THE CONFERENCE PROCEEDINGS - IFEAT

IFEAT INTERNATIONAL CONFERENCE 2012SINGAPORE: ESSENTIAL ASIASUNDAY 4TH TO THURSDAY 8TH NOVEMBER 2012M A R I N A B A Y S A N D S H O T E LSunday 4 – Thursday 8 NovemberTHE CONFERENCE PROCEEDINGS

Editor: Dr. Peter GreenhalghPublished by:International Federation of Essential Oils and Aroma Trades (IFEAT)9 Lincoln’s Inn Fields, London WC2A 3BP, United KingdomE-mail: secretariat@ifeat.orgTel: +44 (0)20 7729 5904Fax: +44 (0)20 7814 8383Website: www.ifeat.org

CONTENTSPREFACEvRavi Sanganeria, Chairman, IFEAT Conference CommitteeESSENTIAL ASIA 1The IFEAT Medal Lecture: A view of menthol development - from the perspective of Singapore 3Mr. Chih Lung Shih, Tien Yuan Chemical Pte. Ltd., SingaporeThe Indian consumer market: the pinnacle of the fragrance and flavour industry 25Sant Sanganeria, Ultra International Ltd., New Delhi, IndiaIndia’s spice oleoresin industry: way forward initiatives 39Shanavas Bavu, Synthite Industries Limited, Cochin, IndiaThe Indian floral extracts industry 51Raja Palaniswamy, Jasmine C. E. Pvt. Ltd., Chennai, IndiaNatural essential oils from the Western Himalayas: their role in fragrances and flavours,quality parameters, sustainability and conservation 63Surender Mohan, Natural Biotech Products, Mandi, Himachal Pradesh, IndiaChina’s flavour and fragrance industries: an overview 83Zhang Jingyuan, China Association of Fragrance, Flavor andCosmetic Industries (CAFFCI), Beijing, ChinaOverview of the Chinese gum turpentine and turpentine derivatives industry 91Enping Zheng, Fujian Green Pine Co. Ltd. Jianyang Fujian 354200, ChinaAnethole development trends 103Huang Zongliang, Chengdu Jianzhong Flavors & Fragrances, Sichuan Province, ChinaThe essential oil industry in Sri Lanka 113Fazal Mushin, Link Natural Products (Pvt) Ltd., Colombo, Sri LankaOverview of the agarwood oil industry 131Dr. Pakamas Chetpattananondh, Department of Chemical Engineering,Prince of Songkla University, ThailandValue addition in the Indonesian flavour and fragrance industry 139Ali Haliman, PT Haldin Pacific Semesta, Jakarta, IndonesiaMarketing trends of ambient scenting in Asia 143Simon A Faure-Field, Equal Strategy, Singaporei

SUSTAINABILITY AND MARKET ISSUES 149Sustainable supply: a consumer product goods company perspective 151Arthur Schick, Worldwide Flavors, PepsiCo, Valhalla, NY, USAEfforts and challenges for sustainable essential oil production in Indonesia 161Meika Syahbana Rusli, Bogor Agricultural University/Indonesian Essential Oil Council, IndonesiaThe ingredients supply chain: past and present but what does the future hold? 171Trevor Rahill, Focus International LLC, Cincinnati, Ohio, USANEW SOURCES OF NATURAL INGREDIENT SUPPLIES 185Aroma chemicals from the tropics via biotransformation of sustainable biomaterials 187Dr. Shao Quan Liu, Food Science and Technology Programme,Department of Chemistry, National University of Singapore, SingaporeBiotechnology and the changing role of the sales agent in the fragrance and flavour industry 195Thomas Plocek, Aroma Chemical Services International (ACSI), Inc., Hightstown, NJ USACan bio-synthetic biology be the next disruptive technology in transformingthe flavour and fragrance landscape? 203Dr. P M Murali, Evolva Biotech Private Ltd. Taramani, Chennai, Tamil Nadu, IndiaREGULATORY ISSUES 215The socio-economic importance of the fragrance industry and insights intothe global regulatory system 217Pierre Sivac, IFRA, Brussels, BelgiumREACH: An update of EFEO’s programme for Natural Complex Substances(i.e. essential oils) 235Dr. Hans van Bergen, Para-Celsus Concept, The NetherlandsEFEO (European Federation of Essential Oils) - the first decade and beyond 247Peter Meschede, Eramex Aromatics, Meerbusch, Germanyand Jens-Achim Protzen, Paul Kaders, Hamburg, GermanyCOUNTRY AND OTHER STUDIES 253The flavour and fragrance industry in Russia 255Maria Novozhilova, Leko Style, St Petersburg, RussiaImproved identification methods for Australian tea tree oil 273Jerome Chopard, Maria River Plantation, Port Macquarie, NSW, Australiaii

IFEAT BUSINESS 283IFEAT Annual Report 2011: Ramon Bordas, Chairman of IFEAT 285Reports on the IFEAT Education Programme:ICATS/Plymouth University Report for 2012, Dr Tony Curtis 287Report on the 2012 British Society of Flavourists Training Courseat the University of Reading, Charlotte Mills 291Brazil and Paraguay IFEAT Study Tour 2012, Britta Kipcke 295IFEAT 2013 San Francisco Conference presentation in Singapore, Colin Ringleib 301The IFEAT 2013 Study Tour to South India June 9-18, 2013 George Paul 307ICATS Intermediate Perfumery Workshop, Dr Tony Curtis 315iii

PREFACEThis CD contains the formal presentations given at IFEAT’s 2012 International Conference held inSingapore on the theme of Essential Asia. The Conference was held at the Marina Bay Sands Hotelfrom Sunday 4 th to Thursday 8 th November 2012.The Conference was a resounding success for the record number of people attending. There were 980delegates, representing some 53 countries, 94 accompanying persons and 45 day registrants. IFEATgrows more multinational each year and is now a true United Nations of flavour and fragranceingredient suppliers! The conference provided a unique opportunity for delegates to meet face-to-facewith their existing trading partners and friends, as well as meet up with potential new suppliers andcompanies, and to catch up with the latest developments in the industry.The programme included three days of presentations, in which 30 presentations were made bypresenters from 14 different countries. In addition, there were two discussion panels providing indepthanalyses of sustainability issues and possible new sources of ingredient supplies for the F&Findustry. Also there was a one-day trade exhibition and an intermediate perfumery workshop.Following the Opening Ceremony on Monday morning, November 5 th there were four very diverse butexcellent presentations. The first two lectures analysed developments in the key F&F producing andconsuming countries of China and India. Then followed two presentations concentrating on regulatoryissues in the global fragrance industry as well as the REACH legislation and EFEO’s programme foressential oils. The Monday afternoon session was devoted predominantly to sustainability issues,which have become an increasingly important component of the F&F sectors. Then followed a widerangingdiscussion of what “sustainability” means to the different stakeholders in the F&F sectors.On Tuesday 6th November the first session reviewed “value added” issues with three papers coveringvalue addition in the Indonesian F&F sectors, Indian floral extracts and Indian oleoresins. Themorning continued with the IFEAT Annual General Meeting following by several business reports,including reviews of the very successful past year by IFEAT’s Chairman, and the IFEAT-supportedPlymouth perfumery and the Reading flavour courses. The three other business reports covered thevery successful Brazil and Paraguay Study in August 2012, the forthcoming 2013 southern IndiaStudy Tour and the 2013 IFEAT San Francisco Conference. The final morning presentation was theIFEAT Medal Lecture, which provided a detailed, and wide ranging review of developments in themint oil and menthol industry.The afternoon session dealt with a topic that could have a dramatic, if not revolutionary impact on theF&F industry over the next decade, namely the supply of new ingredients through biotechnology.Three presentations were made followed by an illuminating discussion on the possible impact of thesedevelopments.This year also saw the conference move away from the customary field trip with a one-day TradeExhibition that was held in the conference venue. This took place on Wednesday 7th November andprovided an exciting occasion for companies in the essential oils and aroma trades to showcase theirproducts to delegates, associates and friends. In total, 36 companies took advantage of securing abooth and on the day they attracted many visitors. Wednesday also saw the organisation of anIntermediate Perfumery Workshop that was attended by 19 participants. The Workshop programme isincluded in these Proceedings and feedback from the participants was better than any of the previousperfumery workshops.v

On the last day of the conference, Thursday 8th November, delegates were treated to presentations onan array of topics but with essential oils and Asia being the dominant themes. The first session sawpresentations on fragrance use by Asian brands, along with papers on anethole and gum turpentine.These were followed by two country studies on essential oils in Sri Lanka and the F&F industry inRussia. The afternoon session started with a new presentation format involving a “lounge talk” on thefirst decade of EFEO’s activities. Then followed three presentations on essential oils namely essentialoils from the Western Himalayas; Australian tea tree oil and an overview of the agarwood oil industry.The great success of the Conference arose from the efforts of many people. In particular, I would liketo thank my colleagues on the IFEAT Singapore Conference Committee and the Local OrganisingCommittee (details below). I would like to thank all those that have continued to support the IFEATConferences with their attendance, advertisements and sponsorship of coffee breaks, lunches andevening events. Also, I want to extend special thanks to the speakers that give of their time to organiseand give presentations, often travelling long distances. Their efforts, along with the Session Chairs andthe Discussion Panel members, are much appreciated. In addition, thanks are owed for their work onthe logistics to members of the IFEAT Secretariat, the DMC (Imaginations PTE) and the staff ofMarina Bay Sands Hotel, who provided excellent facilities and organisational support.I am looking forward to seeing you all again at the IFEAT San Francisco 2013 Conference, which Itrust will be as successful and enjoyable as the Singapore Conference.Ravi SanganeriaChairman, IFEAT Conference CommitteeThe IFEAT Singapore ConferenceOrganising Committee MembersChairman: Ravi SanganeriaMembers:Ramon Bordas, Alastair Hitchen, JonpaulHowarth, Colin Ringleib and Winnie YeungLocal Organising Committee MembersChairman: Ravi SanganeriaMembers:Robby Gunawan, Bhuvana Nageshwaran,Sandeep Tekriwal and Gatsby Shih Chih LungProgramme Coordinator: Peter Greenhalghvi

Essential Asia1

A VIEW OF MENTHOL DEVELOPMENT- FROM THE PERSPECTIVE OF SINGAPOREChih Lung ShihTien Yuan Chemical Pte Ltd.Singaporetienyuan_shih@yahoo.com.sgINTRODUCTIONIt is an honour for me to be invited to presentthe Medal Lecture at this prestigiousConference in Singapore. Allow me to extend avery warm welcome to all of you to Singapore!I joined Tien Yuan Chemical in 1980 as aManager and became the Marketing Managerin 1985 and have now been in the mentholbusiness for more than 27 years. Someone toldme the menthol business is a "wine and dine"business; that the menthol business seems to bean "easy" business to deal in. I would beg todiffer - I would say it is anything but an easybusiness.A VIEW OF MENTHOL DEVELOPMENT- FROM THE PERSPECTIVE OF SINGAPOREGATSBY SHIH C LTIEN YUAN CHEMICAL PTE LTDNov 2012In the last 27 years, I have encountered cases where menthol was traded at US$9 per kg, or evenlower. I have also seen menthol at US$80 per kg during 1996-97. Three years ago in 2009, during theIFEAT Conference in Shanghai, menthol was selling at just US$13-14 per kg. Earlier this year inMarch/April 2012, menthol prices moved up to US$65. Today, it's half of that price. This is what thementhol business is all about. Menthol is part of essential oils but it is different - a bit likecommodities but not as high volume a trade as commodities.Today's lecture on A View of Menthol Development from the Perspective of Singapore is made up ofseven sections:1. Singapore – the Jewel of Southeast Asia2. Fundamental Concepts of Agricultural Economics3. A Brief History of Menthol Development4. Menthol in China5. Menthol in India – and this will be the main focus of the lecture6. Recent Trends and Future Challenges7. Conclusions3

SINGAPOREFirst, I would like to spend a few minutes on Singapore, which is right at the centre of Southeast Asia– indeed someone said it’s a “tiny red dot”.Singapore – Geographical LocationSingapore – Population & GDPSingapore is the Jewel of Southeast Asia - it is a tiny island with a land area of 714.3 squarekilometres (ranked 193 out of 249 countries).It has a population of 5.3 million (the latest), the highest population density of 7,257 per squarekilometre and a GDP of US$266 billion (ranked 37 worldwide).The following slides show some vital statistics on Singapore. You can see that 74% of the populationare Chinese, 14% Malays, 9% Indians, 3% others.Singapore – Vital Statistics 2011Singapore – Ethnic Composition4

There is a highly educated workforce inSingapore. Almost half (45%) of the populationaged 25~39 years are university graduates, andone-fifth (or 23%) have diplomas. That is, 68%of this age group has a minimum diplomaqualification.Singapore - Highly Educated WorkforceSingapore – High Standard of LivingThe slide shows the 2012 Worldwide Cost ofLiving Survey prepared by the EconomistIntelligence Unit. Singapore never comes cheapand has a high standard of living, being ranked9 th out of 130 cities.Singapore’s Role in the Flavour & Fragrance IndustrySingapore is the preferred choice of many well-known multinational companies (MNCs) for theirregional/corporate headquarters. This is due to the lower tax rates and pro-business policies forinvestment. Also there is an increasing role for procurement, trading and R&D as there are friendlypolicies welcoming foreigners and the recruitment of professionals and expatriates.MNCs that have set up corporate/regional HQs in Singapore include Firmenich, Givaudan, Proctor &Gamble (P&G), Symrise, Takasago and Unilever. These are either huge, respectable companies in theF&F industries or big users of aromatic products. The list is not meant to be exhaustive - my apologiesif your company is unintentionally left out of the list. If you really feel strongly that your prestigiouscompany should be on the list, please let me know! I will put it in.In a recent HSBC survey, Singapore was voted the first choice destination by expatriates relocatedoutside their countries. And this was for obvious reasons:- They get higher earnings and have better career prospects in Singapore.- They enjoy a better quality of life (i.e., enjoying better accommodation, incurring lesscommuting time, and maintain a more active social life).- They also like the child-friendly environment – but a negative point is the higher cost ofeducation.5

Currently, there are about 1.5 million foreigners in Singapore - making up about 28% of the totalpopulation of 5.3 million. Paul Arrowsmith, Head of Retail Banking and Wealth Management inSingapore is quoted as saying that: "Singapore is fast becoming an all-round expat destination forcareer progression, financial rewards and quality of life".In the World Bank Doing Business Reports,Singapore ranked number 1 in both the 2013and 2012 reports. In fact, Singapore wasranked 1st for the ease of doing business for 7consecutive years. This is a strong stamp ofrecognition by the World Bank on theimportant role of Singapore as a hub forbusiness and investments. Besides the HSBCSurvey and World Bank Report, Singapore iseasily ranked in the top three in many moreglobal surveys - a great recognition of theglobal status of Singapore in the business andinvestment world.2013 Doing Business Report– World BankSingapore is a preferred residence for many celebrities in the entertainment, electronicand other industries. Thus, Gong Li, a celebrity in her own right, became a Singaporecitizen in 2008.Jet Li, another well-known figure in the entertainment world, became aSingapore citizen together with his family in 2009.Eduardo Saverin, the 30-year-old billionaire co-founder of Facebook Inc.renounced his US citizenship in September 2011 to settle in Singapore.Well, if any of you decide to migrate, you may learn a thing or two fromthese celebrities by choosing Singapore as your final choice!FUNDAMENTAL CONCEPTS OF AGRICULTURAL ECONOMICSBefore I begin the lecture proper on menthol, I would like to touch on a few fundamental conceptsrelated to agricultural economics. These concepts help us to understand better the nature of thementhol business, and why I said earlier that menthol is not an easy business. The three fundamentalconcepts are (i) cost (ii) supply and demand and (iii) imperfect information. I will discuss each ofthese in turn.CostThe concept of cost in agricultural economics, or to farmers, is different from that of manufacturers.To farmers, it's about opportunity cost, which can be defined as the value of the next best activityforgone. Thus, in the case of the Indian farmer, if he decides to plant mint during February ~ May, hemay have to give up planting potatoes. So farmers would choose the crops that give the most monetary6

eturn, say, mint, in this case. In contrast, cost to manufacturers is made up of direct material costs +direct labour costs + manufacturing overheads.Demand and SupplyDemand is not static but active. The price elasticity of demand (i.e. the responsiveness of quantitydemanded to change in price) depends very much on the availability of substitutes. Demand isinelastic in the short-term. When a man decides to buy a car, he can either buy a brand new car, or anold car. Or he can buy either a bigger car or a smaller car. In this case, the demand for cars is elastic.That is, if the price of a brand new car increases drastically, he may choose a cheaper older car instead.Examples of inelastic demand include electricity, water and petroleum.Supply is inelastic in the short term. Once the crops are planted, the supply is “fixed” and pricefluctuations would not affect the supply. The switching of crops (say, from mint to other crops) isrestricted by geographical conditions (i.e., climate, soil, availability of rainfall and irrigation) and thesupply of labour in the area.Supply of, say, mint is inelastic in the short term. Why is this so? Once farmers have planted mint, thesupply is basically fixed. Even if prices fluctuated upwards or downwards, the supply remainsunchanged.Supply is usually concentrated in certain periods. For example, mint is planted in February~May andharvested in June~August, while the demand is spread across the whole year. This leads to supplydemandnon-equilibrium or imbalance and price fluctuations.The trading of agricultural products in commodity exchanges, such as the Multi CommoditiesExchange (MCX) in India, simply magnifies price fluctuations.Imperfect InformationImperfect information increases the difficulty of estimating total supply and demand. The assumptionof traditional economics is that all market participants have perfect information. That is, I know whatyou have and you know what I have. In fact in the real world, all market participants have imperfectinformation, especially in the supply and demand of agricultural products and financial markets. Nomarket participant knows exactly what is the overall production, overall supply or overall demand.What are the stock positions of individual users and their expectation of future prices? So in real life,we all have an imbalance of information to a certain extent.Here you can see the cycle of price fluctuation thatapplies to agricultural products. An increase inprice leads to more planting. This in turn leads tooversupply, followed by a price decrease and lessplanting. This in turn leads to undersupply, thenprice increases again and another circular round.Cycle of Price Fluctuation7

MENTHOL DEVELOPMENTS: A BRIEF SUMMARYBefore 1939, there were small quantities of mint planted in China, Japan, and Taiwan. Brazil startedcultivation in 1939 due to increasing demand in the USA and the supply interruption of World War II.Brazil had ideal climatic conditions, low land prices and wage costs. Production had declined by thelate 1970s due to the limitations of the “slash and burn” production methods.From the early 1970s China came to dominate the global market accounting for more than 90% ofsupply during the 1980s, with some competition from synthetic menthol. The sale of menthol wascontrolled by state-owned enterprises, and the co-ordination council set the prices and restricted saleswith the issue of export permits. But "water cargo" (i.e., those sold without permits) was notuncommon. Production declined rapidly due to economic and social changes after 2000.I told some visiting Chinese officials in early 1990 that the setting of price and the restrictions arisingfrom export permits would not work well for long. They were unable to do anything about it. TheChinese were reduced to "price takers" when India emerged on the global scene, and slowly came todominate the global market.India started exporting small quantities in the 1980s. In 1986, Tien Yuan was amongst the first, if notthe first, to buy mint from India. Today, mint is still widely planted in India but subject to variableweather conditions and prices can be volatile - magnified by speculative trading at the MultiCommodities Exchange in Mumbai.This is history but to understand the future, we need to know the past.MENTHOL IN CHINAThe reformists of the Communist Party of China (CPC) started the economic reform () inDecember 1978 led by the late Premier Deng Xiaoping. The economic reforms introducing capitalistmarket principles were carried out in two stages. The first stage, introduced in the late 1970s and early1980s, involved the de-collectivisation of agriculture, the opening up to foreign investment, andpermission for entrepreneurs to start up businesses. The second stage of reform, in the late 1980s and1990s, involved the privatisation and contracting out of much state-owned industry and the lifting ofprice controls, protectionist policies, and regulations, although state monopolies in sectors such asbanking and petroleum remained.The first stage of reform led to the shift from "Commune and Brigade Enterprises" (to"Township and Village Enterprises" so farmers could decide what to plant. As Imentioned earlier, price controls remained with the State.Mint as a cash crop was widely planted - the productionof mint averaged 8,000 tons for the period 1991~2001.The main production areas include: Anhui, Jiangsu,Henan, Zhejiang, and Shandong.China – Main Mint Production Areas(Early-1970s~early-2000s)HenanShandongJiangsuAnhuiZhejiangJiangxi8

