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The global aroma chemicals market size was USD 4,976.0 million in 2020. The global impact of COVID-19 has been unprecedented and staggering, with aroma chemicals witnessing a negative demand shock across all regions amid the pandemic. Based on our analysis, the global market exhibited a decline of 3.43% in 2020 as compared to the average year-on-year growth during 2017-2019. The market is projected to grow from USD 5,125.8 million in 2021 to USD 6,968.3 million in 2028 at a CAGR of 4.5% during the 2021-2028 period. The sudden rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.
Aroma chemicals are used in various applications and are mostly found in spices, food, perfumes, soaps, wines, detergents, fragrance oils, and others. Increasing consumer demand for natural-based products over synthetic chemicals and a shift of consumers towards fragrances and exotic scents are likely to drive the market growth. The growing demand from the fragrance and food & beverage industries, along with the rise in consumer spending is driving the overall market size.
Declining Sales and Earnings Has Significantly Affected the Aroma Chemicals Industry amid COVID-19
The ongoing coronavirus pandemic has affected the cosmetic market. With nationwide lockdown, international travel bans, and shutdown of retail businesses, the purchasing behavior has drastically changed in personal care and beauty industries as product sales have fallen across many beauty segments.
The cosmetic company, L'Oréal reported an overall drop in its beauty segment sales by 4.8% in 2019 owing to the ongoing COVID-19 pandemic. Similarly, Givaudan, a flavors and fragrances company, reported that its sales in the first half of 2020 rose by 4.0%. In the company’s fragrance division, consumer product sales were up by 11.8% on account of purchasing household goods during the pandemic. In contrast, it’ fine fragrances sales dropped by 16.4% due to the travel ban and closure of retail channels.
Also, consumer goods companies reported mixed financials across their various business divisions. For instance, Procter & Gamble (P&G) reported that the company’s net sales in beauty and grooming were down by 1% and 3%, respectively for the third quarter of fiscal 2020. However, its net sales across the entire business were up by 5%, where 8% sales rose up in fabric and home care division, 7% rise in healthcare, and 6% rise in feminine, baby, and family care.
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Movement of the Perfume Industry towards Sustainability is a Vital Trend The shift in consumer preference for buying naturally derived fragrances due to their benefits on the skin, and thus avoiding synthetic ingredients due to their adverse health effects, is one of the reasons why the perfume industry is moving towards sustainable fragrances. Concerns over environmental and sanitary risks have led consumers to use perfumes that are made using ingredients that are more natural. The fragrance market is slowly introducing more naturally derived compounds for perfume compositions. Also, greener fragrance formulations are sustainable, as these processes include conversion, extraction, and fractionation, which are cleaner and efficient with less waste generated and energy used.
Additionally, manufacturers are adopting and developing new extracting technologies that are cleaner and less damaging to the environment. Privi Speciality Chemicals Limited, for instance, aims to reduce emissions, improve eco-friendly operations, and recycle waste through its manufacturing processes. The company uses high-value chemicals of aroma from Crude Sulphate Turpentine (CST) and agrochemicals from by-products, thus reducing the waste and enhancing profits.
Expansion of the Cosmetics Industry to Drive Aroma Chemicals Market Growth
The increasing demand for cosmetics and personal care products, such as creams, facemasks, peels, and others due to the widening usage among both men and women shall augment the cosmetics market growth. Changes in lifestyles and a rise in the per-capita disposable income have contributed to the shift towards natural and organic cosmetics, thereby creating avenues in the market. Rapid urbanization and booming e-commerce business have resulted in the increased consumer interest in different premium and new cosmetic products.
Aroma chemicals are widely used in cosmetics and toiletries such as gels, aftershaves, lipsticks, moisturizers, foundations, body and hand washes, body lotions, soaps, shampoos, and others. Such chemicals are used in these products to induce natural scents without hampering the product quality and formulation. As cosmetics have become an integral part of an individual’s life, major cosmetic manufacturers are introducing new products that contain natural ingredients, thus accelerating their sales globally and driving the market growth.
Synthetic Chemicals in Perfumes and Their Potential Health Effects May Affect the Industry
About 95% of synthetic chemicals in fragrances are derived from petroleum-based chemicals such as benzene derivatives, phthalates, aldehydes, and others, which are considered harmful and toxic to human health. These chemicals cause birth defects, cancer, allergies, asthma, and nervous-system disorders among adults and children. Also, some of these synthetic chemicals are cited as dangerous on the EPA’s hazardous waste list.
According to the Environmental Working Group (EWG) researchers, about 75% of the fragrance’ products contain phthalates which have resulted in breast cancer, diabetes, reduction in sperm count, reproductive malformation, and disruptive hormonal activities. These factors may hamper the overall market growth.
Synthetic Aroma Chemicals Segment to Dominate the Market
Based on the source, the market is segmented into synthetic and natural aroma chemicals.
The synthetic segment is expected to dominate the market in the forthcoming years. Synthetic aromas are an essential ingredient for manufacturers operating in the cosmetics, personal care, and food & beverage industries. In the food industry, they can replicate the scent of natural foods for snacks, carbonated sodas, and candies. Synthetic chemicals are vital for many fragrance manufacturers to produce a strong natural scent without compromising the characteristics of other chemicals used in the fragrance formulations. There has been increasing demand for cosmetics containing natural scents. However, owing to the risk of skin sensitivities and allergies, it is not feasible to produce natural ingredient cosmetics, which has compelled manufacturers to produce products made of synthetic chemicals.
Terpenes/Terpenoids Segment to Hold the Largest Market Share
Based on the product, the aroma chemicals market is segmented into terpenes or terpenoids, benzenoids, musk chemicals, and others.
