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Current economic conditions and our customers’ instinct to safeguard themselves through the current recession will have the greatest impact on the flavor industry in the months to come. Frugality will be the key driver. And frugality, 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 too 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.
As 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 potential for long-term success. The burden of investing in product development, market research, quality assurance, and regulatory staffs long ago began to shift from the consumer packaged goods (CPG) companies to their suppliers, including flavor houses. And while it is not likely that CPG companies will ever grow completely dependent upon their suppliers for these resources, their reliance has and will continue to grow. Therefore, it will be essential for flavor houses to continue to invest in staff to support these disciplines and have as complete an understanding as possible of the challenges our customers face.
Finally, the flavor industry must formulate flavor profiles and flavor systems that address the well-publicized trends of age segmentation and convergence of ethnic populations in order to be best prepared for future on-trend new product launches. As CPG companies develop products to target these trends, the flavor industry must develop flavor profiles to satisfy Generations X and Y, baby boomers, and pre-baby boomers. And they will do so in the context of the ongoing melding of cultural diversity. Flavors will, therefore, need to be formulated to address such market paradoxes as tradition versus novelty, comfort versus adventure, and in some cases, indulgence versus health.