In spacious stark white laboratories, with sophisticated equipment and an investment of about Rs 21 crore (3.7 million Swiss francs), Swiss flavour and fragrance company Givaudan recently began tweaking exotic flavours like blueberry cheesecake and black currant to suit the Indian palate, hoping to benefit from the fast-growing processed food market in the country.
Companies in segments such as bakery, confectionery, snack food and beverages that have been ramping up in India, expect their flavour partners to also roll up their sleeves and work alongside.
“Speed is very important to this market. Customers don’t want to miss out on any trends so they expect us to come out with the right support in terms of concepts, ideas and products,” says Tansukh Jain, Givaudan’s country head for flavours, seated in the plush conference room of the innovation center in Andheri.
Founded as a perfumery in 1895 in Zurich, Givaudan is the world's largest flavour and fragrance maker. It has been operating in India since 1994 with manufacturing capabilities but did not test and create flavours locally until March. The company has a fragrance facility in Bangalore and a manufacturing facility in Daman. It was happy to expand, says Jain, because “as our clients in various segments grow, we will automatically grow.”
More urbanization, higher disposable incomes and the resulting lifestyle changes have made India an attractive playing field for many global players, who are looking away from the saturated United States and Europe. About 50% of India's population being under the age of 25 and an increase in the number of nuclear families further boost opportunities for food companies. The Indian processed food market, which was worth about $80 billion in 2012, is expected to double by 2020, according to consulting firm Frost & Sullivan.
Givaudan, which supplies scents and flavours to food and beverage makers and personal care companies, is not alone in its pursuit. Rival flavour companies including US-based International Flavours and Fragrances (IFF) as well as Germany’s Symrise have also been tasting growth and stepping up operations in the country.
IFF, which had invested Rs 20 crore to set up a technical and creative center in Mumbai in 2005, opened another facility in Gurgaon last June to innovate flavours for the Indian market. Customer intimacy prompted IFF to start the new facility in the region as several of its existing and potential clients are near Delhi, says Sridhar Balakrishnan, managing director of IFF India.
Improvisation has become necessary to win over the Indian consumer who wants to try new things. Other than the indulgent global flavours, there is high demand for traditional and regional Indian tastes, says Givaudan's Jain. The company's innovation center houses an industrial kitchen to prepare popular dishes such as pav bhaji or biryani that are later broken down in the analytics section. The flavours created in the labs are then tested on consumers in a sensory science area. Givaudan plans to open a new manufacturing facility in Pune over the next three to five years.
While exotic flavours are made "bolder" to woo local buyers, presenting ethnic flavours in new formats like nimbu pani in packaged format or masala oats is another trend in the space. "Indians do not want to compromise on taste even for health and wellness products and that is one of the challenges that we are working on to make healthy products tastier as well," says Balakrishnan of IFF.
The bulk of growth for flavour companies is coming from emerging markets. Givaudan's sales in these markets rose 13.2% and accounted for 44% of the total in 2012. Its sales in India grew in the high-single digits. The sales contribution from developing regions is targeted to hit 50% by 2015. Asia is also the largest region for the flavours of IFF, which reported sales growth of 8% there in the last fiscal.
Frost & Sullivan analyst Chaitra Narayan pegs the value of the Indian food flavor market at around $230 million and expects it to grow at a rate of 8 to 9% over the next three to five years. International companies account for about 80 to 90% of the market, she says.
The flavour and fragrance industry in India is fragmented, with top global players and local players of various sizes competing in the same marketplace, notes Anand Jhunjhunwala, president of Fragrance and Flavour Association of India.
"(But) most of the global corporates have their own set-up in India now and there are not many with local partners."
The Indian companies, which are mostly family-run, are now trying to become technologically advanced to compete in this space, he observes.
Global flavour makers, it seems, want a bigger bite of India.
