Natural Flavour Market In the APAC Region Offers High-Growth Opportunities In Creative Applications

Friday, December 10th, 2021

In the APAC region, consumer preferences have shifted to include more natural and clean labels emphasising health and wellness.

With changing lifestyles, evolving consumer preferences, improved quality of life, increased disposable income and awareness of health and wellness as key drivers in the flavour industry, the APAC region is already in the midst of a booming growth phase that will be worth more than US$8 billion by 2030.

Contributed by Diego Shimizu, Senior Consultant—Chemical Materials & Nutrition, APAC at Frost & Sullivan.

The global market for flavours reported annual revenue of US$13.74 billion in 2019. The Asia-Pacific (APAC) region leads market sales of over US$4.1 billion compared to North America, Europe, Latin America, the Middle East and Africa. High opportunities for end-use applications for natural and artificial flavours in the food and beverage industry coupled with changing consumer behaviours and rapid urbanisation are key growth factors. With a CAGR outlook of 6.5 percent in the APAC region for flavourings through 2030, the region offers plenty of growth opportunities for flavour manufacturers, suppliers and end users. Key growth drivers include a growing consumer base, increased disposable income, changing consumer lifestyles, high demand for unique or regional flavour profiles, premium labels, stable sales of artificial flavouring, and an increasing preference for natural flavouring.

Food & Beverage Trends

Flavourings are important to modify the taste or smell of food products and are a staple in the food and beverage industry. Traditional applications include dairy, for flavoured milk, yoghurt, and dairy alternatives; bakery such as bread; confectionary, especially in chocolate-based products; processed or ready-to-eat savoury and sweet snacks; along with other food products such as sauces, dressings and condiments.

In the APAC region, consumer preferences have shifted to include more natural and clean labels emphasising health and wellness. Even alcohol consumption in Asian countries has declined since 2019. This will fuel the demand for natural ingredients, flavours, and lower-calorie, low-fat, or sugar-free products. Furthermore, marketing strategies that promote premium quality taste and pay special attention to dietary needs such as lactose intolerance or vegan diets will go a long way in carving out new consumer markets.

Premium Quality & Specialty Beverages

Despite health and wellness trends, China will remain a major consumer of carbonated beverages such as energy and specialty drinks. Flavoured sparkling water and flavoured water are also growing in popularity amongst younger demographics. Hot drinks, including herbal and green teas and coffee products, are being marketed with creative flavour profiles and premium quality ingredients or taste.

Unique Dairy Flavours Meeting Consumer Diet Demands

In the dairy segment, consumption of flavoured milk, butter, cheese, and yoghurt is expected to increase as population size, awareness of health, and disposable income increase. APAC countries such as India, Indonesia, Thailand, and China are expected to lead the region’s dairy flavour market. Innovations in unique flavour profiles and textures, especially in yoghurt and milk production, have risen in creativity, such as red grapefruit-based yoghurt or cherry blossom, lavender, blueberry, white peach, and jasmine flavour offerings in ice cream. Regional and ethnic flavour sources have increased in demand and popularity for their clear association with natural-sourced ingredients.

Expansion beyond the current consumer base, especially for lactose-intolerant and vegan diets, has prompted plant-based or microbial-based dairy alternatives. Lactose intolerance has historically been high, especially in Southeast Asian countries, thus leaving an untapped consumer base brimming with high potential for sales through plant-based alternatives. These can be significant growth factors for value chain flavour manufacturers and end-retailers from wholesale distributors to grocery retailers.

Globalisation And Lifestyle Shifts Propelling Bakery And Confectionery Sectors

Changing lifestyles to suit work needs, independent living and smaller family units have also increased the need for flavourings for on-the-go bread and bakery products that emphasise convenience. Globalisation trends such as cross-country flavour adoption are also driving market growth—from Japanese-style bread growing in popularity in the Southeast Asian market to the spike in demand for South Korean bakery offerings (popularised by the country’s infamous themed cafes) from various countries throughout the APAC region.

Plant-Based But ‘Meatier’ Flavour: The New Norm For Savoury And Sweet Snacks

Along with the beverages segment, the snacks segment is projected to have the highest and fastest growth potential for the flavour industry in the APAC region. In terms of salty snacks, China led the region in 2019 for the greatest number of product launches. India, Indonesia and Japan also have high-growth potential. Not only are cross-country flavours becoming a trend among bakery, confectionary, and snack goods, but hybrid sweet and salty snack profiles are increasingly becoming popular. Popular flavours in the region include wasabi, Sakura (cherry blossom), and meatier umami flavours. The hunt for plant-based alternatives that can mimic the savoury taste and texture of meat has already promoted healthy competition and opened new opportunities for flavour manufacturers in APAC countries, including Singapore, Australia, New Zealand, and China.

Last Call: Sourcing Plants & Microbes For Flavourings

The cost of producing natural flavours derived from animal or botanical sources can cost 20 to 30 times more than artificial-based flavouring, so the next technology growth phase of the flavour industry lies in the production of plant-based or microbial-sourced flavourings. Microbial fermentation and enzymatic transformation have been identified as cost-effective and sustainable production processes beyond yeast extraction. Growth opportunities that emphasise accommodation for various diets such as the alternative meat market, vegetarians, vegans, and lactose-intolerant consumers through plant-based or microbial-sourced flavourings can increase product value and capture new consumer markets beyond traditional food and beverage consumers.

Production phases for plant-based sources include flavour extraction, distillation, enfleurage and flavour retention or encapsulation of flavour extract, while microbial-based flavour production requires fermentation and cell harvesting of a micro-organism strain such as bacteria or fungi to extract the flavour. Creating an efficient production system that reduces input waste and maximises flavour extraction while sourcing all-natural ingredients can pave the way for a movement beyond artificial flavourings and toward naturally derived flavour. This can lead to a domino effect that highlights transparency with customers through quality ingredients and applications of consumer behaviour patterns of health, wellness and natural or organic ingredients.

Overall, the APAC region serves as a prime market for flavour manufacturers and suppliers due to its high-growth opportunities in natural ingredient sourcing and end-use potential for various food and beverage products. With changing lifestyles and consumer preferences, improved quality of life, increased disposable income and awareness of health and wellness as key drivers in the flavour industry, the APAC region is already in the midst of a booming growth phase that will be worth more than US$8 billion by 2030.

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