As we bid farewell to FY2023, we reflect on the culmination of New Global Plan-1 (NGP-1), Takasago's 3-year mid-term management plan. This transformative period saw us unite across divisions and organizations to pursue three fundamental directions: expanding overseas growth, improving profitability in Japan, and promoting sustainability.
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As we bid farewell to FY2023, we reflect on the culmination of New Global Plan-1 (NGP-1), Takasago's 3-year mid-term management plan. This transformative period saw us unite across divisions and organizations to pursue three fundamental directions: expanding overseas growth, improving profitability in Japan, and promoting sustainability.
Takasago
Tokyo, Japan
2023 Sales: ¥195,940 million
Our expansion strategy lies in a dedication to building a robust global infrastructure, from building up the R&D capabilities to develop innovative flavors and fragrances to the establishment of new facilities and introduction of core systems at the global overseas sites to meet the needs of customers and consumers while caring for people and respecting the environment, in line with our Vision 2040.
Following on, Takasago president and CEO Satoshi Masumura speaks on how Takasago translates the recent trends and future prospects to the company’s latest developments and strategies in this year’s Leaders & Newsmakers issue.
Takasago, president and CEO Satoshi Masumuracourtesy of Takasago
Can you share three key company highlights for the last 12 months?
Satoshi Masumura [SM]: FY2023 was the final year of New Global Plan-1, which is Takasago’s 3-year mid-term management plan. We worked across divisions and organizations to address the priority issues based on three basic policies including promoting overseas growth, improving profitability in Japan, and promoting sustainability.
Firstly, we have introduced the core system as part of our efforts to develop a global business infrastructure. After deploying the system at the Singapore site in FY2022, we proceeded to introduce it at our U.S. site in FY2023.
We view the promotion of digitalization as an indispensable strategy for improving the productivity of the entire Takasago Group under the One-Takasago initiative as it will enable us to unify and streamline our global workflow in the process of development and utilization.
At the same time, we are also working on data visualization on a global scale to promptly respond to issues and speed up decision-making.
Secondly, as part of the restructuring of the production system based on the synthetic business growth strategy, we have decided to make a capital investment of approximately 8 billion yen at the Iwata Plant in Japan for the manufacture of pharmaceutical intermediates in the fine chemicals business.
This investment will promote further growth by increasing the capacity of the fine chemicals business to meet strong demand from overseas, especially from large pharmaceutical companies in the United States.
In addition, we will establish an environmentally friendly and sustainable production system based on the design concept of reducing the use of energy and water.
Construction is scheduled to begin in April 2024 and operations are scheduled to begin in the second half of 2025.
Last but not least, our Indonesian facility, one of our overseas growth drivers, achieved significant growth in FY2023. Prior to the establishment of the Indonesian plant, we mainly exported and sold products manufactured in Singapore to the Indonesian market, but in November 2019, we constructed a new plant in order to quickly respond to strong local needs.
Besides the transfer of manufacturing from the Singapore base, the increase in revenue from New Win contributed significantly to growth in FY2023.
Indonesia has a population of over 270 million and is expected to continue to grow in both flavors and fragrances segments.
What are the major influences for innovation in 2024 leading into 2025?
SM: The flavors and fragrances industries are poised for ongoing innovation driven by various influences. These influences encompass shifting consumer preferences, technological advancements, sustainability imperatives, and emerging trends. Understanding these key factors is essential for businesses seeking to stay ahead in the competitive landscape of flavors and fragrances.
One of the most significant influences driving innovation in flavors and fragrances is the increasing emphasis on sustainability and natural ingredients. Consumers are becoming more environmentally conscious, demanding products that are ethically sourced, and eco-friendly. In response, manufacturers are focusing on sustainable ingredient sourcing, adopting green production methods, and reducing carbon footprints. This trend is leading to the development of flavors and fragrances derived from renewable resources, such as botanical extracts, natural essential oils, plant-based alternatives to synthetic ingredients and biobased synthetics.
The wellness movement continues to influence consumer preferences in both flavors and fragrances products. There is a growing awareness of the link between aroma, taste, and emotional well-being, driving demand for products that promote relaxation, mindfulness, and stress relief. Fragrances infused with calming essential oils like lavender and chamomile, as well as products with functional ingredients, are gaining popularity. Innovations in this space focus on creating holistic sensory experiences that cater to consumers' desire for self-care and emotional balance.
Consumers are increasingly seeking flavors and fragrances that offer health benefits and functional properties. This trend is driving the incorporation of ingredients with antioxidant, anti-inflammatory, and immune-boosting properties into fragrance and flavor formulations. From probiotic-infused fragrances to functional foods and beverages, innovation in this space is driven by the convergence of taste, aroma, and health. Brands are capitalizing on the demand for products that not only smell and taste good but also support overall well-being.
