Fragrances are proving increasingly popular in India, as the population continues to increase its expenditure on increasingly sophisticated personal care products containing greater amounts of fragrance.
Wash products, including soap, hand washes and shower gels, currently account for 42 per cent of this category, whereas shampoo, hair oil and fine fragrances account for 5, 3 and 2 per cent of the market respectively.
The Indian flavors and fragrance market is valued at around $225 million, 55 per cent of which comprises fragrances, with the top five international fragrance manufacturers accounting for 75 per cent of the market.
To put this in context the global market is worth $17.8 million, and the top five players currently account for 40 per cent of the market, according to Frost & Sullivan India.
Those five companies are Givaudan, International Flavors & Fragrance (IFF), Firmenich, Symrise and Quest International, who are being followed by domestic players such as SH Kelkar, Sachee Aromatics and Oriental Flavors & Fragrances.
Unlike the flavors market, the fragrance market is highly consolidated. Frost and Sullivan says that the most of the sales are accounted for by the big personal care players, such as Unilever, Godrej, Nirma and Dabur.
The report also points out that the Indian fragrance market differs fundamentally from the global market in its segmentation. While fine fragrances are a major component of global fragrance sales, in India this category is negligible, whereas the wash products category is by far the most dominant.
Currently there is one trend in particular that characterizes the flavor and fragrance industry as a whole: a market dictated by keen pricing. In the last decade prices have been pushed down constantly by the larger manufacturers and in recent years this has gathered momentum, due to the increasing bargaining power bought about by industry consolidation.
Frost and Sullivan says that currently Indian consumers are already struggling with rising costs due to the upswing in oil prices. This means that manufacturing companies are unable to pass on price increases, even if costs are rising.
On a global basis, the international flavor and fragrance houses are absorbing rising costs by using both Indian and China manufacturing capabilities as hubs, a factor that is likely to ensure significant growth for the Indian industry in the future.
The report added that the industry in India is facing tougher times due to rising input costs and the falling prices, but that this will continue to be counterbalanced by a continued growth in the market, both on a global and a domestic basis.
Market success in India, the report concludes, will depend on the ability to forsee new market segments at an early stage, speed in building up a sizeable presence in the Asia Pacific region and the ability to function on a globally integrated scale.