The flavor industry faces the growing commoditization of flavors. As industrial clients push for price reductions, profit margins shrink. A key strategy counteracting this phenomenon is the shift from merely providing “organically equivalent” flavors to delivering value-added solutions to customers via ingredients, delivery systems and a wider range of services. Recent moves by Wixon (St. Francis, Wisconsin) provide a window into this shift in thinking.
“Companies that provide [value-added] flavors and flavor systems—specifically in the meat and protein category—have found very little downturn in the strength of their product line offerings and margins, if you can translate margins into success,” says Wixon president and CEO Peter Gottsacker, adding that he sees growth in new SKU development for value-added flavors. “There’s very little downturn in margins,” he adds. “Little downturn in sales and margins tells me, in a recession, there’s something going on there … We can see it in our business, and I can tell you we’re not alone in that category.”