Value chain overview: chips, oil, incense, perfumery, wellness

1. Agarwood Value Chain Overview

Agarwood products are derived from resinous heartwood of Aquilaria trees. The value chain spans from cultivation and resin induction to processing and high-value product creation.

Step 1: Cultivation & Plantation

  • Species: Native (A. malaccensis, A. cumingiana)
  • Planting Systems:
    • Monoculture plantations
    • Agroforestry integration (with coffee, coconut, or timber trees)
  • Key Inputs: Land, seedlings, soil preparation, irrigation, fertilizers
  • Sustainability Notes: Avoid wild harvesting; promote CITES compliance and traceability

Step 2: Resin Induction & Harvesting

  • Methods:
    • Fungal inoculation (Fusarium spp., MnO₂-enhanced blends)
    • Mechanical wounding
    • Combined biotic + abiotic stress methods
  • Resin Maturation: 2–10 years depending on method and tree age
  • Harvesting: Trees are felled or pruned for resinous heartwood extraction

Step 3: Primary Processing

  • Chipping:
    • Heartwood cut into small chips (2–10 cm)
    • Sorted by color, density, and resin content
  • Grading:
    • Superior grade: Dark, resin-saturated, aromatic
    • Lower grade: Lightly resinous; used for incense or blending

Step 4: Secondary Processing

ProductMethodNotes
Agarwood Oil (Attar / Oud oil)Steam distillation, hydro-distillation, or solvent extractionHigh-value; purity determines price; small yield per kg of wood
IncensePowdered chips or oil blended with gums & resinsWidely used in spiritual, cultural, and ceremonial contexts
PerfumeryOil fraction refined for luxury fragrancesBlended with other essential oils; used in niche/high-end perfume markets
Wellness ProductsAromatherapy oils, candles, diffusers, skincareGrowing demand in holistic wellness markets; low-volume, high-margin

Step 5: Tertiary & End-Market Applications

  • Domestic Markets: Religious, cultural, artisanal, perfumery
  • International Markets: Middle East, East Asia, EU luxury perfumery, aromatherapy
  • Market Drivers: Scarcity of wild agarwood, premium pricing, sustainability certification, traceability

Step 6: Byproducts & Circular Economy

  • Residual wood chips: Fuel for smoke, small-scale incense
  • Leaves and bark: Experimental use in herbal teas, essential oil research
  • Carbon credits: Plantation-based carbon sequestration projects add financial value

8. Value Chain Flow Diagram (Conceptual)

Seedlings / Plantation
       │
       ▼
Resin Induction (fungal/chemical/mechanical)
       │
       ▼
Harvesting (heartwood)
       │
       ▼
Primary Processing (chipping, grading)
       │
       ├─► Agarwood Chips (raw trade)
       │
       ├─► Oil Extraction (distillation/solvent)
       │       ├─► Perfumery
       │       └─► Wellness / Aromatherapy
       │
       └─► Incense (powdered or chips)

Key Observations

  • Chips: Entry-level, widely traded, moderate value
  • Oil: Highest-value product, requires specialized processing
  • Incense: Cultural and ceremonial demand; moderate to high volume
  • Perfumery & Wellness: Luxury and niche markets; high margin
  • Sustainability & Traceability: Critical for market access (CITES compliance, ethical sourcing, FSC or ISO certification)