1999). In 1999 opened its office in Poland, where he began to export pasta produced in Italy in local markets.
The landing in Russia and not ‘planned, but with the acquisition of Harry’s Wasa gain control of these companies small offices in Moscow. We are in 2002 and the situation for a foreign investor is favorable to the resumption of the Russian economy after the financial crisis of 1998. So Barilla decided not only to invest in the country, but also to enhance the production facilities, acquiring the plant Solnechnogorsk.
The process is not ‘smooth: 20 million being spent to rebuild the plant Solnechnogorsk after a disastrous fire in 2004. Another 40 million are used, from 2004 to 2007, to improve the production of this plant that produces only for the subsidiary’s Harry. Barilla pasta that matter in Russia always comes from Italy.
Harry’s hand and ‘the colossus of French bread loaves, which produces many varieties suitable for each meal. To bear the internalization, the company has suffered over the years, many structural changes. The holding has also changed over the years several times its operating structure to achieve its present form. Then the system for foreign Barilla provides direct entry into the market, acquiring companies that can provide knowledge and know-how, to use as a base for future expansion of its core business abroad.
While this system is characterized as very solid, almost textbook economics, however, is only possible by companies such as Barilla, that have large, very solid financial basis (also accessible through the weapon trade), confidence banks, large availability of money for long-term investment. Although the expansion in Eastern Europe has begun for the last decade, the recent imbalances of the economy are putting a strain on the coffers.
barilla organigramma.jpg
3.2)Zara in West Europe Pasta Zara is an unusual case in the Italian industrial sector. While most other food companies producing for the domestic market and possibly export the surplus, since 1958 this company, with rare foresight, has started to export, so that now the export is the main source of income of the company. In Italy it is a little known brand in the main distribution channels, but through some sub-brands popular discount stores. The experience in Eastern Europe began in the 80 and 90. Through small improvements every year, Zara was the first going through uncharted territory.
Zara’s experience in Eastern Europe is very attractive. Pursuing a long policy of small steps, it has earned the trust of consumers and respected brands and quality. This system is fairly inexpensive, considering that need no infrastructure in place but only an exporter with a warehouse. Must be added also costs of marketing. It ‘s true that with this system Zara has become the largest exporter of pasta in the world but to become it took years of effort, sacrificing the domestic market to focus entirely on exports. And it was really long! But the positive side is that now Zara, while its competitors are suffering and reel, squeezed by banks and crisis, has an enviable financial position, rather it is also able to expand its production facilities. A successful economic policy, therefore, provided to be able to wait many years and do not be alarmed by the lack of results.
zara organigram.gif
3.3)De Cecco in west Europe De Cecco has always been the pride of Italian quality. It began to export its products only recently, but in Russia especially stood out for its products in the range Premium Segment.
In particular, the company has distinguished itself for its commitment in the use of new technologies, especially the e-commerce and Web 2.0. The use of these powerful new media and online marketing campaigns, combined with the company’s presence in social networks and YouTube, have fostered his knowledge outside of Italy.
Is too early to comment on the results obtained by De Cecco nell’export online. The system is in fact not be operational until 2007, after a year that had put a strain on the company. It seems that the idea to focus mainly on trade web has been in practice a gamble in which few people believed. In the absence of funds and massive investment, however, seemed a logical solution. In practice it is not exported to Eastern Europe but to explore a whole new space (internet), very little used by Italian companies to sell their products. The data so far are very fragmentary. On social networks, the company has a large number of fans, as well as recipes on youtube channel. This is the first Italian company to have understood the potential of Web 2.0, but there is no practical data on the quantities sold. Despite this, I think this is an excellent system, able to demonstrate that the business is not achieved only with exaggerated amounts of money, but also with good ideas and lots of advertising.
Future of Pasta market The pasta is a food that is going through a second youth, in recent years. Its nutritional properties make it an excellent item, but not yet adequately known outside the Mediterranean region and North America. From this point of view, the efforts of many Italian companies to showcase the product is impressive, especially in the East of Europe
In a few years the consumption of pasta in those countries began to grow exponentially, a sign of the goodness of product. But if the increased consumption of pasta, it makes it necessary to increase the users understanding of the product and “best practices” on how to consume it. Only in this way, a product still popular but seen as a foreigner will be able to enter definitively into the hearts of people.
