Indian F&F in-transit

14 November 2005 00:01  [Source: ICB Americas]

Major changes are sweeping India’s flavors and fragrances (F&F) market. Rising input costs and severe price competition in India are leading to industry consolidation, from raw material manufacturers and suppliers to consumer products producers. Growth, however, is on the rise, especially in the flavors and fine fragrances sectors.

The Indian F&F market is estimated at $225 million with the top five international players—Givaudan, International Flavor & Fragrances (IFF) Inc., Firmenich, Symrise, and Quest International—accounting for 75 percent of the market, according to a recent study by Frost & Sullivan. Top Indian F&F players include SH Kelkar, Sachee Aromatics, and Oriental Flavors & Fragrances.

The flavors market is said to be highly fragmented, especially in the bakery, savory and confectionery segments which accounted for 33 percent of the market last year in terms of revenue. Flavor buyers in those segments reportedly ranged from multinational food players to individual mom-and-pop stores that manufacture on small scale.

Demand for flavors in India is on the rise, attributable mostly to the over 12 percent average growth in processed food market. Beverage and savory applications are some the market’s largest growth consumption areas. “Processed and instant food itself is a nascent industry in India. Demand is also fueled by rising disposable incomes in urban areas and an increased willingness to consume store-bought foods,” says senior industry analyst Aparna Vedapuri of Frost & Sullivan India.

Demand for fragrance, meanwhile, is increasing in higher-end products such as skin creams, lotions, hair gels and other personal care applications. Demand growth for more sophisticated and expensive fragrances is on the rise, while fragrance consumption in washing products is declining.

According to Frost & Sullivan, the market for fine fragrance in India is very negligible compared to the soap and detergents market which accounted for more than 50 percent of sales last year. Fragrance sales in personal care accounted for 12 percent of the market while household/air care holds 2 percent.

“Air-care applications are also seeing increased growth,” notes Vedapuri. “Consumers are switching to more-expensive insecticides and are also starting to use fresheners in home and office areas.”

Unlike the flavors market, the fragrance market is said to be highly consolidated, with most of the sales coming from large to midsize personal- and home-care players. Increasing consolidation within the end markets sectors is also driving the bargaining power of both flavors and fragrances consumers in terms of pricing.

“Most manufacturing companies are unable to pass on energycost increases to consumers. Any price increases by F&F houses are therefore strongly resisted,” notes Vedapuri.

Another notable trend is the increase in long-term alliances between F&F players and end-users. F&F houses are providing large discounts and exclusive fragrance and flavors styles to international clients in exchange for expanded global entry. Large F&F houses are also working closely with Indian suppliers to upgrade the quality of their raw materials to international standards, as well as to bring down costs and lead times.

“Inventory management is another challenge that F&F houses are trying to address with more streamlined systems,” says Vedapuri. “Most large houses typically have about 1,000 materials on their standard palette for perfumers and flavorists to use. Maintaining sufficient quantities and shorter lead times for imported raw materials are critical for end users.”

By: Doris de Guzman
+1 713 525 2653

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