China expands squeezed margins for flavour firms

- Last updated on GMT

Related tags: Western europe, Asia pacific, United states

Europe and the US continue to dominate demand in the €4.5 billion
flavours market, but Asia Pacific region is quickly catching up
thanks to high single-digit growth, reveal figures from a new
report, writes Lindsey Partos.

China is spurring growth in Asia Pacific, a region slated to advance at about 7.3 per cent, year on year, until 2008. This compares to western Europe and the US with 3.7 and 3.3 per cent growth respectively.

Such escalating demand should help global flavour firms tackle ongoing price squeezes that continue to slice into their margins.

The rising power and ongoing growth of the multiple global retailers is putting constant pressure on ingredients companies to keep up with the pace, deliver products at competitive prices and guarantee supplies. The flavours is no exception.

"Pricing pressures are across the board, mainly due to consolidation in the food and beverage industry,"​ Pamela Prokop, author of a recent report from analysts Freedonia​, tells FoodNavigator.com.

Mopping up some of the lost margin, food sales in China took off in the mid 1990s rising from under 100 billion yuan (€9.2bn) in 1991 to well over 400 billion yuan (€37bn) just ten years later.

Driving the market is the increased spending power and changing eating habits of China's 1.3 billion people who are transforming the country's food sector, both domestically and in foreign trade.

Historically, flavours production has been dominated by the US, Japan and western Europe - in particular, France, the UK, Germany andSwitzerland. But the Freedonia report warns that until 2008, these areas will lose market share to developing areas of the world, as the product range and demand expands.

In 2003, the US and western Europe had a 23 and 21 per cent share of the market respectively, compared to Asia Pacific with about 30 per cent .

The fastest market growth for the overall sector is expected in soft drinks, snacks, convenience foods, health foods and nutraceuticals, claims the report.

Swiss firm Givaudan continues to lead the competitive global flavours industry with an estimated 13.5 per cent slice of the market in 2003, followed by US International Flavours & Fragrances that has an 11.7 per cent share. Firmenich, Symrise and ICI-owned flavours company Quest International are slated to have about 9.8, 9 and 6.1 per cent of the market respectively.

Related topics: Suppliers, Flavors and colors

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