2016 Flavor & Fragrance Leaderboard


The past year has seen changes in the industry influenced by regulation developments, mergers and acquisitions, sustainable initiatives and expansions into key growth markets. This year’s leaderboard features interviews from company executives at leading F&F houses who have expressed the importance of long-term sustainability initiatives as the foundation of successful R&D efforts. Expansions into cosmetic and nutritional actives through M&As has broadened product portfolios and addressing consumer needs for multifunctional, healthy products.

Biotechnology processes, such as yeast fermentation, and marine peptides are growing in popularity for companies which are looking to expand product portfolios and address the health and wellness megatrends. Companies are challenged with maintaining nutrition, while stabilizing and improving scent and taste in many of these applications.

In 2016, the global fragrance and flavor market is expected to total $26.5 billion

According to Leffingwell, the overall value of the industry has declined from $19,209.4 million in 2014 to $18,662.2 million in 2015, impacting the top 11 companies’ sales; however, overall market share is up from 77.2% in 2014 to 77.4% in 2015. Asia and the Middle East continue to evolve as mature markets, while Latin America offers opportunities for companies to invest in facilities and technologies to strengthen its emerging market status. With the rise of international mergers and acquisitions, global food trends are also an influence in flavor development, bringing the world’s most popular flavors to new corners of the globe.

This is only the beginning. In 2016, the global fragrance and flavor market is expected to total $26.5 billion (www.freedoniagroup.com). By 2019, the F&F market could reach $35.5 billion with a compound annual growth rate (CAGR) of 5.8% (www.bccresearch.com). The North American F&F market is expected to reach $9.9 billion growing at an estimated CAGR of 5.7%, from 2014 to 2019 (www.bbcresearch.com). Not far behind is Western Europe’s F&F market value, which is estimated to grow at a CAGR of 5.8% to $9.9 billion from 2014 to 2019. With a flourishing middle class and increased income, Asia’s flavor and fragrance market is expected to reach $9.6 billion by 2019. As the global F&F market continues to grow, companies are expanding innovation in R&D and sustainability initiatives to prepare for the future.

*A Note on Rankings

2015 sales: CHF4,396 million/$4,575.5 million
Estimated market share: 19.0%
CEO, Executive Committee Member: Gilles Andrier

2020 strategy launch

Maintaining leadership

Customer focus

Innovation opportunities

Looking to the future


Creating value



Stimulating continual creativity

Industry changes

Partnering with our customers

Industry changes

Innovation drivers

Where to grow?

Naturals, health and well-being

Integrated solutions

Small companies

Investment landscape

bTasteSolutions is a registered trademark of Givaudan.


Estimated 2015 sales: ~CHF3,020 million/$3,143.3 million
Estimated market share: 13.0%
CEO: Gilbert Ghostine

  • Strengthened our No. 1 position in the industry in fine fragrance
  • Received numerous accolades for award-winning creativity:
    • Patrick Firmenich, our vice-chairman of the board inducted into the Fragrance Foundation’s Circle of Champions.
    • Master perfumer Annie Buzantian received the Fragrance Foundation “Perfumer of the Year - Lifetime Achievement Award”.
    • Nathalie Lorson named “Perfumer of the Year” in France and Italy.
  • Rethought the future of food with our fourth annual culinary event working hand-in-hand with world-class Michelin-starred chefs and leading scientists and academic experts.

"We believe there is an important role for flavor companies to play in helping to improve the nutritional profiles of food and beverages in today’s world."

  • Demonstrated our leadership in White Biotechnology, as we launched Ambroxc building on the success of Clearwoodd, the industry’s first white biotechnology ingredient.
  • Advanced our position in health and wellness, by launching 3D Dairy, our new line of advanced flavor systems for dairy applications, enabling sugar and fat reduction without compromising mouthfeel and taste.
  • Set industry-leading environmental goals for 2020 to advance our vision to become a carbon neutral company;
  • Achieved a perfect score of 100A, in this year’s CDP Supplier Climate Performance Leadership Index (SCPLI), comprising the world’s top 121 suppliers in greenhouse gas (GHG) emission management;
  • Launched our Naturals Together campaign (#NATURALSTOGETHER), a responsible sourcing initiative that brings together many of the world’s best natural ingredients suppliers to shape and protect the future of naturals.
  • Joined the conversation at COP 21, where we announced our participation in the Livelihoods Fund for Family Farming, Livelihoods 3F to scale up our commitment to responsible sourcing.
  • Confirming our leadership in sustainability—Firmenich was elected to co-chair the World Business Council for Sustainable Development (WBCSD) Sustainable Lifestyles Cluster.

Customers at the heart of our success

Reinventing hygiene

Enabling healthier food choices

Becoming carbon neutral

Shaping the future of naturals

Scientific excellence

World class leaders to drive transformational agenda

cAmbrox is a registered trademark of Firmenich
dClearwood is a registered trademark of Firmenich.


