International essence giants have participated in the layout of the Chinese market, and local enterprises face opportunities and challenges

In October 2020, Qihuadun set up the world's largest factory in Changzhou, Jiangsu Province, with an annual production capacity of 38000 tons of essence and spices and an investment amount of 100 million Swiss francs (about 730 million yuan).

Previously, Qihuadun had acquired the Dele Man Chuang Fragrance Center and production plant in Guangzhou in July 2019. At the end of the same year, it officially announced the expansion of its edible essence factory in Nantong, Jiangsu Province, rapidly expanding its strategic territory in the Chinese market.

At the same time, in 2018, Symrise officially capped its essence and spice production base in Nantong with an investment of about $100 million, and in 2019, Fanmi Italy officially opened its world's largest edible essence manufacturing plant in Zhangjiagang, Jiangsu

International flavor giants have extended their tentacles to China, and have invested and set up factories in China, further boosting the growth of domestic flavor essence market scale. Chinese local essence and fragrance enterprises are facing opportunities, competition and challenges.

At present, China's flavor products have more export competitive advantages than essence products

At present, there are nearly 6000 actual spice varieties in the world, most of which have an annual output of less than 100 tons. Therefore, low production, diverse varieties, and competition between natural and synthetic products are important characteristics of the spice industry. Essence is a product formulated from a variety of spices, which is the downstream of the spice industry. It can be divided into food essence, daily essence and other essence according to the use.

China's bulk synthetic and natural flavors have export advantages

In synthetic fragrances, the commonly used fragrances are those with an annual global consumption of over 5000 tons, including linalool, geraniol, vanillin, linalool, maltol, etc.

China's bulk synthetic spices have production advantages, such as vanillin accounting for about 60% of the global total production, and maltol and linalool accounting for about 50% of the global total production.

In terms of import and export, about 1/3 of China's essence and spice products are used for export every year, of which about 2/3 are used for export. China's natural spice category is unique and has a large export volume, such as the unique spice Shan Cangzi oil, which is rich in citral and is the main raw material for producing violet ketone and vitamins A and E. The annual export volume is about 400 tons, ranking first in the world in terms of annual output.

※ China's essence manufacturing industry is still in the development stage, and further efforts are needed

From 2011 to 2019, the output of essence in China accounted for 58% of the total output of essence and flavor, while the output of essence and flavor in Japan accounted for 75% to 85% of the total output of essence and flavor. China's essence industry was lagging behind some developed countries.

The competition pattern of China's essence industry is decentralized, with SMEs as the main players. Limited by barriers such as technology, talent, capital and raw materials, China's small and medium-sized essence enterprises are prone to fall into a price war, which is not conducive to innovation and development of the industry.

Therefore, China's essence industry is still in the development stage at this stage, and the leading enterprises need to increase brand value, reduce costs and improve competitiveness through R&D innovation, attracting talents, vertical layout of the industrial chain and other ways.

※ In 2020, China's essence and fragrance market will exceed 50 billion yuan, and it is expected to develop steadily in the next five years

From 2015 to 2019, the development of China's essence and fragrance industry mainly depends on the growth of food essence and fragrance sales.

In 2019, China's food essence and fragrances have basically met domestic demand, and it is difficult to grow explosively. From 2020 to 2025, China's essence and fragrance industry will mainly rely on heated non combustible tobacco products (HNB) to drive the industry's continued development.

International giants of essence and fragrance have come to China in succession. Can Chinese local enterprises break through the tight encirclement?

Essence manufacturing is the highest part of gross profit in China's essence and fragrance industry chain, and China's essence manufacturing faces many pain points

The upstream industrial chain of China's essence and spice industry is spice planting and production, the midstream is essence production, and the downstream is application industries such as daily chemicals, food and tobacco. Among them, the output of spices and essence is at the same level, but the profit rate of essence is far higher than that of spices, and the production is more difficult.

In the middle reaches of China's essence and fragrance industry, essence production links have extremely high added value, with gross profit levels as high as 60% to 180%. Among them, the gross profit level of tobacco essence is the highest. The spice planting and spice production processes belong to the processing and production stages, with low added value and gross profit levels of about 30% and 50%, respectively. Compared with the production chain of essence and fragrance in developed countries, the planting and production of spices in China have not been large-scale and standardized, so the gross profit level is relatively low.

At the same time, because essence enterprises in developed countries also layout fragrance business, they have stronger synergy, thus raising the technical barriers of the fragrance industry. In addition, the integrated layout of essence and fragrances makes it unnecessary for the enterprise to purchase fragrances, which can further improve the gross profit level of essence products.

