By Natasha Telles D’Costa, research manager, New Zealand GIC, Frost & Sullivan
As consumers increasingly demand answers to the question “what’s really in our food?” the need for transparency with respect to food ingredients and along the value chain has never been more important.
The food flavour industry because of its prominent role in defining food choices is one of the first ingredients that come under consumer scrutiny. With tighter household budgets growing inversely with consumer demand sophistication the global and indeed domestic food flavour industry has had to emerge as a cost effective innovator that can attract and retain demand from capricious consumers.
Food flavours
Flavours are a mixture of a few volatile chemicals. However, only combinations of specific flavours are responsible for a specific taste. Currently, flavour compounds are widely used in the food industry, either to deliver a definitive flavour to a product or to strengthen an existing flavour, characteristic in a food product. Flavours give taste to a large number of food and beverages and are also used in pharmaceuticals and oral care industry. Food flavours are primarily segregated as Natural and synthetic flavours, Herbs and spices and flavour enhancers. This segmentation is further dependent on its use in various applications of which beverages accounts for over 50 percent of demand.
Global flavour industry
The global flavour industry is one of the most established, competitive and innovation intensive industries in the world. The industry is primarily populated by a handful of global companies that compete fiercely in almost all country markets.
While the US, Europe and Asia Pacific account for approximately 82 percent of market share there is much excitement about emerging flavour requirements from the other 18 percent of the world. The market is extremely region specific with each country and sometimes several regions within a country demanding specific types of flavours. For instance while Chinese demand is typically for boiled meat flavours, Europe requires roasted meat flavours while India in stark contrast has a negligible market for these same flavours.
Additionally the constantly increased range of end use applications such as demand from the flavoured dairy and flavoured water categories have ensured that product differentiation is the key purchasing criteria for flavour houses. One of the key examples of such differentiation was the brainchild of Givaduan flavours which introduced TasteTrek TM in 2004. TasteTrek is a yearly pilgrimage undertaken by flavourists and perfumers to isolate and discover newer flavours from remote regions such as the Kombu seaweed from South Korea, the teriyaki eel from Japan and so on.
With R&D investments from most major firms ranging between six to 10 percent of total sales, the global flavour market is expected to remain a hot bed of innovation. In 2011 the global flavour market was estimated at US$13 billion and growing at a CAGR of 1.5 percent. Key companies globally are Givaduan, Firmenich, International flavours and Fragrances, Symrise and Takasago which together account for 58 percent of the market. Increasingly newer regional companies have also mushroomed aiming to take local flavours to the world.
New Zealand flavour industry
New Zealand has long been a manufacturing location for many of the global majors in the flavour industry due to its unique ecological profile that allows for the introduction of new and exotic raw materials giving rise to flavours that are uniquely Kiwi. The New Zealand flavour market is estimated around US$130 million growing at four-five percent year on year.
The market is dynamic and is witnessing encouraging growth spurred by consumer demand for newer and more innovative flavour profiles. New Zealand’s food industry possesses one of the developed world’s most differentiated product portfolios due to the strong localisation of New Zealand based flavours. However, there is increased focus on utilising the New Zealand production as a base for exports to the emerging economies in South East and South Asia where classic New Zealand flavours like kiwifruit and feijoa have gained immense popularity and poses a profitable avenue for penetration.
Key trends in the New Zealand Flavour market
Thinking global acting local – in a world of contradictions the flavour industry is a key participant, for while consumers constantly require their taste buds to be challenged the average kiwi is quite conservative when it comes to trying completely new product offerings. The trick is thus to provide flavours that are new but still possess enough of local ingredients to gain consumer trust. The many kiwifruit flavoured products are testament to this mode of thinking, for while consumers are willing to try new formats the idea that the ingredient is a known one pushes sales forward. Flavour manufacturers thus need to place keen focus on the NZ story behind their products, a school of thought that is standing them in good stead even in export markets such as the USA and Europe where these products are considered exotic and wholesome.
Formulating success – never has the packaging been more important that the produce as it is today. Delivery formats sell products in the competitive processed foods market and the flavour industry is no exception. Flavour manufacturers are thus called upon to provide application profiling wherein the flavours are easily formulated into the end product no matter how revolutionary the formulation. This is apparent with the increasing interest of the alcoholic industry in the products provided by flavour manufacturers. Traditionally a stoic and conservative market, alcoholic drink in New Zealand has witnessed a huge revolution in the demand for flavour alcohol. Such demand has introduced a whole new segment to the market that is a huge growth opportunity for the New Zealand flavour industry especially as the New Zealand alcohol industry is also a large exporter and these flavoured drinks provide a means of taking New Zealand flavours to the international consumer as well.
Focussing on dairy – in 2011 the dairy sector accounted over 35 percent of all global fortified food product launches, with yoghurt and flavoured milk buoying demand. As the primary sector in the New Zealand food industry dairy products have traditionally been considered commodities and sold in their primary form. With the entry of Fonterra the New Zealand dairy industry witnessed a change of guard allowing it to become the world’s largest individual dairy exporter. The flavour industry has belatedly hitched itself to this bandwagon and is today witnessed tremendous demand for flavoured dairy products. Flavoured milk and yoghurt continue to be a huge growth avenue the former with the youth and the latter with the increasingly health conscious Kiwi population.
Conclusion
As the flavour industry globally witnesses an increasing shift towards innovative product profiles the New Zealand market stands to gain purely from its ability to provide unique flavours with sophisticated formats. With fierce competition to gain consumer interest and large awareness of the country’s clean green image New Zealand is already primed to take advantage of this situation. The existence of all of the top five flavour and fragrance manufacturers in New Zealand is testament to the country’s ability to provide flavours for both domestic and export use. The NZ flavour industry needs to capitalise on these factors to ensure that awareness on its ability to take ethnic flavours and turn them into global flavours reaches the world’s business community.