Research & Innovation Growth Opportunities


Addressing the world’s biggest challenges

Driving sustainable lifestyles

Flavors Growth & Innovation Opportunities

Partnering for great taste

Sustainable protein opportunities

Naturals and side-streams


New York
2015 estimated sales: $3,023.2 million
Estimated market share: 12.5%
Chairman and CEO: Andreas Fibig

“We are pleased with how we started 2016, in light of the volatile global operating environment and against our strongest year-ago growth comparison,” said Andreas Fibig, chairman and CEO, IFF.

IFF’s consistent double-digit growth in sales can be attributed to the company’s balance between pursuing mature with emerging markets, as well as establishing business with local/regional customers and with global customers. The company experienced an 11% increase in Q1 sales with a strong growth in fragrance. Currency-neutral sales are strong, growing to 6%.

The New York-based company’s first quarter showed high single-digit sales in encapsulation led by fabric care and toiletries. The company also commercialized two new flavor molecules and one natural sweetness modulator, strengthening its savory, dairy and beverage portfolio to grow into strong double-digits. All regions reported an increased growth with North America leading a double-digit increase followed by high single-digit growth in Latin America. Overall, flavor sales showed a decrease of 1% to $372.5 million.

Following the company entrance into the cosmetic actives division with the acquisition of Lucas Meyer, IFF was awarded the silver innovation award at In-Cosmetics for the ingredient, Miniporyld, an eco-friendly and preservative-free natural pore-minimizer for skin care products. Fragrance ingredient sales, including those related to Lucas Meyer, grew to 15%; while overall sales reported a 3% increase to $410.8 million.

IFF continues its pursuit for eco-friendly and sustainable initiatives this year and received a gold rating by EcoVadis for its flavors creative center in Jakarta, Indonesia. As part of the company’s 2020 goals, the company has already surpassed its water reduction goal of 25%, increasing the goal to 50%. The company also earned a perfect score of 100 and an A by the CDP Climate “A” List for its action plan to alleviate climate change.

Finally, the company has also announced its partnership with Vapor Communications this year to broaden its fragrance portfolio into digital scent delivery mechanisms. By combining 12 of IFF’s scent creations with Vapor Communication’s proprietary scent delivery systems, scents can be delivered via digital messages using personal electronic devices for air care use.

d Miniporyl is a trademark of IFF.


Holzminden, Germany
2015 sales: €2,601.7 million/$2,887.2 million
Estimated market share: 12.0%
CEO: Heinz-Jürgen Bertram

The goal is clearly formulated: Symrise wants to further increase its success in the coming years. Not on its own, but closely and transparently with customers, suppliers, partners and its employees. Here, Dr. Heinz-Jürgen Bertram, CEO, describes how the company plans to sustainably and profitably achieve these goals.

Perfumer & Flavorist: What were Symrise’s growth opportunities in the past year?

Bertram: We substantially expanded our competencies in the past year and tapped into new growth fields. Now we must focus on connecting these new application areas with the traditional ones. That is why we are pushing interconnectedness across all levels—with our customers, suppliers and of course, within the company. We also managed to expand our market position in every region and have further built upon the extensive trust that customers already had for us. Here, we always keep the twin ideals of sustainability and economic success in view. At the same time, we bolstered our portfolio, both in terms of content and regions, so that we can better react to the political and economic uncertainties in some countries. Last, but not least, we strengthened our innovative abilities via cooperation within the company and with external partners.

P&F: How else is Symrise expanding its portfolio?

Bertram: Not too long ago, we were strictly considered a supplier of fragrances and flavors. Today, we cover a much larger spectrum of products that optimally complement one another. With the acquisition of the French company Diana, with whom we have just completed our first full fiscal year together, we were not only able to increase sales, but also expanded our range of offers to cover the entire family. By adding baby food and key ingredients for pet foods, we now serve completely new consumer groups and market segments. We are also using Diana’s broad range of natural, sustainably grown raw materials for many joint projects.

P&F: With the acquisition of U.S. company Pinova in 2015, how will Symrise expand its flavor and fragrance segments?

Bertram: We now have access to an extensive palette of fragrance materials made from renewable resources. It also gave us entry into new product areas. At the same time, we could strengthen important competencies, like oral care, where we were already the established market leader. We also tightly link these new developments to our more traditional segments. For instance, we combine active ingredients for cosmetics with our perfume compositions, as well as probiotics with oral care products, or use functional ingredients in foods. All these combinations open up growth opportunities for us. Here, we rely on the innovative strength of our employees, who cooperate across departments, divisions and continents. This increases our diversity and lets us continue growing faster than the market for fragrances and flavors.

