2018 Flavor & Fragrance Leaderboard

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With natural and technology as the cornerstones of F&F growth and diversification, the industry has certainly undergone major shifts this year, including the rising cost of natural raw materials due to facility and environmental devastations, stricter regulations and an expanding digital distribution model.

As consumer preferences move away from larger brands and towards smaller ones that are both relatable and accessible in-store and online, the industry is searching for adjacent tech-savvy businesses that focus on natural ingredients to expand their portfolio and spread a wider footprint across product lines.

“For the first in many years, the majority of the major companies had sales increases in excess of 7.7% in local currencies,” explains John Leffingwell, president, Leffingwell and Associates, and the author of the 2017 Leaderboard data. This growth can be attributed to an investment in R&D and an increase in multifunctional F&F products in developed markets, while emerging markets are seeing a rise in income and urbanization with a higher demand for basic personal care products and packaged foods. Leffingwell also notes that investments in infrastructure offer another opportunity in strengthening or increasing market share, particularly from Firmenich  and Mane. Overall, the top 11 totals reached $20,707.2 million, capturing 78.7% of the market (an increase from last year at 77.9%). The total sales for the F&F market reached $26,300 million, compared to $24,450 million last year.

In early May of 2017, the industry was met with the announcement of IFF’s acquisition of Frutarom for $7.1 billion, including the assumption of Frutarom’s debt. With 22 acquisitions in two years, Frutarom’s growth accelerated from a number 10 position in 2012 (with 2.8% USD market share) to number six in 2017 capturing 4.8% of the USD market share, notes Leffingwell. Through these acquisitions, Frutarom purchased nutraceutical, biotechnology, active ingredients and savory businesses among others, giving us a snapshot of where the industry is headed in terms of M&A and innovation. Post-acquisition, the industry will watch how these businesses evolve with IFF at the helm.

Creativity in a Regulated Landscape

Business is expected to be driven more by regulatory than creativity. With safety and transparency as the foundation for F&F policy, the industry will continue with creating materials that comply with standards, both in the US and the EU. Most notable, in April of this year, the European Union announced the banning of two commonly used grill flavors (Grillin’ 5078 and Grillin’ CB-200SF), based on inconclusive data that the materials are safe to consume.

Additionally, the Food and Drug Administration’s (FDA) outline to update health claims on the label will be based on scientific claims. This includes ingredient simplification (for example, replacing the name pyridoxine with vitamin B6), including ingredients that should be limited (like sugar and sodium); as well as including recommendations of nutrients that Americans should be consuming, like potassium.

On the fragrance side, the Fragrance Creators Association (formerly IFRANA) worked with fragrance stakeholders to successfully amend California SB258 (The Cleaning Product Right to Know Act) to protect intellectual property while maintaining transparency. In its original form, the bill required full ingredient disclosure on labels. Additionally, the association, along with fragrance suppliers and the Research Institute of Fragrance Materials (RIFM), successfully defended the widely used coumarin to preserve consumer choice, creative artistry and the industry.

As the industry continues to adapt to evolving shifts in the global marketplace, regulation will also influence the form of the F&F business, posing its own unique challenges and opportunities.

Editor’s Note:

In order to address the diversification of the F&F industry into other segments outside the traditional flavor and fragrance business, P&F is issuing the following note to the July 2018 Leaderboard: the following list comprises the top 11 companies’ full-year 2017 sales, including all business segments, in the original currencies. All total sales are preliminary estimates for year 2017 as of April 20, 2018.

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