Flavours provide taste to a large number of foods and beverages such as sweets, meat and savory products, soups, beverages, alcoholic liqueurs, dairy products, etc. Flavours and flavourings are concentrated mixtures of
flavouring substances and some formulations may contain a considerable number of different ingredients. They are prepared by mixing the following:
• Natural aromatic raw materials
• Natural flavour concentrates
• Flavouring substances with a defined chemical structure and flavouring properties. These substances are subdivided into natural substances, directly obtained from natural sources, nature-identical substances, which are naturally occurring substances that are produced by synthetic means and artificial substances.
Major participants in the flavor industry
The figure shows the market share of the competitors of different geographical areas in the world flavor industry Asia-Pacific, North America and Western Europe are the major flavor export countries in the world ,accounting for 26%,32% and 25% of the total market respectively.
The biggest competitor is from Japan, which export their monosodium glutamate to South Africa as well. As the production way is different from ours, their cost of production is more than ours. Owing to the cheaper price, our product is always prevailing in the market, dominating the majority of the market.
2002 – 2006 Sales Volume of Flavor & Fragrance Industry participants
.. Company 2003 2003 2004 2004 2005 2005 2006 2006 …
Rank .. =US $ Market Share1 =US $ Market Share1 =US $ Market Share1 =US $ Market Share1 Source
1 Givaudan $2194.1 13.5% $2,346.9 13.3% $2,108.9 13.2% $2,387.9 13.3% Givaudan
2 IFF $1901.5 11.7% $2,033.7 11.5% $1,993.4 12.5% $2,100.0 11.7% IFF
3(3) Firmenich $1596.9 9.8% $1,782.1 10.1% $1,752.1 11.0% ~$1999 (est.) 11.1% Firmenich
4 Symrise $1462.2 9.0% $1540.3 8.7% $1,360.2 8.5% $1,623.0 9.0% Symrise
5 Quest International $987.5 6.1% $1,101.6 6.2% $963.4 6.0% $1,151.8 6.4% ICI
6(4) Takasago $897.7 5.5% $985.1 5.6% $898.3 5.6% ~$945.8 (est.) 5.3% Takasago
7(6) Sensient Flavors $452.0*** 2.8% $499.2*** 2.8% $516.4*** 3.2% $565*** 3.1% Sensient Technologies
8(5) T. Hasegawa $433.8 2.7% $490.4 2.8% $405.7 2.5% $394.4 2.2% T.Hasegawa
9 Mane SA $310.2 ~1.9% $345.1 2.0% $311.4 1.9% ~$366.8 2.0% Mane SA
10 Robertet SA $254.7 1.6% $275.7 1.6% $245.1 1.5% $291.8 1.6% Robertet
… Top Ten Totals $10,554.70 64.75% $11,469.4 64.96% $10,555.0 66.0% $11,825.4 65.7% …
All Others $5,745.3 … $6,188.0 35.04% $5,445.0 34.0% $6,174.6 34.3% …
Total Market $16,300 … $17,657.4 … $16,000 … .. .. …
10/11 Frutarom $139.3 0.9% $196.8 1.1% $243.8 1.5% $287.2 1.6% Frutarom
12 Danisco ~$318.8 ~2.0% ~$345.1 2.0% ~$238.0 1.5% ~$269.3 (est.) ~1.5% Danisco
13 Cargill Flavors (formerly Degussa) ~$258 ~1.6% ~$274.7 1.6% ~$230.9 ~1.4% ~$269.3 (est.) ~1.5% Cargill
Top 12/13 Totals $11,206.7 68.8% $12,201.6 69.1% ~$11,267.7 ~70.4% ~$12,651.2 ~70.3% …
It can be seen from the table that at Givaudan, IFF and Firmenich are the top 3 companies in the flavor industry in the world with large sales. Givaudan is one of the foremost innovators, creators and suppliers of flavour and fragrance ingredients. IFF was formed in 1958, through the merger of two small companies. Its annual revenues have grown almost fifteenfold since the early 1970s, and it currently has manufacturing facilities in twenty countries.
