Fragrances and flavours can evoke powerful emotions – be it the scent of someone we know or a favourite meal being cooked. Businesses and individuals have been trying to exploit the power of smell and taste since years.
In today’s world, the aroma of an office or home is transforming into huge business. Moreover, customised scents are a fad across several industries, especially hospitality. Luxury hotels are formulating their own fragrances, thus making the product individualistic and personalised.
The global flavours and fragrances industry has evolved over the last few years. Covid-19 and the subsequent lockdown brought new challenges and led to changes in consumer preferences and habits. In fact, Europe and the Americas have been the fastest growth markets for flavour and fragrance companies in the last two years, largely due to high consumption of processed foods and fine fragrances, and expanding e-commerce. Competition is so robust that manufacturers need to differentiate their brand such that it is memorable.
During the pandemic, demand for fragrances and flavours has remained strong. This is because individuals enhanced focus on personal hygiene and appearance, and consumption of healthy and natural food products. NPD Group mentions global fragrance sales were up 49% YoY in 2021, driven by higher demand for perfumes and scented candles.
In the last two years, e-commerce in the flavours and fragrances industry has increased considerably. For instance, Firmenich, an industry giant launched on Alibaba (an e-commerce platform) three years ago, gained organic customers in the last two years. In FY22, sales of perfumes through the online route grew 11% for the company, while that for the taste and beyond segment (flavours) expanded nearly 44% on YoY basis. The trend is likely to continue with more companies trying to build sales through e-commerce.
Coming to India, there has always been a keen interest in the art of manufacturing perfumes and fragrances from natural substances. The domestic fragrances and flavours industry is projected to expand led by shifts in consumer preferences and higher disposable income. Key users include small businesses, major MNCs, and local entities in the homecare, food and beverages, cosmetics, pharmaceuticals and personal care sectors.
As per the Essential Oils Association, sales of Indian aromatic and medicinal oils increased 20% in the last two years. Interestingly, there is extended use of fragrances in non-food segments: laundry products account for 29% of the market, of which detergents, powders and bars constitute 75%..
Work from home schedules and prolonged stress—as an aftereffect of lockdown measures—boosted demand for natural food flavourings and products with clean labels. This development could continue well into the coming years
Perfume capital of India
Prior to liberalisation of the import market, perfumes were one of the most popular purchases for Indians travelling abroad. Now the market is flooded with local and international brands. However, not many are aware that India’s oldest perfume business, with traditional methods and organic ingredients, is attempting to remain relevant amid branded lifestyle products.
Kannauj, a historical city in Uttar Pradesh, is known as the perfume capital of India due to its important role in fragrance production since centuries. In fact, what Grasse is to France and the world, Kannauj is to India. Here, fragrance manufacturers are mostly engaged in producing ‘attar’ or natural fragrance oils and extracts (widely used for making perfumes), and essential oils for soaps, shampoo, etc. Besides, these businesses manufacture flavouring agents for food and non-food segments, even medicines.
Ittar manufacturers use myriad natural ingredients, such as flowers (jasmine, rose, lavender, marigold, etc.), natural products (vetiver), and herbs and spices (saffron, cloves, juniper berries etc.). Mitti-attar, i.e., distilling the fragrance of fresh rain on dry soil, is one of the most sought-after perfume fragrances in Kannauj since decades.
Challenges
Over the years, most traditional manufacturers have been finding it challenging due to: (i) stiff competition from mass-manufacturers, alcohol-based perfumes and reputed fragrance brands; and (ii) surge in raw material costs. Producers also face difficulties in procuring essential oils. Many are now using dioctyl phthalate or liquid paraffin as alternatives.
Though Grasse was transformed into a tourist attraction, tourism in Kannauj has not gathered the same momentum. Walking tours of manufacturing units, flower nurseries etc., training locals to become guides, and improvement in the town’s facilities can assist in conserving this Made in India venture.
In 1991, Government of India set up the Fragrance & Flavour Development Centre, Kannauj (FFDC), with support from United Nations Development Programme/United Nations Industrial Development Organisation. The Uttar Pradesh state government offered land, technologies and infrastructure, while the central government provided recurring, non-recurring and indigenous apparatus and equipment. With this initiative, the government aims to bridge the gap between research and essential oils, fragrance and flavour industries.
The fragrance and flavour industry is multi-faceted and emphasises on the importance of smell and taste, which are vital to enhance our life. Globally, the industry is highly competitive, with the presence of 500+ companies.
AGR has been supporting the F&F industry by studying markets and opportunities for aroma chemicals both natural isolates and synthetic, essential oils, fragrances, flavours both veg and animal extracts etc. AGR can help companies understand the opportunity, help in prioritising products to manufacture, understand the techno-economic feasibility, identify technology partner etc.
Arshad Hippargi, Senior Analyst.
R Subramaniam, Executive Vice President