Health & Beauty

With the development of the economy and the improvement of people's living standards, the demand and supply market of my country's flavor and fragrance industry have achieved two-way growth, and the market size of the flavor and fragrance industry has continued to expand. At the same time, the rapid development of downstream industries has brought a growing new market space to the domestic flavor and fragrance industry. Recently, the fragrance supplier Kunshan Yaxiang Fragrance Co., Ltd. (hereinafter referred to as "Asian Fragrance") announced that the company's initial public offering of shares on the Growth Enterprise Market has become effective and is expected to be listed on the Shenzhen Stock Exchange in the near future.

For a long time, the global flavor and fragrance market has been occupied by international giants. However, in recent years, domestic fragrance companies have sprung up, trying to get a share of the fragrance battlefield. At the same time, since 2020, a large amount of capital has extended olive branches to upstream companies, and Kunshan Yaxiang Perfume Co., Ltd. is one of them.

The scale of the industry continues to expand

my country's flavor and fragrance industry started in the 1930s. At that time, there were several small businesses that prepared flavors mainly in Shanghai, and all the spices used were imported. Since 1980, my country's flavor and fragrance industry has developed rapidly. In the course of more than 40 years of development, with the development of China's economy and the improvement of national living standards, my country's flavor and fragrance demand and supply have grown in both directions, and the market scale of the flavor and fragrance industry has continued to expand.

Based on the huge population base and increasing income levels, developing countries such as China have become the fastest growing markets in the food, daily chemical and other industries, and have driven the huge demand for flavor and fragrance products. At the same time, under the trend of economic globalization, international flavor and fragrance giants have invested and built factories in China, which has further boosted the growth of the domestic flavor and fragrance market.

According to the data released by the China Fragrance, Flavor and Cosmetics Industry Association in October 2018, after 40 years of development, the number of companies in the flavor and fragrance industry has increased from 83 in 1980 to more than 1,000, and the market size has also increased from 1980. From 524 million yuan to 37.06 billion yuan in 2017, the market size has expanded by more than 70 times.

The development of the national economy has provided a good opportunity for the development of the downstream industry of flavors and fragrances, driving the annual output value of the downstream industry to exceed 10 trillion yuan; and the rapid development of the downstream industry has brought growing market space for the flavors and fragrances industry in my country.

Yaxiang is one of the beneficiaries.

The trend of natural flavors

Flavor is an organic compound that can sense fragrance by smell or taste, also known as fragrance raw material. It is mainly used to formulate flavors for flavoring products, or directly used as food additives. Spice and essence are not direct consumer goods in people's lives, but are added to other products as supporting raw materials. They are widely used in food, tobacco, daily chemicals, medicine, feed, cosmetics, textiles and leather and other industries.

Yaxiang Co., Ltd. was established in 2001. Its main business is the research and development, production and sales of spices. It has now become one of the main manufacturers of mid-to-high-end spices in China.

There are many world-renowned fast-moving consumer brands among Yaxiang's customers. For example, "Mars Wrigley", the world's largest producer of chocolate and chewing gum, "Mondelez International", one of the world's largest snack companies, and Colgate, a world-renowned consumer brand, etc. Its "fist product" cooling agent WS-23 occupies 80% of the global market share of the same category. Mars Wrigley, the parent company of Green Arrow Chewing Gum, has taken over half of Yaxiang's "cooling agents" and is the largest purchaser. The company's flavors include: "Vanillin," the milk-enhancing flavor in Oreo cookies, "Liquid aldehyde," the citrus-flavored citrus in foam baths, and the refreshing peppermint "Cool" in Green Arrow chewing gum and Colgate toothpaste. agent" etc.

It is worth mentioning that high pollution is an issue that the spice industry has always been able to avoid. According to the "Comprehensive Catalogue of Environmental Protection (2021 Edition)" issued by the Ministry of Ecology and Environment, the "vanillin" to which eugenol vanillin and ferulic acid vanillin belong are "high pollution and high environmental risk products". In response to environmental protection issues, the industry is actively reducing the production of "highly polluting" products and switching to the use of natural raw materials.

The data from Yaxiang shares shows that the income of its natural flavor products is on the rise, with 253 million yuan, 269 million yuan and 309 million yuan respectively, contributing 50% of the company's income. The revenue of its synthetic fragrance products showed a trend of rising first and then falling, respectively 101 million yuan, 128 million yuan and 111 million yuan.

It can be seen that the transformation to natural spices has become the general trend of the industry. With the improvement of people's health awareness, natural spices can meet people's demands for returning to nature. And Yaxiang's income comparison also reflects this phenomenon.

Market segment leading development

From the perspective of industry data, the global flavor and fragrance industry is mature and the industry has maintained steady growth. According to data released by Zhiyan Consulting, the global market size of flavors and fragrances increased from US$24.1 billion in 2015 to US$28.1 billion in 2019, with a compound annual growth rate of 5.1%. The Asian market has become the region with the largest consumption demand for flavors and fragrances in the world, accounting for about 40% of the global market share. With the current market in developed countries such as Europe and the United States approaching saturation, the fragrance and flavor industry is constantly shifting to developing countries, and the fragrance market in these regions has become the most potential and competitive market.

Among developing countries and regions, my country is one of the few countries that can compete with developed countries in the production of flavors and fragrances. The export volume of vanillin and ethyl vanillin has accounted for more than 50% of the global supply. Maltol and ethyl maltol have also captured most of the international market.

The "14th Five-Year" Development Plan for the Fragrance and Flavor Industry pointed out that during the "13th Five-Year Plan" period, the size of my country's fragrance and flavor market has grown steadily. According to incomplete statistics, the domestic output of fragrance and flavor in 2020 will be about 218,000 tons, with sales of about 16.8 billion yuan. ; The output of essence is about 317,000 tons; the sales volume is about 24 billion yuan. It is estimated that by 2025, the main business income of my country's flavor and fragrance industry will reach 50 billion yuan, with an average annual growth rate of more than 2%. Among them, the output of flavors will reach 400,000 tons, and the output of spices will reach 250,000 tons.

At present, my country's spice industry is decentralised, and will shift to centralisation in the future. Usually downstream customers' demand for spice products is characterized by small batches and fast delivery, which requires enterprises to have the ability to respond quickly and innovate. Compared with small and medium-sized enterprises, leading enterprises in the industry will have more advantages in resources, capital and technology to meet customer needs. Therefore, the fierce market competition will cause small and medium-sized enterprises to gradually withdraw from the market or be merged and reorganized by large companies.

On the whole, the fragrance and flavor industry is an industry with stable growth, fierce competition and high product quality requirements. From the development of Yaxiang, it can be seen that leading companies in the industry segment will benefit from the growth of industry demand.