The position of Wu Yi company in the flavor industry
Critical success factors of Wu Yi company in flavor industry
The flavor is a commodity in the food industry in the past, however, now it becomes differentiated as consumers are more concerned about the different tastes and nutrition of the flavor. Therefore , constant improvement of technology will update the taste and deliver more value-added products to the consumers.
The quality of the flavor depends on the taste of the products . High quality can bring better taste to the consumers and they can function as a delicious addictive to the food . High quality addictive are likely to be accepted by the restaurants .
Now with an increasing number of companies which enter the flavor industry,consumers are more concerned about the brand of the flavor. Many companies register them own brand which helps to build the brand image for them, ultimately creating the customer loyalty .
The flavor industry step into a high development level. In 2006 , the sales revenue of the flavor industry amounted to 42.78 billion RMB , growing 22.29% compared with last year . The total profit is 2.13 billion RMB , growing 22.41% compared with last year .
The total consumption reached 62 billion RMB last year, the sales revenue reaches as high as 20 billion RMB, in the future, the market will be furthered developed and the competition will become even more intensive .
During recent years, the growth rate in South Africa reaches as high as 27.9%, constituting the fastest growing sector in the food industry. The food industry become more focused and it begin to denominate the market.
In the future , people will become more focused on the quality and taste of the flavor with the continuous improvement of people’s living standard. The food agency carry out more and more food requirements which will increase the input of the flavor. There is also a trend that an increasingly strict requirements of flavor targeted the higher end market.
The diversification and specialization will become more and more obvious in the future. There are many competitors who produce delicious seasoning in the market , some of the companies specialize in a specific flavor market because after specialization , the taste and the quality become much better .
The catering industry is the major channel for the development of flavor industry . According to the national statistics , the retail volume amount to 748.6 billion RMB , net gaining increase 133 billion RMB , 21.6% of growth compared with last year of the same period . At the same time , the flavoring industry and enterprises gain enormous development for 14 years .
The following diagram shows the trends in the catering industry , which brings enormous opportunity of development in the flavor industry .
International Influence in the Flavor Industry
South Africa is a developing country. The GDP of the country contains 20 percent of whole Africa. These years South Africa has become wealthier because of the abundant of trade. To China, South Africa is the biggest and most important country for trade in Africa. As to Africa, China is also one of the biggest countries for trade. The two countries both have a large opportunity and return from mutual trade. According to the custom of China, the amount of trade is up to 9856 million dollars, which increases 36 percent from last year. There is a good prospect for the further trade of China and South Africa.
In South Africa, when eating bread, people are likely to use monosodium glutamate as the additive .Almost all of the South Africa people like to eat food with it. They eat it just like eating candy; therefore the consumption of monosodium glutamate is large.
Many people are aware of flavors used in different parts of the world, opening up new possibilities in the flavor industry. For instance, if someone experiences a taste they enjoy in an ethnic food they sample when they are on vacation, they may want to find a sauce or a flavoring that will make it relatively simple for them to make a similar dish when they return home. Likewise, seeing someone else utilizing lots of herbs and spices on television make these items more familiar to consumers, who may be more likely to try foods that boast flavors similar to the foods they have seen prepared, even if they have never actually tasted them before. Industry experts have also found that consumers are often more apt to find a new flavor pleasing if it is associated with a food that is already familiar to them.
Some of the most important advances in flavor manufacturing are now occurring in the field of biotechnology. The leading firms in the industry spend a lot of money in R&D. In addition ,more and more advanced technologies are used in producing them.
TOP FLAVOR R&D ISSUES
of flavors 79%
Certification of natural flavors 69%
* percent of processors indicating that this is a
very to extremely important issue to them,
Source: 2005/Prepared Foods Processor Survey
Since Jan.1th, 1998, South Africa had established the diplomatic relationship with China .After that ,the two countries work together to ensure rapid integrated development .The former chairman Jiang accepted the invitation to visit South Africa in April 21, 2007.In 2004,the two countries had developed a strategic partner relationship on the basis of equality and mutual respect.
The government encouraged the foreign investment in South Africa and welcomes the exported commodities from the world. There are no quotas on monosodium glutamate.
