The fragrance and essence manufacturing industry in China is booming, with revenue increasing at an annualized rate of 14.5% in the five years through 2012, totaling $8.4 billion, a recent report revealed.
According to Fragrance and Essence Manufacturing in China, from IBISWorld, China has experienced rapid growth in the past five years, driven by expanding demand from downstream food, beverage and tobacco manufacturers. The large domestic market, cheap labor and rich aromatic plant resources have encouraged international firms like Firmenich and Symrise to enlarge their presence and establish China as a major fragrance and essence manufacturing center, the report said.
In the international market, fragrance and essence manufacturing has a high concentration level, the report indicated. However, the young fragrance and essence manufacturing industry in China has a low concentration level as it is still developing.
The market in China is expected to consolidate as international manufacturers increase their presence and competition intensifies. Technology development, especially patent technology, is critical for enterprises in this industry, the report analysts say. Top international players currently invest about 10% of revenue in technology and product development. However, Chinese enterprises invest a much lower proportion. Most Chinese fragrance and essence manufacturers are small in scale with very limited patent technology. However, the IBISWorld report projects that small firms can survive or even prosper by providing low-cost fragrances and essences to domestic and international markets.
As consumers become more aware of health and wellness trends, synthetic fragrance and essence products will lose ground in the market, says IBISWorld. In addition, to complement the limited volumes of natural aromatic plants, biotechnology will continue to develop in China. R&D investment by Chinese enterprises like Huabao International Holdings Ltd. are expected to increase as competition becomes more intense and firms look at ways to increase market share.