The Indian fragrances and flavours (F&F) industry is considered one of the fastest growing industries globally and a significant competitor to China in terms of exports. However, due to the temporary lock down in the country, the supply chain of F&F Industry has been significantly disrupted. Given the situation, the industry is suffering 80% production loss and similar impact on exports. More than this, the industry fears to lose its ground to China as the latter is currently operating in full swing while we are still in the lock down.
Commenting on the situation, Rishabh Kothari, President, Fragrances & Flavours Association of India (FAFAI) said, “We are one of the biggest exporters and importers of ingredients. Due to the prevailing logistics issues in the country, as inter-state transportation is either restricted or difficult, there is a substantial impact on our industry. If the existing situation continues for a long time, there will be a huge economic cost for us. China will benefit from the situation as we may lose some of our global customers to the neighbouring country which will result in a significant business loss and market share for us”.
He also highlighted that the production has been hit to an extent of 80% and exports and imports too have been similarly impacted. The growth of the industry, which was growing at over 10%, is likely to become negative both due to the lockdown during the pandemic and as a result there will be significant drop in demand for consumer products and processed foods in the rest of the year.
As an ancillary industry to FMCG, food processing and Pharma, the products from the fragrance and flavours segment, in the existing scenario are considered in the essential category. Almost all products in the food processing industry as well as hygiene and cleaning products like sanitizers and hand-wash use them for providing better colour, taste and smell. Given the dependency of food, pharma, FMCG industries on fragrances and flavours industry for ingredients, it becomes imperative to resume the operations of units involved in production of these products which are disrupted due to the ongoing lock down.
However, Kothari informed that the operations of these units may take some more time to resume normally. He stated that “It will take another 4-6 weeks to resume operations completely even after the lock down is lifted. Supply of manpower will again become a major problem as most of them have gone to their native places.” In the given situation, “the government should bail out the industry by announcing an appropriate fiscal stimulus package which will stimulate demand rather than only a 3 month moratorium which favours the banks than the enterprises. Otherwise, the industry will acutely suffer apart from losing its competitive advantage in the global markets”, Kothari added.
Globally, there are about 300 key natural fragrant raw materials in which about 50% are cultivated and the rest are collected from the wild habitations. Out of the cultivated raw materials only 110 widely used which account for about 95% of the global fragrance oil production. With about 31 key raw materials, India has made the significant impact in global fragrance oil markets by producing essential oils of menthol mint, sandal wood, jasmine, tuberose, and spices. Similarly, there are more than 1,000 synthetic aromatic molecules or ingredients of which around 250 constitute more than 90% of global aroma chemical production. A large majority of these are manufactured as well as exported from India to key international markets making India a key player in global fragrance supply chain.
According to the Ministry of Micro, Small and Medium Enterprises, Government of India, the Indian Fragrances and Flavours industry size is estimated at around $500 million which is growing at 11% per annum while the global fragrance and flavour industry is valued at $24 billion. With its rich diversity of flora and fauna, Indian fragrances and flavours industry is projected to grow exponentially in the coming years due to increasing demand for personal care products, brand awareness, growing demand from the middle class due to rising disposable incomes and products now being available at an affordable price points.
