From the beginning of 2020, the entire world economy has been affected by the COVID-19 pandemic and the Flavour and Fragrances industry has certainly not been spared. It is easy to realise, considering the problems this pandemic has created, that the sector is dealing with a considerable challenge. There are problems in both demand and supply.
Summary of the general situation worldwide:
China: During the first two months of 2020, Chinese industrial production recorded a decline of 13.5% (source: China National Bureau of Statistics).
India: On March 24, the Indian Government decided to shut down its $2.9 trillion economy, with reopening scheduled for May 3. A report from the Centre for Monitoring Indian Economy forecasts that the unemployment rate could exceed 20% after the lockdown.
United States: In the first weeks of April, over 5 million people in the United States filed for unemployment benefits, not to mention the turmoil in the stock markets both nationally and globally. The Government is working to find adequate responses to this critical context.
Currently, due to the constantly changing situation, it is difficult to find reliable statistics on the flavors and fragrances market. However, we have worked with data from related industries in order to develop an accurate estimate.
As for the food sector, according to IRI’s report, during the twelfth week of 2020, Italy recorded growth in consumption of bakery and pastry ingredients of 135.8%, alcohol by 120.1%, and prepared mixes for desserts by 119.5%. In France, the consumption of ready meals increased by 186.6%. In the UK, canned food, including meat, vegetables, fruit, etc., rose by more than 150%. The situation is similar across all European countries. The report also showed that the demand for packaged foods is stabilizing. Meanwhile, data indicate that consumers are increasingly buying organic food, as fear of the coronavirus has taken hold in their country. Overall, with these figures, we can state that the flavor industry could easily see growth until May and should not suffer a sharp reduction in the near future.
In the fragrance sector, major companies are converting their production facilities from perfumes to hand sanitizers. At the same time, it is estimated that consumption of perfumes and cosmetics will decline. However, the main categories that saw growth according to the IRI report include soap and sanitary detergent, in which fragrances are also used among other ingredients.
On the supply side, more than a month of lockdown in China caused a shortage of materials such as ethyl vanillin, vanillin, ethyl butyrate, and derivatives. Since early March, supply has returned to normal with slightly higher prices and much longer delivery times, making good planning necessary.
The Indian lockdown created a limited supply of key Indian products. Cycleverdyl acetate and propionate, benzyl salicylate, cinnamic aldehyde, cinnamyl alcohol, phenylethyl alcohol, styrallyl acetate, diphenyl oxide, cyclamen aldehyde, OTBCHA, PTBCHA, coumarin, carvacrol, and thymol are in very short supply. Menthol prices have risen by $2/kg since the lockdown. The impact of the Indian lockdown on mint cultivation and harvesting is still unclear.
Turpentine derivatives were already limited during the Chinese lockdown, and the Indian lockdown caused a sharp contraction in supply. Prices of pinene, terpineol, terpinyl acetate, and ISO-E-Super have risen significantly. It is advisable to regularly monitor market trends.
Download the full IRI report on the impact of COVID-19 on the global market