The production chain of essence and fragrance in China has not yet formed synergy, and it needs to develop towards the direction of industrial chain integration in the future. China's essence and fragrance industry has low added value and serious homogenization, and is still in the stage of exporting to foreign countries relying on raw material processing. This is mainly because the technology and formula of the essence and fragrance industry are monopolized by foreign leading enterprises, the pattern of local enterprises is scattered, and the leading blockade is difficult to break.

Although developed countries continue to transfer essence and fragrance industries to China, at present, the production links undertaken by China are mainly raw material intensive, resource consuming and environmental polluting. Developed countries still firmly grasp the R&D and matching links with the highest added value in the industrial chain.

Therefore, at this stage, essence products exported from China are mainly flavor products, and essence products are not internationally competitive. At the same time, there are about 1000 essence and fragrance enterprises in China, and about 40 enterprises with annual revenue of more than 100 million yuan. There are a large number of small and medium-sized enterprises, scattered market pattern, low concentration, and lack of scale effect. From this, it can be seen that Chinese domestic enterprises find it difficult to catch up with overseas leading enterprises in a short period of time.

The formula of daily chemical essence is complex, and Chinese enterprises mostly use essence products from overseas companies. Because Chinese food and tobacco enterprises pay more attention to localization, they mostly use local essence products. At this stage, the output of essence products of China's daily chemical industry is low. Due to the low downstream demand, large daily chemical companies use essence from overseas companies, and local essence is mainly supplied to local small and medium-sized enterprises.

Among food enterprises, about 70% to 90% of multinational enterprises use overseas essence, while most Chinese food enterprises use local essence products to meet the tastes of local consumers. The tobacco industry is monopolized by state-owned enterprises, which mostly use local tobacco essence products to adapt to the habits of local consumers, while also obtaining higher profit levels.

International giants of essence and fragrance have come to China in succession. Can Chinese local enterprises break through the tight encirclement?

Technology, talent and tax are the three major pain points for Chinese essence manufacturing enterprises. The Chinese spice industry enjoys a 9% export tax rebate rate and a policy of exempting value-added tax output tax, which will encourage Chinese spice enterprises to be more inclined towards exporting products and reduce the cost of importing Chinese spice products overseas. When it comes to essence production, the cost of raw materials of Chinese essence enterprises will be higher than that of overseas essence enterprises, and they will be at a disadvantage in international competition.

At the same time, compared with foreign essence and spice leading enterprises, China's essence and spice enterprises have a large gap in R&D investment. In terms of talent supply, there are only three universities in China with essence and fragrance majors, which is far from meeting the industry's demand for high-end talents.

The downstream demand of China's essence and fragrance industry is relatively stable, and HNB may bring explosive opportunities

The downstream of China's essence and fragrance industry mainly includes the daily chemical, food and tobacco industries. The daily chemical and food industries are relatively stable, and the tobacco industry is greatly affected by policies and new products, with certain volatility.

※ China's food essence consumption demand is stable, but there is still room for improvement

China's food industry has a large market scale and stable demand for essence. With the upgrading of consumption and the development of localization, China's local new consumer brands have risen, injecting power into the development of beverage, dairy products, convenience food, snacks and other categories, and promoting the growth of demand for upstream edible essence.

From the perspective of regional distribution of global essence and fragrance market consumption, Asia has the highest proportion of consumption, 34%, while China's per capita consumption of essence is low, only 28% of the per capita consumption of essence in the United States. With the development of food processing industry becoming mature in the future, China's edible essence market will have more potential for growth, and the demand of residents for essence will further increase.

※ China's daily chemical industry essence market demand is stable but difficult to break through

China's daily chemical industry is dominated by personal care products, while personal care products are dominated by overseas brands, and overseas brands all use overseas essence products. Therefore, about 80% of the essence demand in the personal care product market is overseas essence products. Household chemical products are mainly Chinese local brands, and about 60% of essence demand is Chinese essence products.

Overall, China's essence products account for less than 30% of the downstream China's daily chemical industry. Due to the complexity of daily chemical essence matching, it is difficult for Chinese essence and fragrance enterprises to break through the technical blockade of international leaders in the short term, and the demand in the field of daily chemical essence will be relatively stable in the next five years.

※ China's tobacco industry is greatly affected by industry regulation, and HNB drives the demand for tobacco essence to rise

Although the traditional cigarette industry in China has a trillion dollar market, its market size growth rate is relatively slow due to tax policies.

