Flavoring Extracts and Flavoring Syrups, NEC

SIC 2087

Companies in this industry

Industry report:

This category includes establishments primarily engaged in manufacturing flavoring extracts, syrups, powders, and related products, not elsewhere classified. The products are generally used at soda fountains or during the manufacture of soft drinks, as well as for adding color to baked products and confectioneries. Establishments primarily engaged in manufacturing chocolate syrup are classified in SIC 2066: Chocolate and Cocoa Products.

Industry Snapshot

While most foods have some flavor, certain agents can enhance the taste of these foods. These products encompass a wide range of materials that can be used alone or mixed into a blend. In total, in 2010, the Food and Drug Administration maintained a database of 3,000 food additives. In the late 2000s and into the early 2010s, health-conscious Americans were becoming increasing attuned to food additives, colorings, and preservatives. As a result, the trend was toward flavoring products with natural flavors. Other trends pushing the industry included the continued demand for low- or no-sugar products, reduced sodium, and organic varieties of products. In 2009, the flavorings extracts and flavoring syrups industry was valued at $33.4 billion.

Organization and Structure

Flavoring manufacturers, sometimes called "flavor houses," create extracts, syrups, powders, and other forms of flavoring materials. These manufacturers work with natural base ingredients purchased from suppliers throughout the world. The manufacturers' dependence on natural sources leaves the flavor chemicals open to price fluctuation due to the availability and cost of the raw materials. Once processed, flavoring ingredients are sold to soft drink companies and other makers of processed foods.

Flavor manufacturers and food producers cooperate increasingly in research and development efforts to create new food products. Flavor producers also provide technical support on flavor issues, especially with the beverage industry. Flavor houses custom tailor flavors, relying heavily on work in application laboratories. Flavor companies and product developers work in conjunction with flavor chemists to achieve desired results.

Although the starting materials may be of natural origin, all flavoring materials are processed in some manner. The distillation process uses hot water or steam to extract the aromatic materials from the flavoring materials. The quality of the flavor depends on the raw materials and the process. The product derived from this process is called a volatile or essential oil.

Extraction is used to obtain characteristic flavoring attributes provided by nonvolatiles. Organic solvents are used to dissolve volatile and nonvolatile compounds from the natural starting material. After removing the solvent, usually with a high vacuum process, the flavoring compounds remain. An extracted flavor often is fractionated into many parts and only certain ones are selected for the final flavor.

Extraction and distillation remain important methods for obtaining natural flavor components. Types of extracted/distilled flavor components are essential oils, aromatic fractions of the plant, oleoresins (which are extracts without volatiles), standardized oleoresins (which are added with extra essential oils), and concentrated oils (which are essential oils fractionated to a specific degree of concentration).

The flavoring industry works closely with the Food and Drug Administration (FDA), primarily through the efforts of industry trade association Flavor Extract Manufacturers Association (FEMA). FEMA participated in the development of the Nutritional Labeling and Education Act of 1990. This legislation mandated that producers detail the ingredients used in processed food formulations. The act was implemented in May 1993.

Background and Development

Development of the modern flavor industry occurred when some of the earliest flavors were manufactured by extraction during the 1940s. By the 1950s and 1960s, the industry moved toward the use of synthetic flavor compounds as flavoring agents. By the 1970s, "natural" began to be a selling point, and methods were sought to develop pure, natural chemicals. One problem with these natural extracts was that the raw materials varied in taste and intensity. However, the modern flavor industry resolved this issue by compounding natural flavor chemicals rather than using the extracts as final flavors. This procedure provided food manufacturers with consistent flavors.

Though the flavors market grew steadily throughout the 1980s and 1990s, the industry experienced flat growth in the late 1990s, particularly in 1998. North America and Europe accounted for the majority of sales in the international flavors market, with sales of about $2.7 billion out of a total of $4.8 billion in 1997. The market experienced signs of recovery in 1999, though several major flavors manufacturers continued to suffer from slumping revenues.

Flavorings and syrups saw steady growth throughout the late 1990s and early in the first decade of the twenty-first century. U.S. shipments of flavorings syrups and concentrate products were valued at $8.1 billion in 2001, compared to $6.64 billion in 1997. In the late 1990s and the early years of the first decade of the 2000s, consumer trends continued to focus on natural ingredients and products that were perceived as "healthy." Medicinal ingredients such as ginseng and garlic became more commonplace. Tropical and exotic flavors also regained popularity and were often paired with more established fruit flavors. The results were such flavors as kiwi-strawberry and cranberry-mango.

Approximately 175 U.S. companies were involved in the production of flavoring extracts and syrups under the flavoring syrup and concentrate manufacturing umbrella, according to the figures published in 1997 by the U.S. Census Bureau. More than 6,000 workers were employed in the flavoring extracts and syrups industry, and roughly 10 companies accounted for almost two-thirds of the flavor industry's sales to beverage and food processors.

Colorants were one of the smallest segments of the food additives industry. The natural colorants (mainly caramel color used in cola drinks) dominate the industry. Synthetic colorants also are used largely by the beverage industry, followed by use in pet food, confections and gums, and dry mixes. However, consumer concerns over the safety of colorants in food products led many firms in the late 1990s and early in the first decade of the 2000s to pursue natural colorant options. Reflecting the strength of this industry segment, between 1997 and 2000, industry leader Universal Foods, later renamed Sensient Technologies Corp., acquired nine colorants businesses.