By 2001, mint production had declined due to aconfluence of factors:- Farmers turned to growing staple crops(i.e., rice, wheat) as these crops receivedattractive subsidies;- Shortage of labour in rural areas forlabour-intensive mint plantation;- Low prices of mint during 2000~2004discouraged farmers from planting mintand they switched to other crops.Yet, China as a former major producing countrystill produces a few hundreds to 1,000 tons ayear. This effectively acts as a "buffer" againstMint in China – 2001~now! Mint production declined*Due to: farmers growing staple crops (i.e., rice, wheat) instead ofmint; shortage of labour in rural area; & low prices of Mint during2000~2004.*But there’s still mint production of few hundreds to 1,000 tons inChina plus some carried-forward stock – acting as buffer againstshort-term price fluctuation.! The emerging of India as major producingcountry in mid-1990s~, China Mintproducers reduced from Price Maker toPrice Taker.short-term price ups and downs. With the emergence of India as the major producing country from themid-1990s onwards, China’s mint producers have been reduced from price makers to price takers. Asthey say, the rest is history.Main Menthol Manufacturers1. Tien Yuan Aromatics (Kunshan) Co., Ltd 2. Anhui Fengle Perfume Co., Ltd 3. Nantong Menthol Factory Co., Ltd 4. Shanghai Xinjia Perfume Co., Ltd 5. Teck Soon Hong (Zhuhai) Flavours & Fragrances Ltd 6. Shanghai Green Leaf Perfumery Co., Ltd 7. Anhui Province Yifan Spice Co., Ltd 8. Huangshan Tianmu Pharmaceutical Co., Ltd 9. Anhui Yin Feng Daily Cosmetics Co., Ltd 10. Xiang Sheng Perfume (Huai An) Co., Ltd 11. Anhui Great Nation Essential Oils Co., Ltd 12. Anhui Tonghui Perfume Co., Ltd The slide lists the main menthol manufacturers inChina, including Tien Yuan Aromatics(Kunshan) Co., Ltd, our subsidiary in China.Again, this list is not meant to be exhaustive, anddon’t feel bad if you are left out. Just let meknow, and I will make sure you are included!MENTHOL IN INDIAThe main focus of mypresentation is menthol in India,starting with an overview of mintin India. India started exportingsmall quantities of mint in 1986and, as I mentioned earlier, TienYuan was the one of the firstbuyers of Indian mint in 1986.Mint began with intercropping insugar-cane fields in smallquantities. By 1992~94, therewas large-scale mint planting inthe Sambhal area of eastern UttarPradesh. By 1995~97, theplanting of mint had expanded toIndia - States & Union Territories9

the Barabanki area in western Uttar Pradesh due to the attraction of higher prices. As mentionedearlier, price hit a high of US$80/kg in 1996~97. Mint was usually planted after the wheat harvest inApril and harvested before the planting of rice in August.Let me elaborate a bit on the crop cycle. In China, farmers in Anhui and Jiangsu can plant one or eventwo crops within a year. In India, farmers can plant three crops in a year, say, wheat-mint-rice. Mint isplanted in roots in February~March or by transplant in April.The Multi Commodities Exchange (or MCX) in Mumbai started trading in June 2005 and is asignificant step forward for the traditional menthol business. Many in the menthol business were notused to it, and even resisted it initially – now all and sundry know the prices - but as they would say:this is the age of "Facebook and Twitter" where you simply cannot hide the price! Today, the price onthe MCX serves as an important reference for all buyers and sellers, whether you like it or not.Basically, there are the four main seasons inIndia: Winter (Dec~Feb), Summer or Pre-Monsoon (March~May), Monsoon(June~Sept), and Post-Monsoon (Oct~Nov).Not quite the typical seasons we see in theUSA, Europe or China. But you can see theimportance of the monsoon to India in thatthe seasons are defined around it! Annualrainfall is illustrated on the slideAnnual RainfallAs we know, India is the second mostpopulous country after China, and agricultureis critical to its survival. So the IndianGovernment is always on the lookout forways to make full use of the land andincrease the crop harvest. In the 1980s, cornmint (Mentha arvensis) was identified since the climateand geographical location is suitable for mint, the crop is pest-resistant, and it would increase farmers’incomes. It did not quite take off until the 1990s when high-yielding, shorter growing cycle varieties,such as M1, Shivalik, and Kosi were introduced to farmers and this led to widespread planting.Main Cornmint Area –Punjab/Uttar Pradesh/BiharThe main cornmint growing areas include:Uttar Pradesh (UP), Punjab, and Bihar. AndUP is the largest producer of mint. Togetherthey are known as the Mint Belt of India.The Mint Belt is also located in the subtropicalarea known as India's breadbasket -an area about 1,500 km long and 250 kmwide that includes Punjab, HimachalPradesh, Haryana, Uttar Pradesh and Bihar.10

Uttar Pradesh (UP)UP is India’s most populous state with apopulation of 199.5 million (about 16% oftotal population) (or ranked 5th as a countryafter Indonesia), and a land area of 240,000square kilometres (about 7.3% of total landarea) - about the size of United Kingdom(UK). Punjab has a population of 27.7million (about 2.3% of total population) andis ranked 15th in India by population and19th by land area. Its land area is 50,000square kilometres (about 1.5% of total landarea). Bihar has a population of 103.8million (8% of total population) and a landarea of 94,000 square kilometres (2.9% oftotal land area). These three states make upMain Cornmint Growing Area- Population and Land Area27% of India's population and 12% of total land area. In all, India is made up of 28 states and anumber of Union Territories.The slide provides a detailed map of UP with all 70 districts - with the mint growing areas indicatedwith a green dot.Main Cornmint Area –Uttar Pradesh (UP)Why UP? UP is basically a flat area with plenty of labour for the labour-intensive mint. Though it islocated at a lower longitude with insufficient rainfall, the area is compensated by plenty of water11

supply from the River Ganges (i.e., the longest river in India and the second greatest river in the worldby water discharge – providing livelihoods for 400 million people) with headwaters from snowmeltfrom the mountain peaks of the Himalayas (i.e., mountains that form the northern boundary of India).In the mint belt, the temperature can be as high as 40 degrees Celsius. Before the introduction of mintinto UP, there was a lull period with no planting activity and the opportunity cost is literally “zero” tothe farmers.The slide provides a more detailed mapof eastern UP with widespread mintplantation in 8 districts. These are themain growing districts, namely Sitapur,Bahraich, Barabanki (which has thehighest volume of mint output), Gonda,Rae Bareilly, Sultanpur, Faizabad andAmbedkar Nagar.Main Cornmint Area –Uttar PradeshEastMain Cornmint Area –Uttar Pradesh (West)This slide shows a detailed map ofwestern UP with widespread mintplanting in 6 main growing districts ofJyotiba Phule Nager, Moradabad(Sambhal and Chandausi), Rampur,Budaun, Bareilly and Jalaun. Thetraditional mint growing areas areRampur and Bareilly.12

Mint ProductionThe graph illustrates the increase in mintproduction since 2000, with UP leading theway. For 2011, the estimated crop sizeexceeded 40,000 tons.India – Crude Cornmint Oil OutputIndia – Crude Cornmint OilDetailed production by State is shown in thetable, which details the big jump in quantityproduced from an estimated 12,800 tons in2000 to 37,000 tons by 2009. These areestimates collected by our survey team thatvisits the producing areas at least three timesa year to gather the relevant information forthe benefit of our valued customers. Thesedata are even talked about, and admired byour Indian peers. For sure, we simply have towork harder to outdo our Indian competitorsin this industry.Next, I would like to show you some quite interesting photos from our collection.13

Distilled oil is delivered to the market in asmall village.In small villages, or towns, you can seehundreds, even thousands, of mintcollectors/speculators. Do not be surprised ifyou find a grocer acting as an oil collector inhis shop. Anyone with some capital can be acollector – this is a fully free market!As mentioned earlier, three crops can beplanted at the Mint Belt. Thus, there iswheat, or mint with sugarcane in summer. Intercropping at Mint BeltRice and sugarcane during the monsoons,while wheat or potatoes are planted inwinter. The intercropping in the Mint Beltis illustrated in the graphical presentation.For example, farmers can decide on a mixof rice-potatoes-mint here. Mint can beplanted in February using roots (or inApril using transplanted mint) andharvested in June. Then rice is planted inJune and potatoes in November. Or he canhave rice-wheat-mint or rice-potatoeswheatand so on. Based on this cropcalendar, we can estimate the earnings ofindividual farmers in a year. And it is good for us to know the opportunity cost of the farmers.16

The table provides an example of the estimatedaverage annual income of intercropping for2007~2009. You can see that the combinationof rice-wheat-mint in red and rice-potatoesmintin blue gives the farmers the highestincome. Our team collected these data duringour routine survey in a year. However, it servesas an estimate only.Average Annual Income ofIntercroppingMint TradeIndia – Main Cornmint ExportersMajor Exporters1 Arora Aromatics 15 Narain Terpene & Allied2 B.D Aromatics Pvt Ltd., 16 Nav Bharat Impex3 Banwari Aromatics 17 Nectar4 Everest Flavour 18 Neeru Enterprises5 Fine Fragrances Ltd., 19 Nishant Aromas,6 Fine Organics 20 Quality Flavours Export7 Hundustan Mint 21 Sangam Aromatics,8 Indo-swift 22 Sharp Menthol9 Jindal Drug 23 Siddhant10 K.V. Aromatics 24 Som Extracts Ltd11 Kaizen Organic 25 Surya Pharm12 Kancor Ingredients Ltd, 26 Swati Menthol13 Meher Impex 27 Tulip Impex14 Mentha & Allied 28 !!!!!!!The table lists India’s main cornmintexporters. They are arranged alphabetically,and the list is not meant to be exhaustive.Some of them may be out of business. This isnot uncommon since there are newcomers inthe market, and old companies leaving thescene. In terms of size, you have Sharp (22),Jindal Drug (9), and K.V. Aromatics (10).The graph illustrates theexchange rate of one US dollaragainst the rupee since Jan2011. Basically, Indianexporters are very sensitive toexchange rate changes. InChina, we see the RMBappreciating since 2006~7,while the rupee’s depreciationor appreciation is more difficultto predict. For example, withinthe last couple of weeks, therupee went from 56 to 52 then54 to US$ 1.00. These changessimply increase the difficulty ofpredicting the prices ofmenthol.Average Exchange Rate - US$/Rupee Jan 2011~ Jul 201217

The chart shows the prices of mentha oiltraded on the MCX from July 2005 to May2010. You can see that prices fluctuatedbelow Rp 1000.MCX MENTHA OIL FUTURES PRICES(01/07/2005~26/05/2010)(Prices < Rp 1000)MCX MENTHA OIL FUTURES PRICES(01/07/2005~13/10/2012)Rp1000(Oct 2010)Rp2500(Mar 2012) Rp 1000 on 6 Oct 2010 and > Rp 2500 on 5/3/2012)This reflects the ups and downs of methol in last 7 yearsHere is another chart on MCX spot prices.About the same price pattern as the twocharts that I shared with you earlier.MCX Spot Price (06 Nov 2006~07 Aug 2012)18

RECENT TRENDS AND FUTURE CHALLENGESIn reviewing some of the recent trends and future challenges of our industry, I am going to discussfour topics: rising costs since 2008; global warming and changing weather conditions; speculativetrading and the impact of synthetic menthol.Rising CostsSince the end of 2008, the world over faces the impact of quantitative easing (QE) introduced by theUSA, and inflation becomes inevitable, especially affecting the prices of raw materials andagricultural products, such as iron ore, and petroleum. The Federal Reserve in the USA, and othercentral bankers in Eurozone and Asia are battling inflationary trends.Climatic ChangesWith climatic changes, including frequent droughts and floods, output is affected and just-in-time(JIT) delivery becomes not so workable. Larger users need to maintain higher stock level instead ofjust depending on the JIT system. For example, Hurricane Sandy that hit the States in October 2012caused much woe and disruption to the people.Speculative TradingSpeculative trading at India’s Multi-Commodity Exchange (MCX) causes volatile, unexpected pricefluctuations and uncertainties and magnifies price fluctuation. As I mentioned earlier, we faceimperfect information in real world transactions. Individuals who know a lot more information wouldhave the competitive advantage, while the rest might just follow the herd instinct. So it’s normal aperson ended up buying high and selling low at a loss.Impact of Synthetic MentholSynthetic menthol will have an increasing impact on the market with the entry of the giant BASF intothe market in 2012 and the expansion of existing producers Symrise and Takasago. Menthol has ademand of more than 22,000 tons a year and is worth about US$ 660 million at a price of US$ 30/kg.If mint derivatives are included the market is worth more than US$ 800 million. Menthol has enjoyeddouble-digit growth rate for years, with growth coming mainly from China, India and Southeast Asia.Before 2012, there were two main players insynthetic menthol, namely Symrise (Germany)with 3,000 to 3,600 tonnes per annum, andTakasago with 2,000 tonnes. Together, theysupplied about 20~25% of menthol globally.Pre-2012 Synthetic Menthol – Production Capacity! Symrise

Then, in 2010, Symrise announced plans to doublecapacity at its German site to 5,000~6,000 tonnesby 2012. Takasago announced plans for expansionto 3,000 tonnes by 2012. BASF entered the marketwith a complete production facility in the thirdquarter of 2012 with 5,000 tonnes, which can beincreased, to 10,000 tonnes!2012 Synthetic Menthol – Production Capacity! Symrise5,000~6000 metrictons(Current production at 4000 metrictons and 50% for internal use)! Takasago3,000 metric tons! BASFInitially 5,000metric tonsWorld Top 10 Chemicals Companies -2010! BASF SE (Germany)! The Dow Chemical Company (USA)! ExxonMobil (USA)! Sinopec (China)! LyondellBasell Industries N.V. (Dutch)! Saudi Basic Industries Corporation (Saudi Arabia)! Shell (Dutch)! Mitsubishi Chemical Holdings Corporation(Japan)! INEOS (Switzerland)! E. I. duPont de Nemours and Company (USA)Source: icis.comBASF is the world’s largest chemical companywith a sales turnover in 2010 of Euro 63 billion (orUS$85 billion) and a net profit of Euro 4.5 billion(i.e. a net profit margin of 7% - and an average of3%~8%, with the exception of DuPont at 11% andSBIC at 25%).BASF’s road to menthol began some three decadesago. In 1981 BASF started manufacturing citral,(the raw material for the aroma chemicals linalooland geraniol), with a capacity of 10,000 tonnes thatreached 40,000 tons in 2004. In 2004 a new 40,000tonnes citral plant was established atLudwigshafen, Germany to produce synthetic vitamins A and E and other carotenoids. In 2010, itannounced plans to produce synthetic menthol with a production capacity of 5,000 – 10,000 tonnes ayear. Menthol, in comparison to its other activities, is a small or, should I say, a tiny business forBASF.The chart shows that in 2010, totalsupply of menthol is greater thandemand. Assuming that naturalmenthol production remains constantat 22,000 tonnes per year, anddemand increases by 7% per year.Assuming new production ofsynthetic menthol starts in late 2012,supply may exceed demand by2016.Menthol – Projected Demand2012~201620

Compared to the giants in syntheticproducts, all suppliers of naturalmenthol look like little David….But I believe this story will notrepeat itself in the 21 st century formenthol!Little David vs Goliath???!!!(Natural vs ……..)! The emergence of India as a main producersince mid-1990s.! The establishment of MCX provides both pricestability and price fluctuation.! The menacing threat of global warming onoutput.! Since the US sub-prime crisis in 2008, theworld is going through a period of inflationwith fluctuating foreign exchange rates.Will BASF stay on in the business? Syntheticmenthol is a small business to BASF.Assuming annual production of 5,000 tonnesand a price of US$30/kg then this is equal toannual sales of US$150m. This is equivalent toonly 0.2% of BASFs total sales (i.e.US$150m/US$85,000m = 0.2%). BASF mayget out of the business if the net profit marginsare not as rosy as expected.! The threat of synthetic products?CONCLUSIONS• The emergence of India as a main mint producer since the mid-1990s and it will remain amajor mint producer for a long time in the future.• The establishment of MCX was both a boon and a disadvantage – it provides both pricestability and price fluctuation.• The menacing threat of global warming on output – just look what Hurricane Sandy has done– and my heart goes out to all those affected.• Financial crises - since the US sub-prime crisis in 2008, the world is going through a period ofinflation with fluctuating foreign exchange rates. I do not think I need to elaborate more.21

• The threat of synthetic products1. The price of synthetic menthol can easily be fixed within a certain period, while the price ofnatural menthol, being affected by many factors, tends to have ups and downs. But we knowfrom historical data that the average price of natural menthol would not be higher thansynthetic over a period of 1~3 years (i.e., synthetic menthol at US$27/kg for a year, naturalmenthol trading at US$30/kg but averaged US$24~25/kg over a period of 3 years).2. From past experience, the setting of the synthetic menthol price is affected by the naturalmenthol price (i.e., synthetic set at US$27/kg when natural is selling at US$30/kg). But if thequantity of synthetic menthol expands too fast, it may suppress the price of natural menthol.And eventually this might lead to a lower price for synthetic menthol in future.3. There is an oversupply of consumers’ products, too many brands, and this coupled with laxmonetary policies resulted in strong demand for raw materials. Unless economic conditionsworsened and demand decreases, the price of raw materials would tend to be at a higher levelin the longer term.And we have to be careful in predicting price. Hence, players in the menthol industry wouldrequire healthy and stronger finance. Human beings finally have to face the issue of“scarcity”.4. Previously, Asia served as a market supplier of raw materials, but it is becoming animportant consumers’ market. Asia will play a more important role in deciding the price ofmenthol or other essential oils in future.5. Natural products need strong support from government research institutes to improve on thespecies to shorten the growth period and provide better yields (e.g., Kosi mentha introducedby the Indian governmental research unit).6. Natural menthol is a sustainable product - where land is the factory and sunlight, theenergy. It fulfils the needs and demands of modern, environment conscious consumers andglobal governments. And synthetic menthol exists to fill a specific void in the menthol market.Finally, I would like to thank my colleagues, Mr. Y.T. Sng, our Marketing Manager, for providingmost of the information for the lecture. He has had more than 30 years of experience in this business.Also thank you to Mr P.S. Lee for the preparation of the lecture.I hope that you enjoyed the lecture and if you have any queries, please drop me an email at the abovee-mail address.Thank you for your attention – have a nice stay in Singapore for the next couple of days.22