At present, there are two main types of new tobacco products, atomized electronic cigarettes and heated non combustible tobacco products (HNB), of which the unit use of HNB for tobacco essence is 10 to 20 times that of traditional cigarettes. Since 2015, the annual compound growth rate of HNB has reached 106%, and in 2019, the global market penetration rate reached 2.8%.

At this stage, HNB products have not been approved for sale in China, but can be produced by China Tobacco Corporation and sold overseas. If HNB products are approved for sale in China in the future, the demand for tobacco essence will increase sharply.

International giants of essence and fragrance have come to China in succession. Can Chinese local enterprises break through the tight encirclement?

Deep insight: China's essence and fragrance enterprises are difficult to break through the leading technology blockade in a short time, but they can give play to their own unique advantages from subdividing fields, and may achieve curve overtaking in the future

※ China essence&Fragrance Company can give play to its own unique advantages in combination with local culture

For example, in the field of daily chemical essence, China's unique products such as osmanthus essence are explored, and in the field of food essence, salt flavor essence is explored. Chinese essence and flavor enterprises lead the world in salt flavor essence, mainly due to the large gap between Chinese consumers' eating habits and overseas ones. Chinese enterprises should seize these characteristics, keenly explore China's unique culture and lifestyle habits, create more localized products, break through the encirclement with the advantage of localization, and achieve overtaking on the bend.

※ Chinese essence manufacturing enterprises can arrange in advance in the field of tobacco essence

Compared with overseas leaders, China's local essence and fragrance enterprises have the advantage in the market share of China's tobacco essence, or they can arrange in advance in this field, such as HNB essence related products.

However, HNB has its own heating and non combustion property, which makes the corresponding essence products unable to be released through combustion, thus requiring higher technical requirements. Chinese enterprises need to increase relevant R&D investment for advance layout.

In the long run, Chinese essence and fragrance enterprises need to get through their production chain through technology research and development, industrial chain integration and other ways to improve their product innovation ability, so as to have higher investment value in the fierce market competition.

1、 Natural essence. It is a completely natural substance extracted from animals and plants (spices) in nature through physical methods. The carriers that can usually obtain natural aroma substances include fruits, animal organs, leaves, tea, and seeds. The extraction methods include extraction, distillation, and concentration. Vanilla extract, cocoa extract, strawberry extract, etc. can be obtained by extraction method; Mint oil, fennel oil, cinnamon (osmanthus) oil, eucalyptus oil, etc. can be obtained by distillation; Orange oil, lemon oil, citrus oil, etc. can be obtained by distillation method; The concentration method can be used to obtain apple juice concentrate, mango concentrate, orange juice concentrate, etc. There are more than 5000 kinds of raw materials that can extract edible essence in the world, and more than 1500 kinds are commonly used.

2、 Equal to natural essence. This kind of essence is a chemical substance obtained by taking care of natural raw materials by chemical methods or artificial synthesis, which is identical with natural essence substances.

3、 Synthetic essence. It is a substance obtained through chemical methods such as artificial synthesis, which has not been proven to exist in nature. If the same chemical molecule is found in nature and dominates, it is equal to natural essence. As long as one of the raw materials of essence is artificially synthesized, it is a synthetic essence.

4、 Essence prepared by microbial method. It is a essence obtained by microbial fermentation or enzymatic reaction.

5、 Reactive essence. This kind of essence is obtained by Maillard reaction of protein and reducing sugar. It is often used in meat, chocolate, coffee and malt.

According to the state of essence, edible essence includes: liquid essence (water soluble, oil soluble, emulsifiable), of which 10% -20% are fragrance substances, and 80% -90% are solvents (water, propylene glycol, etc.); Emulsified essence, of which solvents, emulsifiers, gums, stabilizers, pigments, acids and antioxidants are 80% -90%; Powder essence, of which fragrance substances account for 10% -20% and carrier accounts for 80% -90%.

Powder essence has developed rapidly and is widely used in beverages, snacks, baked goods, etc. There are three types of commonly used powder essence:

1. Powder essence in mixing form: several powder flavor substances are mixed together, such as five spice powder, curry powder, etc; Most of these flavors come from natural plant spices, while meat essence is being blended; Vanilla powder, vanillin, etc. are also powder essence in the form of mixing.

2. Adsorption form of powder essence: make essence extremely adsorbed on the surface of the carrier, and this essence composition should have low volatility; All kinds of meat essence are mostly powder essence in the form of adsorption.

