Consolidation within the Flavors Industry Impacts Opportunities for Smaller Manufacturers
With the top five suppliers accounting for approximately 54 percent of the total revenues, the highly competitive global flavors industry is experiencing a period of consolidation. Larger flavor houses are strengthening and expanding their application base by acquiring specialized companies. While this allows them quicker and easier access to a range of market segments, the increased consolidation is impacting the market share and profitability of smaller companies. As a result, small and medium-sized manufacturers are looking for opportunities in developing markets such as Eastern Europe, the Middle East, and Asia.
This Frost & Sullivan research service is an analysis of the global flavors market. It contains growth forecasts with insights into the development of the markets in the United States, Europe, Asia Pacific, and the Rest of the World as well as a top-line analysis impacting the growth of the market by application. In addition, key trends such as consumer preferences affecting each market segment are also discussed.
Increasing Buyer Power causes Price Pressure
As a result of the ongoing consolidation in the FMCG market, buyer power is on the rise. Large food manufacturers operating on a global scale are putting pressure on flavor manufacturers to reduce their prices. Offering quality products while maintaining a low cost base is a major challenge for participants in the global flavors industry. Furthermore, due to the faster rotation of flavors in the market, consistent and efficient delivery of products that meet the customers’ exact specifications is becoming a competitive necessity.
An added challenge for participants in the flavors industry is that flavor differentiation is being overshadowed by innovations in packaging and the development of new functional ingredients. "While flavors have been used as a way of differentiating a product from its competition in the past, companies are now looking at other options to provide brand or product extensions," says the analyst of this research service. "Such options include being able to offer different portion sizes, nutraceuticals, and delivery formats. The threat of substitution from alternative product offerings is likely to remain high."
Demand for Healthy Products and Development of Innovative Flavors Ensure Market Growth
Along with the increased global demand for nutritional food, consumers today are not willing to accept products that do not have an acceptable sensory profile. This consumer interest in healthier products is contributing to growth in the global flavors market. Also, as food manufacturers look to tap the growing consumer demand for new and foreign tastes, flavor houses are introducing new exotic flavors such as lychee and guava and are able to provide novel combinations of original favorites such as strawberry and mint.
"Among the regions, flavor consumption has traditionally been dominated by the United States, Japan, and Western Europe while France, Germany, and the United Kingdom consume the greatest volume of flavorings in Europe," says the analyst. "However, since the Western markets are becoming increasingly saturated, growth potential is at its highest in the Asia Pacific region, particularly China and India."
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