THANK YOU &HAVE A NICE DAY!Mr "Gatsby" Chih Lung SHIH is the Managing Director of Tien Yuan ChemicalPte Ltd based in Singapore. He has been involved in the essential oils andaroma chemicals sector for almost 30 years. Born in Taiwan, he studiedlanguages at university in Taiwan and then joined the family business in theearly 1980s. The Tien Yuan Company was set up in Singapore in 1972 and itsmajor activity is the manufacturing of menthol from mint oils. It also produceseucalyptol, eucalyptus and eugenol. In 1995, the company established amanufacturing company in China, close to Shanghai. Mr Shih has presentedpapers at various F&F Conferences in China.23

INTRODUCTIONTHE INDIAN CONSUMER MARKETTHE PINNACLE OF THE FRAGRANCE & FLAVOUR INDUSTRYSant SanganeriaUltra International Limited304, AVG Bhawan M-3, Connaught Circus, New Delhi100 001 Indiaultra@ultraintl.comThank you for the great honour of addressing therepresentatives of the F&F world.Over the past four decades, I have experienced thebeauty and dynamism of our industry – which hasgrown and evolved from generation to generation.It is heartening to see the spirit of our industry,which has changed in many ways to meet thecomplex challenges of the global world. But whathave not changed – what can never change – are thevalues that got us this far.THE INDIAN CONSUMER MARKET-The Pinnacle of the Fragrance & Flavour IndustryBy!"#$%!"#&"#'()"%Ultra International LimitedIndiaOur success has never just been about survival of the fittest. It has been about building a strongrelationship and sharing a stake in each other’s success.The passion to perform has made our industry survive all the upheavals of the changing needs of theNew World.The journey continues and we are all here to share our mutual business growth.TOPICSToday I will talk about the Indian Consumer Market and how it will impact the Indian F&F Industry.!"#$%&'Indian Fast Moving Consumer Goods (FMCG) – The Road AheadIndustry Size-FMCG Sector in IndiaKey Findings- FMCG MarketHistorical Growth of the FMCG IndustryKey Trends Shaping the FMCG market in IndiaGrowth Drivers, Challenges and Opportunities for FMCG SectorKey challenges - FMCG SectorNew Indian ConsumerThe Youth FactorLuxuryIndian Fragrance & Flavour MarketMarket Size – F&F IndustryGrowth Projection of F&F MarketThe Indian F&F Horizon : Maximizing TargetsAs we all know - India is amongst thebetter destinations globally forinvestments and business. But with therecent economic slowdown there arequestion marks on sustaining the growth.The Indian economy is changing inprofound ways by the onward march ofits “consumers”.India’s ascendance as an economic powerto reckon with has forced the world tounravel the mystery called India.Conclusion25

An intriguing element of this mystery is India’s Consumer Market; characterized by diverselanguages, regions, religions, and economic and social status.Consumer growth has, of course, always been a central engine of economic growth, but what issignificant about the past decade is the acceleration in the pace of change.INDIAN FAST MOVING CONSUMER GOODS (FMCG) – A ROAD AHEADIndustry Size – (FMCG) Sector in IndiaThe Fast Moving Consumer Goodsmarket (FMCG) is valued at morethan US$ 30 billion, while the F&Findustry feeding this market is closeto US$ 500 million. This industrytouches the life of every Indian andtherefore has perhaps the widest reachamong all industries in the country.Industry Size – FMCG Sector in India,-%.$3(45+126$%'1*7"26$82*'95#$!"#$$%"&#'()*+$)($,-%.$/*01"2$1 Hindustan Unilever Ltd.2 ITC (Indian Tobacco Company)3 Nestlé India4 GCMMF (AMUL)5 Dabur India6 Reckitt Benckiser7 Cadbury India8 Britannia Industries9 Procter & Gamble Hygiene and HealthCare10 Marico Industries11 Colgate-Palmolive (India) Ltd.12 Gillette India Ltd.13 Johnson & Johnson14 Modi Revlon15 Nirma LtdSource : Technopak AnalysisIndian Fast Moving Consumer Goods Market – Key FindingsIndia’s rising affluence will drive the growth for FMCG firms over the next several years. The marketis expected to grow at an average rate of 11-12%.Rapid growth in India’s toiletry and cosmetic market will create opportunity for new players.India’s rapidly growing middle class, with annual household incomes of US$ 3,000-5,000 is becomingincreasingly brand-conscious and is aware of the importance of personal grooming.Indian Fast Moving Consumer Goods MarketKey Findings• Demand will grow by a strong 11-12% p.a.• India’s rising affluence will drive the growth for FMCG firm over the nextseveral years.• Rapid growth GDP in of ~5% India’s toiletries and cosmetic market will createannuallyopportunity for new players.• Foreign firms that can add localization in their health and beauty productsand leverage international expertise and well known brand names, willcontinue to have a competitive edge over domestic players.26

Indian Fast Moving Consumer GoodsMarketThe market for cosmetics and toiletries andother personal care items is concentrated, witha few well-known brands dominating sales ofshampoos, hair conditioners, make-up,fragrances and personal hygiene products.Growth in demand for most of these productsis expected to be rapid in 2011-15, leavingscope for new companies to make inroads intothe current market leaders’ dominance. Men’sgrooming products, such as skin lighteningcreams, deodorants, facial cleaners and so onis an area that is showing steady growth.Historical Growth of the FMCG IndustryHistorical Growth of the FMCG IndustryGDP growth of ~5%annually!"#$%&' !""$&%' !""$()'!")$**'GDP Growth %!"&$(#'!"($*"'Golden Years for FMCGIndustry GDP growth of ~8%,rural markets opened up.!)#'!)+$&,'!)($%,'Source : AC Nielsen, new article, Booz & Company analysis!&#$)&'-.#& -.#/ -.#* -.#( -.#, -.#+ -.#% -."# -."" -.")Indian Fast Moving Consumer Goods MarketSoap and Cleansers : Market Demand Growth (% Real Change P.A.)Territory 2008 2009 2010 2011 2012 2013 2014 2015Asia and Australasia 4.3 6.5 5.2 5.9 7.0 5.9 5.8 5.3GDP growth of ~5%annuallyChina 13.3 18.6 3.2 12 12.7 9.7 9.3 7.3Hong Kong 3.9 7.0 8.7 8.6 6.8 3.7 3.4 3.0India 10.2 16.6 14.1 11.1 9.9 10.5 9.8 9.8Japan -0.8 0.6 3.5 -0.6 2.4 1.5 1.4 1.0Taiwan -0.8 2.6 5.0 5.5 5.4 4.1 4.8 4.7Source : Economist Intelligence UnitFigure for 2012 onwards are forecasts. Prior years are actuals or estimatesThe industry has tripled its size over the past10 years growing much faster than in recentdecades. This has been facilitated by the manychanges in the Indian economic and industriallandscape - reduced levels of taxation, easierimport of materials and technology, reducedbarriers to entry of foreign players, growingorganisational maturity of Indian players,growth of media, and, of course, the growingaffluence and appetite for consumption of theIndian consumer. The industry’s potential togrow further and faster is awesome, given thelow penetration of most categories and risingconsumer incomes.Key Trends Shaping the FMCG Market in IndiaThough many changes have taken place overthe past 20 years, the rate of change in theoperating environment appears set toaccelerate. The waves of change will bepropelled by government policy, channelcustomers, technological advances, leaders ofsocial change such as NGOs, consumerbehaviour and, of course, the playersthemselves. Change will therefore occur alongmany dimensions simultaneously, in a morecompressed time scale at the intersection ofthese change vectors.Key Trends Shaping the FMCG market in India1. Accelerating Premiumisation2. Evolving Categories3. Goldmine at Bottom of thePyramid (BOP)USD 30bnFMCGSector4. Rapid Globalisation5. Many Indias6. Growing Modern Trade7. Ecoconsciousness8. Gamechanging Technologies9. Enabling PoliciesSource : Booz & Company analysis27

This will produce significant, if unpredictable, outcomes for the industry. Over the last 20 years,almost all FMCG companies have been riding the rising tide and almost all have prospered. That may,however, not hold true over the next 10 years.While the industry is set to grow at an even faster rate, in this round there could be as many losers aswinners.Growth Drivers, Challenges and Opportunities for FMCG SectorThe current economic trend, exhibiting modestdemand and supply is likely to have amedium-term impact on the demand forFMCG products but promises revival andhigher growth in the long term based on thefollowing fundamentals:1. Expanding purchase basketresulting in higher penetration ofproducts.Growth Drivers, Challenges & Opportunities for FMCG SectorGrowth DriversDemand-Side DriversSupply-Side Drivers• Consistent GDP Growth• Growth of Modern Retail• Increasing Consumer Income• Low Labour Cost• High Private Consumption• Rising Urbanization• Increasing DiscretionaryIncome2. Increased consumption withhigher disposable householdfamily income.Systemic Drivers• Favorable changes in GovernmentPolicies• Infrastructure DevelopmentSource : Economic Survey 2008-20093. More consumers entering the market place (Rural and Urban Base of Pyramid).For these developments to catalyse faster there are two sides of the equation that need to cometogether - demand and supply along with other systemic factors.Demand-Side DriversConsistent GDP GrowthThe Indian economy hasbeen consistently growingover the last few years.Though the current annualgrowth rate is lower(6.7%) compared toprevious years.Demand-Side Drivers – Consistent GDP GrowthGDP Growth %Source : Economic Survey 2008-200928

Increasing Consumer IncomeIncrease in incomes is largely an outcome of economic growth across sectors. Over the past few years,India has seen increased economic growth, with a continuing and substantial impact on consumerdisposable incomes enabling good growth for the FMCG sector, among others.Demand- Side Drivers – Increasing Consumer Income!""#$%&'(#)*+(%,&-".(/*&!""#$%&'(#)*+(%,&-".(/*&&0123&45$6&7889:87&0;888''6&788?(@A+&&08?(@A+&&08C:98B8

Rising UrbanizationIndia has 70% of its populationliving in rural areas. With risingurbanization, more people willhave exposure to modernproducts and brands and thusshift to branded and packagedgoods and products.Demand- Side Drivers – Rising UrbanizationRising UrbanizationBy 2015, an additional 75million consumers will havemoved into cities, not onlybuying FMCG products forthemselves but also serving as aconduit for information andgoods to their families still inrural India.Source : Technopak AnalysisIncreasing Discretionary SpendsAnother encouraging factor is the falling spends on basic food items, which frees up consumer incomefor other categories of FMCG products. This trend is noticeable among both urban and ruralconsumers.Demand- Side Drivers – Increasing Discretionary IncomeShare of WalletSource : Technopak Analysis30

Supply Side DriversGrowth of RetailFrom US$ 535 billion in 2012-13, Indian retail is expected togrow to US$ 755 billion by2018.Supply- Side Drivers – Growth of Modern RetailsGrowth of Retails (US$ Billion)Modern Retail - At current sizeof US$ 73 billion, and withfresh investments over the next5-7 years, modern retail willshow impressive CAGR(Compound Annual GrowthRate) of more than 30%.Traditional Retail – In absoluteterms, Traditional Retail willgrow more than Modern Retail,in the next 5 years. From theSource : Technopak Analysiscurrent 9 million, the numberof outlets selling FMCG is expected to increase to 11 million by 2013 and 16 million by 2018. Insummary, Traditional Retail will grow slower in percentage terms, but will continue to occupy a verydominant share of FMCG sales over the next 10-20 years.Low Labour CostIndia has by far the lowestlabour cost compared to manyemerging countries giving it anedge for establishingmanufacturing base for bothdomestic and internationalFMCG brands. Average labourcost in India is US$ 110/monthcompared to US$190/month inChina, US$ 210/month inThailand and even higher atUS$1,300/month in Taiwan.Supply- Side Drivers – Low Labour CostLabour Cost (US$ Per Month)Source : CEIC, Morgan Stanley Research and Investment commission of India, 201131

Systemic Drivers for Sectoral GrowthFavourable changes in Government PoliciesSeveral other factors are also encouraging for FMCG sector growth in the long run, such as policychange and investments in infrastructure development.The Indian government has been trying to foster the growth of various categories of FMCG by way ofmaking policy changes. Some of the policy changes include:• Automatic investment approval (including foreign technology agreements within specifiednorms), up to 100 per cent foreign equity for most of the food-processing sector• Quantitative restrictions removed• Five-year tax holiday for new food processing units in fruits and vegetable processing• Customs duties reduced on plant and equipment, raw materials and intermediates, especiallyfor export production• Capital goods freely importable, including second hand ones• De-reservation of most FMCG categories from SSI (Small Scale Industries)• Many states have also begun competing with each other to offer incentives to different sectorsincluding FMCG, in the form of tax holidays, fiscal incentives, land at concessional rates andsubsidies to encourage economic development.Infrastructure DevelopmentThe government has invested a considerable amountin the Golden Quadrilateral Project to connect thefour corners of the country, of which over 96% hasbeen completed. 50% of existing highways arebeing improved and expanded. The railways arealso increasing capacity through increasing tracks,improving existing tracks and adding more freightcompartments to enable better carrying of goods andproducts.32

ChallengesWith the growth drivers in place, there are many issues and challenges the sector grapples with.The key challenges faced by FMCG sector players in India are:• Tax structure - complicated tax structure, high indirect tax, lack of uniformity, entry tax andchanging tax policies.• Infrastructural bottlenecks - Agriculture infrastructure, power cost, transportationinfrastructure and cost of infrastructure.New Indian ConsumerThe Youth FactorThe Indian consumer market is drawingglobal attention not just because of itspromise of sheer volumes, but also becauseof the tectonic shift happening in the natureof demand. Increasing urbanization,increasing incomes and rising aspirations fora better life, especially among the lowereconomic strata, are some of the factorsreshaping the Indian consumer market. Theresult of this flux is a new Indian consumerwho is more discerning than ever, ready toplace his money on brand, quality andconvenience, and eager to explore theorganised retail market.The Indian consumer market, which is primarily dominated by the young generation, is becomingincreasingly sophisticated and brand-conscious. A typical upper middle class young consumer isbeginning to look beyond the utility aspect of a product to seek intangibles such as brand and lifestylestatements associated with the product.33

LuxuryIndia’s luxury market is still nascent because ofsteep import duties of up to 30%, poor luxury retailinfrastructure, expensive real estate, a 51% cap onforeign ownership of a single-brand, retail outletsand customer preferences for localised products.This market is expected to grow at an average of 5-10% through 2014. Foreign luxury brands areexperimenting with localising their products by, forexample, issuing limited edition bags and shoes soldonly in India.A recent luxury brand survey conducted by theNielsen Co. has ranked India third after Greece andHong Kong in the list of most brand-consciouscountries in the world. More than 35% of Indianrespondents said they spend money on luxurybrands.INDIAN FRAGRANCE & FLAVOUR (F&F) MARKETIndian Fragrance & Flavour Market!"#$%"&'"%()*+&,-*.)/-01&!-2%34%/&5,,&6%/)&78&9#$)*:):&7(.*-+)&;%#.)+?0&'"%()*+&!#=-%&,*%=*%/0)+&'2:@&A:4&B*-)/:%"&&8*#.%?0&&A:4@&7@&C@&D)"

Indian Fragrance & Flavour (F&F) MarketRapid globalisation is the catalyst in ensuring India’s emergence as a significant player in theinternational market. The confluence of ancient traditions with modern influences has augmentedIndia’s progression as internationally integrated.Indian Fragrance & Flavour Market!"#$"%&'()%*)+**,-'#-'%."*/'-0"&*1'&"#)-2"3*!"#$"%&'()%*)+*,5'=)9-*/'-0"&*1'&"#)-2"3*("#&!"#&)"#("#&$"#!!"#$$"#&%"#!"#&'"#$%"#!*"#4"-3)%'5*6'37* 8)93"7)5:* ,';-2.*1'-"*4"-3)%'5*1'-"* 8'2-.'-"*

Growth Projection of F&F MarketOver the next decade, the Indian F&Fmarket will grow at a base rate of at least10-11% annually to become an US$ 980million industry by 2020. Additionally, ifsome of the factors play out favourablywithin an environment of enabling policyand easing of supply constraints, 17%growth may be expected over the nextdecade, leading to an overall F&F marketsize of US$ 1.5 billion by 2020.The Indian industry is thus on a cusp ofmetamorphosis. The upbeat mood of theeconomy, the youthful exuberance of thepopulation and its increasing integrationwith globalized lifestyles and consumptionpatterns will drive the growth.Growth Projection of F&F Market!"#$%&'("#)*+,#-.'/0/'12"3*%'45-'65775#-'89:;'17%10-11%However, to assume that the Indian industry will become an exact replica of the global industry is thebiggest fallacy companies can make. While the Indian consumers’ appetite for value and branddominatedgoods and services is increasing, the cultural and regional framework characterising them isintact.The Indian F&F Horizon: Maximizing TargetsThe global trends gaining momentum in India and the accelerating production costs, catapultconsolidation of customers through Mergers and Acquisitions are moves essentially to establish astrong hold in India.But the corporate collaborations both at the customer and industry levels pose challenges for themanufacturers. In addition to hedging against domestic competition, some companies have graduallysucceeded in widening their product portfolio by entering into global markets.The outlook for demand growth in F&F is positive, and expected to grow at 1.5 times the GDP growthrate, driven primarily by three factors:• Growth in demand for end-use products: driven by rising disposable incomes, leading toincreased consumption of processed foods and non-food FMCG including personal care andhome care.• Changing lifestyles: demand for ‘premium” functional products that will push manufacturersto formulate far more sophisticated and expensive fragrances. The urban lifestyle fuelled byincreased incomes and resulting fast pace, will encourages customers to switch to packagedand canned foods.36

• Regulatory environments: regulations mandating stringent consumer product qualitystandards will lead to substitution of low-end chemicals with high-end safe replacementformulations.The Indian Fragrance Flavour (F&F) Horizon: Maximizing TargetsFor the Indian F&F industry the competitive edge will be to encapsulate indigenous ingredients andtechnologies that make a flavour or fragrance exclusive and sought after, thereby extending its shelflife.Significant success will be dependent on valuable market understanding and the capacity to foreseeemerging trends and new segments that have the potential to grow and the resourcefulness to exploitthese at the right time. With such accelerating growth there will be a greater demand for humancapital - especially the higher quality of talent, which will be required to deal with the increasinglycomplex Indian market.Competence to perform on a globally integrated scale will be an upcoming prerogative. The flavourand fragrance trends are no longer region-specific as buyers range over other parts of the world. Thecapacity to function on a global scale will be the key to gaining core-listing contracts.In these global economic conditions, the Indian F&F industry must ensure a well-establishedinfrastructure, investment in continual product development, market research, and quality assurance,plus regulatory bodies to meet the long-term success plans.CONCLUSIONSIn today’s ever changing business environment the burden is not only of relentless rivalry but also thecrucial understanding of a greater collaborative approach. With the emergence of close ties betweenthe makers and the consumers, the onus is on being a responsible player within the gambit of toughcompetition.ConclusionGrow and theResourcefulness toExploitInvestment inContinualProductsDevelopmentWell-EstablishedinfrastructureValuable MarketUnderstandingDevelopmentConclusionCapacity toFunction on aGlobal ScaleForeseeEmerging TrendsIntroducing NewSegmentsGloballyIntegrated Scale37

