Synthetic colours knock Sensient sales

Related tags Flavor

US colours and flavours group Sensient continues to feel the impact
of soft markets in North American food and beverage segments,
particularly synthetic colours, posting a further drop in income
for the first quarter of 2004. Pressure on colour companies to move
into natural equivalents continues.

Following disappointing results last year the Milwaukee company announced a round of cost cutting measures, including job losses, to get back on track. But figures released this week show that earnings for the period fell 26 per cent to $15 million (€12.4m), down from $20.5 million last year. The firm's CEO is optimistic the turnaround is in sight.

"Our North American flavour business has already begun to recover and our cash flow is upsubstantially. Our cost saving initiatives are expected to bring even greater improvement in the second half,"​ said Kenneth P. Manning,CEO of Sensient Technologies.

Suppliers of synthetic colours have seen sales drop in recent months as food manufacturers turn to natural colouring foodstuffs. Sensient reported that sales of synthetic food and beverage colours were down for the quarter, which lowered profits.

Growing consumer demand for natural food products has increased the use of naturally derived flavouring compounds, including fruit and vegetable extracts. These extracts are benefiting from wider use in new product formulations and as replacements for synthetic ingredients in existing formulations.

According to a recent study from Business Communications, The Food Additives Business​, the total US market for food additives, the category into which colours fall, reached nearly $5 billion in 2001 and is expected to rise at an AAGR (average annual growth rate) of 3.1 per cent to $5.8 billion in 2006.

Reflecting the market movement of flavours, particular growth for natural food colourants is growing faster than in previous years, driven by public demand for 'natural' and less 'chemical' products. This $320 million market should grow to $371 million in 2006, predicts the report.

Certifiable colour additives - of which there are nine in total - are manmade, with each batch being tested by manufacturer and the US Food and Drug Administration.

Colour additives exempt from certification include pigments derived from natural sources such as vegetables, minerals or animals, and man-made counterparts of natural derivatives.

Market analysts Frost & Sullivan predict that the $960 million (€819.9m) US and European fruit and vegetables extracts and powders market is on course to grow at a CAGR of 4.5 per cent, reaching $1,321 million by 2009. In 2002, the European fruit and vegetables extracts and powders market was valued at $390 million and the US market at $570 million.

According to the market analysts growth is likely to be driven by larger companies, consolidating in the sector, attacking new niche areas. Pricing pressures, high R&D costs and excess capacity are forecast to increase market consolidation with acquisition of smaller niche oriented participants by larger companies seeking to exploit newly emergent opportunities in the nutraceutical sector likely to drive further consolidation.

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