Firmenich sets up China jv to make essential oils

Source: PCE

1995/01/07

Swiss aroma chemicals company Firmenich International has received the go-ahead to buy into a plant in Kunming, provincial capital of China's Yunnan province, and establish its first production facility in the Asia-Pacific. Yunnan is known locally as the kingdom of plants' due to its excellent climatic conditions. The group has received the business licence for a joint venture, the Kunming Perfumery Factory, to produce essential oils and ingredients used in the perfume and flavour industry. Kunming Firmenich Aromatics Co is a joint venture with the Swiss group holding 80% and local partner, the state province of Yunnan, the remaining 20%.

The plant was built in 1982 on a 40 000m2 site in Kunming. Firmenich will upgrade and re-equip the plant to western standards. 'The new operating unit is part of Firmenich's long-term industrial development plans worldwide and is of strategic importance for the group's raw material sourcing,' said Firmenich director Viveca Ott.

Last year the group acquired a majority share-holding in the joint venture Suzhou Firmenich Aromatics Co, some 100km from Shanghai, which is engaged in compounding. The Kunming facility will produce the raw materials and formulation for compounding in Suzhou. Both the Kunming and Suzhou facilities are manufacturing for markets in China and Southeast Asia. The company also has a compounding plant in Singapore, which has been established for three years.

Firmenich is one of a number of Western speciality chemical companies looking to expand in the Chinese flavours and fragrances market. Th Goldschmidt of Essen, Germany, recently opened two new sales offices in China - Guangzhou and Shanghai - to build on those in Seoul, Taiwan, Singapore and Hong Kong. Goldschmidt intends to increase its sales in the region from DM36m in 1993 ($25.7m) to more than double that amount by 1997. In Southeast Asia, Goldschmidt signed an agreement with PT Sumi Asih Oleochemical Industry in Jakarta to manufacture 15 000 tonne/year of Goldschmidt's betaines product range for Indonesia's cosmetic industry on a contract basis.

But the biggest Western player in the regional aroma chemical sector is probably International Flavours & Fragrances of the US, which is soon to open a new aroma chemicals facility in Hangzhou, Zhejiang province, some 200km from Firmenich's aroma chemicals plant in Suzhou. The $20m project, a partnership with the Hangzhou Xinan Jiang Perfumery Factory in which IFF holds an 80% stake, will have an initial capacity of some 3500 tonne/year.

IFF already has a wholly owned $8m flavour ingredients and aroma chemicals plant in Guangzhou, Guangdong province. It has been fully operational for three years and has a capacity of 5000 tonne, sourcing some 50% of its raw materials locally. Key raw materials used at the Guangzhou site include litsea cubebaq, cedarwood and citronel oils, of which there are abundant local supplies. 'China is loaded with raw material supplies,' said Sidney Rossuck, IFF's vice president and area manager for the Far East. The biggest sectors of the market are powder and liquid detergents (including shampoos) and laundry and toilet soaps. Sales of high value products such as fine fragrances are still relatively low but this will change as incomes rise, says Rossuck. IFF also has a third major investment in China - Hua Fang Tobacco, also in Guangzhou. A 50:50 partnership with China National Tobacco, it makes tobacco flavours.

According to figures from the China National Soap Manufacturers' Association, production of synthetic detergents reached 1.66m tonne in 1993, up from 1.55m in 1992. Output of toilet soaps increased to 142 500 tonne from 137 000 tonne, while production of laundry soaps fell to 583 000 tonne from 680 000 tonne as consumers switched to powder detergents. Sales of soaps, fragrances and other cosmetics products in China are still lagging far behind other key Asian centres such as Japan, Korea and Taiwan. But as a strong middle class emerges on the mainland, particularly in the wealthy industrial cities of Beijing, Shanghai, Guangzhou and Tianjin, demand for high quality consumer goods and cosmetics is expected to rise rapidly. As IFF's Sidney Rossuck observed: 'If per capita demand for fragrances in China ever reaches anything like Western levels, the market here will dwarf everywhere else.'