Market Challenges And Opportunities

High Cost of Natural and Organic Flavor and Raw Material

High cost of natural and organic flavor due to high production, processing, and preservation cost is expected to hinder the market growth. Additionally, the stability factor for natural and organic flavors is higher because of reaction-related issues. Temperature, humidity, and chemical compounds in the flavors are the major factors that affect the stability of the natural and organic flavors, and this is expected to hinder the market growth.

Fluctuating prices of raw material price due to bad weather condition that affect the production and ultimately demand and supply is expected to hinder the market growth. Volatile raw material prices have an impact on how smoothly the market for natural and organic flavors operates, as well as on the stability of the company's financial liquidity.

Global Natural and Organic Flavor Market: Growth Drivers

Rising Demand for Natural and Clean Label Products

Rising demand for food with natural ingredients and clean labelling, owing to rising health consciousness, increased consumer spending power, and rising food adulteration incidents is expected to drive the market growth. As a result, manufacturers are expanding their natural and organic flavor portfolio.

Clean label products are products that are organic, natural, non-GMO (genetically modified organism), and minimally processed. According to the Clean Label Alliance in June 2021, nearly 75% of consumers are willing to pay a premium for clean label products. Increasing awareness about consumer health is boosting demand for natural and clean label products, and this boosts demand for natural food colors and flavors. Consumers prefer clean label products as people are aware of the negative effects of non-synthetic ingredients.

One of the most important aspects of packaged foods is its clean label. Consumer awareness is strengthening the clean label trend, motivating them to switch to plant-based and natural diets instead of synthetic ones, thereby promoting the development of the natural and organic flavor market. Retailers are also supplying their own private label brands in response to the growing consumer demand for clean label products. The COVID-19 outbreak has prompted consumers to purchase more 'clean label' products, owing to its safety and health benefits. According to a study published by the International Food Information Council Foundation, in 2021, 57% of people likes to review FOP (Financial Operating Plan) labels a new or unfamiliar product. More than half of Americans stated that front-of-package (FOP) labels influence their food and beverage purchases.

Natural Food Product Renaissance among Consumers

Growing consumer consensus that food products derived from natural ingredients are healthier is boosting demand for natural and organic flavors. Customers frequently steer clear of products with artificial ingredients now that both terms are used interchangeably, which is advantageous for the market under consideration. It ensures that the same consumers are constantly checking food labels before purchasing. Several organizational surveys on consumer purchasing behavior that stated that there has been an increase in consumer interest in looking for superior ingredients on food labels. Furthermore, changes in consumer behavior and market dynamics for food flavorings are putting pressure on food producers to stop using artificial additives in their products. Furthermore, major food companies such as Kellogg's, General Mills, Nestle, Campbell, and Kraft had limited the usage of artificial additives and flavors in their product formulations. For instance, in March 2020, IFF (International Flavors & Fragrances) (Israel), partnered with Evolva (Switzerland), a biotech company, to further develop and commercialize vanillin. Under the terms of this agreement, IFF, would be in charge of commercializing the vanillin product developed by Evolva. This would expand the reach of Evolva's developed products and will include newly developed products in IFF's product portfolio.