However, the paste cannot hope to increase its market share in the intensely until remains a niche product of luxury. If this can start to attract more wealthy clients, it must then expand to all other social classes, with appropriate pricing policies and promotional purposes.
It should not underestimate the different cultures from which the users come. If in some cases the result of any intersections of recipes is not pleasant, very often you get tasty combinations.
The expansion into new markets becomes the only option for companies at home suffer more and more competition. Not only the internal ones (in Italy exists, in each store, tens of hundreds of shapes and products) but also from China and countries in the developing world.
It is important to point out then that the real “Made in Italy” for wine and food products every year suffer more from clones from different countries, much cheaper but with much lower quality.
Not only that, the pasta industry is still in danger from the changes in the price of wheat (see fires in Russia that in 2005 and 2010 have destroyed the stocks of that country, a formidable exporter) and in general of market imbalances: particular the recent crisis has led to a negative peak of exports, and fear for one of the key sectors of Italian economy, although it is early to reach definitive conclusions or analysis.
But this I can definitely say that the pasta industry will expand only through export.
Conclusions The situation of the market for products derived from corn is very precarious. On one side we have the farmers, who are fighting daily against nature to obtain a more healthy wheat, but their efforts are frustrated by the industries that underpaid their product.
From other side we have to endure the same companies that increasingly stringent budgetary constraints in order to sell their products, and increasingly fierce competition.
That’s why these three large Italian companies have decided to export its products to countries that are foreign to the culture of pasta.
Someone called him a chance, something else a fail, but all these companies are fighting every day to sell their products.
It ‘s just business, but it is also through these channels that the real Made in Italy spreads. We have seen how difficult it is to enter a different market. is a long-term investment, and massive investments of money, time and energy are required, as well as know-how previously unknown. Until 2009 these companies have made it. With the recent crisis, the situation has deteriorated drastically, and perhaps have a good product will not be enough to save himself.
Sources 1) www.istat.it
2) Comtrade
3) www.barillagroup.com
4) www.cia.gov
5) http://www.pastazara.it/
6) http://www.dececco.it/IT/
Barilla official report 2001 -2010
http://www.eiu.com/public/
Italian Embassy in Moscow www.ambmosca.esteri.it
www.confindustria.it
www.worldfood-moscow.com
http://www.unipi-pasta.it/dati/andam.htm
http://www.pasta.it/consumo.htm
Tutto il Grillo che conta (Beppe Grillo, Feltrinelli 2006)
http://www.intracen.org/appli1/TradeCom/TP_IP_CI.aspx?RP=643

History And Ancient Trade Of Herbal Medicines Economics Essay

Herbal medicines or Herbalism is a traditional or folk medicine practices based on plants and plant extracts. [3]. These medicines are sold as tablets, capsules, powder, teas, extracts, and dried or fresh plants. Herbal medicines is a most important part of all the alternative medicine systems including Ayurvedas, Chinese traditional medicines, Siddha, Homeopathy, Naturopathy and Native American and African medicines. [4].
WHO estimates that almost 80 % of the world population especially in developing world used herbal medicines for various aspects of primary health care. [5]. Herbal drugs fills the vacuum that is growing day by day due to ever increasing costs of conventional medications and poverty ridden developing world, most of them lives on less than U.S $10/- per day[6]. Contrary to conventional medicines, herbal medicines can be manufactured from plants and plant extracts which can be easily procured therefore much cost effective than conventional pharmaceutics thus providing an alternative means of medical treatments for almost three quarters of the world population.
India and China are the two main exporters of herbal medicines in the world accounting for almost 15% of share of world herbal market. (China-13.5% and india-2.5%) [7]. According to WHO estimates, the present demand for medicinal plants is approximately US $80 billion a year and by the year 2050 it would raise to US $5 trillion[8]. These estimates indicate huge potential for growth in this sector of economy which is still unorganized due to various reasons even unidentified.
