W.Whether the food we eat is spicy, sweet, savory, or even bland, there is no question that taste is important. Tasty food is rewarding, and even some flavors, which can be an upset stomach for some, can be very appealing to others. That is, we think many are questioning them Vomit-flavored jelly bean even if it was created to bring a fictional world into our reality. The bottom line is that taste sells, and as we know, consumer tastes can be fickle. Different flavors come and go awkward, but since we prefer plant-based alternatives, especially for meat, consumer expectations call for something that tastes as good, if not better, than the original. For investors, that taste demand can be met by a handful of global companies attacking the food flavoring market. Fortune Business Insights estimates it will hit $ 19.3 billion by 2027, up from $ 14.1 billion in 2019.
What is taste
On our way to discussing these companies, let’s first understand what flavor is. Taste is the sensory impression of a food or other substance and is mainly determined by the chemical senses of taste and smell. While many of us would think that taste is the ultimate determinant of taste, it is really smell that affects taste. The reason for this is pretty simple – the taste of food is limited to sweet, sour, bitter, salty and umami. Yes, while we feel pretty knowledgeable in our respective kitchens, we too had to google a bit to find out what umami is. The smells of a food may be unlimited, in part due to the fact that the human nose can recognize more than a trillion different fragrances.
This means that the change in the taste of a food depends not so much on its actual taste, but rather on its smell. Examples of this can be found in soft drinks and flavored jellies. The point is that when we think of companies that affect the taste of food, we need to consider not only spice and ingredient companies, but fragrance and fragrance companies as well. Food for thought (or taste?).
The combination of taste and smell sensations is called aroma substances. We use them to change or enhance the flavors of natural foods such as meat and vegetables. From the simple salt and pepper to the more complex condiments you have in your pantry, their purpose is to enhance the natural taste of the food so that it becomes more appetizing. Flavorings also add flavor to foods that may not have the desired flavors, such as: B. differently packaged foods, including sweets, snacks, beverages and yes, plant-based foods, especially plant-based meat alternatives.
According to the Plant Based Foods Association, taste is the main driver of all food purchases. As more plant-based foods are made, the colors, flavors and fragrances that consumers have become accustomed to will be in demand, and these products will become a bigger part of the science of food. The vegetable meat market is expected hit $ 13.8 billion by 2027, a dramatic increase from $ 3.3 billion in 2019 as people seek healthier lifestyles and become more socially responsible. Conventional animal husbandry contributes to it 18% of all global greenhouse gas emissions – that’s more than the entire transport sector!
Consumers are also increasingly looking for colors, flavors, fragrances and other ingredients that are organic, contain less sodium, are gluten-free, and do not contain GMOs (genetically modified organisms). In addition, they are no longer willing to trade off tastes for health and nutrition. In 2017, 57% of consumers agreed that nutrition is more important as a taste, but only 48% of consumers in 2019 agreed. Given that consumers want less sugar and sodium in foods and beverages, or the addition of functional ingredients to increase nutritional benefits, the need to rebuild or balance taste expectations will continue to be of paramount importance. The convergence of these factors is expected to fuel the global natural and organic flavor market to $ 10.7 billion by 2027, an average annual growth rate of 8.1% over the period 2019-2027.
Add some flavor to your portfolio
When it comes to the combination of taste, flavor, and smell, investors have roughly a handful of public companies to invest in. According to data from Statistais the greatest Givaudan SA (GIVN: SW) with 16% of the global flavors and fragrances market, followed by International flavors & fragrances (IFF) at 13%, rounded off by Symrise AG (SY1: GR) and privately owned Firmenich at 10% each. If you quickly add up the market share percentages published by Statista, half of the flavor and fragrance market remains, but we’d quickly find that the composition doesn’t matter McCormick & Co. (MKC) or flavor and color company Sensient Technologies (SXT). Even after adjusting for these two additions, the flavors and fragrances market is rather fragmented, and if recent history is correct, the recent wave of acquisitions could continue as companies seek to position themselves to meet changing consumer preferences.
In recent years, McCormick & Co., the company behind Grill Mates’ Montreal Seasoning, Lawry’s Seasoned Salt, Old Bay and Frank’s Red Hot Sauce, has been on an acquisition course, among other things. The company recently acquired FONA International, which has sales of nearly $ 114 million for $ 710 million. That purchase exactly followed McCormick’s purchase of Cholula, a hot sauce maker, for $ 800 million. We would like to point out that McCormick is a member of the Dividend aristocratsThis means that not only is it a member of the S&P 500, but it has kept increasing its dividend for over 25 consecutive years. From our perspective, we see a company’s ability to deliver that track record while incorporating acquisitions that indicate a disciplined and financially savvy management team.
International Flavors & Fragrances recently merged with the Nutrition & Biosciences business at DuPont (DD). This combination follows IFF’s acquisition of Frutarom in 2018, which improved its position in terms of natural taste, smell and nutrition. When IFF releases its quarterly results on May 11th, investors should look out for the expected synergies, which are likely to range from flavors and fragrances to cross-marketing opportunities and cost reductions. To the extent that IFF shares more detailed thoughts on this, it is more likely that we can see significant changes to the current EPS consensus projections for 2021 and 2022 of $ 5.91 and $ 6.59, respectively.
Individual companies continue to grow both organically and through acquisitions, as explained here. We have no doubt that this segment of the food industry is headed for growth, especially given the move away from animal protein (meat) and towards plant sources. Most of all, as anyone who has cooked with soybean products can tell you, because soybeans are a very versatile food, they lack taste.
The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.