Terpenoids emerged as the dominant chemical segment in 2020. They possess medicinal properties, such as anti-carcinogen, antimicrobial, and antiseptic. Terpenes are used in many flavorings and fragrances as it has a nice aroma. Terpenoids and their derivatives are used as antimalarial drugs such as artemisinin, as they have anti-carcinogen, antimicrobial, and antiseptic medicinal properties. Increasing demand for terpenes in pharmaceutical, cosmetics, food, and other sectors shall augment the segment’s growth.
Musk chemicals are extracted either synthetically or naturally. They are widely found in personal care & cosmetics, food, household products, and soaps & detergents. The increasing demand for personal care products with a surging number of working professionals has led to a rise in the growth of musk chemicals. The increasing popularity of various types of cosmetic products and fine fragrances shall bolster the musk chemicals market size in the forthcoming years.
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Fine Fragrances Segment to Hold Major Share during the Forecast Period
On the basis of application, the market is segmented into food & beverages, fine fragrances, cosmetics & toiletries, soaps & detergents, and others.
The fine fragrances segment accounted for the highest aroma chemicals market share in 2020 and is expected to continue its dominance during the forecast period. This is attributable to the advancement in technology to meet changes in consumer demands and growth in the fragrance industry. The rise in per-capita disposable income and surging demand for natural flavors and fragrances would drive the fine fragrances segment.
Supportive government initiatives and key strategic development by manufacturers may also propel the fine fragrances segment’s growth. For instance, in July 2019, Givaudan, a manufacturer of flavors and fragrances acquired Drom, a perfume house creating fragrances for consumer products and fine fragrances globally. This acquisition will expand Givaudan’s market position in the fragrance industry.
These chemicals of aroma are substantially used in the manufacturing of flavorants, which are used in food preparation for flavor enhancement. Various compounds are responsible for the aroma of food products, such as esters, aldehydes, alcohols, lactones, and others. So, flavors and aromas play an important role in food quality. The rising demand for processed food, along with the increasing consumer taste preferences shall augment the food & beverage segment.
Europe Aroma Chemicals Market Size, 2020 (USD Million)
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Europe stood at USD 1,807.3 million in 2020 and is expected to dominate the global market during the forecast period. This is attributed to the increasing demand for fragrance in soaps & detergents and household products in Germany, France, and the U.K. Moreover, the rising consumer spending on luxury and premium fragrances on account of high-income levels and improved standard of living may propel the market growth in this region. Germany is the largest food producer in Europe. The country’s food and beverage industry provide great opportunities for flavor manufactures, as it helps in delivering palatability. Thus, it would favor regional growth in the forthcoming years.
The market in Asia Pacific may witness a significant growth rate during the forecast period. This is attributed to the growing personal care industry in China. The increasing demand for fragrances in China, Japan, and India, along with the rising importance of organic and natural fragrances is expected to drive the regional market growth. The high spending power of consumers in these countries is another factor contributing to the market growth.
Companies are focusing on investing in R&D activities and expanding their businesses in the Asia Pacific region. For instance, in September 2019, Firmenich, a manufacturer of flavors, ingredients, and fragrances opened an innovative Fine Fragrance Atelier in China. The company is providing easy access to all the fine fragrance products to customers in China and worldwide.
The U.S. held the highest share in the North American market in 2020 due to the growth in the personal care and cosmetic industry. A rise in the per-capita disposable income is likely to trigger the expansion of the personal care, cosmetics, and food & beverages industries, along with the growing health-conscious consumers is likely to strengthen the market position in the region.
Increasing demand for the production of soap and detergents and household products may offer massive growth opportunities in the Latin American region. The rising awareness regarding the importance of household hygiene may boost the demand for detergents and household products in Brazil.
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The rapid increase in the demand for cosmetics & personal care products, along with consumer awareness about beauty and hygiene practices shall accelerate the product demand in the Middle East & Africa. The cosmetics market in Africa will grow at an exponential rate, as the low-income population is starting to increase their spending on beauty products to achieve a better appearance.
Novel Product Innovation and Acquisition Remain Key Market Strategies of Companies
Most of the major players are present in the industry for a very long time and have large production capacities. Hence, to expand the product portfolio and businesses, they are focusing on expansion, product launches, and acquisitions to meet their growing demand from end-use markets.
Consumers are progressively becoming more conscious of the usage of the product and its benefits, which has obliged manufacturers to develop affordable, high-quality, and sustainable products. Additionally, key participants are witnessing high integration across the value chain and are involved in raw material procurement to gain a competitive edge in the industry.
An Infographic Representation of Aroma Chemicals Market
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The global aroma chemicals market research report provides a detailed analysis of the market and focuses on crucial aspects such as leading companies, sources, products, and applications. Also, it offers insights into market trends and highlights vital industry developments. This report includes historical data & forecasts revenue growth at global, regional, and country levels, and analyzes the industry's latest market dynamics and opportunities. In addition to the factors mentioned above, the report encompasses various factors contributing to the market's growth in recent years.
Value (USD Million)
Source; Product; Application; and By Region
Fortune Business Insights says that the global market size was USD 4,976.0 million in 2020 and is projected to reach USD 6,968.3 million by 2028.
In 2020, Europe stood at USD 1,807.3 million.
Registering a CAGR of 4.5%, the market will exhibit steady growth during the forecast period (2021-2028).
The fine fragrance segment is expected to lead this market during the forecast period.
The rising consumer spending for cosmetic products and fine fragrances is expected to drive the growth of the market.
BASF SE, Privi Speciality Chemicals Limited, Givaudan, International Flavors & Fragrances Inc., Takasago International Corporation, and Solvay are the major players in the global market.
Europe dominated the market in terms of share in 2020.
The rising adoption of sustainable fragrances by the perfume industry is expected to drive the adoption.
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