P&F: In your opinion, how do these expansions within the company connect you with your customers?

Bertram: We have always maintained a trusting relationship with our customers. These companies produce foods, perfumes and cosmetics with our products. In recent years, we have worked even more closely with them. This means engaging with them at even earlier stages in projects and developing solutions in even closer cooperation. This starts at the innovation phase and continues well beyond the stage of process optimization. Furthermore, we have expanded our market research so we now better understand consumer wishes and needs. The result is more refined solutions in product development.

P&F: As sustainability continues its influence on the industry, how do you balance sustainable initiatives with economic success?

Bertram: By constantly assessing every step along the value chain in view of this aspect. That starts with the raw materials. We source them from around the world and often from less developed nations. Take vanilla, for example. Here, we ensure that the farmers are paid a fair price for their goods and that environmental aspects are considered in the growing process. We also ensure that absolutely no child labor occurs. Over the past 10 years, we have been committed to improving education and healthcare in Madagascar, where our vanilla is grown. We have established production facilities there that meet the environmental standards of the developed world. More than 30,000 people depend on Symrise for their livelihood there. Something similar is being developed in the Amazon region in Brazil. We established a site in the rainforest that researches new, sustainable raw materials for perfumes in close cooperation with Brazil’s top cosmetics manufacturer Natura. At the same time, many families in the region are benefiting from our commitments there.

P&F: What are Symrise’s goals for the next several years? How do you plan on achieving them?

Bertram: We want to continue achieving sales and earnings growth between 5% and 7% and a profit margin between 19% and 22% through 2020. These are ambitious goals. Achieving them will require us to continue building on the three pillars of our corporate strategy: growing together with select customers and in clearly defined markets, improving the efficiency of our processes and sustainably expanding our portfolio areas wherever this makes sense. Furthermore, we will reduce our CO2 emissions, wastewater and other sensitive wastes by a third through the constant refinement of our processes by 2020. We have multiple teams that are focused on achieving these goals. The international non-profit organization Carbon Disclosure Project had good reasons for ranking us as the leading company in the sector last year. It placed us among the top 100 companies in the world for our transparency and activities in this area.


2015 sales: ¥141,660 million/$1,170.5 millionf
Estimated market share: 4.9%
President and CEO: Satoshi Masumura

This year, the Japan-based company expanded its natural ingredients flavor and fragrance portfolio with the acquisition of U.S.-based Centre Ingredient Technology, Inc. (CIT). Using biotechnology processes, CIT is a producer of natural F&F ingredients and a supplier of specialty ingredients for food, beverage and cosmetics.

The company also partnered together with Evolva to strengthen R&D efforts through fermentation technologies in F&F ingredient production. The partnership, which cost Takasago CHF 1 million, entails a multi-year R&D contract to collaborate on the development and optimization of yeast strains—strengthening both company’s sustainability initiatives.

fReporting period is between April 1 and March 31


Le Bar-sur-Loup, France
2015 sales: €947.6 million/$1,051.6 million
Estimated market share: 4.4%
President and CEO: Jean Mane

By continuing to invest in R&D, which supports Mane’s biotechnology and encapsulation capabilities, the French company has grown in sales from e769 million/$1,022.1 million in 2014 to e947.6 million/$1,051.6 million in 2015.

Asia continues to be an area of growth for the French-based company, following the company’s 2015 expansion in Myanmar to produce flavors and fragrances for all applications. In August 2015, the company expanded its offices into Vietnam, investing in the region’s high growth flavor market. In December 2015, its R&D division opened its doors in Cibitung–West Java, Indonesia, which will produce fragrance and liquid flavors and will also support marketing, sensory analysis and administration teams. The 5,000 square meter close by in Cikarang (Jakarta area) manufacturing plant will produce powdered items and savory development.


Haifa, Israel
2015 sales: $872.8 million
Estimated market share: 3.6%
Chairman and CEO: Ori Yehudai

Frutarom jump-started 2016 with the acquisition of Austrian savory flavor company, Wiberg, following a series of acquisitions in 2015, which include Taura Natural Ingredients Holding Ltd., Foote & Jenks, Nutrafur and Sonarome Private Ltd.

“In the past four years, we have nearly doubled our sales while more than doubling our profits. The acquisition of Wiberg which joins the 12 acquisitions we made this year already brings us to an annual rate of USD 1.1. billion in sales,” said Ori Yehudai, president and CEO, Frutarom.

As part of the company’s 2020 growth plan, the Israel-based company has focused on acquiring specialty ingredients in the food and beverage sector. As health and wellness continues to root itself into consumer and customer expectations, Frutarom continues its pursuit for natural and functional ingredients. These endeavors are reflected in the company’s acquisitions throughout 2016, which includes Extrakt Chemie and Grow Company Inc., expanding Frutarom’s portfolio into plant-based enzymes for pharmaceutical applications. With over 30 acquisition in the past five years, the company plans to reach over $1.5 billion sales by 2020.

