Introduction

A Dynamic Business With Taste - The Flavour Industry

Herta Ziegler

Humans are decisively influenced by their sense of taste and odour and human history is, therefore, closely tied to the development and usage of flavours. Whereas in prehistoric times, only herbs and spices could be employed for flavouring purposes, today a broad spectrum of flavourings is available, not only for use in the individual household, but especially for the production of food on an industrial scale.

The application of all products from the flavour and fragrance industry is solely aimed at enhancing the human striving for increased pleasure and sensual enjoyment. Hedonistic aspects, therefore, form the basis of our industry [1].

The roots of this industry date back to early Egyptian history, as this extraordinarily advanced civilisation was already thoroughly aware of and acquainted with perfumery and the embalming characteristics of certain spices and resins. Simple methods for the distillation and extraction of essential oils and resins were already known in pre-Christian times and subsequently elaborated by the Arabs. Balsamic oils produced by these methods were later on primarily used for pharmaceutical purposes; it was not before the times of the courtly baroque period that fragrance was an aspect of growing importance. In the medieval age, mostly monks were the pioneers in the art of capturing natural essences and transforming them into substances capable of flavouring food [2].

The onset of the industrial production of essential oils can be dated back to the first half of the 19th century. After the importance of single aroma chemicals was recognised in the middle of the century, efforts were started to isolate such compounds from corresponding natural resources for the first time. This was soon followed by the synthesis of aroma chemicals. In this context, the most important pioneers of synthetic aroma chemicals have to be mentioned, such as methyl salicylate [1843]*, cinnamon aldehyde [1856]*, benzyl aldehyde [1863]* and vanillin [1872]*, as they constitute the precursors of a rapidly growing number of synthetically produced (nature-identical) aroma chemicals in the ensuing years.

From this starting point, the flavour and fragrance industry first developed in Europe, expanded to the USA and later reached an international scope. Today Western European companies have reconquered the leadership position in this market, which, after the 2nd World War, was held by American companies.

Generally, the dynamics of the flavour and fragrance industry mirror the trend of many industrial sectors: the most important representatives of a large number of nationally oriented companies have through mergers, acquisitions and market expansion developed into globally operating multinational enterprises. As a result of this concentration process, the number of small and medium-size businesses decreased, a trend that will certainly result in a more uniform, less diverse market. Already an analysis of the year 1995 showed that approximately 65% of the total turnover of the flavour and fragrance industry is achieved by fewer than 10 firms (Fig. 1.1).

Fig. 1.1: Competitors' share of world market (1995) in aroma chemicals, fragrances and flavours (estimated by Haarmann & Reimer) [3]

Also, today analysts estimate the market share of the 'Top Ten' flavour houses at approximately 65% of the entire world market. The preceding decade, often described as the 'Age of Acquisitions', has for the Top Ten of the flavour and fragrance industry resulted in the current market shares depicted in Fig. 1.2.

Givaudan, IFF, Firmenich and Symrise are the contestants for the leadership positions, followed by Quest and Takasago in centre field, while Sensient, Hasegawa, Mane, Charabot and Danisco, with rather similar market share, compete every year to join the higher ranks of the Top Ten. However, it is of considerable importance in this context on which data the respective analysts base their evaluation. Therefore, in the data employed for 2005 [5], sales of non-flavour and fragrance industry items, included by some flavour and fragrance houses in their sales totals, have been subtracted or eliminated from the total sale figures (items eliminated include materials such as sugar, sunscreen chemicals, chemical intermediates, pharmaceutical chemicals, stabilisers, gums, etc.).

Comparison of the sales figures for the years 1995 and 2005 clearly reflect the ongoing changes in the corporate landscape. The merger of the two German flavour giants Haarmann & Reimer and Dragoco to form Symrise has strengthened the company's position in the top ranks. Names that are deeply rooted in and intertwined with the traditions and outstanding developments of the flavour and fragrance industry - such as the vanillin synthesis and the name Haarmann & Reimer (founded 1870) - today remain without contemporary counterpart. Analogously, with IFF's acquisition of Bush Boake & Allen in 2001, the name BBA, considered an invariable constant in Britain, ceased to exist. The pending merger of Givaudan with Quest in November 2006 marks another step towards further market consolidation. Givaudan's current unrivalled market leadership will certainly be source and aim of other interesting developments in the industry.

The landscape of the big players of the flavour business is still centred on companies with European roots, which, however, all constitute global players.

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Fig. 1.2: Competitors' share of world market (2002, 2004 and 2005) in aroma chemicals, fragrances and flavours (calculated by www.leffingwell.com [4])

These companies are closely followed by a considerable number of international and national manufacturers (not resellers) of flavours and fragrances with sales figures which are sometimes only slightly lower, but often not published as a result of private ownership. Danisco, Ungerer & Co., Robertet, Bell, Shiono, Chr. Hansen, Frutarom, Wild, McCormick, Treatt, Todd and Mastertaste (Kerry) deserve mentioning as examples of a long list of flavour and fragrance companies [4, 5].

These manufacturers are countered by the big purchasing companies, the multinational giants of the food and beverage industry as well as the household and consumer goods sector (Procter & Gamble, Unilever, Nestle, Kraft, Coca-Cola, Pepsi, General Mills, Danone, etc.).

In this context, an analysis of the flavour and fragrance sector along geographic regions and national boundaries is of considerable interest. As a single nation, the USA continues to be the world's largest consumer of flavour and fragrance products [6]. Together with Europe and Japan, the USA accounts for only 15% of the world population, but made up 71% of the overall demand for flavours and fragrances in the year 1999 and 66% in 2004 [www.leffingwell.com]. This clearly reflects the trend of increasing industrialisation usually coupled with a growing demand for flavours and fragrances in other parts of the world, especially Asia. The magical 'A' of Asia has to be granted as much importance in this context as the 'A' of acquisitions, as both 'A-words' decisively influence the investment trends of the flavour and fragrance industry in the beginning 21st century.

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Fig. 1.3: Worldwide market shares of the flavour industry for the years 1999 and 2005 (estimated by Freedonia; see: www.leffingwell.com/1372pr.pdf)

The total market, valued at US$ 9.6 billion in 1995, has nearly doubled in the ensuing decade. The share of the typical flavour sector with its classic division into beverages, sweets, dairy and savoury, can only be estimated today and is usually valued at slightly over 40% of the total sales volume. Generally speaking, the global share of the flavour industry on the one hand and the fragrance industry on the other hand can be best approached with an approximate 50:50 ratio.

Since the 1960s both the usage of flavours and fragrances and their general acceptance in a broad array of consumer goods has been continually on the rise. This development in combination with the growing industrialisation in a number of coun tries and, as a consequence, the predilection for flavours and fragrances does indeed portend well for the flavour and fragrance sector. This industry can realistically look forward to positive expectations and increasing turnover in the future. As far as fragrances are concerned, David J. Rowe has remarked with pleasant cynicism: 'This trend might perhaps suggest we have become afraid of smelling human' [7].

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