A COMPETITIVE SURVEY OF FLAVOR AND FRAGRANCE MARKETS

SUMMARY

This study analyzes the U.S. market for flavor and fragrance materials. The purpose of the report is to quantify supply, demand, and tradeconditions existing in the market; analyze trends influencing the market; and describe the competitive structure of the domestic flavor and fragranceindustry.

The time series used in this report for historical data is from 1996 to 2002. Supply, demand, and trade conditions are forecasted through 2006. Allflavor and fragrance materials are measured in millions of pounds and millions of dollars. All gross domestic product figures, end-use industryshipments, and income figures are rounded to billions of dollars. Population figures are rounded to millions.

Data was gathered from a variety of sources. General economic data was gathered from the U.S. Department of Commerce Survey of Current Business andStatistical Abstract of the United States, as well as other U.S. government and Federal Reserve documents. Information on shipments and consumptionwas gathered from the U.S. Census of Manufactures, the U.S. International Trade Commission' s Industry and Trade Summary Flavor and FragranceMaterials, and the U.S. Department of Agriculture' s Agricultural Statistics and Foreign Agricultural Circulars. Other government sources referred toinclude the Annual Survey of Manufacturers. Import and export data was obtained from the National Trade Databank and the U.S. Department ofAgriculture' s FATUS and Foreign Agricultural Circulars. Supplemental sources included numerous industry and trade publications such as BeverageWorld, Chemical Marketing Reporter, Chemical Week, Food Engineering, Food Product Design, Perfumer and Flavorist, HAPPI, and Food Processing.

Whenever available, actual data was used. Aggregates were computed and statistical discrepancies reconciled. Preliminary forecasts were based ontrend analysis of supply, demand, and trade variables, and their relationship to exogenous variables such as gross domestic product, disposablepersonal income, and population growth. These figures were adjusted for anticipated future changes. As a final check, independent estimates of acommon variable were made and then reconciled to eliminate inconsistencies.

In the statistical tables included in this report, columns may not add exactly to their totals due to independent rounding. It should also be notedthat growth rates may have been calculated using unrounded numbers.

TABLE OF CONTENTS

TABLE OF CONTENTS

INTRODUCTION

• Scope of the Report i
• Definitions and Terms ii
• Sources ii
• Statistical Methodology iii

CHAPTER I EXECUTIVE SUMMARY

• Overview 1
• Historical Review 3
• Long-Term Outlook 5

CHAPTER II MARKET ENVIRONMENT

• Overview 10
• Economic Environment 11
• Demographic Trends 13
• Flavor End-Use Markets 17
• Nutraceuticals 20
• Sweeteners 26
• Meatless Meals 26
• Vegetables and Grains 27
• Spices 28
• Fragrance End-Use Markets 28
• Technology and Innovation 34
• Encapsulation 35
• Liposomes 36
• Spray Drying 36
• Supercritical Fluid Extraction 37
• Spinning Cone Column 37
• Biotechnology 38
• Packaging 41
• Modified Atmosphere Packaging 43
• Retort Packaging 43
• Aseptic Packaging 44
• Interactive Packaging 45
• Microwave Cooking 47
• Processing Technology 47
• Legislative and Regulatory Environment 49
• Food Additives 49
• Warning Labels 53
• Dietary Supplements 53
• Meat and Poultry Products 56
• Legislative and Regulatory Environment (cont' d.)
• Food Safety 56
• Cosmetics 57
• International Trade 59

CHAPTER III ESSENTIAL OILS

• Overview 64
• Extraction Methods 66
• Steam Distillation 66
• Expression 67
• Solvent Extraction 67
• Supercritical Fluid Extraction 69
• U.S. Essential Oil Production 70
• Citrus Oils 71
• Mint Oils 72
• Other Oils 74
• The Market for Essential Oils 76
• Consumption, by End-Use 78
• Imports 81
• Exports 87
• Market Competition 93

CHAPTER IV AROMA CHEMICALS

• Overview 95
• Terpenes 97
• Benzyl Alcohol 99
• Musk Chemicals 99
• U.S. Aroma Chemical Production 100
• The Market for Aroma Chemicals 102
• Consumption, by End-Use 104
• Imports 107
• Exports 109

CHAPTER V FLAVOR BLENDS AND COMPOUNDS

• Overview 111
• U.S. Flavor Blend and Compound Production 113
• The Market for Flavor Blends and Compounds 115
• Natural vs. Synthetic 116
• Imports 119
• Exports 120

