The “big four”, according to a former manager at International Flavors & Fragrances Inc (IFF), are IFF, Givaudan, Firmenich and Symrise. In February, IFF completed its merger with DuPont’s Nutrition & Biosciences business, launching a new brand identity and tagline, “where science and creativity meet”. Described by the specialist we interviewed as a “bold move” — but “so far, on the execution side, well done” — the deal is being hailed as a defining moment for the F&F industry. Indeed, IFF said it is aiming “to push past traditional industry boundaries” and drive a “better and more sustainable future”.1https://ir.iff.com/news-releases/news-release-details/iff-unveils-new-brand-identity-accelerate-strategic But integrating the various business units is not straightforward, according to the former IFF manager. A successful merger, we’re told, would be one where customers enjoy “the complete suite of offerings that the new IFF has to offer” and are able to “plug and play” as per their needs. “A not-so-successful merger will be that you have 2-3, per customer, operating units that will do their own thing with a little bit of cross-selling.”
We also heard that industry consolidation is under way, particularly among the smaller F&F houses. But “you’re not seeing them necessarily be acquired by the large… [who] are acquiring technologies, are partnering with advancements in the industry. They’re not just trying to acquire for share growth”, a former divisional leader at Givaudan said. The IFF-DuPont deal and the potential acquisition of CHR Hansen by Givaudan could be seen as examples of responses to this.
Other industry dynamics are also at play. For example, F&F companies have been trying to increase their share of business with start-ups around the world that are coming to market with innovative consumer products. “That’s really important,” the former divisional leader at Givaudan said. “They’re a bit more nimble, they’re a bit more agile, and the F&F organisations needed to align with that in order to capitalise.” Here, IFF’s Tastepoint division focused on small and medium-sized customers could give the company an edge, we heard. And this appears to be a global trend, with a former Symrise executive telling us that, in APAC, the company has “outgrown their largest competitors by gaining market share with the smaller accounts, the regional FMCGs and the local FMCGs”.
APAC is certainly a region to watch. While the US and Europe are seemingly reaching the “climactic pinnacle” of their transition to more natural products, significant growth is expected here — though “we don’t expect the same, we’ll call it, leverage point in scale. We don’t think that they’ll probably go above the 50-60% movement towards natural”. However, “they still have a long gap to move from synthetic to natural, and they’re just behind the mature regions of the globe. That’s really going to come into play,” the Givaudan expert said.
The former Symrise executive shared some numbers to underpin this point. “For the years that I was in APAC, we saw growth rates of 6-9%… This is quite a bit higher than the global numbers, which are around 5-6%, and then, for the western market, it’s usually 2-3%”. Growth is projected to reach 7-10%, driven by Singapore’s appetite for sustainable products and APAC’s urbanisation. Interviews also revealed shifts across the region’s competitive landscape, with Symrise now a “fierce competitor” to Givaudan. “Whereas maybe in 2008, Symrise would have been the number four of the big four… today, I would see Symrise as number two, and yes, in size, dominated by Givaudan, but in success rate in the market, I’d see them beating Givaudan more often than not.”
Across all corners of the F&F industry, health and wellness is a strong trend and includes demand for “clean” labels that are free from additives and harmful chemicals. The shift away from artificial to natural ingredients remains an important strand of this and has been further amplified by COVID-19. As highlighted in one Forum Interview, the trend isn’t new but has been “exponentially” greater over the past decade, driven by consumer demand for transparency and simplified ingredients. According to a 2021 survey of 1,054 US-based adults by the International Food Information Council, nearly two in three (64%) are looking for food products made with clean ingredients.2https://ific.org/media-information/press-releases/strong-interest-in-knowing-about-food-ingredients/ At the same time, functional ingredients, which deliver additional or enhanced nutritional benefits, such as probiotics and proteins, are expected to be a key growth area.
However, fulfilling these requirements while ensuring that products look and tastes great, with the desired texture, can be a complex task within the food segment. This is where bioconversion, where organic materials such as microorganisms or yeasts convert one natural material into another, is coming into sharper focus. “Interestingly enough, the Impossible Burger makes use of exactly this technology. They have a genetically modified organism that makes the key ingredient,” the former Symrise executive said. There are some nuances, however; the burger is classified as natural but doesn’t meet the requirements for organic. “I do think it’s [bioconversion] safe,” they added. “The consumer is accepting it, so… natural penetration, I think will go up still, because of this.” The approach is also gaining traction from an ESG standpoint, including being seen as a way to help fix the “broken food chain” and solve some of the environmental problems associated with food production, such as resource scarcity.
Overall, Forum Interviews suggest there are exciting times ahead for the F&F industry, which looks poised for further growth as technology and science become increasingly ingrained in R&D. After over a year of pipeline disruption owing to the COVID-19 pandemic, one executive predicted a “catch-up wave of new products hitting the market towards H2 of this year”. As noted by the former IFF expert, while the COVID-19 pandemic caused “a lot of shifts within different segments, overall it’s a very resilient industry”.
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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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