Concurrently, as consumers promote healthy lifestyles, there is a growing emphasis on basic taste & nutrition, further driving the development of health-conscious food & beverage products.
Additionally, the alternative protein market is growing rapidly, especially for plant-derived products, including Dairy Alternative and Meat/Seafood Alternative. The demand for such products varies by country and region. To meet customer demands for "masking" and "authentic” flavor, we will actively develop new ingredients/flavors.
We see continued interest in more environmentally friendly solutions both due to Regulatory pressures, like the restrictions on non-biodegradable microplastics, and company commitments, for example in the areas of CO2 emissions reporting and reduction. Takasago has been producing ECHA-compliant fragrance capsules for over a year now, and we expect the transition to this capsule type to continue in 2024-25, alongside further improvements in the chemistry. Calculating carbon footprints for fragrances and flavors is not straightforward and in addition to our internal efforts, we participate in the various IFRA-IOFI cross-company initiatives in this area. There remains strong interest in the science behind mood-related claims, however, legal concerns often temper the final on-pack claims – we still see this as an important area of research, in line with consumer needs. An emerging area in terms of claims is the use of Artificial Intelligence. In this fast-developing area, our internal teams collaborate with external partners to enhance our speed and creativity.
Advancements in technology are enabling greater personalization and customization in flavors and fragrances. Brands are leveraging data analytics, artificial intelligence, and machine learning algorithms to analyze consumer preferences and create bespoke fragrance and flavor profiles. Customizable perfume blends, personalized skincare products, and flavor-mixing platforms empower consumers to create products tailored to their individual tastes and preferences. This trend reflects the growing demand for personalized experiences.
Advancements in technology and sensory science are driving innovation in fragrance and flavor creation. From advanced extraction techniques to virtual reality-enhanced sensory experiences, technology is revolutionizing product development processes. High-throughput screening methods allow for rapid screening of fragrance and flavor ingredients, accelerating the discovery of novel compounds. Additionally, neuroscientific research into olfaction and taste perception provides insights that inform the design of more effective and evocative fragrances and flavors.
By understanding and leveraging these major influences, businesses can create products that resonate with consumers and stay ahead of evolving market trends.
What are your main company focuses and/or goals for the next 12 months?
SM: Competition in the industry is expected to intensify amid soaring energy costs and raw material prices triggered by the Russia-Ukraine crisis. Considering the impact of geopolitical risk on resource prices and the impact of political instability on supply chains, we believe it is important to firmly grasp evolving consumer needs and develop and sell products that align with these changing demands. We also believe that these efforts will lead to improved profits for the company as a whole.
As we enter the next phase of our strategic growth plan, our primary focus remains on capturing a larger share of the global flavors market, with a particular emphasis on the Asian region. Additionally, we are actively exploring opportunities to establish footholds in key markets such as India and Africa.
For the fragrance side, the focus will be on enhancing our creative and technical capabilities in emerging markets, particularly in India, China and South-East Asia where market growth rates across both the consumer and fine fragrance categories remain resilient. In India, we have added a creative center to our growing network. Situated in Mumbai, this will serve the dynamic Indian market and provide a collaborative hub for our strategic partners to engage with Takasago teams to provide customized solutions for their brand portfolios. This opened in April 2024 and compliment the modern production facility located in Chennai. We will also invest in new facilities in specific markets such as Vietnam, where we are seeing continued growth versus the traditional developed markets.
Regarding commercial goals, Takasago will continue to focus on speedy delivery aligning with market growth rates. This has been achieved over recent years as we have focused on providing fragrance solutions across the Consumer categories. These have included new approaches to combating malodors, augmented emotions with fragrance and harnessing the power of data to create winning fragrances for our partners. We will continue to invest in those innovation platforms that enhance the quality of consumers' lives and this forms part of the core principle of Takasago, “contributing to a society based on technology."
Furthermore, we will also enter an exciting new phase of development in the Fine Fragrance category with new leadership, perfumer, and commercial team members to deliver value to our partners across the marketplace. Markets of focus will include Dubai, India and China as these countries are characterised by new levels of creativity and product launch dynamism.
The most important objective of 2024 is the continued focus on our corporate sustainability goals. We will leverage our understanding of green chemistry, explore ways to minimize our environmental impact and develop tools to measure continuous improvement. Today we already embed into our creative development process, carbon footprint measurement and design formulations for efficiency. The overarching goal is to create fragrances that delight the consumer, have elevated sustainability credentials, and deliver innovative benefits that support the product portfolios of our valued partners.