The rewards for those who innovate, adapt, and develop a deep understanding of India’s newconsumers will be substantial. Perhaps the most attractive aspect of India’s consumer growth is thatthe history of this market is yet to be written. The changes that are foreseen – a quadrupling ofconsumption and a dramatic shift in the structure of incomes will represent a period of discontinuity.Today’s winners will not necessarily be tomorrow’s, and the field is open for entrepreneurialcompanies to take advantage of these fundamental changes.While we are pleased with our achievements, the business is not complacent. It remains focused on theroad ahead – simultaneously addressing the challenges of today while investing in the opportunities oftomorrow.Competitive pressures will be on the rise as newer entrants seek a slice of India’s long-term growthpotential. None of these challenges are new; they have stayed with us in some form through the years.Our ability to steer through these conditions and lead the market is reflected in the numbers we willdeliver.Over the next decade, all these changes will continue to impact the F&F industry favourably. Whilemany leading foreign multinational companies have operated in the country for years, given liberalpolicies, the next decade will witness increased competition from tier two and tier three global players.In addition, larger Indian companies will continue to seek opportunities internationally and gain accessto more global brands, products and operating practices.Pressure from government, NGOs and consumers for efficient and prudent use of environmental andnatural resources will increase. The industry will need to significantly increase its efforts to drivesustainability as a core business strategy.In conclusion, I expect challenging years ahead and should remain focused on what we need to do tofurther enhance our competitiveness.Despite these challenges we look forward with confidence to the years ahead.Sant K. Sanganeria is Managing Director of Ultra International Ltd. He is agraduate of St. Xavier’s College Calcutta, and came to New Delhi in 1970. Thefollowing year he established Radha Sales Corporation, a leading tradinghouse importing aroma chemicals and essential oils with Tata Exports Ltd. Hebegan to travel widely, forging links with important international F&F housesto greatly increase the number of materials and supply. This internationaltrading network became a powerful force in the industry demanding moresubstantial administrative and manufacturing facilities. In 1989 a corporatehouse, Ultra International Limited, was established at Sahibabad tomanufacture essential oils and aroma chemicals. Today Ultra is one of theleading manufacturers of F&F in India, serving customers worldwide. In 2007 he established UltraInternational B.V., Netherlands to distribute these products worldwide. He has held key positions ininternational organisations, including IFEAT, in which he was a Founder Member, Vice Chairman(1989-1992) and Chairman (1992-1995) and Executive Committee Member until 2004.38

INDIA’S SPICE OLEORESIN INDUSTRY: WAY FORWARD INITIATIVESShanavas BavuSynthite Industries Ltd,Kolenchery,Cochin – 682311,Indiashanavas@synthite.com“Globalization began with the spice trade. It was the world’s first long distance exchange, its mostprofitable and for two millennia its most mysterious.”Source: Historical classic, ‘The Spice Route’ by John KeayINTRODUCTIONThe Indian story of value added spice products began in the early 1970s. Over the years, withinvestments in quality and supply chain management, it has emerged to be the largest in the world. Itis not only a local sourcing and processing point but also changed itself as a value addition hub for thespice crops from the Asia-Pacific region and elsewhere across the globe.This paper reviews the industry’s current position, the challenges and its efforts to maintain theprogress and deliver the best to the world.OVERVIEW OF THE INDUSTRYThe export of spice oleoresins and essential oils from India amounts to 7,800 tonnes in volume andUS$ 255 million in value7800760074007200700068006600640062006000Quantity, MT2007-08 2008-09 2009-10 2010-11 2011-12Figure 1: Oleoresins & Essential Oils Exports (Volume)39

&!!"%#!"!"#$%&'()##)*+',-'.'%!!"$#!"$!!"#!"!"%!!'(!)" %!!)(!*" %!!*($!" %!$!($$" %!$$($%"Figure 2: Oleoresins & Essential Oils Exports(Value)The industry has witnessed steady growth in volume and value since the beginning. The postliberalisation economic environment in India facilitated the import of raw materials from Asia-Pacificregions; and the industry leveraged on this to become a processing hub ensuring competitiveness andmanaging the supply chain effectively.Oleoresin Products from IndiaBlack pepperCorianderCapsicumCorianderCardamomCuminCassiaCurry LeafCeleryDecalepisCinnamonDill SeedCloveFennelCoffeeFenugreekEssential oils from IndiaAjowanAniseedBasilBlack PepperCalamusCardamomCassiaCedarwoodCelery SeedCinnamon BarkCinnamon LeafCitronellaClove BudClove LeafCorianderCumin SeedCurry LeafDavanaDill SeedFennelGarlicGinger* The list excludes mint oil and mint products.GarlicGingerHingJalapeno PepperMaceMustardNutmegOnionGinger GrassGreen PepperHingHorse RadishJuniper BerryLemongrassMaceMarjoramMustardNutmegOlibanumPaprikaPimentoRosemaryTamarindTurmericWhite PepperPalmarosaParsley SeedPimentoRosemarySpearmintThymeTurmericValerian RootVetivertWhite Pepper40

Product MixThe pie-chart shows the relative volumes of product mix from the Indian oleoresin industry.Turmeric6%VanillaHerbsPepper19%Nutmeg& Mace4%Ginger3%Onion& Garlic Others13%Seed Spices4% CloveCardamomCinnamon& CassiaChillies46%Figure 3: Oleoresins & Essential Oils - Product Mix (volume)Chilli extracts, oleoresin paprika andoleoresin capsicum constitute 40% of thevolume.Crop AreaSpices are cultivated in a total crop area of2.94 million hectares that forms only 2% ofthe total 142 million hectares of agriculturalland in India. There is considerable effortfrom the government agencies and industrytowards proliferation of spices cultivation.The results are apparent from the growth ofcrop area over the last 5 years.3.002.902.802.702.602.502.402.302005 –06million hectares2006 –072007 –082008 –09Figure 4: Crop Area for Spices2009 –10*41

Within the total area of 2.94 million hectares, 7% is utilized for organic farming. This includes theuncertified, but organically grown farming area in the north-eastern states. Approximately 10% of thecrop area is covered under Integrated Pest Management (IPM) farming.Cinnamon VanillaSaffronClove NutmegPepperTamarind7%2%Onion &CardamomGarlic3%6%Seed Spices41%Chilli28%Turmeric6%Ginger5%Figure 5: Crop Area DistributionThe major part of the cropped land is used for seed spices namely cumin, coriander, celery, fennel,fenugreek, dill and ajowan. These are concentrated in the northern states of Rajasthan, Uttar Pradesh,Gujarath, Punjab and Uttaranchal. Chillies being the next major crop are mainly grown in the southernstates of Karnataka and Andhra Pradesh.SUSTAINABILITY INITIATIVESThe industry has been proactive in its initiatives toward sustainability. The emphases were on thesupply chain and processing. In order to ensure the availability of raw materials and consistency, theindustry and government agencies promoted backward integration in major spice crops.The industry made considerable investments in process technologies; and was keen on adopting thelatest processing equipment. In addition, there have been government incentives to upgrade theprocessing and quality assurance /quality control infrastructure.42

Raw Material Sustainability InitiativesThe objectives of the backward integration programme are:• Raw material availability• Sustainability• Traceability• Predictability• Contaminant control• Regulatory requirementsThe conditions that challenge spices cultivation in India are;• Growing urbanisation• Scattered farms• Diminishing agricultural incomes• Lack of labour force• Less scope for mechanizationRaw Material Sustainability ProgrammeFigure 6 : Raw material sustainability programThe stakeholders in the programme are;• Contract farmers• Spice Growers Co-operatives (SGS)• Government Agencies• NGOs43

The methodologies include training as well as awareness programmes, the supply of agriculturalmaterials and technical advice, and financial aid. Successful regions have been rewarded withincentives that provide additional income to the farmers. The industry provides further support bychannelling the Corporate Social Responsibility (CSR) activities in the growing regions, ensuringregional welfare.The focal crops in the backward integration programare;ChilliesSeed spicesCardamomTurmericNutmegPepperMarigoldVanillaRosemaryMustardGingerVetiverFigure 7 : Rosemary CropThe map of India shows the regionsof major backward integrationprogrammes. The respective cropsare indicated.Figure 8 : Backward Integration Programme in India44

The major challenges in theimplementation of the backwardintegration programme are;• Scattered farms• Lack of awareness• Cultural and linguisticbarriersThe pie-chart indicates thedistribution of farm extents in Indiafor spices; 70% of the farms are ofless than 10 acres in area. This makesthe programme more labour intensiveand difficult to handle.TOOLS AND METHODOLOGIES34'1*''9:'"56%0''948'''(*6%'12"+'9:'"56%0''348'/%00'12"+''34'"56%0''748'Figure 9 : Distribution of Farm Sizes (Spices)The industry leverages on ITtools like SAP to maintaintraceability. The nationaldatabase is being setup by thegovernment agencies,integrating the industry data.Figure 10 : Traceability - SAP Tracking ProcessIPM PROGRAMIn order to maintain the quality requirements oncontaminants and toxins; the IPM programmehave been effectively implemented in major cropslike chillies, seed spices and cardamom. The stepsinvolved in the process are as below.• Soil conditioning• Bio agents and organic manure• Insect traps (visual / pheromone) and birdperches• Border crops and trap crops• Approved plant protection chemicalsFigure 11 : Chilli Field under an IPM Programme45

• Protective microorganisms• Natural plant protective chemicals• Fortnightly monitoring and data recording.• Methodical sampling and local assays.An IPM program is completed along with the postharvesthandling of the spice. Special emphasis isplaced here on controlling mycotoxin incidence.The national programme for backward integrationinvolves setting up Spice Growers Cooperatives andthe installation of regional testing labs.Figure 12 : Post Harvest Handling of GingerPROCESS TECHNOLOGIESThe industry uses a blend ofconventional and modernprocess technologies toachieve optimum levels ofquality, productivity and cost.Figure 13 : Steam Distillation PlantTraditional steam distillation units are still being used forprocessing spices like ginger, nutmeg etc. for essential oil.Spinning cone type thin film distillation is employed forfresh spices like ginger, garlic and mustard. Thistechnology results in a superior aroma profile, high yieldand faster processing.Figure 14 : Steam Distillation KettlesAll major spice oleoresins are still being produced bysolvent extraction. Over the years, there had been changesin regulatory requirements for the type of solvents andresidue levels. The industry was proactive in upgradingthe facilities for these requirements. Investment in the46

supercritical CO2 extraction equipment is theway forward to keep up with the residualsolvent regulations in future. This technologyyields the benefits of a better flavour profile,less thermal impact and lower cost-in use.This technology could replace steamdistillation and solvent extraction at least insome spices in the near future in view of theoverall cost benefits.Figure 15 : Batch Type Solvent Extraction PlantThe current focus on process technologies isto produce extracts that are not thermallydegraded, and exact replication of the spiceraw material.Figure 16 : Continuous Type Solvent Extraction PlantFigure 17 : Supercritical CO2 Extraction Plant (SCFE)47

Figure 18 : Centritherm - Thin Film EvaporatorDOMESTIC MARKET IN INDIAFinally, a review of the domesticconsumption in India is provided.Over the last 5 years, the industryhas registered a steady growth of20% volume year-on-year. Thefactors that propelled this growthare;• Shifting food habits of thepopulation due to rapidurbanisation.• Increased usage ofoleoresins by traditionalspice blenders – in view ofcost-in use and regulatoryrequirements.706050403020100Value, in million US $2007-08 2008-09 2009-10 2010-11 2011-12Figure 19 : Domestic Sale of Oleoresins & Essential Oils48

CONCLUSIONSIndian exports of spice oleoresins are growing; driven by quality, cost and consistency. There havebeen conscious efforts from industry towards sustainability in farming and supply chain management.It is aiming at a steady increase of agricultural productivity, focusing on quality and reducingenvironmental impact.Investments in advanced process technologies and the QC infrastructure are definite priorities. Withraw material imports, the industry is transforming into a processing hub for materials from Asia-Pacific area and other global locations.Shanavas Bavu has been leading the team of researchers and applicationspecialists in the New Products Division of Synthite for the last two years. Hiscore experience is in process engineering and he has considerable exposure insetting up and commercialising extraction technologies like SCFE and SCC. Hehas been in the oleoresin field for 5 years and has a total experience of 17 yearsin industry.49

S. Palaniswamy RajaJasmine C. E. Pvt. Ltd.39 Joiser Street, Chennai 600 034, India.raja.palaniswamy@jasmineindia.comTHE INDIAN FLORAL EXTRACTS INDUSTRYS. Palaniswamy RajaFor several millennia India has been a Jasmine pioneer C. in E. the Pvt. identification Ltd and application of products39 Joiser Street, Chennai 600 034of natural origin to practical use. This is true India historically and remains true today for flowersraja.palaniswamy@jasmineindia.comand their value added products. A flourishing industry exists, based on extensive cultivationand INTRODUCTIONa vibrant trade that is driven by consumer acceptance and demand. This paper brieflyreviews For several those millennia Indian India floral has raw been materials a pioneer that in find the identification application in and the application international of products fragrance ofnatural origin to practical use. This is true historically and remains true today for flowers and theirindustry.value added products. A flourishing industry exists, based on extensive cultivation and a vibrant tradethat is driven by consumer acceptance and demand. This paper briefly reviews those Indian floral rawmaterials that find application in the international fragrance industry.India:INDIAFig. 1: Satellite image of the Indian SubcontinentFig. 1: Satellite image of the Indian SubcontinentTo comprehend the evolution of the use and importance of products of natural origin in the Indianculture, one needs to first understand the facilitating role played by the geography of India.To comprehend the evolution of the use and importance of products of natural origin in theIndian India, its culture, civilization one and needs its to culture, first understand has always been the facilitating defined by its role geographic played by boundaries the geography and not of byits ethnic, religious or political boundaries. Almost uniquely among non-island countries, India can beclearly identified and demarcated by its geography as seen in the satellite image in Fig. 1. The Indian51

subcontinent is not just a large land mass (stretching 3,500 km North – South and 3,000 km East –West) but also very diverse in its geography possessing almost every agroclimatic zone within itsboundaries. This diversity and corresponding richness in both flora and fauna has encouraged some ofthe earliest farmers to domesticate and cultivate many crops. Nearly half the land mass of the Indiansubcontinent is arable and this helps support the huge population more than half of which is involvedin agriculture and related activities.FLOWERS - CULTIVATION AND TRADEThe geographic diversity has made India one of the hotspots of biodiversity. Even though it is believedthat only about 70% of India’s flora has been mapped, already more than 15,000 species of floweringplants have been identified with about a third of them being endemic to the Indian subcontinent.Indians have tapped into this resource pool for many needs. Flowers (Fig. 2) have been used asingredients for wide ranging purposes including culinary (e.g. neem), flavouring (e.g. saffron),colouring / dyeing (e.g. marigold), fragrance (climbing ylang), medicinal (e.g. periwinkle), cosmetic(e.g. hibiscus), etc.ChrysanthemumClimbing YlangHibiscusSaffronFig. 2: Examples of flowers used in India52

Such cultivation and use of flowers have been recorded since the earliest Vedic period. Thiscontinuous and extensive usage over many millennia have made flowers an integral part of Indianculture (Fig. 3) across linguistic, ethnic and religious communities.Fig. 3: Examples of cultural usage of flowers in IndiaThe widespread demand for flowers has led to the development of a dynamic country-wide tradenetwork. This is catered to by a cultivation area of more than 65,000 hectares across the country. Thechain (Fig. 4) from the farmers to the final consumers includes primary and secondary wholesalemarkets with a wide selection of retailers, traders and agents depending on the peculiarities of eachsegment (whether geographical or application based). The relationship between the processingindustry and the retail trade is quite symbiotic. The processing industry benefits from a lower averagecost of procurement compared to a situation where the flowers are grown specifically for extractionwhile the trade benefits from the risk diversification of an alternate demand that has different driversfrom that of retail consumer demand.Fig. 4: Indian flower trade chain53

FLOWERS - PROCESSINGThe availability of raw material due to large scale cultivation as well as the acceptance and demand offloral products led to the development of a processing industry that is an ancient tradition in its ownright. Archaeologists have identified the presence of distillation apparatus during their excavations atthe over 5,000 year Harappan Civilization ruins.Fig. 5: Traditional flower distillationThese distillation equipment and practices are in existence even today in an almost identical form (Fig.5) for processing flowers (Fig. 6) like rose damascena and screw pine / kewda (Pandanusodoratissimus) primarily for the domestic Indian market.KewdaRose damascenaFig. 6: Flowers processed by traditional methods54

The floral fragrance products in the form of oils, waters and attars have been an integral part of thebouquet of products that were offered by Indian merchants in their trade routes that extended fromEast Asia to the Mediterranean. In recent years, as the worldwide demand for natural products grewwith an increasing appreciation of their potential applications, India was able to leverage its traditionalskills in cultivation, harvesting and processing with modern techniques (Fig. 7) and developments andthereby capture an increasing market share and position itself as a major player in the global floralextracts trade. The modern processing technique commonly used is solvent extraction to obtainconcretes and subsequently absolutes.Concrete production lineAbsolute production lineFig. 7: Modern flower extraction55

(a) Jasmine GrandiflorumThe primary flowers processed in this manner for the global fragrance industry are(a)Jasmine GrandiflorumJasminum grandiflorum (Oleaceae), known as Jaathimalliin the local language, Tamil, is the leading floral extract ofIndian origin. Although cultivated throughout peninsularIndia in varying degrees, the extracts are producedpredominantly in the Coimbatore district (Fig. 8) ofTamilnadu state where the flowers are grown exclusivelyand under contract for extraction purposes.Jasminum grandiflorum (Oleaceae), known as Jaathimalli in the local language, Tamil, isthe leading floral extract of Indian origin. Although cultivated throughout peninsular India invarying degrees, the extracts are produced predominantly in the Coimbatore district (Fig. 8)of Tamilnadu state where the flowers are grown exclusively and under contract for extractionpurposes.The season lasts from June to December and theflower harvest volumes are parabolic with a peak inAugust/September. The plant has a productive lifefrom the 3rd to the 10th year and can yield about 5tonnes of flowers per hectare per year. The concreteyield from flowers ranges from 0.27% to 0.3%.The season lasts from June to December and the flower harvest volumes are parabolic with aFig. 8: Areas of Jasmine cultivation for extraction peak in August/September. The plant has a productive life from the 3 rd to the 10 th year andFig. 8: Areas of Jasmine cultivation forextraction can yield about 5 tonnes of flowers per hectare per year. The concrete yield from flowersranges from 0.27% to 0.3%.The production (Fig. 9) has showna decline since 2007 because ofthe demand drop in 2008 due tothe global crisis led to a reduction"### !"##$!"##!###$in acreage under cultivation.!###However, this is increasing since%"##%###$%"##$%###2010 but as the plant takes 3 years'"##to reach optimal yield, it is'###expected that the production will&"##&###cross 4,000 kg of concrete only in"##2014. 2011 and 2012 also#witnessed below average yieldsbecause of unsuitable climaticconditions. Egypt and India arethe two major origins for thisproduct having together about 95% of-.#/(Fig. 9: Fig. Jasmine 9: Jasmine concrete production trendthe market share with Morocco and France comprising the rest.!"#$%&%'()*+,(The production (Fig. 9) has shown a decline since 2007 because of the demand drop in 2008due to the global crisis led to a reduction in acreage under cultivation. This is howeverincreasing since 2010 but as the plant takes 3 years to reach optimal yield, it is expected thatthe production will cross 4,000 kg of concrete only in 2014. 2011 and 2012 also witnessedbelow average yields because of unsuitable climatic conditions. Egypt and India are the twomajor origins for this product having together about 95% of the market share with Moroccoand France comprising the rest.%###$'##( '##) '##* '#&# '#&&56

