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The Fragrance Horizon: 2009 and Beyond

By: Jeb Gleason-Allured, Editor, Perfumer & Flavorist magazine
Posted: January 23, 2009, from the February 2009 issue of GCI Magazine.

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“Our industry has been obsessed in recent years with the need to be core-listed by major customers,” Wright continues. “Mergers and acquisitions have been seen as a good way to ensure inclusion on core lists. Core listing makes good sense for customers. Nobody can deal effectively with unfocussed submissions from dozens of suppliers. However, the opposite extreme is equally unattractive. All F&F suppliers have highly characteristic competencies and tend to formulate within a familiar comfort zone. No customer wants to be limited to one or two ‘take it or leave it’ choices. [It is] best to have a core list of three or four suppliers with an additional couple of challengers. This provides plenty of incentive for the suppliers and plenty of choice for the product developers. If our industry consolidates much further it will be impossible to have this level of relevant choice.”

Raw Materials

“During 2008, the flavor and fragrance industry saw a huge price rise in many of the commodities that are basic to our business,” says Hughes. “This, coupled with historic levels of energy costs, created margin erosion that was difficult to gain back through sales price increases or even a change to alternate sources. Finally, [there are] issues related to off-shore supply of certain materials and some key customer policies against the use of them. In 2009, the challenge to assure a stable sustainable supply of quality raw materials at a reasonable price will remain a priority.”

A group report from drom’s international marketing staff and perfumers Pierre Gueros, Delphine Jelk and Kevin Verspoor adds, “A negative consequence of the [current economic] crisis will be that, on the raw material side, there will be less development of new chemicals because of the price of testing.”

Wright adds, “Most F&F companies assume that raw material R&D in both flavors and fragrances will continue for many years along relatively conventional lines—ever more detailed analysis of nature and ingenuity in organic chemistry. These approaches still appear to be delivering the goods; GRAS 23 alone added over 170 new flavor ingredients! Closer examination tells a different story. Many of the additions are not exactly new, and many more simply represent small variations in structure. I suspect that each truly novel ingredient will become more and more difficult to find and, sadly, less and less game changing in its impact.”

On the other hand, Hughes presents some silver lining. “The major consumer CPG companies continue to search for ways to differentiate their brands from their competitors and private label products,” he says. “Flavor suppliers, for example, can assist with this effort by combining unique technologies such as taste modifying materials with proprietary encapsulation techniques to ‘insulate’ the customer brand from competition.”

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