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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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When asked about the challenges facing the industry, Jack Corley, executive vice president of Trilogy Fragrances, cites Whole Foods Market’s recent sales and earnings woes: “[It] underlies the environment many companies find themselves in today—that is, shrinking income statement values and financial liquidity. Industry after industry, company after company today is faced with this same dilemma. Many are fighting daily to survive. Many will not survive.”

Willy Palmer of Flavor & Fragrance Specialties adds, “[F]rugality, or maybe better said, fiscal discipline, for those companies with access to capital, suggests that our customers will be limiting their new product introductions since the investments needed to market those products are far riskier than investing in the marketing of existing products that have a proven track record in the marketplace. And if new product introductions are limited, it stands to reason that so are the opportunities to supply new flavors. The alternative growth opportunities for the flavor industry during this economic downturn will be driven by an ability to provide an economic benefit to customers rather than an ability to provide on-trend flavor profiles or unique delivery systems for those flavor profiles.”

The drom team also finds opportunity in this crisis: “There will be some negative consequences, but actually there could also be some positives. The concept that less is more will be a positive. Manufacturers will offer less expensive, smaller sizes of products in order to accommodate consumers during this financial crisis. The consumers are changing right now because of the crisis. … They choose a product because they really need it, it’s good for them, it’s good for the planet and it’s not polluting [the environment]. This crisis changes our thinking process. On a fine fragrance side, we have more and more launches every single year. Many of them include flankers or re-interpretations. It seems logical that because of the financial crisis there will be fewer launches in the [coming] years, and instead they will be more interesting.” Corley concludes, “Plan, plan, plan for the future. The economy will recover and when it does, you want to be ready to move quickly. Most personal care product development cycles can take six to 18 months—probably the length of this economic contraction!”

Meeting Customer Needs

“CPG companies continue to increase their dependence on flavor company product development resources,” says Hughes. “As a true product development partner, suppliers are asked to develop and even produce market-ready products that can be adopted quickly into the CPG distribution system.”

Willy Palmer of Flavor & Fragrance Specialties adds, “As the global economic conditions improve, the flavor industry must be prepared to absorb the increasing demands of its customers and be able to address the continuing evolution of demographic trends, namely the aging and growing diversity of populations. Individual flavor houses must have a well-established infrastructure to have the potential for long-term success. The burden of investing in product development, market research, quality assurance, and regulatory staffs has [long ago] begun to shift from the CPG companies to their suppliers. … Their reliance has, and will continue to grow. Therefore, it will be essential for flavor houses to continue to invest in staffs to support these disciplines and have as complete an understanding as possible of the challenges our customers face.”

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