Lockdown impact: Supply disruption hits fragrance and flavour industry with 80% production loss

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May 13, 2020 1:50 AM

The industry, which was growing at 10%, is likely to see de-growth due to the nationwide lockdown and the consequent drop in demand for consumer products and processed foods during the year.

A significant part of the ingredients come from extracts of natural plants while the bulk is aroma chemicals and synthetics, which are used in this industry. (Representative image)A significant part of the ingredients come from extracts of natural plants while the bulk is aroma chemicals and synthetics, which are used in this industry. (Representative image)

The domestic fragrance and flavour industry, a competitor to China in exports, has taken a production hit to the extent of 80%. The industry, which was growing at 10%, is likely to see de-growth due to the nationwide lockdown and the consequent drop in demand for consumer products and processed foods during the year. “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 situation does not improve, there will be a huge loss for us. China will benefit from the situation as we may lose some of our global customers to the neighbouring countries, which will result in a significant business and market share loss for us,” Rishabh Kothari, president, Fragrances & Flavours Association of India (FAFAI), said in a statement.

The domestic fragrances and flavours market is estimated at around $500 million while the global industry is valued at $24 billion. There are over 1,000 small, medium and large-size enterprises operating in this industry, both in organised and unorganised sector. A significant part of the ingredients come from extracts of natural plants while the bulk is aroma chemicals and synthetics, which are used in this industry. Almost all the food, pharma, FMCG industries are dependent on fragrances and flavours. So, it is imperative to resume the operations of units involved in production of these products, Kothari said.

“It will take another four to six weeks to resume our operations completely even after the lockdown is lifted. Supply of manpower will again become a major problem as most of them have gone back to their native places. Hence, the government should bail out the industry by announcing an appropriate fiscal stimulus package, which will stimulate demand, rather than only a three-month moratorium that favours the banks than the enterprises. Otherwise, the industry will suffer, apart from losing its competitive advantage in the global markets,” the FAFAI president 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. Of the cultivated raw materials, only 110 are widely used, which account for about 95% of the global fragrance oil production. With about 31 key raw materials, India has made a 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 international markets, making India a key player in global fragrance supply chain.

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