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In “The F&F Horizon: 2009 and Beyond,” a number of F&F experts discussed their views on the state and future of the industry from the vantage point of formulation to raw materials to the marketplace. (Perfumer & Flavorist magazine, January 2009, Page 45.) In this week’s edition of P&Fnow, we present the first of several extended commentaries from our panel of experts and industry voices.
No decade in the history of our industry has unfolded entirely according to expectations, so predictions are foolhardy. That said, I suspect the key drivers that will influence F&F over the next few years will include the economy, R&D and industry training.
The economy has dominated the headlines. Industry consolidation and market segmentation will both be influenced by a severe recession. Current wisdom dictates that consolidation of the flavor and fragrance industry still has a long way to go. I suspect this is greatly exaggerated. Many acquisitions in recent years have not even remotely met their financial targets and in a tougher financial climate it will be harder to persuade wary bankers to provide finance.
Our industry has been obsessed in recent years with the need to be core listed by major customers. 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 unfocused 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’s 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.