Perfumer & Flavorist: The past year has seen changes in F&F regulatory, M&As and sustainability. As companies offer their own color to the evolving landscape, what are the current challenges Frutarom is addressing to improve its portfolio and the industry?

Yehudai: In recent years we have witnessed growing consumer awareness and intensified demand for transparency by food and beverage companies. This, along with a growing preference by consumers for more natural and clean label products and their willingness to try out new food products, has brought about changes in the regulatory landscape of the food and beverage industry which directly affects Frutarom and its peers. Fortunately, Frutarom recognized this trend over a decade ago and has been carrying out a strategy of providing its customers with healthier, cleaner and more natural ingredients and solutions. To further this strategy, Frutarom has also been very active in seeking out and acquiring companies and investing in start-ups whose products and innovations are in line with this trend. As a result, Frutarom today is ideally positioned to answer market needs and provide its customers with a comprehensive range of natural, healthy and added value solutions, such as natural flavors, colors and food protection solutions, as well as added value health ingredients for foods and beverages.

Frutarom sees itself as a market consolidator and is highly active in pursuing and executing M&A deals. We have extensive M&A experience and a strong acquisitions pipeline, and we are rightfully considered as providing a good home for our acquired activities.

P&F: Looking toward the future, what are Frutarom’s growth and innovation opportunities?

Yehudai: I believe some of Asia’s emerging economies, such as India, China and Vietnam, as well as key countries in Latin America, Africa and the Middle East, offer high growth opportunities for Frutarom. With the economies in these countries developing, their consumer lifestyles and income levels are changing and demand for processed foods is climbing.

As part of its geographic focus, Frutarom has invested in establishing and reinforcing its position in these markets, both by launching activity on its own—Frutarom has just finished building a new state-of-the-art plant in Shanghai and last month inaugurated its new site in Johannesburg to serve the sub-Saharan region—as well as through the acquisition of prime local companies such as Sonarome in India and Inventive in Hong Kong and China, which were acquired last year.  

The U.S. market also presents promising growth opportunities. As one of the world’s most innovative markets, it provides Frutarom a superb showcase for proving its ability to offer unique cutting-edge solutions combining taste and health as well as responding to the market trend toward natural and clean-label products. Frutarom is well positioned to capitalize on the high growth rates in this market.  

In addition, over a decade ago we recognized that the food and beverage market was headed toward healthier food, with more natural ingredients replacing synthetic and chemical ingredients, and foresaw a growing desire to combine great taste with healthy and functional ingredients containing less salt, sugar and fats. Since then Frutarom has been focused on building up a unique product portfolio to fill these market needs and spearhead this trend.

Today over 75% of Frutarom’s products are natural and we estimate this percentage will rise, as this is where we are focusing our growth.

P&F: As leaders in the industry, where do you see your company heading? How do you plan on addressing these changes? Where do you see the industry as a whole heading?

Yehudai: Frutarom’s growth strategy blends profitable organic growth with strategic acquisitions. Our internal growth strategy is a combination of:

Geographic focus – Strengthening our position in high-growth markets, particularly emerging countries and the U.S.;

Our unique product offering – We are continuing to build up a leading position in offering tailored solutions combining superb tastiness with health and functionality, all under one roof, by investing in the development of natural ingredients to replace artificial ingredients and pioneering the market trend towards clean-label foods.

In recent years we have witnessed more and more food and beverage companies, including leading market players, announcing that they are going more “natural.” This mega trend, which can be seen in both the developed and the developing world, is now driving the whole industry to adapt healthier and more natural solutions to replace synthetic colors and flavors, integrate natural anti-oxidants and anti-microbials, reduce sugar and salt, cut down on fats and, wherever possible, eliminate E numbers so as to offer consumers cleaner and clearer labels. I believe that with growing consumer awareness and education, as well as increasing regulation in the food and beverage industry, this mega trend will continue growing in intensity while at the same time consumers will refuse to forego taste. I believe that the trend towards regional and ethnic tastes and offbeat flavor combinations will continue. From a nutritional point of view we definitely see ongoing interest in alternate protein sources and products that boost the immune system and healthy aging.

Today, over 75% of all Frutarom products are natural—from all-natural flavors, through natural solutions for food protection and preservation, to natural food coloring. I believe we are ideally positioned to offer our customers comprehensive solutions combining natural taste and health.

Customer Focus – We stand out from the competition by also catering to mid-size customers, including the fast-growing private-label sector, with the same excellent service and solutions extended to larger customers. This includes the joint development of products and close technical support.