Although COP29 of the United Nations Framework Convention on Climate Change will be held in Azerbaijan in 2024, many issues related to climate change remain, and we anticipate continued concerns regarding the supply of natural ingredients post-2024 due to climate change and unstable global conditions. To address these issues, we will continue to develop flavors that reduce our dependence on natural ingredients and promote product development with an awareness of biodiversity. We will also promote green chemistry by developing products that utilize renewable raw materials (Sustainable Scenta and BIOSWITCHb) and highly efficient processes that use catalysts to reduce the environmental burden. Additionally, we will actively engage in bio-based manufacturing and develop biodegradable products to further promote the development of environmentally friendly products.
In a post-pandemic world where health consciousness remains paramount, emphasizing mental and physical well-being is expected to continue growing in importance. To meet the demands of this health consciousness, we will focus on developing flavors and fragrances that utilize psychophysiological measurement technology and human olfactory and taste receptors, proposing the Shojin® solution to address the challenges of plant-based foods, and expanding Vivid Flavorsc Retromad, which offers authenticity to improve palatability.
In a world where sensory experiences play a vital role in consumer decision-making, aroma ingredients hold a unique position. Whether it's the enticing scent of a perfume, the comforting aroma of a home fragrance, or a taste that transports us back in time, evoking vivid memories shows that the power of fragrance or flavor cannot be overstated. As we embark on the journey of the next 12 months, understanding the strategic landscape of aroma ingredients becomes crucial for businesses in the flavor and fragrance industry.
Again, innovation lies at the heart of Takasago’s corporate philosophy: “Contributing to Society through Technology.” Investing in research and development to discover novel aroma ingredients and formulations is essential for staying ahead of the curve. Over the next year, we will focus on experimenting with sustainable sourcing methods, exploring new extraction techniques, and harnessing the potential of biotechnological advances to create innovative solutions. Moreover, catering to the rising demand for personalized fragrances through customizable options can be a lucrative avenue to explore.
The fragility of global supply chains has been highlighted in recent times, making supply chain resilience a top priority for businesses. Diversifying sourcing locations, establishing strategic partnerships with reliable suppliers, and adopting digital technologies for real-time monitoring and optimization can mitigate supply chain risks. Additionally, fostering transparency and traceability throughout the supply chain will enhance credibility and trust among consumers, especially regarding ingredient origins and sustainability practices.
In 2024, we will implement the next generation of SAP in our major development and production facilities. This investment will enhance our supply chain resilience and provide a capability designed to meet our partner demands and navigate the challenges the industry faces in material sourcing and logistics. These challenges are wide-ranging, from the geopolitical to environmental and building robust contingency plans will remain a company focus throughout the next growth plan.
In a crowded marketplace, effective brand positioning and marketing strategies are essential for capturing consumer attention and fostering brand loyalty. Over the next 12 months, focus on crafting compelling brand narratives that resonate with consumers' emotions and aspirations. Takasago has adopted a new theme that incorporates Japan’s 72 Microseasons and traditional colors of Japan. This is an alternative way to visualize the unique olfactory experiences offered by Takasago products, along with transparent communication about ingredient quality and sustainability efforts, which can differentiate our brand in the competitive landscape.
Adherence to regulatory standards and safety protocols is non-negotiable in the flavors and fragrances industry. Stay abreast of evolving regulations pertaining to fragrance ingredients, labeling requirements, and safety assessments to ensure compliance. Investing in rigorous testing and certification processes demonstrates a commitment to product safety and consumer welfare. Moreover, proactive engagement with regulatory authorities and industry associations can facilitate knowledge-sharing and regulatory advocacy initiatives.
In an interconnected world, collaboration holds immense potential for driving innovation and growth. Explore opportunities for collaboration with other industry players, research institutions, and technology providers to exchange knowledge, share resources, and co-create solutions. Collaborative ventures can range from joint research projects and ingredient sourcing agreements to co-branded product launches and marketing campaigns, fostering synergies that benefit all stakeholders involved.
As we navigate the path of the next 12 months and beyond, embracing a strategic approach to aroma ingredients is paramount for success in the flavors and fragrances industry. By leveraging market insights, fostering innovation, optimizing supply chains, strengthening brand positioning, ensuring regulatory compliance, and fostering collaboration, businesses can carve out a competitive edge and delight consumers with captivating olfactory experiences. We will embark on this fragrant journey with foresight, resilience, and creativity, shaping a scented future that captivates the senses and inspires the soul.
Footnotes
aSustainable Scents is a trademark of Takasago
bBIOSWITCH is a registered trademark of Takasago
cVivid Flavors is a registered trademark of Takasago
dRetroma is a registered trademark of Takasago
