Demand for fragrance blends will benefit from healthy increases in the production of cosmetics and toiletries worldwide and from growing interest in aromatherapy, the study adds. It notes two particular influences: In the developed world, aging and affluent consumers are increasing their use of skin-care products and cosmetics; while in the developing world, increasing per capita incomes are allowing purchase of greater amounts of better quality consumer products.
All of that demand requires a wide variety of essential oils and extracts and synthetic flavors and fragrances. According to SRI consultants, some 2,800 individual aroma chemicals--benzenoids, terpenes, and heterocyclic chemicals, primarily--are used in F&F compositions. However, SRI points out, only a few hundred are offered on the merchant market and used in quantities larger than 50 metric tons per year.
Although essential oils and natural extracts that are needed for compounding are closely identified with the F&F product business, major F&F houses are only selectively involved in producing them.
International marketing and global presence are becoming increasingly important in this sector, and SRI predicts that the role of essential oil dealers will change from one of trader to that of a critical link between suppliers and users of raw materials of natural origin.
These days, China is the biggest natural products source for the F&F industry. However, points out one supplier, China is also importing a lot from India. The two countries, with their cheaper raw material costs, have kept prices down.
This is also true in aroma chemicals. For example, Jean-Pierre Tirouflet, CEO of Rhodia, a major producer of vanillin, says that Chinese suppliers of vanillin have sold at extremely low prices, hurting the overall market. But now, he says, the situation seems to be improving, and Chinese manufacturers are becoming more realistic about their pricing.
Other areas, too, have their natural-oil specialties. For example, until the 1990s, Bulgaria was the prime supplier of rose oil, distilled from Rosa damascena, the damask rose. The blooms are picked by hand early in the morning, when the aroma is strongest, and transported to distilleries.
ROSE GROWING in Bulgaria suffered in the 1990s as subsidies from the post-communist government dried up and land reforms began. Farmers who got only one crop a year from a rose harvest ripped out bushes to plant grain and other seemingly more lucrative crops. At one point, Bulgaria had about 50% of the world rose-oil market, but the country saw its share fall to about 35% when growers elsewhere in the world, including Turkey, Morocco, and India, gained market share.
Seven companies garner almost half of the global sales of flavor and fragrance chemicals
|International Flavors & Fragrances (U.S.)
|Quest International (U.K./ Netherlands)
|Haarmann & Reimer (Germany)
|Sensient Technologies (U.S.)
|a C&EN estimate. SOURCE: Leffingwell & Associates
Bulgaria's rose acreage is going up again, however, because growers see the crop as a high-value product. Rose-oil distillers are modernizing, and producers are emphasizing quality rather than quantity. Last year, according to one source, international buyers paid anywhere from $3,500 to $3,600 per kg for Bulgarian rose oil, up about 5% from previous years, for the 1,200 kg of rose oil produced in Bulgaria. Some 60% of that went to the European Union and 35%, to the U.S.
Meanwhile, even for suppliers in an industry as traditional as essential oils and flavors, technology is not sitting still.
A case in point is U.K.-based Ineos Fluor, which this month is completing expansion of its capacity for toll manufacture of flavor and fragrance extracts, featuring its proprietary Xentia process. The expansion will introduce "new opportunities for the toll manufacture of high-quality, natural extracts," the company says.
The company has been working for the past two or three years to commercialize the Xentia process, "as we have worked in conjunction with worldwide flavor and fragrance houses to provide products and services that are unique in this market," says Dave Morrison, new ventures development manager for Ineos Fluor.
The process, based on fluorine chemistry, features hydrofluorocarbon 134-a, which Richard Longden, communications manager, terms "an effective extraction agent, good for essential extracts without damaging them." It works at about room temperature and at pressures of about 300 psi, retaining the volatile components of natural extracts. Longden claims that the quality of the extracts "is right up there with those produced by supercritical CO2."
He points out that because Ineos Fluor--formerly part of ICI and recently acquired by Ineos--produces propellants for asthma inhalers, "we understand regulations such as current Good Manufacturing Practices."
Other potential customers are final producers of F&F products--companies working with essential oils, but also the end-product manufacturers, on a global basis. The new capacity is primarily in the U.K., but Ineos Fluor is "doing a lot of development work in our labs in Japan as well," Longden says.
As Meredith Willson pointed out in "The Music Man," a good marketer "has gotta know the territory." For marketers in this very specialized sector of the chemical industry, it's a question of knowing how to juggle the science with the magic--and how to exploit products sourced from faraway places with strange-sounding names.
Treatt plc, based in southeast England, is typical of the specialist firms that, despite consolidation, continue to populate the flavor and fragrance (F&F) industry. It succeeds by concentrating on niche businesses and offering services and products that the industry giants don't offer.
Treatt was founded in 1886 as a London trader in essential oils, soon becoming an agent for the Zanzibar government trading company, dealing with commodities such as clove and other East African essential oils.
The company began adding value to its commodities by distillation and similar processing. According to Hugo Bovill, managing director of Treatt, at one point, "we looked at making fragrances and flavors but decided strategically that was not for us."
The company also became a distributor of aroma chemicals, and since the mid-1980s this business "has grown faster than anything else," he notes. "Often, the needs of the entire F&F industry are less than one chemical company wants to make."
Additionally, the company offers related specialties such as diacetyl--a by-product of the South African sugar industry that is used to make margarine flavors--and various high-impact sulfa chemicals often used at dosage levels of less than 1 part per million.
"Any chemical company making something with an aroma might look to us to see if there is a market for it," Bovill explains. "They might need to determine whether or not the chemical is kosher, for example. Determination of whether a chemical is halal [the Moslem equivalent of kosher] will be next."
Moreover, increasingly sophisticated analytical tools are helping the industry determine the impurities in a sample. However, unlike most of the chemical industry, which wants impurities out, in the F&F industry, "impurities are what frequently matter--they carry and contribute to the odor profile," Bovill points out. "It's the mix of the impurities that may give the desired properties, not the overall purity of the product."
And the company is beginning to see marketing opportunities in the field of chirality. "We've been doing chiral chemistry for years," Bovill says. "For example, l-carvone is a spearmint flavor, and d-carvone is dill/caraway. This field is becoming more important, and we'd like to get more involved. If you can make a chemical with one isomer stronger than the other, you might get better value."
Inventory, Bovill notes, "for us is a key word. To have $12 million in inventory and $40 million in sales is a lot, but it's part of the business. You can wait for years and then something may happen very quickly."
Treatt, he says, can act as a one-stop supermarket for the flavor and fragrance industry in Europe, but not in the U.S. The company set up a presence in the U.S. in the early 1990s in Florida to process orange-peel oil. It now has a small team, selling to more than 300 customers, including all major F&F companies in the U.S., and this autumn it is scheduled to move to a new site in Lakeland, Fla.
"Long term," Bovill says, "we want to develop and do what we do in Europe in the U.S. We'll do it through organic growth and selective, very small acquisitions. We're not in a tearing hurry--we are patient."