I believe we will continue to see a combination of increasing consumer awareness and demand leading to increased regulation along with higher demand for innovation and sophistication. We will also continue seeing more intense competition and difficulty by smaller flavor and ingredients producers to cope with the increasing demands from customers, consumers and authorities. Based on our track record for growth, I believe Frutarom is well positioned to handle these market developments.

We have an excellent pipeline of prospective acquisitions which, along with continued reinforcement of our market leadership in joining together the worlds of natural flavors and health, will pave the way towards achieving the goals we recently set out for ourselves: USD 2 billion in sales by 2020 along with an EBITDA margin of over 22% in our core activities.


Milwaukee/Hoffman Estates, Illinois
2015 sales: $667.9 million
Estimated market share: 2.8%
Chairman and CEO: Paul Manning

As part of the company’s three-year restructuring plan, Sensient has closed several underperforming facilities, including its subsidiary in Indianapolis, Indiana. Despite these cutbacks, the Illinois-based company has achieved strong growth in its cosmetics and food colors businesses, with consistent growth in Asia Pacific.

Perfumer & Flavorist: The past year has seen changes in F&F regulatory, M&As and sustainability. As companies offer their own color to the evolving landscape, what are the current challenges Sensient is addressing to improve its portfolio and the industry?

Manning: At Sensient, we have implemented a number of significant changes over the last several years, including aligning our business along market segments, rationalizing our production footprint and upgrading our organizational capabilities. Most of this work is close to completion and our attention is now turning to efforts to sell more value added customer solutions. For us, this will mean helping our customers adapt to rapidly changing consumer preferences. Evolving regulation, such as concerns about added sugar or sodium, will create challenges and opportunities, but in the end, consumer preference will drive demand. This means that natural and label friendly ingredients will be important to our customers as will products and ingredients that offer authenticity.

P&F: Looking toward the future, what are Sensient’s growth and innovation opportunities?

Manning: Our innovation is focused on sustainable, naturally positioned ingredients and flavors. We also continue to develop flavor modulation solutions that will help our customers adapt their product offerings to meet customer expectations for healthier and more naturally positioned products. Among Flavor companies, Sensient is uniquely positioned because of our expertise in natural color technology. Among Fragrance and Cosmetic suppliers, Sensient is unique in that we offer fragrances as well as colors and other important cosmetic innovations. We will exploit this synergy where there is an opportunity to leverage our expertise and provide an integrated solution to customers.

P&F: As leaders in the industry, where do you see your company heading? How do you plan on addressing these changes? Where do you see the industry as a whole heading?

Manning: The industry will continue to move toward minimally processed, natural and authentic products. But regulatory, product safety and quality demands will also continue to intensify. Balancing these priorities presents a challenge to our customers. Sensient will be a leader in helping customers address these trends. We want our customers to view Sensient as a provider of innovation and solutions. Our offering and our expertise have the potential to be much broader than customers have traditionally expected from a Flavor or Fragrance supplier.

P&F: In your opinion, what are some of Sensient’s successes this year?

Manning: We have had very good success shifting our product mix away from undifferentiated ingredients toward value added solutions. A good example of this is within our fragrance business. We are rationalizing some of the basic aroma chemicals and putting more resources behind our fragrances for household and personal care products. One thing that has helped this transition is that we can combine our cosmetic color and ingredients with our fragrance products. Our cosmetic colors and ingredients give us great access to personal care customers and this has helped us to grow fragrance sales with these same customers.

Another success for Sensient has been our focus on smaller regional and national customers. Over the last several years, we have dedicated sales and marketing efforts to smaller innovative customers and this is paying dividends now. In several of our businesses, these customers are delivering much of our growth.

P&F: What region is an area of interest for Sensient? What are you finding that is unique in these regions that offer areas of growth for the company?

Manning: We continue to focus on both our developed markets, as well as emerging markets in Asia and Latin America. Both of these areas are necessary for us to continue to grow our business. You hear a lot of people talking about a slow-down in emerging markets such as China and Brazil, but that doesn’t alter our strategy or our emphasis. As an example, Brazil continues to be an important and promising market for Sensient. One of the things we notice there is that development cycles are much shorter than in larger developed markets. Customers innovate quickly and this is good for our business.

gAccording to Leffingwell: “Sensient restated sales of ‘traditional flavors & fragrances’ and ‘natural ingredients’ as separate categories for 2012, 2013 and 2014; comparison to previously reported figures indicates that some of the so-called dehydrated products possibly should have been included in sales.”


Grasse, France
2015 sales: €435.3 million/$483.1 million
Estimated market share: 2.0%
CEO: Phillippe Maubert

On M&A

From a mergers and acquisitions standpoint, we’re a mid-sized company in the industry. We’re about $500 million globally [including] all three business units. And so for Robertet, at the current point, we’re not really looking to [seek out] mergers and acquisitions because we feel with our size we are still able to generate organic growth, broad-based growth, without making the big acquisitions that some of our competitors are doing in the field right now. However, we wouldn’t rule that out. We would be opportunistic in looking at different acquisitions as they became available or as strategically we are interested in it, but at this point in time we really still see that we can generate growth based on the opportunities that we can find in the marketplace.

