Tuesday, March 24, 2009

US Fragrance Compound Sales to I&I clients

What are the stakes for the Fragrance industry with the proposed environmental criteria that will reduce the materials that previously were deemed safe? Two market research firms, Kline & Co. and The Freedonia Group, have published reports projecting the US I&I estimated sales to be $10 billion. Kline has provided the segment breakdown to be:

Janitorial    3.25 b
Industrial    2.75 b
Food Service     1.9 b
Food Processing   1.9 b
Laundry      880 m

Sales of fragrance compounds are directly sold to the I&I manufacturers and developed specifically for their product formulations. Aromatic chemicals, like benzaldehyde, methyl salicylate as well Essential Oils, like orange, pine oils and their by-products, mainly terpenes are also used in certain cleaners for their odor and lower cost value. They can be used by themselves or in combination with a compound. These materials are usually resold or transfer sales, therefore the sales amounts are often double counted within the Flavor and Fragrance industry.

The Green Nose has built a projected fragrance compound sales from actual customer sales experience and a wide knowledge of typical price points and end-use dosage. Many of the fragrance company sales to I&I clients include air freshener compounds, of which those sales amounts were omitted from the projection. Therefore the total US I&I fragrance compound annual turnover for products that are rinsed off is $18 million.

Within the Fragrance industry companies (thirty plus), market share to I&I clients is widely segmented. Almost all of the top I&I formulators have an exclusive list of fragrance vendors based on a variety of capabilities and resources. All of the top tier Fragrance companies do not market target the total I&I industry firms due to sales potential, cost of sales and product development return. Typically, I&I segment sales for the top five companies are only ten percent of their compound mix. And due to acquisitions within the past few years, the top fragrance companies have spun off (or tried)"long tail" unit sales due to the same target account strategies. 

Thusly, few fragrance companies service the I&I needs of many. These same few have an influential and biased view which lead to a not-so-desirable response from Trade Associations to the environmental standards of EPA DfE.  $18 million divided among dozens of fragrance companies should not be a roadblock for the Perfumers to replace where needed re-formulated fragrances and should be a corner stone to responsible sustainable policies and product standards. The formulators will hopefully rotate these fragrances into their products very soon.

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