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The global flavors and fragrances market size was valued at USD 25.89 billion in 2021. The market is projected to grow from USD 26.54 billion in 2022 to USD 36.49 billion by 2029, exhibiting a CAGR of 4.7% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering, with flavors and fragrances experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global market exhibited a decline of 8.4% in 2020 as compared to 2019.
Flavors and fragrances are made from lactones, acids, esters, ketones, alcohol, and aldehydes. They are substances added to enhance the value of a product by modifying the characteristics of the solute, such as providing a pleasant odor or imparting sweet, sour, tangy, and other taste profiles. The preparation of these sensory improvement products involves a rigorous process. They are either prepared from natural and synthetic chemicals or essential oils such as vanilla pods, citruses, beaver’s castor and deer’s musk. Natural counterparts of these products are created from plant and animal-based materials. Artificial esters are mixed with alcohol, glycerol, or propylene glycol to formulate synthetic essence or flavorings. Flavors are used as an additive to enhance the taste of food & beverages in bakeries, snacks, dairy products, sauces, and confectionery. Similarly, fragrances are important to conceal the bad odor in the environment, and thus are mainly used in consumer products, including body care, oral care, and home care.
Large-scale companies are focusing on adopting new technologies to stay ahead of the competition in the global market. For instance, in April 2021, Givaudan announced the acquisition of Myrissi, a developer of a patented AI technology capable of rendering fragrances into color pallets and imagery to attract the consumer and predict the end consumer’s emotional response. The acquisition helped the company to expand its AI-based capabilities in developing novel fragrances.
Impact of COVID-19 on Sensory Organs to Reshape the Market in the Next Few Years
The impact of COVID-19 pandemic was particularly visible across the entire specialty chemicals sector, seeping down to the sensory improvement products. The impact of coronavirus on the sensory organs isn’t yet well recorded. However, the loss of smell and taste has been a critical symptom in identifying the infection of the virus. How the virus uniquely and suddenly impacts the smell and taste is yet to be fully understood. Both anosmia and parasomnia have been observed in the patients. In fact, according to a report by Fifth Sense, an awareness charity set by a professor of the University of East Anglia, 60% of COVID-19 patients suffer from sensory disturbances, of which 10% show persistent problems beyond four weeks. It is estimated that several million people have been affected by smell and taste loss symptoms. A Facebook group page AbScent, which joins people having lost their sense of smell and taste for a prolonged period, has expanded from 1,000 members in March last year to over 25,000 members as of April 2021. This impact on the sense of taste and smell has presented a challenge to the flavoring companies to come up with solutions and deal with common supply chain challenges.
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Development of Regional and Novel Flavors and Fragrances to Accelerate the Market Growth
Strong growth in the food & beverage industry led to the innovation of new flavors. Changes in taste and preferences of consumers coupled with the trend of the ready-to-eat product led to an opportunity for the manufacturer to come up with innovations to meet consumer demand. For instance, recently, the company Ben & Jerry's launched its new ice-cream flavor called Netflix & Chill'd, a vegan version of traditional peanut butter ice cream. Asia Pacific is the fastest-growing region in terms of consumer spending on eating out. The growth is attributed to the availability of food & beverages in shopping malls, selling foods through an online platform, and similar factors. Furthermore, many companies are researching the development of new flavors based on traditional food products.
Growth in Pharmaceuticals and Cosmetics Industries to Drive the Market
The driving factor for the growth of the market is the rapidly growing cosmetic industry. Growing modernization in developing economies augmented the demand for perfumes, cosmetics, toiletries, soaps, and detergents. Further, a rising preference for organic ingredients in the personal care sector leads to increased demand for natural fragrances as they are perceived to be healthier, safe, and therapeutic when consumed. The need for synthetic fragrances is also rising due to their long-lasting and strong aroma properties. The manufacturers of fragrances are innovating to meet consumer demand for differentiating aromas in cosmetics. For instance, in 2019, Givaudan launched Sensityl, an active cosmetic ingredient that offers beauty and health benefits for the consumer. Hence, innovation in fragrances will further help in the flavors and fragrances market growth.