The competition faced by the herbal drugs is stiff and ever increasing from both conventional and recently developed modalities of treatment. The economics has grown from the Adam smith’s simple definition of economics of “science of wealth” to a more complex definition of marginal economics as proposed by Lionel Robbins in 1932 which says “marginal economics applies the principal and method of economics to analyze problems faced by management of a business, or other types of organizations and to help find solution that advance the best interest of such organization”. [9, 10]
History and ancient trade of herbal medicines People have been using herbs growing around them for treatment of illnesses since pre historic times. One of the oldest evidence came from the “Ã-tzi Ice Man” lying frozen in Swiss Alps for almost 5300 years. He was found possessing two pieces of Birch bracket fungus, which he might be using to treat the whip worm infestation from which he was suffering [11].
In ancient world, probably the first documented evidence of herb use for medical purpose comes from Sumerians who used plants like caraway, thyme and laurel. Indian system of medicine, Ayurvedas, dates back to 1900 BC. [12]. Charaka and especially Sushruta described 700 medical plants in his book Sushrua Samhita. [13]. Siddha was another system of medicine which was developing in the same period in southern India (tamilnadu) [14]. Ancient Egyptian medicine also dates back to more than 1000 BC; they were expert in the use of garlic, opium, and mint and indigo among other herbs [15, 16]. Written documentation of Chinese medicine started with a mythological person known as Shennong, who according to mythology have tasted hundreds of medical herbs and poisonous plants and given his knowledge to farmers. The Shennong Bencao Jing (Shennon emperor’s classic of material medica) is considered first Chinese manual of pharmacology dating back to 1 century C.E. and contains 252 herbal prescription for various diseases [17]. Huangdi Neijing also called as yellow emperor’s inner cannon consists 81 treatises of Chinese herbal medicines in question and answers format between mythological yellow emperor and his physician Qibo[18]. The ancient Greeks and Romans also made great strides in the field of medicine and herbalism as preserved in the writing of great scientists like Hippocrates and Galan. De Materia Medica was the first European medical treatises on the use of medical plants written in Greek period. In first century AD, Dioscorides wrote a comprehensive book compiling more than 500 medical plants [19, 20]. Trading was flourishing in the ancient world with Sumerians were trading with Indus valley civilization (seals with inscribed Indus valley script found at excavation at sumeria) and people with southern part of India were braving seas to trade spices and other commodities including medical herbs with far away Greeks and later Romans.
In the medieval Europe, the monasteries have taken over the herbal medical science; they provided the medical knowledge and raw materials for the treatment of simple ailments. In contrast to the European world which was going through dark ages, the Arab world was bearing the torch of medicine, they built universities and first hospitals which were then known as Bimaristan .Al-dinawari and ibn al-baitar supplemented the earlier knowledge of materia medica [21,22] .Avicenna’s cannon’s of medicine (1025AD) was considered first pharmacopeia, he also introduced clinical trials, randomized control trials and efficacy testing [23]. One of the great reasons for the exploding growth of medical science in Arab world was their strategic location, which was almost the center of the known world and well connected to all important trade routes. One such route was silk route which connected china with rest of the world across the Thar desert. These trade routes gave the Arab physician means to get many rare plants and knowledge about medical science, which was supplemented with their own experience and thus producing some major advancement in the field of medicine.
Whereas in modern era two important events were marked, the first was the dominance of the English and publication of scientific knowledge including materia media of herbal medicine in English, the first to be published was the anonymous Grete Herball of 1526[24]. The other was the slow decline of the herbal and plant derived medicines and rise of chemical based therapeutics. This all started with “The Black death of Europe” when all the traditional medicines proved to be useless, so the scientists started exploring other fields for treating the ever increasing disease [25].
Need of herbal medicine in modern times After losing ground for almost three centuries the herbal drug are again gaining their market. Herbal drugs are now emerging as the Need of the day. Since the industry has developed from manual to mechanize to specialized format, the pace of Research and Development in drug industry has increased many folds in the recent past, but this has severely compromised the quality as well as the cost at which a drug is being produced. According to an estimate it took almost US $ 1.2 billion to bring a drug to market, with 10 yrs of effective patent time, but in the race of earning maximum profits and to earn large market share, many pharmaceutical companies are rapidly introducing new products in their product line through little R

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