When evaluating investments in the F&F space, it is important to consider several recent trends that continue to impact multiple end markets:

Increasing proliferation of consumer preferences and the rise of customization

The rise of social media and the increasingly global growth of the middle class is leading to ever heightening demands for micro-personalization. This frequently takes the shape of a unique flavor or scent that can be championed by a sub-group. Specific products, with custom flavors or fragrances, for different demographic groups and sub-groups is an angle that has shown deep resonance with consumers. Changing the flavor or fragrance while maintaining the same, or largely the same, underlying product is a highly cost effective way to bring an accessible level of personalization to the populace. As products shift towards or away from genderless scents there is a need for an update that signifies the uniqueness of the new product offering.

Growing focus on natural

Consumers are increasingly demanding “healthy / better for you products,” which are linked to the use of natural components. The increase in demand for clean label food products and clean fragrances is already driving this fast growing subset of the market, as natural flavors have more than doubled over the last decade, and will only continue to increase in importance moving forward. Consumer research groups have consistently shown a positive response to natural flavors and as more marketing campaigns highlight this, there is a growing willingness to pay for it. As more formulations are developed that incorporate natural bases in new ways, there will be opportunities for companies to further enhance margins. Of course, formulating using only natural ingredients can be a tremendous challenge for flavorists and perfumers when the target is maintaining the same flavor profile or product efficacy as before, though the successes in this space are well defensed from a barrier to entry perspective. This increasing consciousness of whether products are natural and what consumers are putting in or on their bodies will only continue to grow from here.

Use of odor neutralizers to mask malodors from chemical products

As scientists continue to develop either more effective solutions using new formulations or to re-engineer existing formulations utilizing biological-based ingredients, there is frequently a need to mask the base odor created. The trade off is that the increased efficacy of the solution or the “cleanliness” of the product results in a not altogether appealing scent. For example, if a laundry detergent manufacturer could reformulated its detergent solution to be 10x more effective with a similar cost profile, but in so doing created an unattractive scent, a fragrance formulator could provide a neutralizing agent to maintain efficacy while avoiding the malodor. There is also the preference from certain segments of the consumer population for more neutral scents for their everyday applications. These odor control additives can be included in existing formulations to help dampen unappealing scents, while allowing the ultimate desired scent, if there is one, to take center stage. As innovation in the chemicals world continues, it is expected that there will be an increasing need for a way to mask odors that are the result of an underlying highly effective application.