(b) Sambac(b)SambacJasminum sambac (Oleaceae), known as Gundumalli in thelocal language, Tamil, is another extract of the Jasminefamily produced in India. Although relatively new to theinternational market, this is the preferred Jasmine species inthe Indian market. Sambac is cultivated throughout thepeninsular Indian and to a smaller extent in the Gangeticplains. However most of the cultivation (Fig. 10) and all theextraction is undertaken in the state of Tamilnadu.Jasminum sambac (Oleaceae), known as Gundumalli in the local language, Tamil, is anotherextract of the Jasmine family produced in India. Although relatively new to the internationalmarket, this is the preferred Jasmine species in the Indian market. Sambac is cultivatedthroughout the peninsular Indian and to a smaller extent in the Gangetic plains. However mostof the cultivation (Fig. 10) and all the extraction happens in the state of Tamilnadu.The season lasts from March to October but theflowering is in flushes. The plant has a productivelife from the 3rd to the 8th year and can also yieldabout 5 tonnes of flowers per hectare per year. Theconcrete yield from flowers is between 0.12% and0.13%.Fig. 10: Areas of Sambac of Sambac cultivation cultivationThe seasonfor extraction forlasts from March to October but the flowering is in flushes. The plant has aproductive life from the 3 rd to the 8 th year and can also yield about 5 tonnes of flowers perextractionhectare per year. The concrete yield from flowers is between 0.12% and 0.13%.While there has been anincreasing demand for thisproduct in the internationalmarket, last year’s spike inproduction (Fig. 11) was moredue to competitive demand bythe supply chain for buildingstocks. The current annualdemand is believed to bearound 3,000 kg. While Indiais the primary origin, China isanother source for thisproduct.!"#$%&%'()*+,(&"##&###%"##%###!"##!###'"##'###"###&###$!"##$!%##$!###$ !###$!##( !##) !##* !#'# !#''-.#/(Fig. 11: Fig. Sambac 11: Sambac concrete concrete production trendWhile there has been an increasing demand for this product in the international market, lastin production (Fig. 11) was more due to competitive demand by the supply chainfor building stocks. The current annual demand is believed to be around 3,000 kg. WhileIndia is the primary origin, China is another source for this product.57

(c) Tuberose(c) TuberosePolianthes tuberosa (Amaryllidaceae), or Sampangi inTamil, is another major floral extract out of India. Tuberoseis cultivated throughout peninsular India and also in theGangetic region. The extraction is, however, primarily fromflowers cultivated (Fig. 12) in the state of Tamilnadu withsmaller quantities of flowers coming from the neighbouringstates of Karnataka and Andhra Pradesh.Polianthes tuberosa (Amaryllidaceae), or Sampangi in Tamil, is another major floral extractout of India. Tuberose is cultivated throughout peninsular India and also in the Gangeticregion. The extraction is, however, primarily from flowers cultivated (Fig. 12) in the state ofTamilnadu with smaller quantities of flowers coming from the neighbouring states ofKarnataka and Andhra Pradesh.The plant flowers throughout the year in flushesdepending on the local climatic conditions. The plantstarts flowering from 6 months with a decreasingtrend noticed from the 3rd year. The concrete yieldfrom flowers is on average between 0.06% and0.07%.Fig. 12: Areas of Tuberose cultivation forFig. 12: Areas of Tuberose cultivation for extractionextraction The plant flowers throughout the year in flushes depending on the local climatic conditions.The plant starts flowering from 6 months with a decreasing trend noticed from the 3 rd year.The concrete yield from flowers is on average between 0.06% and 0.07%.The variations in production(Fig. 13) are primarily due todemand fluctuations asproduction simply tracksdemand due to the abundantsupply of raw materialavailable from the retailtrade. India is the onlycommercial source for thisproduct.!"#$%&%'()*+,(%!""%&""%(""%'""%"""!""&""(""'"""%&""#%"""#!""#$""#&""#'"") '""! '""* '"%" '"%%-.#/(Fig. Fig. 13: Tuberose 13: Tuberose concrete production trendThe variations in production (Fig. 13) are primarily due to demand fluctuations as productionsimply tracks demand due to the abundant supply of raw material available from the retailtrade. India is the only commercial source for this product.58

(d) Mimosa(d)MimosaAcacia mearnsii (Mimosaceae), although not native toIndia, has been completely naturalised and is sourced fromthe extensive plantations (for pulp and bark) and wildgrowth in the Nilgiri and Kodaikanal ranges in the westernpart of Tamilnadu state (Fig. 14).Acacia mearnsii (Mimosaceae), although not native to India, has been completely naturalisedand is sourced from the extensive plantations (for pulp and bark) and wild growth in theNilgiri and Kodaikanal ranges in the western part of Tamilnadu state (Fig. 14).Mimosa has two clear seasons in March/April andSeptember - November and its flowers have no othercommercial application beyond the fragranceextraction industry. The concrete yield from flowersis around 0.8% to 0.9%.have no other commercial application beyond the fragrance extraction industry. The concreteFig. 14: Areas of Mimosa of Mimosa cultivation cultivation for yield extraction from for flowers is around 0.8% to 0.9%.extractionThe production (Fig. 15) tendsto vary significantly as theflower availability is highlysusceptible to climatic changesdue to the short season and thefragile nature of the flower.Hence processors tend tomaximise production duringthe good years and hold stockto compensate for the badyears. Morocco and France arethe other main origins for thisproduct.Mimosa has two clear seasons in March/April and September - November and its flowers!"#$%&%'()*+,(%"""!%""!"""'%""'"""&%""&"""$%""$"""%"""!"""#$%""#$"""# $"""#!%""#&""( &"") &""* &"$" &"$$-.#/(Fig. 15: Fig. Mimosa 15: Mimosa concrete concrete production production trend trendIn addition to the above big four of the Indian floral fragrance extracts industry, there are many otherextracts produced from flowers (Fig. 16) like Rose bourboniana, Jasmine auriculatum, Jasmine flexile,Champaca (Yellow & Red), Frangipani, Lotus (Pink & White), etc. Some of these have the potentialto become big products in their own right if the fast increasing demand is an indication.The production (Fig. 15) tends to vary significantly as the flower availability is highlysusceptible to climatic changes due to the short season and the fragile nature of the flower.Hence processors tend to maximise production during the good years and hold stock tocompensate for the bad years. Morocco and France are the other main origins for this product.In addition to the above big four of the Indian floral fragrance extracts industry, there aremany other extracts produced from flowers (Fig. 16) like Rose bourboniana, Jasmineauriculatum, Jasmine flexile, Champaca (Yellow & Red), Frangipani, Lotus (Pink & White),59etc. Some of these have the potential to become big products in their own right if the fastincreasing demand is an indication.

Jasmine Jasmine auriculatumJasmine Jasmine flexile flexileRose Rose bourbonianaFrangipani FrangipaniLotus Lotus (Pink) (Pink)Lotus Lotus (White) (White)Champaca (Yellow)Champaca Champaca (Red) (Red)Fig. 16: Fig. Minor 16: Minor flowers processed in India for the global fragrance industry industry60

FUTUREBesides the long tradition, there are several reasons why India is a good source for a wide range offloral products and will continue to be so for the near future. The diverse agro climatic regions ensuresuitability for most cultivation requirements. This diversity also ensures that climatic changes due toglobal reasons are not uniform across India. Hence, as one area becomes unsuitable for a particularspecies, another area in India becomes suitable for its cultivation. Flower cultivation and harvesting isalso labour intensive and highly appropriate for the typical Indian small and marginal land holdingswhere the bulk of the labour is done by the farmer and his family with minimal dependence on paidlabour. Farmers also find cultivation of flower crops a good hedge because of its nature of continuousincome over a significant period of time. The presence of a huge and efficient retail market also helpsdefray costs for the extraction industry. Highest technological capabilities for equipment fabricationand supporting infrastructure is also available locally in India. The presence of a sizable and rapidlygrowing domestic demand for the value added floral products in India is also an advantage for theindustry. Finally, a competitive industry structure and the entrepreneurial and enterprising nature ofboth farmers and manufacturers are also important factors.Raja Palaniswamy is a Director at Jasmine C.E. Pvt. Ltd., the leading floralextracts manufacturer in India. He joined Jasmine in 1998 immediately aftercompleting his Master’s in Business Administration degree and has been drivingthe organic sales growth of the company since.61

NATURAL ESSENTIAL OILS FROM THE WESTERN HIMALAYAS: THEIR ROLEIN FRAGRANCES AND FLAVOURS, QUALITY PARAMETERS,SUSTAINABILITY AND CONSERVATIONSurender MohanNatural Biotech ProductsBaggi-17502 MandiHimachal Pradesh, Indiaaro888ma@gmail.comINTRODUCTIONIndia is one of the few countries in the world having varied agro-climatic zones including westernHimalaya, where large numbers of medicinal, aromatic and dye plants are found growing wild innature.Himachal Pradesh, Jammu and Kashmir, andUttrakahand in India are mountainous states located inthe western Himalayan region. Himachal Pradesh is atthe centre of the western Himalaya with altitudesranging between 460 to 6,400 metres above sea level.Himachal PradeshGeographical PositionSurrounded byTibet, J&K, Utrakhand, Punjab andHaryanaFive RiversChenab, Ravi, Yamuna, Satluj andBeas12 District63

Geographically the state is divided into threeregions: outer Himalaya, inner Himalaya andalpine pastures. The rainfall in the outerHimalayan region varies from 152-178 cms andin the inner Himalayan region from 76-102 cms.The alpine region remains under snow for 5-6months.The climate varies from cool to severe cold withsnow-covered areas.Therefore, a wide range of aromatic plants canbe found here.! Total area 55,673 square kilometres! 40% area under forest! Altitude 460 metres – 6,400 metres! Divided into three regions! Outer Himalaya 152cms - 178 cms! Inner Himalaya 76 cms - 102 cms! Alpine pasture under snow 5-6 months! Climate is cool to coldest with snow coveredareaKey Aromatic Plants found in Western HimalayasAcorus calamusArtemisia maritima,A vulgaris, A.dranculus,A. absenthiumAngelica glaucaCedarus deodaraCinnammomum tamalaCurry leaf (Murraya koenigii)Corydalis govanianumCympopogon speciesEucalyptus speciesFerula speciesGeranium, speciesElschcltzia cristataHedychium speciesCyperus rotundasHumulus lupulus(HOPS), JuniperspeciesJasmine speciesMentha speciesNardostachys jatamansiOcimum speciesPinus roxbughi, P. walichinaRosa moschataRamlin-farnesiaSassurea lappaSkimmia laureolaThymus serphyllum,T.vulgarisTagetes minutaUsena luceaValerian wallichiiZanthoxylum alatumZingiber officinale (Ginger)Essential oils from aromatic plants that are found wild in large quantities in the western Himalaya,include:• Himalayan cedarwood oil• Himalayan juniper berry oil• Indian tagetes oil• Hedychium oil• Indian calamus oil• Valerian oils etcThese will be discussed in this paper. Essential oils from these plants are economically important andare used for various fragrance and flavour compositions. These oils are consumed domestically as wellas exported to other countries.64

The table below provides some data on the production and value of essential oils in Himachal Pradeshduring the last three financial years, namely 2009-10, 2010-11 and 2011-12.PRODUCTION (TONNES)VALUE (‘000 US$)ESSENTIAL OIL 2009-10 2010-11 2011-12 2009-2010 2010-2011 2011-2012Cedarwood Oil 200 200 150 1200 1200 1350Calamus Oil 3 3 3 135 180 195Tagetes Oil 2 3 4 240 360 560Juniper Berry Oil 4 4 4 300 300 300Hedychium Oil 2 2 3 96 100 110Costus Root Oil 0.05 0.05 0.03 50 50 30Valerian Oil 0.8 1 1 400 500 500Jatamansi Oil 0.2 0.5 0.2 44 120 52Carrot Seed Oil 3 3 3 300 300 300Angelica Oil 0.05 0.05 0.03 30 30 21Juniper Leaf Oil 1 0.9 1 24 21 24Celery Seed Oil 2 3 3 150 231 240Other Like Rose 0.1 0.1 0.1 10 15 15Ambrett etc.TOTAL 218.2 220.6 172.36 2961 3407 3775Total production was 218 tonnes, 221 tonnes and 172 tonnes. In quantity terms by far the mostimportant oil was cedarwood oil, which usually accounts for over 80% of the oil produced. The tablealso provides estimates of the value of the essential oils produced in Himachal Pradesh. As you cansee, during the past three years the annual value ranged from almost US$ 3 million to US $ 3.8million. Besides cedarwood oil the value of some other essential oils is also sizeable, particularlytagetes oil, valerian oil, carrot oil and juniper berry oil.65

This table below shows the volume of production alongside the volume of exports. Essential oilexports totalled 21.4 tonnes in 2009-10, 30.4 tonnes in 2010-11 and 39.9 tonnes during 2011 -12.Cedarwood oil is by far the dominant export with much smaller quantities of other oils.PRODUCTION(TONNES)EXPORTS(TONNES)ESSENTIAL OIL 2009-10 2010-11 2011-12 2009-10 2010-11 2011-12Cedarwood Oil 200 200 150 12 20 30Calamus Oil 3 3 3 1 1 0.8Tagetes Oil 2 3 4 0.5 0.5 0.3Juniper bBrry Oil 4 4 4 3.5 3.5 3.5Hedychium Oil 2 2 3Costus Root Oil 0.05 0.05 0.03Valerian Oil 0.8 1 1 0.1 0.1 0.1Jatamansi Oil 0.2 0.5 0.2Carrot Seed Oil 3 3 3 2 2 2Angelica Oil 0.05 0.05 0.03 0.02 0.02 0.02Juniper Leaf Oil 1 0.9 1 0.2 0.2 0.1Celery Seed Oil 2 3 3 2 3 3Other Like Rose 0.1 0.1 0.1 0.03 0.08 0.08Ambrett etc.TOTAL 218.2 220.6 172.36 21.35 30.4 39.9The main export markets for Himalayan cedarwood oil and the other oils are the USA, Germany,Australia, Switzerland, France, U.K. Malaysia and Singapore.In the following sections the economically important oils that are produced in the Western Himalayasregion are discussed.66

HIMALAYAN CEDARWOOD OILThe botanical name of the cedar species native tothe Himalayas is Cedarus deodara. This coniferis found in India in Jammu and Kashmir,Himachal Pradesh and Uttarkhand at an altitudeof 1,650-2,400 metres.Himalayan cedarwood oil is distilled from theroots and stumps of Cedrus deodara left afterlopping trees for timber extraction. These stumpsand roots are removed as per agreement with theState Government in a scientific manner. The pitsso formed are filled and consolidated, and theplanting helps to rejuvenate the cedarwoodforests.! Cedarus deodaraHimalayan Cedarwood Oil! J&K, H.P. & Uttrakhand! 1,650 m TO 2,450 m! Removal of stumps! Rejuvenation of forest byplantation! Process: chopping,disintegration, distillation,rectification! License and agreementwith government of H.P. andJ&K! Employment! ProductionCedarwood Stumps and DistillationThe essential oil is found in the whole of theplant but commercially at present the oil isdistilled from stumps and roots left as describedabove. The stumps are first chopped and thendisintegrated to 1/4" mesh to 1/8” mesh. A batchof 2 tonnes of this disintegrated material is fedinto a still and steam is injected at 35 Psig at therate of 1,000 kg/hour for 12 hours, yielding 4-6%of oil. This oil is then rectified. Therefore, cedarwood oil Himalayan crude and cedarwood oilHimalayan rectified are both known in themarket.A short two-minute video was shown illustrating various aspects of cedarwood and the production ofits essential oil.Physiochemical PropertiesColour : Brown red to yellow in colourOdour : Woody balsamicSpecific Density at 15 0 C : 0.930 to 0.938Refractive Index at 30 0 C : 1.508 to 1.510Optical Rotation : +48 0 to +70 0Acid Value : Below 1Flash Point : 118 0 C (Closed Cup Method)67

Main ConstituentsThe main constituents of cedarwood oil are:Uses• p-methyl acetophenyl acetate• 4-methy !3-tetraphydroacetophenone• "-himachalene• Iso-himachalene• #-himachalene• Cis- and trans-atlantone• Himachalol• Allo-himachalol• Longborneol and deodaroneThe oil is used with other essential oils as a fixative and diluent in soap perfumes, sanitary supplies,and polishes and for masking odours in many other industrial products. The largest quantity of cedarwood oil is used in soap industries due to its odour, epidermic and antiseptic properties.Cedarwood oilUses! The oil is used with other essential oils as a fixative and diluents inthe soap perfumes, in sanitary supplies, polishes & for maskingodors in many other industrial products.! The largest quantity of cedarwood oil is used by Soap Industriesdue to its odour, epidermic and antiseptic properties.! In India the second main use of this oil is to perfume incense sticks! Because it is non toxic to mammals and smells good, it is used inroom sprayers in place of pyrethrum to control household insects! The oil has been found biologically active against mosquito.fungitoxic ,spasmolytic and was found to have anticancer activityagainst human epidermal carcinoma of the nasopharynx in tissueculture.! Special grades of this oil are used for oil immersion lenses and as atissue clearing agent in plant and animal histological workIn India the second main use of this oilis to perfume Agarbatti (incensesticks). Because it is not toxic tomammals and smells good, it is used inroom sprayers in place of pyrethrum tocontrol household insectsThe oil has been found to bebiologically active against the mosquito(Anapheles Stephani). A lowconcentration of cedarwood oil(0.4452%) has proved sufficient toknockdown 50% of mosquitoes underlaboratory conditions. Special grades ofthis oil are used for oil-immersionlenses and as a tissue-clearing agent inplant and animal histological work.Recent studies conducted at the Central Drug Research Unit (CDRI) Lucknow have indicated thatsome fractions of Deodar Oil have potent spasmolytic activity i.e. Cedral and Deodrol are 1/10 to 1/2as active as papaverine while isoallohimachalol was the most effective against and 1.5-4 times moreactive than papaverine.Cedarwood oil is fungitoxic and also exhibits a wide range of activities and is found in more effectivefungicides as tested. It was also found to be non-phytotoxic, non-systemic to paddy plants and alsoable to control the development of leaf spot disease in paddy in preliminary in vivo investigation.Furthermore the oil controls the fungal deterioration of some spices during storage (Anupam Dixit andS.N.Dixit).68

The alcoholic extract of the stem of Cedrus deodara was found to have anticancer properties againsthuman epidermal carcinoma of the nasopharynx in tissue culture (Dhar et al., 1968).During 2010-2011, 200 tonnes of oil was manufactured and during 2011-12 150 tonnes of oil wasmanufactured. But the target for 2012 -13 is 300-400 tonnes as the Government of Himachal Pradeshhas entered into an agreement with six industries for 6,000 tonnes of raw material, and units in Jammuand Kashmir are also getting raw material. All the industries are private sector and give employmentto more than 70 people.Odour ProfileThe odour is woody balsamic but somewhat pungent due to the presence of phenols.'"E:'/6%86'H3)%'

INDIAN CALAMUS OILThe botanical name of the species is Acoruscalamus. Its essential oil is obtained bydistillation of the dried rhizome of Acoruscalamus resulting in a yield of 2% to 4%.It is found in waterlogged or marshy areas,particularly on the banks of rivers, small streams,ponds and lakes. It is both cultivated and foundwild.! Acorus calamus! Habitat! ProcessingIndian Calamus Oil! ProductionPhysiochemical PropertiesColour : Yellow to brown in colourSpecific Density at 20 0 C : 1.0750 to 1.0785Refractive Index at 25 0 C : 1.5400 to 1.5500Optical Rotation : +3 0 to InactiveFlash Point : 127 0 C (Closed Cup Method)Main ConstituentsThe main constituents of Indian calamus oils are:• # Asarone• " Asarone• Calamenol• Calamene• Calameone• Methyleugenol• Eugenol• " - Pinene & CampheneUsesThe oil is employed in perfumery, because of its peculiar, warm and somewhat spicy odour, it blendswell with neem oil and cedar wood oil as a room sprayer against household insects. Indian calamus oilhas been restricted by IFRA due to the high percentage of Asarone in fragrance. A high concentration(0.5%) of #-Asarone has been shown to be positive in Ames mutagenic test following activation(WHO-FAS, 1981)70