The increasing use of flavors in the pharmaceutical industry is also an attribute to market growth. The flavors are inactive ingredients in syrups, suspensions, chewable tablets, gums, and others. The added flavor overcomes the bitter taste of medicine, makes it more edible, and transmits a beneficial therapeutic effect. Hence the rise in demand from the pharmaceutical industry shall further lead to an expansion of the market.
Pricing Irregularity in Many Products Impedes the Market Growth
With growing competitive rivalry amongst the market players and focusing on developing novel flavoring mixes, companies invest heavily in R&D activities. Also, no proper regulations have led to heavy irregularity in the pricing of most products. Some grades of these products can range from a few dollars per liter to even hundreds of dollars per liter, depending on the company. This factor critically affects the growth of the market and prevents potential end-consumers from adopting quality products in their manufacturing processes.
Flavors to Account for Major Share as they Stimulate the Senses, Smell, and Taste
This market is bifurcated into flavors and fragrances on the basis of type, both of which are further segmented into natural and synthetic. Among the two segments, flavors hold a dominant market share due to their significant application in the food & beverage industry.
Flavors can please both the senses of smell and taste, which is the crucial reason for the larger market share compared to the fragrances segment. They elevate the taste of various foods & beverages such as dairy products, sodas, savories & snacks, and desserts. They are compounds that mask the characteristic taste of the product and provide them with a more striking and adored taste. For instance, milk has a very bland taste, but dairy product manufacturers add flavors such as rose, saffron, and cardamom, which provides milk and milk products with a modified smell and taste of these ingredients. Additionally, flavors are also used in pharmaceuticals and cosmetics. Many pharmaceutical products are bitter due to the components used in the formulation. These bitter syrups and powders are difficult to sell, especially for juvenile consumers. Thus, pharmaceutical companies are increasingly using flavors to alter the taste of their products to make them more acceptable, resulting in growth opportunities for the stakeholders operating in the market.
Fragrances alter the foul smell in air with fragrant compounds such as esters. They are used in cosmetics, personal care products, home & floor care solutions, and others. In cosmetics, fragrances give the products a mesmerizing smell, making them attractive to the consumers. The social convention for a good-smelling personality is the key reason for using fragrances in cosmetics. On similar grounds, middle and low notes of fragrances manufacture fine fragrances, which provide the user with a long-lasting, attractive smell.
Both the segments are further divided into natural and synthetic subtypes. Some of the commonly used natural flavors and fragrances include rose, citrus, and chocolate (cocoa). The demand for naturally sourced food & beverages has seen a considerable rise from the young generation, which is expected to create a shift in favor of the natural flavors segment during the forecast period. Fine fragrance manufacturers use natural products to impart a better quality to their products, which is the key reason for the considerable growth of the natural fragrances segment. On the other hand, synthetic products are manufactured in a controlled environment, thus having superior control over quality compared to natural sources, which are affected by various factors of nature. The cost of production of synthetics is also lower than via extraction from natural sources, which further results in their adoption, especially for low-cost applications of home & floor care, consumer goods, and air care products.
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Food & Beverage Sub-Segment to Dominate the Market Owing to Higher Flavors Adoption
On the basis of flavors, the market is segmented into food & beverages, pharmaceuticals, and others. The food & beverages segment is further bifurcated into segments such as beverages, bakery, confectionery, dairy, and others. The fragrances segment is divided into fine fragrances, cosmetics & personal care, home & floor care, and others. Amongst these applications, food & beverage is expected to remain the major application during the forecast period. Flavors are used dominantly in food & beverage manufacturing to provide the food materials with attractive taste and smell. Further, the span of usage of flavors has also expanded from just sweets and savories to niche applications such as hot beverages, soups, and tobacco products. The large-scale consumption of flavors from the food & beverage industry shall be the crucial reason for the growth of the market.
