Menu

Opportunity of specialty chemicals in formulated products of FMCG

by avachem, October 24, 2019

There has been a rising demand in overseas and domestic markets, along with the plant shutdowns in China due to tight regulations. As a result, India’s specialty chemical companies are expanding at an exponential speed. In fact, it is expected that the domestic specialty chemical sector will grow at a rate of 10 percent annually and will double the market size by 2025. For the FMCG companies, this means uncovered opportunities of using specialty chemicals in formulated products that can reap high profits.

Specialty chemicals most commonly used by FMCG companies

Flavour and fragrance
The flavour and fragrance (F&F) sector is a small, yet significant part of the FMCG industry and it currently has a big opportunity in naturals. The global market for F&F was estimated to be around USD 27.1 billion in 2016 and by 2021, it is estimated to reach $37 billion

India dominates the global spice oleoresins market by supplying 60% of the 13,500 tonne of total global demand. Currently, about 85% of the domestically produced F&F ingredients are exported. The growth in exports has been possible because of the natural ingredients and strong raw material base that India offers. Despite constituting less than 1% of a product’s volume and under 10% of its total cost of production, fragrances are instrumental in creating a distinct product association with the consumers.

A look at the Fragrance Industry in India

Opportunities for FMCG industries in F&F: 
Increased demand for processed food in developing countries has, in turn, increased the demand for flavors. While developing countries saw a growth of 13%, there was a global growth of 4% in this category. There is high consumer willingness to experiment with new flavors and fragrances
The fragrance is now seen as a necessity and less like a luxury.

Surfactant
The global surfactant market was evaluated at $31.29 billion in 2017 and it is expected to reach about $58.85 billion by 2026 at a CAGR of 7.3%. India and China are the largest markets for surfactants in the world. The surfactant market in India was estimated at $2.6 billion in 2014 and it is expected to grow at a CAGR of 13% by 2020. 

Opportunities in surfactants for FMCG companies:
– Demand for surfactants in India is expected to grow at more than twice the global rate
– MNCs have the ability to consolidate and scale by acquiring medium-sized Indian players in order to compete with global enterprises
– For Indian players, the opportunity truly lies in the specialized surfactants sector because of better margins and high growth rate than the conventional surfactants 

Personal care ingredients
Specialty personal care ingredients consist of over 30% of the total personal care ingredients market and they are further sub-divided into active and inactive ingredients 

The global market for personal care ingredients ( in USD billion).

The Indian market is also growing because of increasing domestic demand and export opportunities .

The US and Europe are the two largest markets for personal care ingredients, followed by China and Brazil. India and South East Asia might be smaller markets but they have big potential. Currently, the Indian personal care ingredients market is estimated at $300-350 million.

The market size project per region in 2022 is projected to be as follows (in USD billions)

Opportunities in personal ingredients:
Increase in purchasing power of consumers is increasing demand for personal care products with multifunctional ingredients
Increase in demand for natural ingredients as consumers become more environmentally conscious
High growth potential in emerging economies around the world

How FMCG companies can take advantage of niche chemicals?

Growing demand natural ingredients
As the demand for natural ingredients is increasing, FMCG companies are leaning more towards bio-based specialty chemicals which can act as catalysts, accelerators, and additives in various products. They enhance performance, reduce consumption of scarce resources, and decrease the carbon footprint of the company. For instance, DuPont Tate & Lyle Bio products has partnered with RML Inc, a personal care ingredient maker to create a new line of alternative preservatives that are 100% bio-based ingredients which can be used in cosmetics and other personal care products.
Similarly, India’s aroma chemical manufacturers, who already possess the capability to supply ingredients to the global flavours and fragrances market will be able to take advantage of this growing demand for natural ingredients.

Companies like Synthite are already planning ahead and building large scale plants to meet the growing demands of the global markets. Synthetite has commissioned a new plant in China and another one in Indonesia. By 2020, the company aims to increase its revenue by three folds, to $500 million.  Privi Organics, one of the largest manufacturers of aroma chemicals in India, has also leveraged its size to develop natural ingredients at scale and the company has made large investments in developing green manufacturing process.

Following global trends
With the aim to address global challenges, specialty chemical manufacturers are undertaking product innovations to solve these issues. The idea is to develop innovative products and solutions that can create social and economic value while also helping customers achieve their sustainability goals.
For instance, Dow Corning has established silicon technologies for green building and construction process as they last longer and need to be replaced less often than other organic materials. This in turn reduces lifetime costs and improves sustainability.
Similarly, Clariant, the Swiss specialty chemicals company introduced innovative EasyWhiteTan, which is a safe and environmentally compatible tanning process that does not use any chrome, aldehydes, or phenols. 

Adopt sustainable and green efforts as an effective marketing tool
As customers become more environmentally conscious, FMCG companies are increasingly adopting green practices to foster better relationships with customers and suppliers.
For instance, Vinati Organic has invested in two major green plants, both of which emit zero effluents. Their plants are certified by Environment Management System standard ISO 14001.
Similarly, Tata Chemicals was awarded with Unilever’s ‘Partner to Win’ award for significantly reducing their environmental impact, which gave the company global recognition.
It is expected that the domestic specialty chemicals sector will have a strong year because of the continued increase in the demands of end user industries and the stringent environmental norms in China that have tightened the global supply.

About AVA Chemicals
AVA Chemicals is a globally renowned company engaged in formulation and supply of premium-grade chemicals to diverse industries such as Pharmaceutical & Lab Reagents, Agrochemicals, Home & Personal Care, Oil & Gas, Coatings, Water Treatment and many more. Over the last two decades, AVA Chemicals set-up three state-of-the-art Facilities (ISO and HALAL certified) in Badlapur, India, and a strong Clientele presence in over 40 countries.
At AVA Chemicals, we supply EDTA Disodium, EDTA Tetrasodium, DTPA acid, HEDP 60%, NTA acid and Monoammonium Phosphate etc. products which are used as ingredients by the FMCG industry.

For more information please visit www.avachemicals.com or email us at relations@avachemicals.com

Source*
https://www.researchandmarkets.com/research/rmmpsj/global_markets
http://www.craftingluxurylifestyle.com/a-snapshot-of-the-fragrance-industry-of-india/
https://www.researchandmarkets.com/research/h3427z/58_85_billion?w=5
https://www.chemarc.com/feed/article/segment-profile-surfactants-industry-in-india/599d710ef607c744996eedd8
https://www.marketsandmarkets.com/Market-Reports/personal-care-ingredients-market-251972200.html