Looking toward the future

On flavor sustainability

Hong Kong
Estimated 2015 sales: ~HKD3,076.6/$396.9 million
Estimated market share: 1.6%
Chairman and CEO: Chu Lam Yiu

Huabao International made its first appearance to the 2015 Leaderboard. Specializing in R&D, production and sales of flavors and fragrances (tobacco, food and cosmetics), the company also acts as an asset management and investment management provider.

Despite the company’s decline in 2014 sales of an estimated HKD3,380.9 million, the company moved up in ranks on the Leaderboard this year.

In 2011, the company acquired 100% of Guangdong Golden Leaf Technology and Development Co., Ltd. The acquisition allowed Huabao to implement its reconstituted tobacco leaf (RTL) production with an R&D center in North Carolina.

h For 2014-2015, Leffingwell estimates sales of F&F sectors was 3,380.9 million HKD.
iAccounting period is between April 1 and March 31.


2015 sales: ¥47,288 million/$390.2 millionj
Estimated market share: 1.6%
President and COO: Takahiko Kondo

Perfumer & Flavorist: The past year has seen changes in F&F regulatory, M&As and sustainability. As companies offer their own color to the evolving landscape, what are the current challenges T. Hasegawa is addressing to improve its portfolio and the industry?

Kondo: The Japanese domestic market is maturing as a result of the aging population and is expected to remain flat in the coming years; therefore, the competition in this market is becoming more severe. By capturing new demands which would lead to broadened flavor applications, T. Hasegawa will be able to foster the development of the industry.

Under these difficult circumstances, T. Hasegawa has been promoting the solutions-oriented sales initiatives to capture our customer “needs” ahead of the time, and to gain the larger market share in the future, we need to go one step beyond from it to initiate the solutions-oriented sales initiatives capturing our customers’ “wants” to increase the winning percentage of the customer projects.

P&F: Which areas of your business are you primarily focusing on and for what regions?

Kondo: Although the Japanese domestic market is maturing as a result of the aging population and is expected to remain flat, it is the foundation of our business accounting for about 70% of all T. Hasegawa group sales.

It is also necessary for us to proactively provide items which have the additional functions such as carbonation enhancers for beverages, replacers for natural ingredients, antioxidant materials, taste flavors, etc. in order to provide solutions for our customers’ diversified and advanced demands and become a reliable supply partner. The new applications for flavors such as nutritional food, food for medical use and non-alcohol beer/cocktails have the potential to increase the demand for flavors as well.

While maintaining our revenue base of the Japanese domestic market, it is essential for us to grow in overseas market. There, the Asian market especially China and Southeast Asia are our main focus.

In China, although the economic growth rate is decelerating and there is a potential risk of an economic downturn, demand for foods and beverages using flavors remains strong and is growing. It is also expected that the population of younger generation in China is to grow with the termination of the one-child policy which would lead to a higher demand for flavors. On the other hand, it is very important for the R&D staff to capture the consumers’ preferences which vary among different regions in China. Therefore, we need to hire and train the local R&D staff who understands different regional preferences. By combining these locally acquired skills and knowledge in China with the technologies we have been developing and cultivating in Japan, we strive to increase market share for existing customers and to cultivate new customers.

In Southeast Asia, demand for flavors is high and growing with dairy products, beverages, instant noodles, snacks and confectioneries. At Peresscol–a Malaysian company acquired by T. Hasegawa in 2014, we are enhancing the R&D capabilities to enable us to expand the sales of seasoning powder, which is the main product of Peresscol. Acquiring and enhancing the production capabilities of liquid blend flavors is another area we are currently focusing on at Peresscol. Also, we are striving to expand the sales of Peresscol products through our sales subsidiaries in Thailand and Indonesia, and we have also allocated the local sales staff in Vietnam and Philippines which enables us to cover the Southeast Asian market seamlessly.

P&F: Aside from Asia’s market, where do you see the company heading in flavors?

Kondo: Our subsidiary in the U.S. has been successful by focusing on the savory flavor categories. To achieve further growth, we are expanding focus to the beverage market supported by the recruitment of sales and R&D staff that has expertise in beverages. In addition, we completed renovation and expansion of the R&D facility of T. Hasegawa USA in 2014 to enhance the R&D capabilities for our customers.

Although the beverage flavor market in the U.S. is led by top global flavor companies, we have opportunities to have our flavors used extensively in U.S. domestic beverage market. We are currently putting greater focus on domestic brands than globally-sold brands and this initiative has started to gain success.