Due to its insecticidal properties it is used inperfume formulation for household insecticide.Therefore, the use of Indian calamus oil isdifferent from Russian or European calamus oilbecause the latter is mainly used in flavouringliquors. As an insecticide in combination withHimalayan cedarwood oil, neem oil and anyvegetable oil, it can be massaged on pets likedogs once a week followed by a bath. It will keepthe pets free from insects.Indian Calamus oilUses! The oil of calamus is used as an ingredient in flavors, particularly inliquors.! The oil is employed also in perfumery because of its peculiar, warmand somewhat spicy odour! Indian calamus oil has been restricted by IFRA due to highpercentage of asarone in fragrance. Due to its insecticidalproperties it is used in perfume formulation for householdinsecticide.! Therefore the use of Indian Calamus oil is different ascompared to Russian or European Calamus oil because thelater is mainly used in flavoring liquors.! Useful in treating mental ailments (Menon & Dandya-1967),variety of gut disorders (Nandkarni – 1954) and increasememoryDue to the high Asarone percentage this oil is useful in treating mental ailments (Menon & Dandya-1967), as an insecticide (Mukergee & Govind-1960), and in the Ayurvedic system of Indian medicines(Nandkarni – 1954) for a variety of gut disorders.Odour ProfileWarm earth somewhat spicy and greenish with camphorus undertone.3Odour Profile of Indian Calamus Oil.32.52221.5111111Value0.500 0 0 0 0 0WaxyHoneyCivetMuskyBalsamicCaramelSpicyAlmondyFloralFruityCitrusConifer0 0 0 0 0 0MintyGreenVegetable0WoodyHerbaceousHay0 0 0SmokyLeatherPowdery0FungalCamphoraceousEarthy0 0AmberedMossyOily/Fatty0Aldehydic71

TAGETES OILThe botanical name is Tagetes Minuta. It is foundat altitudes of 800-2,500 metres in the westernHimalayas.The whole plant, except for the stem, is steamdistilled to produce the essential oils, with yieldsof 0.25% to 0.5%The best quality oil is produced when the flowerstarts to mature to seed. About 4 tonnes of tagetesoil were produced during 2011, mostly forconsumption in the domestic market.Tagetes oil! Tagetes minuta! 800m to 2,500m! Steam distillation! Yield 0.25% to 0.5%! Production and marketTagetes Minuta naturalises near waste places. It is cultivated as an intercrop with maize, which itprotects as an insecticide. It also acts as a repellent to monkeys. Therefore farmers also cultivate itaround vegetable fields.Physiochemical PropertiesColour : Yellow to reddish in colourSpecific density at 20 0 C : : 0.9170 to 0.9270Refractive Index at 2 0 0C : 1.490 to 1.500Optical Rotation : +3 to 10Acid Value : Below 2Flash Point : 63 0 CMain Constituents• (Z) – # Ocimene• Dihydrotagetone• (Z) – Tagetone• (E) – Tagetone• (Z) – Ocimenone• (E) – OcimenoneUsesIts marigold-like odour is used to perfume incense sticks used during religious festivals at religiousplaces. The oil is also sprayed on fresh marigold flowers and sold during these festivals. Small dosagesare included in perfume formulations, and toilet preparations for the creation of the effects of appleand other fruity fragrances.It is used as a modifier in hair lotions of the bay rum type.72

It is also used by the Attar industries in India, andas one component to flavour tobacco and panmasala. It has a mosquito larvaecidal property,and can also function as an insecticide.The essential oil must be packed in a containerthat is full, or else nitrogen should be bubbled inthe free space so that there is no air left. It shouldbe then be stored in a cool and dark place.Tagetes oil has insecticidal and antibacterialproperties. Particular constituents have specificproperties: Ociminones shows antifungal andlarvicidal activity, Dihydrotagetone andTagetones strong inhibition activity against GramPositive and Gram Negative Bacteria.IFRA has restricted the use of tagetes oil in skincontactleave-on products to 0.01%, but there areno restrictions on rinse-off and non-skin products,including household cleaning products. A limit of0.05mg/kg has been recommended by CEFS.Tagetes MinutaUses! Its marigold-like odour, is used to perfumeincense sticks used during religious festivals.! Small dosages are included in perfumeformulations, and toilet preparations for thecreation of the effects of apple and other fruityfragrances! It is used as a modifier in hair lotions of the bay rumtype! The essential oil is also used by attar industries inIndia and used as one of component to flavourtobacco and pan masalaTagetes MinutaUses (cont)! Tagetes Oil have insecticidal and antibacterialproperties .! IFRA has restricted the use of tagetes oil in skincontact leave on products to 0.01%! Rinse off products and non skin productsincluding household cleaning products norestriction! Limit of 0.05mg/kg has been recommended byCEFS (Center for Environment and farmingsystem) in flavours.Odour ProfileStrong marigold like odour but somewhat disagreeable.3Odour Profile of Tagetes Oil32.5221.51111 1 1Value0.500 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0WaxyHoneyCivetMuskyBalsamicCaramelSpicyAlmondyFloralFruityCitrusConiferMintyGreenVegetableWoodyHerbaceousHaySmokyLeatherPowderyFungalCamphoraceousEarthyAmberedMossyOily/FattyAldehydic73

JUNIPER BERRY OILThe botanical name is Juniper Communis. It iscommonly called Houber. Juniper is a shrub or atree 5 metre in height. It grows in Jammu andKashmir and Himachal Pradesh in India. InHimachal Pradesh it is found in Lahul and Spiti,Kinnour and Chamba districts. Ripe berries aregenerally collected in August and September.Himalayan Juniper Berry Oil• Juniper Communis• 3,000m-4,500m• Jammu & Kashmir,Himachal Pradesh andUttrakhand• Ripe berries aregenerally collected inAugust and September• ProcessingPhysiochemical PropertiesColour : Very light yellow in colourOdour : Peculiar odour of barriers, flavour is some whatburning and bitterSpecific density at 15 0 C : 0.8749Refractive index at 15 0 C : 1.475Optical rotation : +10 0 C to +45 0 CFlash point : 410 CMain Constituents• " Pinene• Sabinene• # Pinene• Myrecene• Limonene• Cedarol74

UsesJuniper berry oil is used widely in essence forflavouring beverages and liquors, particularly ofthe gin and sloe gin type. Several Europeanliquors, e.g. Steinhager, have their characteristicflavour chiefly due to the presence of juniperberry oil.The Himalayan juniper berry oil has a somewhatbitter under-tone as compared to European or“Yugoslavian” oil; therefore its cost is low.However, after its double rectification it hasfound uses in flavouring as well as in perfumeformulations for room sprayers, and as adisinfectant and deodorant. It is also used inhawan samagri.Juniper berry oil is carminative, stimulant anddiuretic. It is also used in genital tract disorderssuch as gonorrhoea, gleets, leucorrhoea, andcutaneous diseases and has been known for along time as a diuretic.The distillate along with the terpeneless andsesquiterpeneless oils are used in flavouringspecial confections and candies in the followingproportions:Himalayan Juniper Berry OilUses! Juniper Berry Oil is used widely in essence for theflavouring of beverages and liquours,particularly of the gin and sloe gin type! Double rectification! Juniper berry oil is carminative, stimulant anddiuretic.! Also used in Hawan SamagriHimalayan Juniper Berry OilUses (cont)! The distillate along with the terpeneless andsesquiterpeneless oils are used in flavouring ofspecial confections and candies in the followingproportions:!Non-alcoholic beverages 32 ppmAlcoholic beverages95 ppmIce-Cream 1.9 ppmCandy4.3 ppmBaked goods11 ppmGelatins & puddings 0.01 ppmChewing gum0.10 ppmMeats200 ppmNon-alcoholic beveragesAlcoholic beveragesIce-creamCandyBaked goodsGelatines & puddingsChewing gumMeats32 ppm95 ppm1.9 ppm4.3 ppm11 ppm0.01 ppm0.10 ppm200 ppm75

Odour ProfileBalsamic, woody, herbal and dry spicy peculiar to berries33Odour Profile of Juniper Berry Oil2.5221.511111 11Value0.500 0 0 000 000000 0 0 0 0 0 0 0 0WaxyHoneyCivetMuskyBalsamicCaramelSpicyAlmondyFloralFruityCitrusConiferMintyGreenVegetableWoodyHerbaceousHaySmokyLeatherPowderyFungalCamphoraceousEarthyAmberedMossyOily/FattyAldehydicHEDYCHIUM OILThe botanical name is Hedychium spicatum. Thecommon name is Kapoor kachri oil. In Japan it iscalled Sanna oil. This plant is commonly foundin the Western Himalayas at an altitude of about1,000 – 2,500 metres from sea level.The essential oil is obtained by steam distillationof dried rhizome.• Kapoor kachri oil• Sana oil in Japan• Western Himalayasat an altitude of1,000m to 2,500m• Distillation• ProductionHedychium oilPhysiochemical PropertiesColour : Yellow to brownOdour : Freshly distilled oil is woody, spicy with aspicy, camphorous, fresh woody top note and increasinglyspicy with a hint of cinnamon.Specific density at 25 0 C : 0.8300Refractive index at 25 0 C : 1.4800 to 1.4890Optical rotation : +10 0 C to +15 0 CAcid No. : 2 to 476

Main Constituents• Elemol• Eugnol• Eudesmol• Cyclopentene• $ methoxycinnamic acid• 1:8 Cineole• Carboxylic acid (has been major constituent)• Linalool• Ferneol• Cis jasmone (contributes to the pleasant odour)• Hydrocinnamaldehyde• Neocarvomenthol• Camphor• Myrecene• Car-3-ene• " pinene• Limonene• # Patchulene• # bisabolene• CadineneCineole and neocarvomenthol are responsible for the spicy note. Camphor adds to the camphorousnote, myrecene, car-3-ene, " pinene and limonene are terpene deducted. The prominent sesquiterpenesare # Patchulene, # bisabolene and cadinene.UsesBoth the rhizome and the oil are stomachic,carminative, stimulant and tonic medicines. Theyare employed in the preparation of Abir, afragrant coloured powder used during the Holifestival and religious ceremonies in India. Indyeing they may help to impart a pleasant smellto fabrics. They are also applied with henna toproduce perfumed clothes known locally asMalagiri clothes. The oil can be used in fragranceformulation for hair oils, to stop hair falling out,soaps and face powder.Hedychium SpicatumUses! The essential oil is stomachic, carminative, stimulant and tonic! Employed in the preparation of Abir,a fragrant coloured powderused during Holi festival and religious ceremonies in India.! They may be employed as auxillary in dyeing to impart apleasant smell to fabrics! They are also used with henna to produce perfumed clothesknown locally as Malagiri clothes! The oil can be used in fragrance formulation for hair oils , soapsand face powder! Cobatine Fragrance which won award in 1994 in Europe was theflower fragrances of this plant. It blend well with Jasmine, Tuberoseetc. to give it warm and spicy odour.! This oil is one of important component of Hina attar, which is used intobacco flavour and incense sticks etcDue to its woody, spicy and peculiar root-like odour, it is used in perfume formulations. CabotineFragrance, which won a European award in 1994, was the flower fragrance of this plant. It blends wellwith jasmine, and tuberose etc. to give a warm and spicy odour.77

This oil is one important component of Hina Attar employed to flavour tobacco, and incense sticks etc.During 2010-11, 3 tonnes of oil was produced and during 2012, 3.5 tonnes of oil is being produced,mainly for the domestic market with only a small quantity exporteOdour ProfileSpicy herbaceous, earthy with camphorous undertone, increasingly spicy with a cinnamon touch.3Odour Profile of Hedychium Oil32.5221.511111Value0.50.50.50.500 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0WaxyHoneyCivetMuskyBalsamicCaramelSpicyAlmondyFloralFruityCitrusconifermintyGreenVegetableWoodyHerbaceousHaySmokyLeatherPowderyFungalCamphoraceousEarthyAmberedMossyOily/FattyAldehydicVALERIAN ROOT OILThe botanical name of the species is ValerianaWallichii. The plant occurs abundantly in thetemperate region of Western Himalaya at analtitude of 1,300- 2,500m.Valerian roots yield 0.4% to 0.8% essential oilby steam distillation. Valerian roots also yield upto 3.2% Valepotriates (irridoids).Valerian Oil! Valerian wallichii! Grows at altitude 1,300 metres – 2,500metres! Distillation and yield of essential oil and Valpotrates! Main constituents:! Patcholi Alcohal, Malliol, 3-methyl valeric acidpatchoulene, Gauiene, Valerenone! Type of valerian oils78

Physiochemical PropertiesColourOdourRefractive index : 1.4830 to 1.5100Specific gravity : 0.9300 to 0.9600Optical Rotation : -300 to -500Flash Point: 1200 CMain Constituents• Patchouli alcohol• Malliol• Patchoulene• Guaiene• Valerenone• 3-Methyl Valeric acid: Pale yellow to dark brown: Musky, woody balsamic and earthyTwo type of valerian oil are found, one rich in patchouli alcohol in Chamba and Kinnaur in theKashmir Valley; the other rich in malliol in the rest of Himachal Pradesh, Uttrakhand and Nepal.UsesIt is utilised in perfumery for its musky wood andbalsamic odours, which give interesting effects incombination with patchouli, costus, oakmoss,cypriol etc. in modern chypre variations.The oil is also used for flavouring tobacco and,in combination with hops or lipulin flavourextracts, beer or root beer.Valerian is used in Ayurveda and Unani systemsof medicine for nervous disorders, debility,falling reflexes as hypnotic and to treat spasticdisorders like chorea and gastro-spasms. It isuseful for hysteria, epilepsy, shell shock andneurosis.Valerian OilUses• Used in perfumery for musky wood and balsamic odourswhich give interesting effects in combination with patchouli,costus, oakmoss, cypriol, etc in modern chypre variations.• Oil is used for flavoring tobacco and in combination withhops or lipulin flavour extracts in beer or root beer• Valerian is used in Ayurveda and Unani systems of medicinefor nervous, debility, falling reflexes as hypnotic and to treatspastic disorders . Useful in hysteria, epilepsy, shell shockand neurosis• The resinoid finds use in modern medicine as number ofepoxy-iridoids esters collectively known as valepotrates usedto improve co ordination, diminish restlessness, anxiety,aggressiveness and increase concentrationThe resinoid found use in modern medicine as a number of epoxy-iridoids esters, collectively knownas valepotrates, improve co-ordination, diminish restlessness, anxiety and aggressiveness, and increaseconcentration.79

Various improvements in the cultivation of Valerian Wallichii have been developed in associationwith the Institute of Himalayan Bioresource Technology (IHBT) Palampur, on experimental sitesshaded by apple trees.Valerian Wallichii experimentalcultivation under apple trees at Badhuin Mandi DistrictCULTIVATION ASPECTS DEVELOPED INASSOCIATION WITH IHBT PALAMPUROdour ProfileMusky, woody, balsamic and earthy.33Odour Profile of Valerian Root Oil2.522221.511111Value0.500 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0WaxyHoneyCivetMuskyBalsamicCaramelSpicyAlmondyFloralFruityCitrusConiferMintyGreenVegetableWoodyHerbaceousHaySmokyLeatherPowderyFungalCamphoraceousEarthyAmberedMossyOily/FattyAldehydic80

CONCLUSIONSWith regard to the essential oils discussed above, the state government and private companies aretaking steps to ensure sustainability and the conservation of plantations. Hence the oils will beavailable for a long time in the future.THANK YOUSURENDER MOHANCHEMEXCIL AWARD WINNER &UDYOG PATRANATURAL BIOTECH PRODUCTSBAGGI-175027,MANDI H.Paro888ma@gmail.comwww.hariindia.com,www.himoil.comPHONE :01905 245232,9418045252fax : 01905 245132Surender Mohan, born in 1952 is a science graduate and currently ManagingPartner of M/S Hari Industries, which has been producing Himalayancedarwood oil since 1980. Since then the company has added three moreproduction units producing a wide range of Himalayan essential oils andextracts. As Managing Director of this group of companies he looks after inhouseR&D projects and marketing, both in India and abroad. He is Presidentof Himalayan Photochemical and Growers Association, H.P. and waspreviously Executive member of Essential Oil Association of India (EOAI). Hehas advised various organisations and organised many seminars on Himalayanessential oils as well as receiving several awards for his work.81

CHINA’S FLAVOUR AND FRAGRANCE INDUSTRIES: AN OVERVIEWZhang JingyuanChina Association of Fragrance, Flavor and Cosmetic Industries (CAFFCI)Beijing, Chinazhangjy@caffci.orgINTRODUCTIONIt is a great privilege for me to give a presentationon recent developments in China’s flavour andfragrance industry at this IFEAT Conference inSingapore – one of the major events in the flavourand fragrance industry’s calendar.At the beginning of my presentation, let me giveyou a brief account of the China Association ofFragrance, Flavour and Cosmetic Industries (orCAFFCI in short form) and its role in the flavourand fragrance industry.The Ministry of Light Industry under the guidance of the Daily-Used Chemical Bureau foundedCAFFCI almost 30 years ago in August 1984.AuthorisedByMinistry OfCivilAffairsNationalLevelSince 1984CAFFCINon-profitSocialOrganisation700+Members Bridge ofCommunicationbetween Industryand Government3 functions:• Development programfor the industries• Industries’ standards• Manufacturing licencesCAFFCI also became authorisedby the Ministry of Civil Affairs ata national level as a licensedindependent corporation. We area non-profit social organisationwith over 700 partners.World famous fragrance andflavour companies are membersof our organisation, includingGivaudan, Firmenich, IFF -International Flavors andFragrances, Symrise andTakasago. These are importantcompanies in the Chinese marketand have made substantialinvestments to establish sizeableoperations in the country.CAFFCI’s responsibilities include representing concerned industry partners. We make sure that theyabide by the laws of China. We help them communicate with the government in order to solve anypotential problems.83

In order to keep our industry developing, we encourage and support our partners by ensuring high andfrequent quality controls. In addition, we encourage them to abide by our laws and to follow ournational standards.CAFFCI has three main functions. They are:• To draft the development programme for the industry, and to provide guidance on itsperformance.• To participate in formulating and revising standards used in the industry, and to organise theimplementation of these standards.• A processing department for the application of manufacturing licences, authorised by thegovernment.CAFFCI is a bridge of communication between the industry and the government.Below is a slide showing the most famous Chinese e-commerce website - Taobao. When you searchfor essential oils you will find 315,432 related products. The best seller can sell 21,000 within a singlemonth. From the chart, we can see that essential oils are very useful and very popular products. Wework in a great industry.84

In my presentation today I intend to dealwith four major topics:• A review of some of the relevantaspects of China’s economy andeconomic development.• A profile of the flavour andfragrance industry in China.• Various legislation andregulations will be reviewed,particularly with regard toessential oils and aromatherapy.• Some of the challenges andopportunities facing the sectors,along with possible future trends,will be discussed.!"#$%&'()*+$+,#*(-#./%0+$!"#$%&'(121(3$4/'.56!"#$%&'(789/:%.+56()$;#5+$,8$.7#'8(+(!"%$$8:'CHINA’S ECONOMIC SITUATION!"#$%&'$()"*+,$)-+./012$34$1566$$78#")+9$:;$+)3??3"4$@$;.A"4B$?-)(.9+$*")?B$38#")+.)$CD#")+9$:;

