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Two key factors are simultaneously converging on, and in the process, reshaping the fragrance and flavor industry, says Steve Hicks, P&G’s director of flavor and fragrance development global capability organization.

The first is the global economic crisis, which is hitting both fragrance and flavor suppliers and their customers. “This is going to put a lot more [emphasis on] innovation to grow sales and profitability in both industries,” Hicks says. In addition, he notes that regulatory pressures and criticisms from NGOs regarding ingredients continue to ramp up. These challenges, he says, are epitomized by REACH legislation in Europe and recent negative attention on air fresheners in California. How, then, will the industry be affected?

Fewer, Better Launches

“The demand … from the customers—us—is going to shift,” says Hicks. “It’s going to shift from more perfumes to better perfumes.” From fine fragrance to consumer products, he explains, the market, and thus the consumer, is oversaturated “with every conceivable consumer product line extension.” The ever-growing pace of launches simply cannot continue. “Certainly, we and others are going to continue to launch smart line extensions of our brands and fill consumer segments,” Hicks says.

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