When we asked five industry leaders how they viewed the biggest challenges the flavor and fragrance industry faces, the replies were remarkably uniform: regulations continue to reshape how business is done, pricing pressures on raw materials continue, and consolidation creates problems and opportunities.
Both Philippe Maubert, CEO of Robertet, Raymond Hughes, president, ingredients, flavor division at A.M. Todd, agree that regulations top the list of industry challenges. To drom president Ferdinand Storp, the issue is global harmonization. “At the moment there is not a worldwide system of rules,” he says. “The world is global, so when one decision is made it affects the [entire] world. This will affect our whole industry; it will also affect our clients.”
T. Hasegawa president and CEO Tokujiro Hasegawa specifically cites the need for Japan-only flavor and fragrance ingredients to be approved globally. He says, “With the assistance of the International Organisation of the Flavour Industry (IOFI) [in Brussels, Belgium] and the Flavor and Extract Manufacturers Association (FEMA) [in the United States], the Japan Flavor & Fragrance Manufacturers Association (JFFMA) is currently conducting an extensive program to ensure the safety of these … ingredients and get them to certified as FEMA GRAS.” Hasegawa also mentions the need to enhance global harmonization of chemical classification and labeling. The program, he says, “addresses classifications of chemicals by types of hazard and proposes harmonized hazard communication elements, including labels and safety data sheets. It aims at ensuring that information on physical hazards and toxicity from chemicals be available in order to enhance the protection of human health and the environment during handling, transport and use of chemicals at the national, regional and worldwide level, an important factor for trade facilitation.”
Hugo Bovill, CEO of Treatt plc, says, “The biggest challenge facing the flavor and fragrance industry in the next 12 months will be the increased raw material costs due to the climate changes caused by global warming and the required REACH legislation from the EU.” Maubert concurs, and Hughes adds that costs will also climb “due to competitive crops, climate changes and petroleum-related issues.”
“Consolidation is both a danger and a chance,” says Storp. “Monopoly reduces choice, and these big conglomerates become very powerful and can rule whole markets. On the other hand … size and creativity clash. You can’t maneuver such a big machine quickly and efficiently.” Bovill agrees that continued consolidation could be a challenge, but Storp explains that while larger companies will dominate certain markets, smaller entities will find opportunities in smaller, emerging regions such as Asia, Latin America and the Middle East. “There are many opportunities to explore,” he says.
Hughes sees all of this consolidation dovetailing with the changing way client companies do business. He notes “limited new product introductions by consumer packaged goods [companies] due to a high failure rate as well as the significant expense of creating new brands” as particular obstacles for the industry. In this environment, Maubert has a very clear formula for success: “The industry must continue to focus on those areas that our clients most depend upon us to deliver, which are creative flavor and fragrance compounds that will help them win in the marketplace. And in this age of growing food safety concerns, the industry must also maintain a clear commitment to delivering only the most consistent and quality products.”