Collaboration between R&D groups in Japan and the U.S. is important since the R&D team in Japan has broad experience in beverages. We can transfer technology accumulated in Japan to U.S. customers through collaboration among these R&D teams and customers. While we continue to secure and expand sales for the savory market that we have historically focused on, we plan to increase flavor sales to the beverage market as well.

P&F: Where do you see the company heading in fragrances?

Kondo: The size of fragrances market in Japan is relatively small compared to flavors accounting for about 20% of the total Japanese F&F market; therefore the competition in the domestic fragrances market is increasingly severe. Amid these circumstances, we are striving to grow our sales by capturing market trends in a timely manner and develop fragrances cater to those trends. In addition, we are focusing on developing high-value-added fragrances, such as long-lasting fragrances and food additive grade fragrances.

In China, as with flavors business, it is very important to develop fragrances with the consumers’ preferences—which are different from Japan—accurately captured. In that regard, we locally recruited the current vice president who is in charge of the fragrance division in China in 2012 and increased the number of local staff who understands the consumers’ preferences in China. This initiative of organizational change of the fragrance division started to gain success and we will continue our efforts to grow our business with existing customers and to cultivate new customers under the leadership of the above mentioned vice president who is knowledgeable about the local preferences and customers.

P&F: How do you adjust to the fluctuating cost of raw materials?

Kondo: The impact of raw material cost fluctuations is limited since we purchase a wide range of raw materials—increased price for certain raw materials can be offset with the cost reduction of other raw materials. The impact of the fluctuation of foreign exchange rate on our business is limited as well since the values of exporting and importing are almost equal.

In addition, we established a project to reduce the raw material cost through promoting global purchasing with overseas subsidiaries and rationalization efforts.

P&F: Where does sustainability play a role in your company’s growth strategy?

Kondo: We regard taking over the irreplaceable earth for the next generation as an important task for the company and also for the entire human race. Accordingly, we have put in place an environmental policy that declares that we are to strive to actively contribute towards environment conservation in every aspect of our business activities. In addition, we have put in place an environmental safety action policy and each facility institutes a concrete measures based on the company policy. We also regard sustainability as one of the most important risk control principles. Accordingly, we take account of global environmental issues in our business operations and adapt and respond to our natural surroundings.

P&F: What are your biggest successes this year?

Kondo: The second phase of the capital investment of Suzhou Plant to enhance the production capacity completed and started operation in June 2015. This has increased our production capacity in China by about 30% and provides us with the ability to meet the increasing demand for flavors in China. To fully utilize our production capabilities, we will continue the efforts to win the customer projects for the products with high demand for flavors such as beverages and instant noodles by cultivating new customers and enhancing business relationships with existing customers.

Our basic policy on globalization is to take a step-by-step approach by allocating human resources and funds efficiently, and business alliances and M&As have always been our options to facilitate our globalization. In this regard, we reached an agreement on business alliances with Ajinomoto Co., Inc. regarding research, development and commercialization of natural flavors using biotechnologies and fermentation technologies, and with Universal Leaf Tobacco Company, Inc. to diversify supply source of natural ingredients. Both of these business alliances became effective in August 2015.

Regarding the business alliance with Ajinomoto, we have been addressing the need for securing the supply of natural flavors since the market for natural flavors has grown dramatically backed by a consumer trend toward natural beverages and foods. Therefore, the decision of forming a business alliance has been made to research, develop and commercialize fermentation-derived natural flavors through combining the technologies of T. Hasegawa and Ajinomoto. Natural flavor is defined by the regulations in Europe and the U.S. as products extracted or fermented from natural materials. Extraction is currently the most commonly used method, but it has issues of securing raw materials and cost. Consequently, methods using fermentation have been attracting attention in recent years.

Ajinomoto has its original leading technologies in the fields of biotechnology and fermentation technology, cultivated through their research and development of amino acids. By combining T. Hasegawa’s flavor refining and formulation technologies with Ajinomoto’s technologies, we are to research, develop and commercialize fermentation-derived natural flavors. We are currently aiming to commercialize fermentation-derived natural flavors within a year and to expand the business overseas.

Regarding the business alliance with Universal Leaf Tobacco Company, Inc., it has always been a challenge for us to secure and diversify the source of natural ingredients with cost fluctuations, and we believe the business alliance with Universal Leaf Tobacco will be an effective approach to address this challenge.

Finally, the test growing of vanilla beans started in Brazil in January 2016 and is on track.

j Accounting period between October 1 and September 30. Net sales reported are company consolidated sales.


Mark E. Bair, President & CEO, Americas, T. Hasegawa USA, Inc.

P&F: The past year has seen changes in F&F regulatory, M&A’s and sustainability. As companies offer their own color to the evolving landscape, what are the current challenges T. Hasegawa USA is addressing to improve its portfolio and the industry?