According to the 1999 Flavor Usage Survey conducted by Beverage Industry, which polled individuals in nearly every segment of the beverage industry, including soft drinks, juices, flavored waters, and specialty drinks, the cola was considered to be the top flavor of 1999. Cola was selected by 31 percent of those surveyed. Second most popular was orange, with 15 percent of the vote. The top flavors used by beverage makers, according to the respondents, were orange, lemon, grape, strawberry, lime, cherry, apple, cola, cranberry, and grapefruit, respectively. Almost half of those polled indicated that they would be using and introducing new flavors in the late 1990s and early years of the first decade of the 2000s. Many named such flavors as grapefruit, lemon-lime, and orange as the flavors that would be used in new drinks.

Exotic flavors, including passion fruit, mango, and guarana, enjoyed increasing popularity in the late 1990s, as well as flavored coffee and tea drinks. Coffeehouses around the world began adding flavors such as hazelnut, raspberry, Irish cream, and vanilla to espresso drinks, regular coffee, hot chocolate, and tea. Health drinks and energy drinks, which relied heavily on natural and fruit flavors, also enjoyed increased consumption. Coffee and tea flavors continued to gain in popularity in the early years of the first decade of the 2000s. In fact, flavoring syrups accounted for 30 percent of sales for the specialty coffee market by 2003.

Ethnic flavors such as Dulce de Leche gained in popularity early in the first decade of the 2000s, as did less common flavors like pomegranate and ginger. However, the top five coffee flavors in 2003 remained traditional ones like French vanilla, hazelnut, Irish creme, cinnamon nut, and vanilla nut. The top five tea flavors were cinnamon, apricot, peach, passion fruit, and bergamot.

In the mid-years of the first decade of the 2000s, shipment values of flavoring syrups and concentrate products remained relatively steady, from $8.15 billion in 2002 to $8.46 billion in 2003, dipping slightly to $8.0 billion in 2004 and $7.64 billion in 2005.

According to industry statistics, there were 583 establishments engaged in manufacturing flavoring extracts, syrups, powders, and related products, not elsewhere classified, valued at $32.4 billion and employing 21,700 workers in 2007.

Flavoring syrups have increasingly made their way onto the shelves of convenience stores, gas stations, and supermarkets as consumers added some flavor to their traditional cup of coffee. "Look to Sugar-free...syrups for key flavors in the coming year," Irene Szyliowicz of Mont Blanc Gourmet noted in Tea and Coffee Trade Journal in January 2008. The flavored syrups market continued to evolve, capturing the attention of juice, pop, and water manufacturers.

Current Conditions

According to a 2010 Dun and Bradstreet industry report, the flavorings extracts and flavoring syrups industry's 569 firms employed 21,433 people and generated $33.4 billion in annual revenues. However, one company--Coca Cola, which falls within this industry--accounted for $33.99 billion, or nearly 93 percent of industry revenues. If Coca Cola is removed from industry totals, all other firms combine for annual 2009 sales of $2.44 billion. In terms of number of establishments, the leading states are California, New Jersey, Florida, Texas, and Illinois. In terms of revenues, the leading states were Georgia (home of Coca Cola), Wisconsin, Utah, California, and New Jersey.

Nonnatural additives and food dyes were coming under heavy pressure in the late 2000s and early 2010s as consumer watchdog groups and health-conscious Americans began to seriously question the effects of additives in the U.S. food supply. According to a report by the Center for Science in the Public Interest (CSPI), U.S. food producers used an estimated 15 million pounds of eight different synthetic dyes annually. Per capita consumption of dyes increased fivefold between 1995 and 2010. Groups such as CSPI point the finger at food manufacturers that add increasing amounts of dye to foods aimed at children such as cereal, candy, and fruit drinks. CSPI claimed that Red 3, Red 40, Yellow 5, and Yellow 6 were contaminated with known carcinogens and called on the Food and Drug Administration to ban dyes from the U.S. food supply. Some drink companies responded to consumers by offering clear versions of their juice and drink mix products.

Industry Leaders

The flavor-producing companies became larger and were based more multi-nationally in the late 2000s and early 2010s. The top two flavor and fragrance companies globally in 2009 were both located in Switzerland: Givaudan and Firmenich, with approximately 19 percent and 14 percent world market shares, respectively. In third place was the U.S. company, International Flavors and Fragrance (IFF), headquartered in New York, which held an 11 percent global market share. The company posted 2009 revenues of $2.33 billion. IFF's flavors business section accounted for 46 percent of its overall sales in 2009.

Sensient Technologies Corp., headquartered in Milwaukee, Wisconsin, posted revenues of $1.2 billion in 2009. The firm's food coloring facility in St. Louis, Missouri, was the largest such plant in the world. Fifty-nine percent of its 2009 sales were generated by food and beverage colors. In 2009, Sensient opened offices and a manufacturing plant in Gaungzhuo, China.

America and the World

Despite the economic crises affecting Asia, Asian countries continued to be targets for flavors manufacturers. Studies showed that consumption of flavored products was directly proportional to per capita income. As the middle class grows in Asian countries, demand for Western-style beverages is likely to gain ground. Growth in Asia is projected to have the ability to drive flavor growth higher well into the next century. Expansion into Asia also would allow companies easier access to newer, more exotic flavors.

Other global markets that appeal to the flavors industry include Latin America and Germany, which represents the largest flavors market in Europe. Most of the leading flavors companies, including IFF and Givaudan Roure, have operations in Latin America.

Research and Technology

New technologies, particularly in extraction techniques and applications of biotechnology, are being applied in the flavors industry, which is expected to post dramatic results in the coming years. Biotechnology is the most advanced of the new flavor technologies and will be used to create "natural flavors of the future." Under pressure to find new coloring options to replace synthetically produced colors, in the early 2010s, chemists were working on developing colors from lycopene, right red carotene and carotenoid pigment and phytochemical found in tomatoes and other red fruits and vegetables. However, the industry was under close scrutiny of the Food and Drug Administration in a complex process of labeling and approval processes so consumers did not intake more than the recommended amounts of lycopene as color additives.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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