What is the current situation and future trend of essence and fragrance industry?

1.1 There are many kinds of spices with less output, and essence is widely used as a blend of spices

Spice production is low, there are many varieties, and natural and synthetic products compete with each other. At present, there are nearly 6000 actual spice varieties in the world, with most of them producing less than 100 tons per year.

Essence is formulated from a variety of fragrance raw materials, solvents, carriers and other auxiliary materials. As the downstream of the fragrance industry, it can be divided into food essence, daily essence and other uses according to their uses.

1.2 The global essence and fragrance market is huge and has entered a mature stage of development

With the development of the world economy, the scale of the global essence and fragrance market is increasing, from US $24.1 billion in 2015 to US $29.1 billion in 2021, with a compound annual growth rate of 3.2%. Among them, food flavor essence accounts for about 56%, and daily flavor essence accounts for about 44%.

In 2021, CR4 of the world essence and fragrance industry will reach 71%, with high industry concentration and an oligopoly pattern. The market shares, from large to small, are respectively Qihuadun, IFF, Fenmeiyi, and Dezhixin.

1.3 The essence and spice market in China has maintained a relatively rapid development, and there is room for industry integration

The market of essence and spice industry in China is broad, with edible essence as the leading factor. From 2015 to 2020, the development of essence and flavor in China mainly depends on food essence and flavor. In 2020, the market scale of essence and flavor has reached 51.1 billion yuan. At present, edible essence (food+tobacco) accounts for nearly 80%, and domestic daily essence industry is relatively weak.

The concentration of domestic essence and fragrance industry is low, and the market pattern is scattered. There are about 1000 essence and fragrance enterprises in China, and only about 40 enterprises with annual revenue of more than 100 million yuan.

1.4 Domestic spices have natural resource advantages and a large export volume

China's bulk synthetic fragrances have export advantages, such as the production of vanillin in China accounting for about 60% of the world's total production, and maltol and linalool also accounting for about 50% of the world's total production.

China has a vast territory and abundant resources, with a rich and unique range of natural fragrances and a large export volume. For example, the unique Chinese spice, Litsea cubeba oil, is rich in citral and is the main raw material for the production of violet ketone and vitamins A and E. Its annual export volume reaches about 400 tons, and its annual production ranks first in the world.

1.5 The domestic essence industry is relatively backward and the export volume is small

China's essence production is large but its export share is relatively low, and essence industry is relatively backward. From 2015 to 2019, the output of essence in China accounted for an average of 52% of the total output of essence and fragrance, while that in Japan reached 75% -85%; In addition, China's essence exports only account for 8% of the total output, lacking international competitiveness.

1.6 The research and development of China's essence industry is backward and lacks innovation

Essence industry has a high demand for customization. Compared with production capacity, R&D capability barriers are deeper. There is a certain gap in the amount and proportion of R&D investment between Chinese enterprises and international leaders.

China's essence industry is lack of innovation, low price, and does not have a brand image and international competitiveness. The competition pattern of China's essence industry is decentralized, with SMEs as the main players, and SMEs lack R&D investment and vertical layout capacity of the industry. Comparing the production mode of essence enterprises at home and abroad, it can be found that small and medium-sized essence enterprises are easily trapped in homogenization competition and price war due to the barriers of technology, talent, capital, raw materials, etc., and their products lack brand value and weak international competitiveness.