CHAPTER VI OTHER FLAVOR MATERIALS

• Overview 122
• Acidulants 125
• Citric Acid 126
• Phosphoric Acid 127
• Malic Acid 128
• Fumaric Acid 128
• Lactic Acid 129
• Other Acidulants 129
• The Market for Acidulants 130
• Manufacturers of Acidulants 132
• Flavor Enhancers 133
• Monosodium Glutamate 134
• Hydrolyzed Proteins 136
• Yeast Extracts 137
• Nucleotides 137
• Other Flavor Enhancers 139
• The Market for Flavor Enhancers 139
• Manufacturers of Flavor Enhancers 141
• Spices 142
• Traditional Spices Derived from Tropical Plants 144
• Spices Derived from Herbs 147
• Spices Derived from Seeds 147
• Dehydrated Vegetables 150
• The Market for Spices 151
• Spice Oleoresins 155
• The Market for Spice Oleoresins 157
• Manufacturers of Spices 159
• Non-Nutritive Sweeteners 159
• Saccharin and Cyclamate 161
• Aspartame 165
• Acesulfame K 168
• Sucralose 170
• Alitame 171
• Neotame 172
• The Market for Non-Nutritive Sweeteners 173
• Manufacturers of Non-Nutritive Sweeteners 176
• Competitive Issues 177

CHAPTER VII FRAGRANCE BLENDS AND COMPOUNDS

• Overview 180
• The Market for Fragrance Blends and Compounds 181
• Shipments 182
• Consumption 183
• Imports 186
• Exports 187

CHAPTER VIII INDUSTRY STRUCTURE

• Overview 190
• Research and Development 191
• Manufacturing 198
• Marketing 199
• Distribution 202
• Industry Activity 203
• International Activity 207
• Company Profiles 209
• Ajinomoto Co., Inc. 210
• A.M. Todd Group 212
• Archer Daniels Midland Company 213
• Ashland Inc. 215
• BASF AG 217
• Bayer AG 218
• Bell Flavors & Fragrances, Inc 221
• Burns, Philp & Company Limited 222
• Celanese AG 224
• Chr. Hansen Group 226
• Croda International Plc 227
• Danisco A/S 229
• Degussa AG 231
• Dragoco Gerberding & Co. AG 233
• DSM N.V. 234
• Elementis plc 236
• Firmenich SA 238
• Givaudan SA 239
• Griffith Laboratories 240
• Hauser, Inc. 241
• Imperial Chemical Industries PLC 242
• International Flavors & Fragrances Inc. 243
• Johnson & Johnson 246
• McCormick & Company, Inc 247
• Merisant Company 249
• Millennium Chemicals Inc. 251
• The NutraSweet Company 252
• Rhodia SA 254
• Sensient Technologies Corporation 255
• T. Hasegawa Co., Ltd. 257
• Takasago International Corporation 258
• Takeda Chemical Industries, Ltd. 259
• Tate & Lyle PLC 261
• Technology Flavors & Fragrances, Inc. 262
• Ungerer & Company 264
• Virginia Dare Extract Co., Inc 265
• The Wild Group 265

CHAPTER IX FLAVOR END-USE MARKETS

• Overview 267
• Processed Meat, Poultry, and Seafood 275
• Flavor Materials Consumption in Processed Meat, Poultry, and Seafood 276
• Dairy Products 279
• Flavor Materials Consumption in Dairy Products 280
• Baked Goods 284
• Flavor Materials Consumption in Baked Goods 285
• Soft Drinks 289
• Flavor Materials Consumption in Soft Drinks 292
• Processed Fruits and Vegetables 299
• Flavor Materials Consumption in Processed Fruits and Vegetables 300
• Cereals and Grains 304
• Flavor Materials Consumption in Cereals and Grains 305
• Alcoholic Beverages 308
• Flavor Materials Consumption in Alcoholic Beverages 310
• Sauces, Dressings, and Oils 312
• Flavor Materials Consumption in Sauces, Dressings, and Oils 313
• Other Processed Foods 317
• Flavor Materials Consumption in Other Processed Foods 318

CHAPTER X FRAGRANCE END-USE MARKETS

• Overview 334
• Toilet Preparations 338
• Fragrance Materials Consumption in Toilet Preparations 341
• Soaps and Detergents 344
• Fragrance Materials Consumption in Soaps and Detergents 348
• Polishes and Cleaners 351
• Fragrance Materials Consumption in Polishes and Cleaners 353

