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.
Flavor and functional fragrance sales have normally been relatively immune to recessions, but the current situation will undoubtedly reduce the frequency of new launches and shift the focus of some customers to cost cutting. This is not necessarily a bad thing. Most formulations have way, way too many ingredients. Many have more than a few “Friday afternoon” ingredients —which can easily be seen in retrospect to have a malign influence. “Simplify and add more lightness” to quote a namesake, Wilbur Wright.
The recession will probably also hasten the segmentation of the flavor business into a high-end, quality driven sector and a low-end “bang for the buck” sector. The challenge for flavorists will be to create individual, economical but still characterful flavors in the face of sensory panels that tend to shift every flavor in the same boring direction. A flavor that offends nobody will often score best in panel tests but, in equal measure, it will often fail to inspire anybody to remember it and want to buy it again.
Conventional wisdom would suggest that fine fragrances suffer most in an economic downturn. This is partly true, but I suspect that many consumers value these "little luxuries” particularly highly in hard times.
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 more than 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.
This does not necessarily denote the gradual demise of ingredient research. Our industry will learn from the pharmaceutical industry. Combinatorial chemistry and rapid screening assays will expand from their current limited niche in the area of basic tastes to the far more promising area of aroma research. Most flavors and fragrances actually derive the vast majority of their raw material costs from a small number of ingredients in a very limited range of aroma profile categories. Imagine if combinatorial chemistry enabled us to discover alternative novel ingredients that were many times more cost effective than the ingredients we traditionally use! Such discoveries could be protected effectively by patents and would enable the discoverer to truly corner the market in a broad range of flavor and fragrance types.
This type of research could obviously put a successful company in a commanding position to win high-volume, cost-driven projects. The same approach could also be used to discover more stable alternatives to many interesting ingredients whose use is currently limited by application or storage considerations. It could also help mitigate the environmental impact of the fragrance business by discovering stronger, more biodegradable alternatives to some of the high-volume chemicals.
Sensory science has much to offer and is currently occupied, for the most part, in little more than validating basic research or in relatively simplistic evaluation of new flavors and fragrances. There are many, much more interesting areas that would benefit from sensory research. I think we can expect some progress during the next decade in areas such as the various preferences “hard wired” during childhood.
Training, or rather the lack of it has been the Achilles heel of our industry for many years. For many companies it is seen as an optional luxury and the first budget to trim in hard times. Most new recruits to our industry are only trained sporadically and find it temptingly easy to retreat to the relative safety of deriving new creations from the existing repertoire. This decreases the capability spectrum of F&F companies and reduces their competitiveness.
At both ends of the cost scale consumers will continue to gradually demand more natural, characteristic products. This will generate challenges for flavorists and perfumers and it will also provide opportunities for fragrances to benefit from the work done in flavors. It is never easy in any company, where flavors and fragrances are usually two separate profit accountable worlds, to encourage open sharing of ideas. Training in general, including cross-training of perfumers and flavorists, is a large part of the answer. An industry-wide training program is the most practical solution.