SCUP Report

Table of Contents

Abstract

The production and use of flavors and fragrances on an industrial scale started in the nineteenth century with the isolation of single chemicals responsible for the characteristic aroma of natural products. The synthesis of aroma chemicals that reproduced the characteristic odor and taste of natural products became commonplace and gave rise to a new branch of chemical specialties. The rapid expansion of the worldwide flavor and fragrance (F&F) industry in the last 100 years has been driven by the demand for a bewildering array of consumer products that contain flavors and fragrances.

The flavor industry developed in Europe and later was established in the United States. From Europe, essential oils as well as compounded flavors and fragrances were exported overseas as countries opened up commercially. In the early twentieth century, many of the larger flavor houses established their own local manufacturing facilities in order to better serve the growing industry.

Flavor and fragrance compositions are the most numerous single group and highest-value intentional additives utilized by the food and personal care industries, accounting for about 72% of the total global value of F&F products. They are also the most profitable and show the highest rate of growth in recent history among food and personal care product ingredients. Aroma chemicals account for 16% of total world value, and essential oils/natural extracts for 12%.

The following pie chart shows world consumption of flavor and fragrance products:

During the past ten years the industry has restructured, and about fifteen large companies have emerged as the dominant players in the F&F industry worldwide. Today, these companies operate on a multinational level and account for over two-thirds of F&F product sales worldwide. Moreover, they introduce most product innovations and creative developments that are associated with the launch of fine fragrances anywhere. This concentration into fewer large companies is continuing with several recent mergers of leading companies.

Europe, and especially France, has been the traditional center for perfumery and aroma raw materials, and the spice houses in the United Kingdom and the Netherlands were the original centers for flavor production. After World War II, the United States emerged as the production leader and the most important consumer in the F&F industry. Today, Western European F&F companies have regained leadership and Japan has become an important participant. Also, China, India and Singapore have become important sources of aroma chemicals, and Brazil for citrus-based products. It is unlikely that the current industry structure will undergo significant changes in the foreseeable future.

The demand for F&F products is fairly mature for most applications in the developed countries, and the potential for growth can be identified only in several expanding economies that include countries in Eastern Europe, Asia Pacific, and especially China, Brazil and India. Although the outlook for the F&F industry as a whole remains positive, the results may vary depending on the region.

Growth is likely to favor large, multinational, innovative, and financially strong F&F houses. Demand for F&F compositions is derived from demand for the food and consumer products that use them, whereas consumption of finished products is directly related to per capita GNP. The low GNP of developing countries indicates a large potential for additional F&F product sales that will likely parallel the rate of economic development for these regions. The sales volume of F&F products may increase at up to 6–10% per year in some developing countries, such as China and India.

Growth is forecast at 3–4% per year, on average, to 2015. While fragrances for detergents, household products and industrial uses are expected to continue their steady growth, flavor compositions appear well-positioned for good growth because of strong demand in developed countries for flavorful, wholesome and convenient-to-prepare processed foods. Also, the strong consumer preference for natural flavors and even fragrances increasingly favors consumption of more expensive essential oils and extracts of natural origin.