Flavors & Fragrances

US demand to rise 3.7% annually through 2012

Demand for flavors and fragrances in the US is forecast to grow 3.7 percent per year to $5.3 billion in 2012. Increasing consumer interest in natural ingredients, which are generally more expensive than their synthetic counterparts, will support value gains. Also, trends toward more complex and exotic flavors and scents will boost demand for new flavor and fragrance blends. Growth in fortified food, nutraceutically enriched beverages and cosmeceuticals such as anti-aging creams will provide opportunities for flavors and fragrances that enhance the sensory appeal of these products while masking the unpleasing taste and aroma of vitamins, minerals, bleaches, antioxidants and other added active ingredients.

Cosmetic and toiletry market to grow the fastest

Through 2012, the cosmetic and toiletry market is expected to record the most rapid advances. Skin care products are expected to provide the best opportunities for growth in the cosmetic and toiletry market, reflecting expansion of the skin care industry itself, as middle-aged baby boomers and older adults seek anti-aging products and manufacturers continue to target growth segments with products designed for men, teenagers and infants.

In contrast, demand for fragrances in soaps and body washes is expected to increase slower than in the rest of the cosmetic and toiletry market, restrained by market maturity in the large bar soap segment. Nevertheless, demand will be supported by the incorporation of valueadded ingredients, including antibacterial agents that mask unpleasant odors.

Furthermore, fragrances will continue to play an important role in product differentiation, aiding demand growth.

Environmental fragrance goods will also experience healthy gains through 2012, driven by advances in aromatherapy and household applications, as well as consumer desires for more sophisticated and blended fragrances. Candles and a host of innovative air freshener products designed to control offensive odors or simply provide a pleasant smell in the home and other living and working areas will spur demand for fragrances. Increasingly, these products are not only being used to mask unpleasant smells, but also to create a certain ambiance through scent and provide additional benefits such as stress relief, relaxation or energy boost.

Food will remain the largest market for flavors and fragrances, based on the widespread application of flavor materials in processed food, dairy and bakery products, candy and confectioneries, and other items such as breakfast cereals and bars, meat and seafood products, snack food and meal supplements/replacements.

The further expansion of fortified food -- as well as beverages -- will provide opportunities, since flavors are often used to cover up the off-tastes of vitamins, minerals, antioxidants and other additives.

Essential oils, natural extracts to see strong gains

Demand for essential oils and natural extracts is expected to see strong gains, spurred by consumer interest in natural ingredients. Essential oils have especially favorable prospects in food, beverages, cosmetics and toiletries and aromatherapy products, where the ""natural"" label is preferred by consumers. Market value growth will be supported by the relatively high cost of essential oils. However, the development of synthetic alternatives with improved performance and lower costs will continue to put pressure on essential oils, particularly in the industrial fragrance sector, which is highly competitive and a large user of synthetics.

Study coverage

This new Freedonia industry study, Flavors & Fragrances, presents historical demand data (1997, 2002, 2007) and forecasts for 2012 and 2017 by market and product.

The study also considers market environment factors, evaluates company market share and profiles industry competitors.

Freedonia's methods involve:

• Establishing consistent economic and market forecasts
• Using input/output ratios, flow charts and other economic methods to quantify data
• Employing in-house analysts who meet stringent quality standards
• Interviewing key industry participants, experts and end users
• Researching a proprietary database that includes trade publications, government reports and corporate literature

This study can help you:

• Determine your market & sales potential
• Learn more about industry competitors
• Assess new products & technologies
• Identify firms to merge with or acquire
• Complement your research & planning
• Gather data for presentations
• Confirm your own internal data
• Make better business decisions

Introduction

The Freedonia Group Incorporated is a leading international industry study/database company. Founded in 1985, Freedonia now publishes over 125 studies each year, covering areas such as building materials, chemicals, health care, packaging, pharmaceuticals, plastics, security and many other industries.

Studies cover entire industry sectors as well as key niche markets. Each study includes valuable intelligence such as growth markets and products, market share, product and market analyses and forecasts, and company profiles.

Studies specific to the United States also place the industry into its international context.

This study analyzes the US market for flavors and fragrances, including flavor and fragrance blends, essential oils and natural extracts, and synthetic and natural aroma chemicals. To avoid double counting, the value of essential oils and aroma chemicals used in the production of finished flavor and fragrance blends is included in the latter categories. The outlook for major markets is also discussed, with a focus on food, cosmetics and toiletries, cleaning products, environmental fragrance goods and beverages, among others. Although they are important flavoring agents, flavor enhancers, artificial and natural sweeteners, and spices are not included in the scope of this study. However, in some instances this report includes mixtures of flavor chemicals that contain the aforementioned items.

The study places the flavor and fragrance market in context through an in-depth overview of market environment conditions. In addition to providing economic background, the market environment section examines historical market trends, pricing patterns, environmental and regulatory issues, and discusses international activity and foreign trade. Finally, the study is concluded with an analysis of the industry structure, market share and the key industry competitive variables, as well as profiles of representative companies within the industry.

Historical data (1997, 2002 and 2007) and forecasts to the years 2012 and 2017 are provided in current dollars unless otherwise noted. As used in this study, the term shipment includes all production from US manufacturing sites that is then shipped to both US and foreign markets. The term demand -- used interchangeably with market, sales and consumption (including both merchant and captive consumption) -- is defined as all shipments from US plants, plus imports, minus exports. Demand is presented at the manufacturers' level. Tabular details may not add to totals due to independent rounding, and some ratios are based on unrounded numbers. In addition, ratios may be rounded for the sake of clarity.

Throughout the study, demand for flavors and fragrances is related to various indicators for comparative purposes and to facilitate further analysis.

Macroeconomic and demographic indicators used in this study were obtained from The Freedonia Group Consensus Forecasts dated August 2008. Because of the Bureau of Economic Analysis' use of chain-weighted price indexes, inflation-adjusted Gross Domestic Product components (2000 dollars) do not necessarily add to the total.

Information and data for flavors and fragrances were obtained from a variety of primary and secondary sources, including government and trade associations, industry participants, online databases and other Freedonia studies. Primary information was gathered through consultations with personnel of participating companies. Secondary and background data were obtained from various government and trade publications, including Chemical & Engineering News, Chemical Week, Food Processing, Food Technology, Household and Personal Products Industry (HAPPI), ICIS Chemical Business and Perfumer & Flavorist. Corporate annual reports, SEC Form 10-K filings, product literature and other company information were also used in framing the industry and market environments and as input for market size assessments.