Essential Oils: Prospects for Supplier Consolidation

In “The F&F Horizon: 2009 and Beyond,” a number of F&F experts discussed their views on the state and future of the industry from the vantage point of formulation to raw materials to the marketplace. (Perfumer & Flavorist magazine, January 2009, Page 45.) In this week’s edition of P&Fnow, we present the first of several extended commentaries from our panel of experts and industry voices.

Read previous insights here, and look for more expert opinions in the January 28 edition of the newsletter. Gueric Boucard's comments, presented here, were submitted following a call for feedback in the January 2009 issue. We similarly encourage readers of this analysis to send us their thoughts at [email protected].

Large and small essential oil distillers, wherever they are, produce so-called "strategic raw materials" for the F&F industry. Yet they may not survive under the weight of such lofty goals of consumer protection as the REACH regulations, nor the high moral demands for "green" and "sustainable" operations, especially in a world where the operating capital needed to run small businesses in developed countries is instead migrating to the financial market "casinos." Meanwhile, the yo-yoing price of energy (a high-cost item for distillers) is at the whim of foreign cartels and local utility monopolists.

Worst of all is the fact that end-users and dealers are getting pickier about the quality and chemical composition of natural oils. More than half the oils we sell, for instance, could be considered more of a "compound" of various fractions, rather than a natural essential oil. This requires equipment for vacuum fractionation, catalytic reactions, crystallization and blending—a rather costly affair for traditional distillers.

In my opinion, unless the larger players in the industry—or God forbid a newcomer from Wall Street or London—decide to consolidate several key producers of essential oils worldwide under a new public company (IPO or such), this critical small-volume commodity, which is so valuable for fine flavors and fragrances, may soon vanish or fall into some kind of supply chaos, which will hurt everybody's creativity and bottom line.

After some cursory research, I found that an IPO calling for as little as $100 million could consolidate and control 85% of essential oil producers in the world—most of whom are ready and willing to be acquired.

In fact, this may well be the last commodity that has not yet been cornered by a couple of "good ole boys" from high finance circles, domestic or foreign.

Who wants to be the ADM of essential oils? Anybody? This is your chance, while "there is blood in the streets."


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