3. Micro gummed powder essence in the form of coating is now the most widely used powder essence in the food industry.

The micro gelatinization of essence is a special means for packaging, isolation, preservation, slow release and liquid solidification of essence. Its main purpose is to keep the original flavor of essence for a long time, while better preserving essence and preventing essence from deterioration due to oxidation and other factors.

This effect is that other powder essence have special significance and wide practicability in the application of food industry. The brief description is as follows: Traditional solid drinks are produced by spray drying, vacuum drying, boiling drying, etc. The liquid essence used in the production process needs to be heated to remove the solvent, and the flavor of the product will be affected.

The dry powder mixing method is often used in the production of solid drinks. During the production process, various powder ingredients are directly mixed with micro gummed powder essence, without heating, and the product flavor remains unchanged. The use of micro gummed powder essence for solid drinks is easy to flavor, easy to mix evenly, does not increase the temperature of flavoring products, keeps the original powder state, and does not change color in white sugary products.

Due to the encapsulation of fragrance components in the tea, volatilization loss is suppressed, thereby prolonging the fragrance retention time. The fragrance components are isolated from the surrounding space to prevent the possibility of fragrance deterioration caused by oxidation and other factors, thereby greatly extending the product's shelf life. It is not convenient to use liquid essence for flavoring, and it is not easy to mix evenly. Increase the water content of flavoring products, so that the products are easy to form lumps. In white sugary products, essence will gradually turn yellow. It can only be added on the surface, exposed to space, resulting in rapid volatilization, short time to maintain the fragrance. essence is easily oxidized when it contacts with the air in a large area, causing the fragrance to deteriorate, and short retention period.

Essence and fragrance industry is a relatively cold industry. Not many people know about it, and even fewer people know about it.

When I talked about essence and fragrances with many friends, most people's understanding remained at the level of ignorance. They always thought that the so-called essence and fragrances were perfume, soaps and shower gels for daily use, or aromatherapy for hospitality, incense plants for worship, etc;

This kind of understanding, although ridiculous, is understandable because most people know nothing about the industrial properties of fragrant raw materials.

Three major fields of essence and spice industry

In fact, essence and fragrance industry is a basic raw material industry, and its main application end is three major fields, first is medicine industry, with the largest consumption, second is food industry, and last is daily chemical industry. In terms of proportion, the latter is not high.

Essence and fragrance industry can be divided into essence and essence. Generally speaking, essence is the downstream product of essence and fragrance. It uses essence and fragrance as raw materials, has the nature of flavor mixing industry, and belongs to fine chemical industry. The basic industry chain of essence and fragrance is much broader, including essence industry, with different extension concepts.

The profit value of essence industry is quite high. Because of this, the essence market in the world is basically monopolized by the famous "eight companies". Most of these eight companies are European and American enterprises, and most of them are giants with a history of hundreds of years. They capture excess wealth through market monopoly every year. There is only one Asian company among the eight major corporations, namely Shiseido from Japan.

I will not talk about essence industry here, because it is not easy for Chinese people to enter that field and the domestic market is not shaped, so I will mainly talk about essence and spice industry, especially natural essence and spice.

Essence and fragrances can be divided into synthetic essence and natural essence. As its name implies, synthetic essence and fragrances are chemical products produced with the help of a certain synthetic base using the synthetic technology of modern chemical industry. It has the properties of essence and fragrances, but it does not have optical activity, that is, it is inorganic and has no organic activity.

It goes without saying that the vast majority of industrial products we currently use are synthetic fragrance materials, including pharmaceuticals.

Natural essence and spice refer to the plant essence extracted from some natural plants (the extraction process is not complicated, most of them are distilled, most of them are oil, and very few are alcohols). The extraction site varies according to the type, but it is always inseparable from branches, leaves, flowers, fruits, stems, skins, etc. Some even secrete crystals or breeding galls from plants.

(This topic is about the analysis of the essence and fragrance industry. This chapter is a brief description of the specific meaning of the essence and fragrance industry. There are many subsequent in-depth analysis articles, including the municipal industry. Please continue to pay attention, and hope to help you.)

Preserving and extracting from heaven and earth, and extracting from the world, is called preserving and extracting. At the right time, seeing countless postures is called 'Tu Jian'. The Nine Bends lead to secluded places, and the Yi Mountain is called Qushui Yi Mountain for harvesting. Sunrise and dusk, a cup of fragrant tea. Nourish the heart, liver, spleen, and stomach, soothe restless souls. A touch of returning sweetness feels perfect. This journey is a solitary journey on earth, accompanied by the taste of tea for a moment. May time be long and peaceful.