CHINA’S FLAVOUR AND FRAGRANCE INDUSTRYThe number of F&F productionenterprises in China is slowlyincreasing. Currently there existmore than 1,000 enterprises in thissector. Of these, over 200companies are foreign fundedenterprises.Most enterprises in our sector aremedium or small sized enterprises.However, large enterprises ownover 80% of the market share, andthis number is still increasing.Company Number1000900800700662Production & SalesAs can be seen from the data onF&F industry sales, the averageannual growth rate of sales in theF&F industry has been greater than10%.20052012This growth rate is higher than the average growth rate for the same period in the country's GDP, thusillustrating the rapid development of the F&F industry in China.China’s F&F industry trade dataalso show the rapid development ofthe Chinese imports and exports offragrances and flavours. Inparticular, exports increased bymore than 100% between 2005 and2011.86

These figures show theproportionate sizes of themain sectors in the industry.The improvement in people’squality of life is promotingthe development of the foodprocessing industry. It is alsomaking the flavouringindustry grow rapidly, so thatit now exceeds more than halfof the total production value.89:0'+302#'910)9;+++++5%6#//%+

FlavouringFlavouring needs a licence and it also needs a security check for food-safety reasons. GB2760 is thenational standard for use of food additives. So, GB2760 approval has to be obtained before the use ofany flavouring products. Appropriate national safety standards are frequently being updated. Forexample, last year we had 1,854 different approved flavouring products. This is a smaller numbercompared to other countries. This year we approved the use of another 15 flavouring products.CAFFCI is developing national flavouring safety standards based on the Joint FAO/WHO ExpertCommittee on Food Additives (JECFA’s) existing international specifications and norms. The aim isto align standards in the Chinese market with existing world standards as far as possible.FragranceCAFFCI has joined the International Fragrance Association (IFRA), and is working with IFRAstandards in China and is prepared to revise the National Fragrance Standards.The Chinese State Food and Drug Administration (SFDA) and other state organs are assistingCAFFCI in formulating relevant laws and regulations relating to cosmetics, including cosmetic rawmaterials and licensing requirements.AN EXAMPLE OF CHINA’S F&F REGULATORY SYSTEM : PHTHALATES IN FOODAs an example of regulatons, I want to take theuse of phthalates in food.In June 2011 unscrupulous Taiwanesecompanies added phthalates illegally into foodemulsifiers. This triggered a food safetyincident, which affected the Chinese Mainland.At that time, IFEAT also followed the eventclosely. According to the regulations, phthalateesters are not food additives and cannot beadded to food. Previously no attention had beengiven to such substances and there was nodetection system.! !"#$$%$"&''%()''*"+*",-./0,1,'2,."/231)-&%."&-"4)&5)-"! !"67&-)"&$%-89%$")"'&3&:%$")32,-:"2;"17:7)'):%."&-";22$"! !"

Enterprises have to pay close attention to the regulation that the raw materials containing phthalatesmust contain less than 60mg/kg by detecting the phthalates levels or they cannot be used in foodadditives.THE RISE OF NEW CHANNELSEssential oil traditional saleschannels include wholesale markets,department stores, speciality stores(such as beauty salons, spa’s andother professional organisations).According to the related associationdata, the total number of beautysalons and similar institutions inChina right now has passed morethan 1.5 million. Out of these, onlyabout 170,000 are large-scaleoperations. This is a very big marketin China.Essential oil sales channels,according to the various productsegments, are not the same. Datafrom the related association from2009 show that 55 percent of sales comes from professional spas, business centres and beauty clubs.Sales from shopping malls came to 27% and “agents” share of the sales accounted for 12%.Essential oils have a huge market in e-commerce.• Rise of New Channels! Wholesale markets! Department stores! Specialty stores,! Professional markets(Beauty salons and SPAs)Traditional!"#$$%&'%()))))! )&*+)(+#&,#-,)! ).#$(%)/-*/#'#&,#))! "01-2,)1-#&,()E-commerce! Huge B2B, B2C market! Quick & lower costWith economic development, public revenues rise and higher incomes are used to enhance the spirit ofenjoyment, and overall spending increases. In the internet era, online sales have become a greatmarket. A casual Internet search in Chinese on the internet shows many websites are selling a varietyof products, including sites selling a large number of essential oils. Young people like this saleschannel.Thus e-commerce is both an opportunity and a challenge. There are excellent products, fake products,some products are of high quality, some are inferior products that fail to meet standards and there isalso fraud to consider.The Internet is a great market in which many essential oils are sold. Monthly sales of essential oils onTaobao (a famous Chinese internet market) website shows that there are more than 10,000 shops. Eachshop can have hundreds of different products and there are sellers who sell 10,000 products a month,so you can imagine how large this market is.Famous brands should seize this market as soon as possible. Chinese people's spending habits favourthe big, quality brands. They could provide consumers with a choice of reliable, well-known products.89

PROSPECTSA short summary of what we havediscussed.The Chinese market should continue togrow. There are many chances enterprisesshould not miss.Chinese laws and regulations and themanagement system are appropriate forfuture business in F&F. There have beenmany great changes, which keep happeningfor the better. Producers entering theChinese market should pay close attention tochanges in regulations.! !"#$%&%'()*+%,'-#..'/0$1$2%',0'3*0-''! 4%32.)10$&'.00+')55*05*#),%'60*'62,2*%'7%8%.05(%$,&'! 4#&%'06'$%-'/")$$%.&The rise of young consumer groups is opening up many new markets. And the establishment of newsales channels is important to keep up with the demand.Thank you for your attention! This completes my presentation and I hope that we can continue todiscuss the issues.Zhang Jingyuan is Secretary General of CAFFCI. He graduated from theNational University of Defense Technology with a degree in chemicalengineering. As a senior engineer, he had several years experience in chemicalstudies and research. Following a long period of employment as the director incharge of managing the government’s scientific programme especially the dailychemical industry, he took up his current position with CAFFCI, where he hasbeen serving the industry with his ability.90

OVERVIEW OF THE CHINESE GUM TURPENTINE AND TURPENTINEDERIVATIVES INDUSTRYINTRODUCTIONEnping ZhengFujian Green Pine Co., LtdHuiyao Industrial Park, Jianyang Fujian 354200, Chinachristina.zheng@greenpine.ccAs you know, terpene-based aroma chemicals play a significant role in the flavour and fragranceindustry. In previous IFEAT conferences there have been many papers on different aspects of theturpentine sector. Today I am pleased to take this opportunity to share my general understanding ofwhat China has experienced in this industry over the past few decades.My presentation provides an update on both global turpentine resources and the Chinese gumturpentine (GT industry). This will be followed by a review of the general turpentine derivativeindustry, the development of the GT derivatives industry in China, together with the challenges facedby the industry. Finally I look to the future and draw some conclusions.GLOBAL GUM TURPENTINE RESOURCES UPDATEToday turpentine supply comes from two major sources. One is obtained by the recovery effort of thekraft process during pulping pine trees - the first phase of the papermaking process. The end productis named crude sulfate turpentine (CST), the by-product from pulping mills, mainly produced in NorthAmerica.The other is obtained by tapping living tree to accumulate pine gum resin, which then is processed intogum rosin (GR) and gum turpentine (GT) with an approximate ratio of five to one. GT is the so-calledby-product of gum rosin production. One thing in common for the two sources is the nature of being a“by-product”. It means this industry is heavily affected by the “main-product”.Sources• Crude sulfate turpentine (CST)• Gum turpentine (GT)91

China started the industrial scale GR/GT production in the late 1940s, which was the time that GR/GTproduction in North America faded out rapidly. Commercial gum tapping in North America almoststopped by the 1980s. Mr Michael B. Wimberly presented the paper A Review of North American andGlobal Turpentine Sector at IFEAT Montreal 2008, which gave us a clear picture of how GTdisappeared in North America and was replaced by more economical CST (Diag. 1).Diag.1 Turpentine Production in North AmericaChina has been increasing GT production from that same period, emerging as a major gum turpentinesupplier since then to meet the expanding global demand. Diag. 2 depicts that gum turpentine annualproduction remained around 70,000 tonnes in the 1980s to 1990s. It has then steadily increased yearby year since 2000 to make up for the reduction in CST production in North America due to theclosure of pulping mills (Diag. 1 North American CST production) and to meet the expanding globaldemand. Finally GT production reached a peak of 140,000 tonnes in 2006, but dropped significantlyin 2008 because of the disastrous snowstorms in most of the crop regions. Production then recoveredto between 120,000 tonnes and 140,000 tonnes in recent years. The rise of Chinese GT production hasboosted China as one of the most important players supporting the sustainable development of thearoma chemicals industry.!"""#$% ""Chinese GT Production 1980-2011Source: China National Forest Product Industry Association (CNFPIA)%!!"$#!"$!!"#!"!"$&'!"$&'("$&'&"$&&)"$&&#"$&&*"$&&&"%!!$"%!!)"%!!#"%!!*"%!!&"%!$$"Diag.2 GT Historical Production in China92

The abundant pine forests in China and a competitive labour force have been the main driving factorsof the China GR/GT industry. Now China acts as a key member in the global GR/GT industrycontributing about 75% of global GT production, as shown in Diag. 3:Global GT Resources UpdateEstimated GT world production 2010!"#$%&&'()&*+%,#-&.)&/$01$23#%&')&/$0#%&4)&5#26$%7&8)&9+:2$;$%&=2>#?1&

It is also highlighted in Diag. 5 thatgum rosin production has beendeveloping rapidly since 2000 inYunnan province, which has takenover the leading position fromGuangdong and Guangxi and hasacted as an active and vital player inChina GR/GT industry. A trend hasbeen emerging more and moreclearly for production to shift fromthe major crop regions in the moredeveloped provinces to moreremote and less developed regions,to take advantage of lower wagerates.China GT Production in each Region(!!!?.2(&!"!##(%!"!##($!"!##-./012#(!!"!##345678#9678:;6#'!"!##-8:#&!"!##=478:;6#%!"!##$!"!##!"!##$!!!# $!!(# $!!$# $!!)# $!!%# $!!*# $!!&# $!!+# $!!'# $!!,# $!(!# $!((#Source: CFNPIA Gum Rosin Annual ConferenceDiag. 5 GT Production in each RegionChinese GT QualityGum turpentine derived from different pine species has different qualities, but what most concerns theusers is the pinene content (Table 1). Pinus Kesiya and Pinus Elliottii are preferred by beta pineneroute aroma chemical producers because of their high content of beta pinene.SpeciesPinus MassonianaLocationsGuangdongGuangxiFujianApproximate pinene content in GTbeta pinene alpha pinene Total3-8% 80-85% 85-90%Pinus Yunnanensis Yunnan 10-20% 70-80% 88-92%Pinus Kesiya Yunnan 20-30% 60-70% 88-92%Pinus ElliottiiJiangxi, Guangdong,Guangxi, FujianTable 1: Quality of Chinese Gum Turpentine35-38% 50-55% 85-90%94

Chinese GT Industry PerspectiveOleo pine gum tapping in China is still a labour intensiveindustry. Since 2000, the number of farmers involved intapping has been greater than 250,000. Most activities are stilldone in the traditional way, which is hard work and notsustainable. Nowadays over 800 GR/GT plants are spreadover the regions mentioned above. Most are small scale.There are only about 60 plants, in which the output of gumrosin is more than 10,000 metric tons annually. In total thereare around 400,000 people relying on the GR/GT industry fora living, including farmers, crude gum collectors, dealers &gum rosin production operators.Pinus ElliottiiGum tapping and transportation in mountain area in Yunnanprovince.Gum tapping family inYunnan ProvinceAlthough China has been dominating globalGT production for decades, and otherproducing countries always follow the pricetrends that China sets, we never expectfavourable winds all the way. In recent years,resource development in Guangdong andGuangxi has favoured the more profitableeucalyptus. It is without a doubt threateningthe future of this industry. And there is amore worrying factor: the irreversible wageincreases (Diag. 6) have driven up gumtapping costs 300% in the last 10 years.“Expensive” GT becomes less attractive.'"$'"#'!"&!"%!"$!"#GT PerspectiveChina Labour Salary Changes!#!!# #!!$ #!!% #!!&()*+,-*./01++,2*.34.567Source: IMFDiag. 6 Chinese General Labour Cost Changes since 2002Source: IMF95

The downturn in the global economy makes things worse. As an overall consequence, the GT price ismore volatile than at anytime in history. The ceiling price of GT price in US dollars is more thanseven times higher compared with that of a decade ago, while the Chinese currency has appreciated 30%against the US dollar. (Diag. 7).GT PerspectiveMonthly Prices of GT Pinus Massonnia 2001-Oct.2012Diag. 7 Chinese GT trends-Pinus Masonniana 2001-Oct.2012Source: www.rosin-china.comSource: With the “demographic dividend” coming to an end, labour costs continue going up, so gum tappingbecomes a questionable model for the future of GR/GT in China. Worries emerge over thesustainability of the GR/GT industry in China. People have started questioning whether the GR/GTindustry route in North American history will be duplicated in China. And, if so, how soon it willhappen? Mr.Wimberly also raised the same question in his conclusion. I’d like to share my views asfollows:1. Chinese economic development is very unbalanced: the inland provinces will still be able togenerate a competitive labour force in the next 10 years. As GR/GT production is movingfrom coastal to inland provinces, China still has a good chance to be able to supply globaldemand.2. The price of GT will continue to go up if we look at the long run trend. Live-pine tapping willnot disappear, as happened in North America, because China does not have enough CST as areplacement in the foreseeable future. Therefore, expensive Chinese GT will lose its marketto other sources, for example, petrochemicals at a certain point or GT from other countries.Only turpentine dependency products consume turpentine. Demand for GT will shrink if theprice is too expensive. However compared to the North American GT price in 1946 when GT96

faded out, which was equivalent to about USD 4.5 kg today, today’s China GT price of USD 2kg is still not expensive.3. Another factor is how many pine trees are used in pulping mills in China. The day when Chinastarts to produce a substantial quantity GT replacement material, such as tall oil rosin and CST,this will be the time for the traditional gum tapping to start phasing out.THE GT DERIVATIVES INDUSTRY IN CHINAGeneral Turpentine Derivative Industry ReviewTurpentine can be used for many different things, mainly as starting materials (Diag. 8) for terpenebased chemicals such as terpene resin, pine oil, borneol, camphor and aroma chemicals for F&Fformulations. The entire value chain of these products and downstream industries’ changes will havea significant impact on the turpentine market.Diag. 8 Turpentine Value ChainTurpentine as a feedstock of chemical synthesis began in late 19 th century after the elucidation ofterpene molecular structure provided by Otto Wallach who won the Nobel laureate for chemistry in1910. Camphor and terpineol are two terpene products that had been made at an early stage in theterpene industry. Amazingly they are still the most important products among the analogues after awhole century. Implementation of pyrolysis technology led the synthesis of terpene chemicals into anew era. Most of the important aroma chemicals, such as linalool, geraniol, citral, citronellol,dihydromyrcenol, iso E Super Rand menthol are made starting with alpha pinene or beta pinene. In themeantime, the petrochemical industry has penetrated everywhere in our lives. Terpene resins havealready lost a big market share through competition with hydrocarbon resin. The competition betweenterpene-based chemicals and petro-chemicals over major F&F ingredients has never stopped. Table 2illustrates competition between these two industries.97

Product NameLinalool/CitralMentholGeraniolCitronellolIso E SuperDihydromyrcenolLyralTerpineolCompetition StatusPetro dominatingPetro dominatingTie, but terpene losing groundTie, but terpene losing groundTurpentine dependenceTurpentine dependenceTurpentine dependenceTurpentine dependenceTable 2 Competition with Synthetic F&F ingredientsDue to the uncertain trend of turpentine pricing discussed earlier (Diag. 7), the turpentine derivativesindustry is facing more and more challenges. Staying with the turpentine dependency productportfolio would be safer.Development of Turpentine-based Chemicals in ChinaBack in China, turpentine processing started in the 1950s, right after the communist party came topower. The industry at that time focused on fulfilling the domestic market demand for traditionalpharmaceutical ingredients, namely camphor, borneol and terpineol (Diag. 9). From 1966 to 1976, the“Cultural Revolution” led Mainland China along the wrong path. All industries were in the dark,turpentine being no exception.Rapid development began in the1980s as China carried out anopen-door policy. Most stateownedturpentine derivativescompanies were privatised.Together with new investmentssince 2000, China has forged agood foundation. Competitionmade people pay more attentionto innovation. As a result, manycatalyst systems with highefficiency and high selectivityhave been developed. Fixedbedtechnology has been appliedsuccessfully to make manyterpene-based molecules in anenvironmentally friendly way.In the terpene-based aromachemicals sector, most of thekey terpene products such asPharmaceutical ProductsOHChinese GT Derivatives IndustryDevelopmentOOHAroma Chemicals1950’s 1980’s 2010’sStarted 1950sRapid development since 1980sBooming after 2000Diag. 9 Development of Turpentine-Based Chemicals in ChinaIBCH, dehydromyrcenol, sandelal, linalool, geraniol, iso E super, and lyral have been produced (Diag.9) in China. And the producers have been playing crucial roles for F&F formulators.OHOHOHOHOHOHOOHCHO98

The GT derivatives industry has beendeveloping fast in China, and it is mainlygum turpentine that has been processed inChina. Diag. 10 illustrates the GT volumethat was used in processing variousterpene-based chemicals in China and thequantity for exporting respectively in2009. The top three uses are for producingcamphor, terpineol and aroma chemicals.Only about 2% of GT is for export, but ifthe quantity used by pinene processing isincluded, 21% is exported.Terpene Based ChemicalsGT Volume Used(tonnes)Camphor, IBA & Camphene 35,000Terpineol & Pine oil 30,000Aroma chemicals 18,000Terpene Resin 15,000Borneol 6,000Pinene for export 25,000Turpentine export 3,200Total GT volume used in 2009 132,200Chinese GT Derivatives IndustryDiag. 10 China GT Usage Breakdown in 2009Source: China Rosin & Turpentine Derivatives TradeAssociation, Customs Data & internal estimatesSource: China Rosin & Turpentine Derivatives Trade Association,Customs data and internal estimates Challenges for the GT Derivative Industry in ChinaOn one hand, China has had great achievements in past decades, but on the other hand, negativity hasfollowed. “Me too” style investment built up capacity much more than necessary. Just imagine, thereare twenty companies producing terpineol, four for camphor, six for dihydromyrcenol and four for IsoE super in China and so on. Domestic competition and simultaneous competition with producers inNorth America, Europe and India are inevitable. In the meantime, uncertain fluctuations in GT priceshave resulted in tremendous cost increases and unexpected risks for GT derivative producers. Eventhough all those threatening situations remain real, new capacity for terpene-based aroma chemicalswill continuously emerge. Small-scale companies with copied know-how, without any innovation, aregoing to find it difficult to survive.While the competition is getting white-hot, regulatory issues are getting more and more important. Aswe all know, REACH has impacted on all companies involved in the flavour and fragrance industry:there is no exception for Chinese terpene chemical producers as they look at the global market. It isnot easy to manage this but China has no choice but to face it. As the leading producers, severalChinese companies have been obligated to take the responsibility of lead registrant (LR). Fujian GreenPine has acted as the LR for camphor; Wanxiang International has acted as the LR for l-carvone, etc. It99

is a very complicated process, it takes quite some time to gather all the necessary product safety dataand, of course, it is extremely costly. There might still be time for small- scale producers unconcernedabout the regulatory issues. However, we foresee that one day they are likely to be eliminated fromthis market.New local and national regulations or laws on environmental protection, dangerous chemical operationand transportation, food additives, and ingredients for flavours have been strictly implemented. Thatwill definitely add much cost pressure on business operations.Today this industry in China is struggling with over-capacity, regulations, tightening environmentalpolicy, competition from petrol route products, and the global economy downturn, as well asfluctuations in GT prices. All of these together have pushed this industry to the edge. Hopefully theadversity can lead to a better future by innovation and consolidation. Mergers, acquisitions, and/orrestructuring in this industry will be inevitable.OUTLOOKAfter a brief review of the turpentine industry in China during the past 60 years, I would like tohighlight some points, which are important for the turpentine industry in China in the next decade.1. Private investors have started to buy out pine forests. They control both gum tapping andGR/GT production. They go even further into downstream products. Their integratedoperations differentiate them from the traditional players. It will be interesting to see how thisaffects the industry in the coming years.2. Though most pulping mills continue to use eucalyptus trees and recycled paper as feedstocksin China, the scheduled paper mills in Jiangxi province will use pine trees as their main source.It means CST supply in China will increase.3. Mergers and acquisitions will continue to cope with the current adversity and to help preparefor the future.CONCLUSIONS1. The supply of gum turpentine from China will offset the global demand in the coming decade,although the cost will continue to rise. In the end, the turpentine dependence product portfoliowill consume the major share of gum turpentine.2. Chinese companies will keep moving to strengthen their position through industry integrationand innovation.3. Competition between the terpene-based chemicals and the petro-based chemicals will continue.4. Competition inside the industry will turn white-hot. It looks as if a tough time is ahead foreveryone. Something good should eventually come from these problems, namely,consolidation.100