LIST OF TABLES

Table I-1 Flavor and Fragrance Shipments 6

Table I-2 Flavor and Fragrance Consumption 7

Table I-3 Flavor Materials Consumption, by End-Use 8

Table I-4 Fragrance Materials Consumption, by End-Use 9

Table II-1 Economic Environment 12

Table II-2 U.S. Demographic Trends 15

Table II-3 U.S. Population Distribution, by Age Group 16

Table II-4 Flavor and Fragrance End-Use Industry Analysis 33

Table II-5 Value of U.S. Exports of Flavor and Fragrance Materials, by Type 61

Table II-6 Value of U.S. Imports of Flavor and Fragrance Materials, by Type 62

Table III-1 Essential Oil Families/Representative Oils 66

Table III-2 U.S. Essential Oil Shipments, by Type 75

Table III-3 U.S. Essential Oil Consumption: Value 77

Table III-4 U.S. Essential Oil Consumption: Volume 78

Table III-5 U.S. Essential Oil End-Use Markets: Value 79

Table III-6 U.S. Essential Oil End-Use Markets: Volume 80

Table III-7 U.S. Essential Oil Imports, by Type: Value 83

Table III-8 U.S. Essential Oil Imports, by Type: Volume 84

Table III-9 U.S. Essential Oil Imports, by Type: Average Prices 85

Table III-10 Top Ten U.S. Import Sources for Essential Oils: Value 86

Table III-11 Top Ten U.S. Import Sources for Essential Oils: Volume 87

Table III-12 U.S. Essential Oil Exports, by Type: Value 89

Table III-13 U.S. Essential Oil Exports, by Type: Volume 90

Table III-14 U.S. Essential Oil Exports, by Type: Average Prices 91

Table III-15 Top Ten U.S. Export Destinations for Essential Oils: Value 92

Table III-16 Top Ten U.S. Export Destinations for Essential Oils: Volume 93

Table IV-1 Types of Aroma Chemicals 100

Table IV-2 U.S. Aroma Chemical Shipments 102

Table IV-3 U.S. Aroma Chemical Consumption: Value 103

Table IV-4 U.S. Aroma Chemical Consumption: Volume 104

Table IV-5 U.S. Aroma Chemical End-Use Markets: Value 106

Table IV-6 U.S. Aroma Chemical End-Use Markets: Volume 107

Table IV-7 U.S. Aroma Chemical Imports 108

Table IV-8 U.S. Aroma Chemical Exports 110

Table V-1 U.S. Flavor Blend and Compound Shipments 114

Table V-2 U.S. Flavor Blend and Compound Consumption: Value 115

Table V-3 U.S. Flavor Blend and Compound Consumption: Volume 116

Table V-4 U.S. Shipments of Flavor Blends and Compounds, Natural vs. Synthetic 118

Table V-5 U.S. Flavor Blend and Compound Imports 120

Table V-6 U.S. Flavor Blend and Compound Exports 121

Table VI-1 Other Flavor Materials Consumption, by Type 124

Table VI-2 U.S. Acidulant Consumption, by Type 131

Table VI-3 U.S. Flavor Enhancer Consumption, by Type 140

Table VI-4 U.S. Spice Consumption 154

Table VI-5 U.S. Spice Oleoresin Consumption 157

Table VI-6 U.S. Spice Oleoresin Imports, by Type 158

Table VI-7 U.S. Non-Nutritive Sweetener Consumption, by Type 175

Table VII-1 U.S. Fragrance Blend and Compound Shipments 182

Table VII-2 U.S. Fragrance Blend and Compound Consumption: Value 184

Table VII-3 U.S. Fragrance Blend and Compound Consumption: Volume 185

Table VII-4 U.S. Fragrance Blend and Compound Consumption and Pricing 185

Table VII-5 U.S. Fragrance Blend and Compound Imports 186

Table VII-6 U.S. Fragrance Blend and Compound Exports 188

Table VIII-1 Top Ten Flavor and Fragrance Companies Worldwide 191

Table IX-1 Processed Food Shipments, by Type 269

Table IX-2 Consumption of Flavor Materials, by Type 271

Table IX-3 Flavor Materials Consumption, by End-Use 273

Table IX-4 Processed Meat, Poultry, and Seafood: Flavor Materials Consumption, by Type 278

Table IX-5 Dairy Products: Flavor Materials Consumption, by Type 283

Table IX-6 Baked Goods: Flavor Materials Consumption, by Type 288

Table IX-7 Soft Drinks: Flavor Materials Consumption, by Type 298

Table IX-8 Processed Fruits and Vegetables: Flavor Materials Consumption, by Type 303

Table IX-9 Cereals and Grains: Flavor Materials Consumption, by Type 307

Table IX-10 Alcoholic Beverages: Flavor Materials Consumption, by Type 311

Table IX-11 Sauces, Dressings, and Oils: Flavor Materials Consumption, by Type 316

Table IX-12 Other Processed Foods: Flavor Materials Consumption, by Type 320

Table IX-13 Flavoring Agents Consumption, by End-Use: Value 322

Table IX-14 Acidulant Consumption, by End-Use: Value 324

Table IX-15 Non-Nutritive Sweetener Consumption, by End-Use: Value 326

Table IX-16 Flavoring Agents Consumption, by End-Use: Volume 328

Table IX-17 Acidulant Consumption, by End-Use: Volume 330

Table IX-18 Non-Nutritive Sweetener Consumption, by End-Use: Volume 332

Table X-1 Shipments of Soaps, Cleaners, and Toilet Goods 335

Table X-2 Consumption of Fragrance Materials, by Type 336

Table X-3 Fragrance Materials Consumption, by End-Use 337

Table X-4 Consumption of Fragrance Materials in Toilet Preparations 344

Table X-5 Consumption of Fragrance Materials in Soaps and Detergents 351

Table X-6 Consumption of Fragrance Materials in Polishes and Cleaners 354