The deal reflects mounting concern regarding the sustainable sourcing of the popular ingredient which is severely threatened and nearing extinction in its natural environment.
New product range
Lush will create a new product range based on the sandalwood sourced from Australian company TFS Corporation.
TFS will begin supplying Lush when the first commercial quantities of oil are available from the plantation, which the company expects to occur by 2011.
Lush will purchase a minimum of one tonne of oil from TFS and a maximum of 15 per cent of the company's production every year for five years.
Plantation to oil production
The agreement reflects TFS' aim to become a supplier of the finished ingredient in an attempt to cash in on the significant economic benefits the oil presents.
"The supply agreement with Lush demonstrates that we are progressively putting in place the necessary steps to make the transition from pure plantation manager and owner, through to a vertically integrated oil producer with blue chip customers in the global fine fragrance and cosmetics industry," said TFS executive chairman Frank Wilson.
To this end TFS signed a collaboration agreement with French essential oils and extracts business Albert Vieille in summer 2007.
Under the agreement Albert Vieille will provide technical advice and support regarding the distillation of sandalwood oil in return for the right to purchase up to 25 per cent of TFS' oil when it comes to market.
Indian sandalwood has long been used as an ingredient in the perfume industry; however the plant is now under threat and appears on the World Conservation Union's (IUCN) threatened species list.
TFS cultivates the Indian sandalwood in plantations in Western Australia, which it argues makes the commodity sustainable and will ultimately protect the plant from over harvesting in its natural environment.
According to TFS, Lush's ethical and socially responsible standards are in agreement with TFS' commitment to the environmentally sustainable development of the plantations.