International Flavors & Fragrances Inc (IFF) is the world’s third largest flavours and fragrances house, with sales of US$2,623 million in 2010. It is active in 33 countries around the world and, although based in the US, earns 75% of its sales from outside this market. Regionally, Europe/Africa/Middle East (EAME) is the largest single market for IFF, accounting for 34% of turnover. For the first time, Greater Asia has become IFF’s second largest market, accounting for a 26% share of turnover to overtake North America, which now commands 25%. Indeed, emerging markets now account for 44% of IFF’s business.
Following in the footsteps of other flavours and fragrances companies, IFF has now opened a new facility in Dubai in the United Arab Emirates. The facility includes creative and application laboratories and sales and marketing offices for both flavours and fragrances. Most of IFF’s competitors have also opened facilities in the country to serve this growing region. Firmenich opened a facility in Dubai in 2010 while Symrise moved into the region via its acquisition of Futura Labs in 2008 and Givaudan expanded its Dubai sales office in 2009. The only leading flavours and fragrances company yet to make a move into the region is Japanese-based Takasago.
So why are flavours and fragrances companies starting to move into this area?
The Middle East and Africa is currently one of the smallest regions in terms of volume consumption of flavour and fragrance ingredients. In 2010, it accounted for just 5% of the global flavours category and 8% of the fragrances category. However, both categories have been performing strongly in the region and are forecast to continue to grow much faster than the global average. Volume consumption of flavours in the region posted a CAGR of 5% over 2005-2010, compared to 2% globally. Meanwhile, fragrance ingredients posted a 6% CAGR over the same period compared to a global rate of 2%. Growth rates over 2010-2015 are forecast to be similar (just under 5% for flavours and just over 5% for fragrances), with the Middle East and Africa set to outperform all other regions, even Asia Pacific and Latin America.
So, even though demand for flavours and fragrances is relatively low in the Middle East and Africa, both categories offer significant growth potential, thus justifying the investment made by companies like IFF in the region.