There are many immigrants in South Africa , the flavoring products are popular for almost all of the Africa because of the special food habits. When eating bread, people are likely to use different flavoring as the additive .Almost all of the South Africa people like to eat food with them. They eat MSG just like eating candy; therefore the consumption of monosodium glutamate is large. So do other flavoring products.
While in global market, the situation is not like that. Most eastern countries like the monosodium glutamate to combine with their food. So the consumption of that is a need in their usual life. On the contrary, the western country rarely uses the MSG to add into their food. For those reasons, the preference decides largely the consumption of the addictive. We must advertise our product first before most competitor’s action. Thus we could seize the market urgently.
The population of South Africa is about 46.9 million. And they have several different cultural customs, as well as their flavoring preference.
It is researched that the customers’ distribution of flavoring market between global and South Africa is shown below. It is shown as percentage. (We assume there are 100 man in both market, the number means the people like the flavoring.)
The location of the market is not better for production and store for the MSG. Because the climate there is rainy in summer and dry in winter. Rice , the major raw material of MSG , is not suitable for growth in South Africa . Only one thing is that MSG should not put in a humidity environment for a long time in case of the deterioration.
Because the MSG is a resource-based product and the production place has rich resource for production. So the quality of the MSG is competitive in global market when comparing with other flavorings. There is less question of lack of raw material or other problems. So the question is only whether the supplier could supply the resource on time.
While the other flavorings have some difficulties in supply as following example, some flavorings’ resources are different from MSG, so the cost and business cycle is totally different. Just like soy, it needs rice and other raw material. It often lacks enough resource to produce.
So it’s advantageous of MSG to prevail in the market because of the abundant of supply.
The distribution channel in South Africa is combined by a variety of supermarkets and small retail stores. The distribution network is relatively mature in urban areas while small retail stores are the main distribution channel in rural areas.
Retailing in much of South Africa, particularly among emerging markets with large rural population ,poor infrastructure ,and low incomes, is dominated by traditional grocery and other shops. Much of the value of goods transacted in South Africa is through traditional retailers such s roadside stalls ,small, semi-permanent shed-type stores who employ movable carts to sell their wares, and street hawkers who peddle goods to cars stuck in traffic or waiting at traffic lights.
Therefore, the most amount of distributor in flavoring market is retailers, because of their low scale of economy. It’s a challenge for MSG, because advertisement should be offered to let those retailers to be familiar with MSG to publicize it, or there is less chance to expose MSG more than other flavorings.
Wal-Mart in South Africa as well as other large chain stores are popular. However, It is very difficult to enter those large chain stores in South Africa independently considering the experience of the firms and the barrier of entry.
In the global market, the situation is not like that, the addictive market mostly sells on the large supermarket. All the flavorings are over there and competed serious directly in that distribution.
STP strategy for Wu Yi company
Market segmentation analysis
The market segmentation criteria are mainly by preference of customers for the addictives. In this country, the traditional food doesn’t use MSG as their addictive. Until recently, the people there have begun to taste it, the increasing demand for MSG indicating that it has a good prospect.
While other addictive also has such good prospective, the sweet addictive is especially popular there. So the market is segmented separately by many addictives.
The market share of the flavoring market in South Africa is shown below by the percentage.
Target market selection
Because market mainly consisted of several addictives, the MSG market is relatively higher than the other flavorings. The MSG market seems prospective in the market.
Another reason is that this is a increasing industry in South Africa, it is accepted by more and more people.
The production and transportation is also convenient. So it is the target of the flavoring market.
Position of the company
In this segmentation, the customers are the ones who have stable income to purchase the addictive, and prefer the fresh and delicious taste. The people in this segmentation often use it to cook their dishes or eat it directly with bread, etc.
The price will not be high so that every one could afford it. Therefore, stable and smooth consumption of MSG is need, and it should be the necessity of every meal for everyone, preferring to MSG as their addictive in their meals.
Customer needs and wants
Customers will need it for meal. So they could taste it every day. According to the need, different production line or diversification may be considered to develop MSG in this market.