Analysis of Market Demand and Market Size in China’s Flavor Industry, 2017

The consumption of flavors is closely related to people’s lives. Since the 1990s, with the economic development of countries around the world, especially developed countries, the standard of living has been improving and people are demanding more and more quality of food and daily necessities, which has contributed to the growth of the flavor industry. According to statistics, the global flavors and fragrances market generated sales of USD 18 billion in 2006 and reached USD 24,450 million in 2016, at a CAGR of 3.11%.

From 2010 to 2015, the size of the domestic flavor and fragrance industry continued to grow, with annual sales of flavor and fragrance products in the country amounting to approximately $20 billion in 2011 and growing to $33.65 billion in 2015, with an average annual growth rate of nearly 10%. In the future, the domestic flavors and fragrances industry will continue to grow at a relatively fast pace in an environment of sustained economic growth and expanding internal demand in China.

Demand for flavors in the food and beverage industry

As China’s residents’ disposable income increases, the consumption structure of the population to upgrade and the pace of urbanization construction accelerated, food consumption will maintain the momentum of rapid growth, driving the continued growth of demand for flavors.2010-2016, China’s food manufacturing industry sales revenue has always maintained rapid growth, average annual compound growth rate of more than 15%.2015 domestic food manufacturing industry to achieve sales revenue 217 billion yuan, the domestic food manufacturing industry achieved sales revenue of 2361.920 billion yuan in 2016, up 8.84% year-on-year.

In recent years, the compound annual growth rate of the main business income of food and beverage enterprises above designated size in China has been about 18%.

In recent years, China’s beverage market has developed rapidly and has become one of the fastest growing markets in China’s food industry, but from the analysis of beverage consumption levels, China’s per capita consumption of beverages is still at a relatively low level. In terms of long-term development trends, with the construction of a well-off society in China and the accelerating pace of urbanization, as well as the rapid development of the food service industry and the annual increase in the level of income of residents, beverage products will become an important part of the necessities of life consumption of residents, beverage consumption market demand will maintain a long-term trend of rapid growth in development.

From 2010 to 2016, the sales revenue of the domestic beverage industry maintained a relatively rapid growth, with a compound annual growth rate of more than 14%; in 2016, China’s beverage industry achieved a sales revenue of 184.48 billion yuan, with a year-on-year growth rate of 6.49%. With the expanding market demand for beverage products, it is bound to further generate incremental demand for flavors, providing a broad market space for the domestic flavors industry.

Demand for fragrances in the household chemicals industry

Flavors are used in the cosmetics industry to perfume, cosmetics, detergents, toiletries and industrial products. The purpose is to make the consumers can smell the comfortable and appropriate fragrance when using these products. For example, the level of perfume essence directly determines the quality of perfume.

In recent years, China’s daily chemical industry has shown rapid growth.In 2007, the main business income of daily chemical enterprises above designated size in China was about 160.162 billion yuan, in 2015 reached about 457.661 billion yuan, a compound annual growth rate of 14.02%.

Demand for flavors from the tobacco industry

China is currently the largest producer and consumer of tobacco in the world, with more than 300 million people smoking. In recent years, the sales revenue of the domestic tobacco industry has increased continuously; in 2009, the national cigarette sales revenue was about 729.720 billion yuan, and in 2016, it reached about 137.052 billion yuan, with a compound annual growth rate of nearly 9.42%. Currently, due to the macroeconomic environment, the domestic tobacco control situation and the impact of the tobacco industry’s policy of raising taxes and reducing prices, the tobacco industry’s sales revenue growth is gradually declining, market capacity tends to be saturated; competition among cigarette brands is also becoming increasingly intense. In order to improve the quality of cigarettes and better meet consumer demand, the major cigarette manufacturers will pay more attention to the application of flavors in cigarette production.

In recent years, due to the implementation of the domestic tobacco control policy, the public’s concern for health is increasing, coupled with the macroeconomic impact of the global economic weakness, resulting in the domestic tobacco industry industrial and commercial inventories increased, structural space narrowed, facing the inflection point in demand.

Due to China’s large consumer base and the gradual stabilization of the country’s macroeconomic situation, although sales in the cigarette industry have declined, overall consumption will remain stable within certain limits.

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