Bair: Our on-going challenge is to continue meeting our customers’ ever evolving need for high-quality flavors that add real value to the foods and beverages they offer customers and consumers—in a very competitive environment. That means continuing to be innovative through our flavor creation and application processes, driving greater efficiency throughout all aspects of our operations, and ensuring superior service and support for our customers. At the end of the day, we want customers to think of T. Hasegawa USA as their “go-to” source for flavors because we combine world-class capabilities of a leading global flavor company—with the responsiveness and flexibility of a leaner company—in service to our customers’ success.

P&F: Which areas of your flavor business are you focusing on and for what regions?

Bair: Our U.S. business, which began in 1978 has historically focused on the savory flavor business. That’s due to the size and growth of savory-based categories, our original customer base and our parent company’s experience in creating and producing a wide range of quality savory flavors. That has been and will continue to be a major strategic focus for our business here.

With that said, our business units in Japan, China and Asia are highly respected for their ability to create and produce a wide spectrum of unique flavors across a variety of beverage categories. Because of this heritage, and the long-term dynamic growth of beverages in North America, we recently expanded T. Hasegawa USA’s strategic focus to include beverage flavors as a second key pillar. We’re drawn on our parent company’s historic strengths, particularly in coffee and tea beverage flavors —while simultaneously expanding our domestic capabilities in flavor creation/applications and customer support, to offer both emerging and established beverage customers an attractive new alternative for unique, market-driven flavors.

P&F: What do you think will be the main driver for the U.S. flavor business in the coming year?

Bair: The main drivers for food and beverage flavor sales in North America continue to be innovation and customer value – regardless of category. It’s well understood that innovation drives brand differentiation, and is a fundamental requirement to fuel consumer/customer interest and purchase of food and beverages. Customer value is also a requirement to remain relevant and attractive to customers and consumers throughout the value chain in our highly competitive retail environment.

Innovation in foods and beverages in North America continues to be driven by four key consumer trends: 1) growth in custom and artisanal foods and beverages; 2) flavors representing regional preferences from diverse populations around the globe; 3) interest in both health and indulgence; and 4) desire for simplified, clean labels including natural, non-GMO and organics. ‘Value’ – is a function of ‘what you get,’ aligning well with ‘what you pay,’ and continues to be a constant for consumers, customers and the entire value chain.

P&F: How do you adjust to the fluctuating cost of raw materials?

Bair: Raw material cost fluctuations are an ongoing factor in the flavor business. We are addressing this through strategic review and analysis of all of our cost drivers, including raw materials. We are always looking for how to make our supply chain more robust in terms of availability of raw material availability, alternative supply sources and appropriate prices for those materials. One of the keys to this is a strong forecasting system that enables us to look ahead and plan for our raw material needs to support customer demand—including any expected changes in raw material availability or cost. The first line of defense to cost increases is achieving favorable contracts with supply partners. Second, we’re always seeking ways to enhance operating efficiencies to be more cost efficient. Finally, we seek to mitigate any raw material cost increases with customers, through creative solutions that create win-win outcomes.

P&F: What in your opinion were your company’s biggest successes this year?

Bair: One of our big successes internally is the progress that we have made developing our organizational capabilities in support of customers. For example we recently established a new vice president of operations position and recruited a highly experienced and capable food manufacturing executive to provide the leadership required to support rapid growth with customers in North America. We also recruited a new senior director of business development who brings to us over 25 years of flavor industry sales and business development experience.

Another area of success was implementation of several new business processes and enterprise software tools that enable us to be a more efficient creator and manufacturer of flavors.

In terms of market successes, we continue to grow our sales revenue at a rapid pace—both among current customers and new customers. We are successfully building our beverage business by offering customers new, innovative flavors with rapid turnaround time and collaborative development support.

P&F: What are the biggest challenges that the U.S. flavor industry faces right now?

Bair: One of the biggest challenges continues to be meeting regulatory requirements—a prime example being the Global Harmonization System (GHS) that took effect in June 2015, with the second phase taking effect in June 2016. In addition, the Vermont GMO labeling laws have added another layer of regulatory complexity that has to be addressed throughout the supply chain. These developments require significant investment in systems and processes to ensure full compliance. In addition, continued strong public interest in non-GMO ingredients, organic and natural ingredients, enhanced nutrition and eliminating certain ingredients like PHO’s represent both challenges and opportunities for flavor companies and their customers.

Final Thoughts

As challenging as the environment is, it continues to be a great time to be in the flavor business working closely with customers in the food and beverage industry. I have never experienced another time in which foods and beverages have received more consumer attention and interest. As a thriving business unit of a thriving 113-year-old flavor and fragrance company, all of us at T. Hasegawa USA are enthusiastic about the future of the flavor business.

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