Flavor and fragrance giants rely on these to maintain growth

Recently, global flavors and fragrance giants Firmenich, Givaudan, IFF, etc. have successively disclosed their latest financial reports. Unlike several major beauty groups in the world, which have shrunk tens of billions of yuan, upstream raw materials manufacturers have shown strong resilience, especially Dezhi Xin and Givaudan led the raw material industry with 7.6% and 4% growth respectively.

So, what are these upstream raw material suppliers relying on for growth? Which innovative technologies will lead the market?


Stable performance, less fall and more rise

On August 11, Firmenich announced its annual results as of June 30, 2020. During the period, the group's revenue reached RMB 29.323 billion, an increase of 2.8% in local currency. The Group’s several core sectors all performed stably. Among them, the fragrance and fragrance raw materials business grew by 2.2%, and the edible fragrance business grew by 3.8%.

Although Firmenich did not elaborate on the company's operating conditions in each quarter, it mentioned the impact of the epidemic on the company. It said that the global blockade policy and travel ban have affected the catering and high-end perfume business, and also have a knock-on effect on the daily chemical fragrance raw material business, and the salty food, sugar reduction, personal care, body care and home care. The strong performance completely offset this negative impact.

Not only Firmenich, but also Givaudan and other major raw material suppliers were affected by the epidemic, and various business units also went up and down, and overall performance was fairly stable. Looking at the sales volume of each group in the first half of the year alone, Givaudan is still far ahead, with sales reaching 24.35 billion yuan, far higher than the 17.709 billion yuan of international flavors and fragrances company IFF and 14.832 billion yuan of Dezhixin; in terms of growth. , Dezhixin performed better than Givaudan, with an increase of 7.6%.

However, overall, the diverse and flexible upstream product portfolios were less affected. In particular, Givaudan and Dezhixin also achieved growth against the trend. In the first half of the year, these two companies increased compared to the same period last year. Over 2 billion yuan also demonstrates the vitality of raw materials as the core of the industry.


Perfume is not "scented", personal care and home care will increase

Recently, data shows that from March to May this year, the sales of perfume in famous Korean department stores increased by 40.8% year-on-year, and in July, the category of Taoist fragrances increased by 65%. For a time, "perfume effect" replaced "lipstick effect" and became a popular term. . However, judging from the financial reports of these flavors and fragrances companies, the perfume has not only failed to become popular, but it has performed poorly.

Including Firmenich, perfume has become one of the sectors that almost all companies have suffered the most. Givaudan mentioned in its financial report that in the first half of the year, due to restrictions on business activities in retail and travel retail channels, perfume sales fell by 16.4% year-on-year; IFF's perfume business also fell by 40% in the second quarter; Dezhixin also cannot escape The fate of declining sales of fragrance products due to the decline of high-end perfumes.

Compared with skin care, personal care, home care, etc., perfume is not just needed, especially for the unpredictable risk of the epidemic. Consumers intend to tighten their wallets to reduce consumption of high-end beauty and luxury perfume products. Therefore, it is reasonable to transmit to the upstream and affect the growth of the enterprise. In other words, categories with strong terminal demand have become a breakthrough for raw material suppliers.

Among the world’s major cosmetics groups, such as Shiseido and LVMH, the first half of the year, which is dominated by beauty makeup, especially high-end beauty makeup, has fallen by double digits, while P&G and Unilever, which include daily chemical businesses, have withstood the pressure. Just as Unilever’s disinfectant soared 200 times, the home hygiene business sales increased 24%, which compensated for the decline in the beauty and personal care department.

Similarly, after the epidemic, consumer demand for personal care and household hygiene products has increased, which has also led to upstream development. Among them, Dezhixin's oral care business achieved double-digit growth, and Givaudan's household care and fabric care fragrance sales also achieved double-digit growth in the first half of the year.

Therefore, the final performance of the daily chemicals, skin care-related flavors, and raw materials businesses of the four flavors and fragrances giants has not fluctuated much. Among them, Givaudan's daily fragrance business sales in the first half of the year were 11.01 billion yuan, an increase of 4.5% year-on-year, while IFF and Dezhixin were basically the same as last year.


Acquisitions continue, industry monopolies intensify

In the cosmetics industry, the innovation of raw material technology plays a key role in product innovation and upgrading. For raw material suppliers, the consolidation of their market position also depends on their own innovative strength. The winners of the market segments of acquisitions and mergers have become the usual means of these giants. Especially Givaudan, which has moved frequently in recent years.

A few days ago, Givaudan announced the completion of the acquisition of Alderys, an innovative French biotechnology company, which it said will enhance the company's development and innovation in cosmetic active ingredients. In addition to Alderys, at the beginning of this year, Givaudan also acquired the American specialty raw materials, edible and daily flavor company Engele.

The injection of these two new companies will not only further enhance Givaudan’s competitiveness in various market segments, but will also bring about 1.7 billion yuan in revenue growth. According to Givaudan, since 2014, the company has actually announced 16 acquisitions.

In terms of the companies that Givaudan has acquired in the past two years, it has paid special attention to innovation and characteristic raw materials, and particularly focused on consolidating the company's leading advantages in the daily fragrance and beauty industries. In fact, not only Givaudan, Firmenich and IFF have also acquired many companies in the past two years. Judging from the areas where these acquired companies are good at, raw material vendors are paying more and more attention to technical reserves in the cosmetics field, and natural organic, environmental protection, and efficacy have become popular words. Just like the Alderys acquired by Givaudan, the latter has a good foundation in designing innovative biological methods to produce environmentally friendly raw materials and will inject vitality into the development of Givaudan's cosmetic raw materials.

At the same time, Givaudan, Firmenich, etc. also launched a variety of new cosmetic raw materials. For example, Firmenich launched Dreamwood™, the first fragrance raw material with cosmetic effects, which claims to have antibacterial and soothing effects on the skin, and 100% Renewable and biodegradable; Givaudan launched Synchronight™, a natural active cosmetic ingredient, which claims to protect the skin from digital pressures such as blue light. Natural, environmentally friendly, anti-blue light, etc. will continue to be popular now and in the next few years.

Although the epidemic has profoundly affected people's lives and consumption habits, the global restart is still unknown. However, once companies have prepared their technological reserves, long-term growth will only be a matter of time.
 
Note:
1. Since Firmenich does not have semi-annual report data, the table statistics are the other three (Givaudan, IFF, Dezhixin) semi-annual report data;
2. Unless otherwise specified, the currency units in the text have been converted to RMB.