Many home & floor care products are manufactured using phenol and its derivatives, which have a characteristic pungent smell, making their indoor use unacceptable. Thus, the manufacturers of such products add fragrances to make them acceptable to the consumer. The demand for home care products has increased due to the drive for cleanliness gaining momentum during the pandemic. Fragrances used in these products replace these odorants present in the product by masking them, making the premises inhabitable. The usage of pest control products has also increased in past years, which is expected to surge the demand for fragrances to minimize the pungent smell of these insecticides.
Europe Flavors and Fragrances Market Size, 2021 (USD Billion)
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Europe occupied a significant flavors and fragrances market share and accounted for USD 8.16 billion in 2021. The key reason behind this is the large demand from food & beverage manufacturers and uptake in considerable quantities for the manufacture of fine fragrances and cosmetics in the region. Furthermore, the majority of the multinational manufacturers have their base in Europe, which results in ease of trade. The demand for flavors for usage in liquor-based drinks has also increased significantly in the recent past, which is expected to further drive the market in Europe.
The market in Asia Pacific is dominated by China. India and Southeast Asia are expected to witness rapid growth, owing to the surge in demand for flavored products in these countries. China accounts for a large share due to the demand for these sensory improvement products to manufacture food and cosmetics in the country. Additionally, the development of the pharmaceutical industry in the region is expected to provide traction for the market.
North America, on the other hand, is expected to witness median growth in the market. The market has reached the maturity phase in the region, but demand for the manufacture of products, such as sodas and canned cocktails, is expected to provide growth potential in the near future. The United States is a key consumer of these products in North America, owing to the increasing demand for flavored desserts in the country.
In Latin America, the demand for flavors and fragrances for the manufacture of local beverages has surged in the last few years. Furthermore, home & floor care products are also in demand in the region, with rising regional health concerns in the recent past. The market in the Middle East & Africa, on the other hand, is expected to grow at a considerable rate due to the heavy demand for cosmetics and fine fragrances applications in the region.
Key Market Players to Strengthen their Position with Acquisition and Expansion Strategies
The market is controlled by a very few large enterprises, making the market a consolidated one. Some of the key market players are Givaudan, International Flavors and Fragrances (IFF), Symrise AG, and Firmenich SA. These four stakeholders hold about 50% of the global marketplace. The key companies in the market have employed a mix of organic and inorganic growth strategies. Givaudan acquired over five companies since 2018 while Firmenich started building a new plant in China in 2019.
The key players have increased their focus on product development to create multiple formulations to match the requirements of their clients. IFF offers over 90,000 individual products to their customers present in over 190 countries. Givaudan, on the other hand, has set up 64 production sites across the globe to satisfy the needs of consumers in over 145 countries. The small stakeholders are employing their experience and expertise to capture the smallest of white space in the market. Companies have also started manufacturing individual products for specific clients as per their requirements. The contents of these formulations are kept secret so that the competitors cannot match the specifications, helping the client keep their product unique in the market.
An Infographic Representation of Flavors and Fragrances Market
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The global market report provides qualitative and quantitative insights on the market share, size, and growth rate by different segments. Along with this, the report provides an elaborative analysis of the market dynamics and competitive landscape. Various key insights presented in the report are Porter’s Five Forces, recent industry developments in the market, the regulatory scenario in crucial countries, macro & microeconomic factors, SWOT analysis, key industry trends, competitive landscape, and company profiles.
Value (USD Billion)
By Type, Type (Cross Application), and Geography
By Type (Cross Application)
Fortune Business Insights says that the market was valued at USD 25.89 billion in 2021 and is projected to reach USD 36.49 billion by 2029.
Growing at a CAGR of 4.7%, the market will exhibit considerable growth in the forecast period.
The food & beverage application segment is expected to lead this market during the forecast period.
Increasing consumption from pharmaceuticals and cosmetics industries shall drive the growth of the market.
Europe currently holds the highest market share in terms of revenue of the market. However, Asia Pacific is projected to topple the lead during the study period.
Givaudan, Firmenich SA, Symrise AG, and International Flavors & Fragrances (IFF) are the key players in the market and have adopted strategies such as acquisition and capacity expansion for their growth in the market.
Rising demand for masking bad odors and tastes in pharmaceuticals, personal care, and home care products is the key factor driving the adoption of these products.
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