Acknowledgements• Mr. Lin Like, Professor of Nanjing University• Dr. Peter Greenhalgh of IFEATBibliography• The Global Supply of Turpentine by Charlie Morris; 2000 IFEAT• A Review of the North American and Global Terpene Sector by Michael B. Wimberly; 2008IFEAT.• Brazilian Pine Chemicals 2010 by Alex Cunningham, 2010 Huangshan FCA• CTO –Rosin supply perspective by Alan Phillipe, 2010 Huangshan FCA• Review Changes in the Ecosystem of Chinese Rosin Industry by Song Lifeng, 2010 ChinaRosin Summit• http://www.pinechemicals.org• http://www.china-rosin.comEnping Zheng is currently vice general manager and sales director of FujianGreen Pine Co., Ltd, a leading manufacturer of turpentine derivatives in Chinasuch as camphor racemic, isobornyl acetate etc. She joined the company in 2009.She obtained a Bachelor Degree of Chemical Engineering at Beijing Universityof Chemical Technology in 1996 and obtained a Master in HRM in BeijingUniversity in 2001. She has been working in the flavours and fragrancesindustry since 1999.101

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ANETHOLE DEVELOPMENT TRENDSHuang ZongliangChengdu Jianzhong Flavors & Fragrances,Sichuan Province, Chinahuangzl74@vip.sina.comINTRODUCTIONGlobal demand for anethole is increasing year by year, withcurrent annual demand estimated at approximately 5,000 tons.Anethole comes from three main sources. First, natural anethole,which is separated from natural aniseed oil, star anise oil andfennel oil. Second, crude sulphate turpentine (CST) anethole isobtained from the high temperature fraction of CST. Third,synthetic anethole can be derived from petrochemical materials.The presentation will selectively analyse production methods,supply and price trends, uses and development trends. Finally, anassessment will be made of the implications of the above developments and their impact on futureopportunities, including the viewpoint that synthetic anethole will gradually be substituted for naturalanethole and CST anethole.Anethole, also called iso-estragole, anethol, 1-Methoxy 4 –propenyl benzene, is found as two isomers,cis- and trans-. The CAS No. of cis-anethole is 104-46-1, and the CAS No. of trans-anethole is 4180-23-8. The physicochemical properties of anethole are summarized in Table 1:Table 1 The physicochemical properties of anethole1. INTRODUCTIONAnethole comes from three main sources• (1) Natural anethole which is separated from naturalaniseed oil, star anise oil and fennel oil.• (2) Crude sulphate turpentine (CST) anethole isobtained from the high temperature fraction of CST.• (3) Synthetic anethole can be derived frompetrochemical materials.Chemical structural formulaCAS No. 104-46-1NamesIso-estragole, Anethol, 1-Methoxy 4 –Propenyl BenzeneMolecular formulaC 10 H 12 OMolecular weight 148.2AppearanceColourless to light-coloured liquidOdourAnise odourSolidifying point!℃" !20Boiling point!℃"234237Relative density!20/20℃" 0.986 0.991Optical rotation!!25D" -0.15° +0.15°Refractive index!n20/D" 1.5570 1.56201:3.0(C=90), It is soluble in benzene, ethyl acetate, acetone,Solubility!25℃"carbon disulphide, petroleum ether and alcohol. It can form amixture with ether and chloroform, and it is insoluble in water.Content!%"!99.0 (GC)Cis-anethole(%) "0.2%Flash point!℃" 90Vapour pressure!kPa" 5.45103

CH 3HC CHOCH 3Trans-anetholeOCH 3CH 3Cis-anetholeTrans-anethole is much more common than cis-anethole. Trans-anethole, used as flavouring, isconfirmed as “GRAS” (Generally Recognised as Safe) by the FDA (Food and Drug Administration)and FEMA (Flavor Extract Manufactures Association) in the USA. Trans-anethole exists naturally inmore than 20 kinds of foods. In the 1980s, more than 100 tons of trans-anethole was ingested throughtraditional foods every year. Cis-anethole has toxicity and an acrid pungent odour, but its content isless than 1% in food and cosmetics. Generally the content of cis-anethole is no more than 0.2%. Lethaldose (LD 50 ) data are shown in Table 2.Table 2 Anethole LD 50 dataNameLethal doseMelting point!LD 50 "!mg/kg"!℃"Trans-anethole 900 21.4Cis-anethole 93 -22.5Anethole can cover unpleasant odours, so it is widely used as a masking agent in commodities, such astoilet soap, toothpaste, mouthwash and so on. This is the main use of anethole, about 80% of the total.It is used as a flavouring additive and scent in food industry products such as beverages, liquor, candy,baked goods, chewing gum and cigarettes etc. Anethole is also used in industrial products,deodorisation, medicine, feed additives, synthetic flavours, pesticides and so forth.It is difficult to quantity the volume of anethole usedexactly, but an expert from a world famous companycalculated that about 3,500 – 4,000 tons annually is usedin the fragrance formulas of toothpastes, mouth washesand so on, about 80% in total. About 8% of anethole isused in foodstuffs, leaving approximately 12% for otheruses. So the total quantity of anethole, including aniseoil, is now nearly 5,000 tons, with the demand for theproduct increasing year by year. We can say thatanethole is a product with much potential.Other Uses 12%Daily NecessitiesOther UsesFoodstuffsFoodstuffs 8% Daily Necessities 80%Figure 1. Uses and quantity of anetholeDaily Necessities: Toilet soap, toothpaste, mouthwash etc.Foodstuffs: Beverages, liquour, candy, baked goods, chewing gumandcigarettes etcOther Uses: Industrial products’ deodorisation, medicine, feedadditives, synthetic flavours, pesticide etc.104

INDUSTRIAL PRODUCTION OF ANETHOLEAnethole is obtained in three main ways:(1) separation of natural essential oils;(2) rectification and reaction of crude sulphate turpentine (CST);(3) chemical synthesis of petrochemical materials.Separation from essential oilThe three main essential oils used to separate anethole are fennel oil, anise oil and star anise oil. Theseparation methods are vacuum fractionation and frozen crystallisation.Fennel oil is obtained from the fruit of the foeniculumvulgare, a kind of umbelliferae plant, by steam distilling.Fennel oil contents include anethole 50% - 60%, fenchone10%, pinene, limonene, phellandrene and so on. Fenneloriginated in the Mediterranean area, but was laterintroduced to some areas of China, suchas Yunnan and Guangxi. The oil yield offresh branches and leaves is between0.1%-0.25%, and of dry fruit is about 4%-5%.Fennel oil• Fennel oil obtained from the fruit of foeniculumvulgare, umbelliferae plants by steam distilling.• Fennel oil contents include anethole 50% - 60%,fenchone 10%, pinene, lemonlene, phellandreneand so on.• Fennel originated in Mediterranean area, but waslater introduced to some areas of China, such asYunnan and Guangxi.• Oil yield of fresh branches and leaves is between0.1% - 0.25%, and dry fruit about 4%-5%.Anise oil• Anise oil obtained from the fruit of pimpinellaanisum, umbelliferae plants, by steam distilling.Main components of anise oil are anethole (80% -90%), methylchavicol and anisic aldehyde.• Pimpinella anisum, also called west fennel andEuropean fennel, is a kind of umbelliferae plantoriginating in Egypt and eastern Mediterranean.The fruit of pimpinella anisum has a sweet taste,like the flavour of liquorice and fennel.• According to 1999 statistics, global output ofessential oil from pimpinella anisum was only 8tons but production of star anise oil reached 400tons in China (from internet).Anise oil is obtained from the fruit of pimpinella anisum, akind of umbelliferae plants, by steam distilling. The maincompositions of anise oil are anethole (80% - 90%),methylchavicol and anisic aldehyde. Pimpinella anisum, alsocalled western fennel and European fennel, is a kind ofumbelliferae plant originating in Egypt and the easternMediterranean. The fruit of the pimpinellaanisum has a sweet taste, like the flavourof liquorice and fennel. According to 1999statistics, the global output of essential oilfrom pimpinella anisum was only 8 tonsbut star anise oil production in China had reached 400 tons.Star anise oil is produced from the fruit, branches and leavesof illicium verum, a kind of illiciaceae plants, by steamdistilling. Anethole is the main composition of the oil, about80% - 90%, and other compositions are limonene,methylchavicol, anisic aldehyde, caryophyllene, p-propenylphenol-isopentyl-etherApproximately 90% of Illicium verumis grown in south-east Asia with theremainder grown in the Americas.China is the main producer, and otherproducing countries include Vietnam,etc.Star anise oil• Star anise oil produced from the fruit, branches andleaves of illicium verum, illiciaceae plants by steamdistilling. Anethole is main component of the oil, about80% - 90%, and other components are limonene,methylchavicol, anisic aldehyde, caryophyllene, p-propenylphenol-isopentyl-ether etc.• Illicium verum is distributed mainly in south-east Asiaand America, and about 90% from former area. Chinais main producer, and other countries also plantIllicium verum such as Vietnam, Cambodia, Burma,Indonesia, the Philippines, Mexico, Haiti and so on.Cambodia, Burma, Indonesia, the Philippines, Mexico and Haiti. According to incomplete estimates,the global planted area of Illicium verum is about 441,000 hectares with annual production of the dried105

fruit of star anise up to 80,000 tons. The planted area in China is about 360,000 hectares and Vietnamabout 56,000 1 . The global output of anise oil was overOther Areas, 50t, 2%2,500 tons in 2007, of which about 2,200 tons were fromChina and some 300 tons from Vietnam, whose Vietnam, 300t, 12% Chinaproduction accounted for 12% of global output in the VietnamOther Areasworld. 644.5 tons of anise oil was exported which isabout 30% of China’s output in 2007.China, 2200t, 86%In China Illicium verum is found in Guangxi, Yunnan,Guizhou, Guangdong, Fujian and so on. Guangxi is themain production area, and is famous as “the land of staranise”. The plant can fruit twice a year, January toFebruary and August to September, with autumn the keyseason. The oil yields are summarized in Table 3.Figure 2 Global anethole distribution 2007Other Areas: Cambodia, Burma, Indonesia, Philippine, Mexico,Haiti and so on.Table 3 Illicium verum oil yieldsPartYield(%)FreshfruitDryfruit2-3 8.05-12Freshleaves0.67-0.95Dryleaves1.78-4.63Drybranch1.36Drybark0.18-0.25DrywoodDryroot0.053 0.5280% of world star anise oil comes from China, over 85% of that produced in Guangxi. The demand forthis oil is over 3,000 tons per year including anethole. The fruit of illicium verum is consistently usedas a spice and in Chinese medicine.Production from CSTAs is well known, CST is a mixture of C10 monoterpene hydrocarbon, such as #-pinene (60%-65%),$-pinene (25%-35%) and other monoterpenes including a little anethole (0.04%-2.0%). In the rosinvolatile component the anethole content is very small, less than 0.5% generally. But because of thevery big quantity of rosin, a great deal of anethole is gained. The total quantity of turpentine was about311,000 tons in 1994, the high production in the year, including about 88,000 tons of gum turpentineand 223,000 tons of mainly CST and a little tall oil.Some components such as anethole,methylchavicol, #-terpineol, caryophyllene areobtained by steam distillation. Generally, theabove four components comprise about 1%-2%of CST, and after further separation, the mixtureof anethole and caryophllene is about 0.5% ofCST. Anethole is removed from the mixture bycrystallization. The fraction containingmethylchavicol and #-terpineol is about 1% intotal CST. The mixture of trans- and cisanetholeat the ratio 87:13 is obtained after anisomerization reaction catalysed by potassiumCrystallisationDistillation2.2 Production from CST (2)Mixture of anethole andcaryophllene (0.5%)caryophlleneAbout 1.5% high boilingPoint fraction of CSTanetholeDistillationMixture of methylchavicoland !-terpineol!-terpineolisomerizationCrystallizationDistillation1 Star anise oil in China Ms. Cindy Xiong, IFEAT Shanghai Conference 2009106

hydrate (KOH), then anethole is gained through distillation and crystallization.In 1992, about 2,050 tons of anethole was consumed, including 654 tons of natural anethole, 128 tonsof essential oil and 1,270 tons of CST anethole. The USA could supply 1,680 tons of anethole in 1994.CST anethole is mainly supplied by the Renessenz company (formerly Millennium), while theSymrise company is the main producer in Europe. The Sensient company in Spain manufacturedanethole from a long time ago. Some European companies attempted to synthesise anethole frompetrochemical materials, but the synthetic process failed because of high costs and pollution.Chemical synthesisThere are many ways of synthesising anethole, but here are several important ones:(1) methylchavicol is isomerized by KOH at 180 - 190℃;(2) Cis-anethole is isomerized to trans-from boiling in alcohol, and then catalysed by rhodiumtrichloride (RhCl3).(3) Anisole and propionic anhydride are catalysed by iron trichloride to acylate and get p-methoxyphenyl-ethyl ketone. This is hydrogenated to get the corresponding alcohol, which then iscatalysed by potassium bisulfate (KHSO4) to gain dehydrated anethole.Reaction formula of method (1):CH 2H 2C CHOCH 3KOH!C 2H 5OHCH 3HC CHOCH 3Reaction formula of method (2):HCHCH 3HC CHC 2 H 5 OHRhCl 3!OCH 3OCH 3Reaction formula of method (3):C CH3OCH 3OC CH 2 CH 3OHHC CH 2 CH 3CH 3HC CH+ (CH 3CH 2CO) 2OFeClH 2NiKHSO 4!OCH 3OCH 3OCH 3Methods (1) and (2) are used in CST anethole, and method (3) is relatively efficient for large-scalesynthesising of anethole. Method (2) is a good supplement to method (3).107

ANETHOLE DEVELOPMENT TRENDSNow people's endless demand for resources has already seriously threatened the natural world. Allkinds of pollution, such as water, soil, atmosphere, foods and so on, are more and more serious. Lotsof disasters occur sequentially or simultaneously, for instance, drought, floods, mud-rock flow, ortyphoons. All these disasters threaten production and lives of human beings. Now that people areaware of this, they have to reduce demand and emissions, produce cleanly, cherish the environmentand protect the earth. So the development of anethole will be affected by these general trends in thefuture. Whether each type of anethole can survive will be decided by the competitive power of cost,stability of price, reliability of supply and adaptability to the environment.Natural anetholeThe price of natural anethole is decided by the weather and production costs. Production and lives ofhuman beings generate a great volume of greenhouse gases, the pollution of air, water and soil risesand the natural disasters, drought, floods and extremes of cold happen constantly. All these factorsthreaten the existence and welfare of human beings. The output and price of many plants fluctuatesgreatly with the weather.With living standards increasing, the costs of production and living are gradually going up. The pricesof all kinds of means of production and subsistence, especially farm produce, are rising rapidly.Conversely, it also increases production costs. For example, the daily wage of a construction worker inwestern China was about 40~50 ¥ in 2005, but it went up to 100~120 ¥ in 2011. In the same years, theprice of rice was 2.0~2.4 ¥/kg, then reached 4.2~4.8 ¥/kg.Table 4 Anise oil exports 2001-2011Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Quantity(tons)593.4 646.5 535.1 624.5 539.8 618.0 644.5 482.3 808.6 569.0 817.0Price(USD/kg6.69 5.74 5.58 5.75 6.26 6.93 6.64 8.68 8.70 17.0 21.6Generally, it is the weather that causes changes in supply that then affects the price of naturalproducts. However, these natural product prices, including natural flavours, are all going up year byyear globally. The key factor is increasing production costs. Anethole and eucalyptus oils are typicalcases. Let us look at the price of anethole from 2001 in Table 4. The average price in 2011 is morethan three times that in 2001.The price of natural anethole increases gradually, with both the exportquantity and the price at their highest in 2011, at 817 tons and 21.6 USD/kg respectively. So theincreasing production cost is the main factor pushing the price of anethole up.From Table 4, we can see that the change in the exported quantity of anise oil is not great. But the datacannot simply reflect the real output of Chinese anise oil. China exported hardly any fresh star aniseoil after 1990, and almost all the anise oil exported is after separation. But there are different customstax regulations for anethole and anise oil in China, with anethole classified as an oxygen compound.So it is very difficult to estimate the real output of anethole. In the anethole trade, the ratio of anetholeand anise oil is calculated as 7:3. For example, 817 tons of anise oil was exported in 2011, so the108

output of anethole is calculated to be about 1900 tons, then adding the output of Vietnam of nearly 400tons, the total output of anethole and anise oil is over 3,000 tons.CST anetholeWith the emission of greenhouse gases increasing ceaselessly, the earth is getting warmer and warmer,causing the glaciers at the south and north poles to thaw. So the voices calling for protection of forests,planting trees and reducing forest resource consumption are louder and louder. Moreover, thepaperless office is a trend coming from the development of the internet. At the same time, more andmore countries are initiating regeneration and recycling of resources.As papermaking develops all over the world, the source of chemical pulp is gradually changing fromconiferous forests in frigid zones to rapidly growing broad-leaved forests from subtropical and tropicalregions. The centre of papermaking is gradually switching from North America and northern Europeto Central and South America (Brazil and Chile), Asia and the Pacific area (Indonesia) near theequator. Although production of pulp worldwide is relatively stable now, at about 200 million tons,and rosin output does not change, at about 1.1 to 1.2 million tons, the output of sulphate pulp fromconiferous forests is decreasing slowly, so CST yields, a by-product of papermaking, also decrease.From the data in Table 5, world production of turpentineand CST peaked in 1994 at 311,000 tons and 223,000 tonsrespectively. In recent years, world total production ofturpentine has been very stable, at about 250,000 tons, inwhich gum turpentine (GT) is around 100,000 tons and CSTdecreased to about 150,000 tons. CST is down about onethird. So anethole from CST dropped more than 30% withit.World production of turpentine 1989~2010 1989 1993 1994 1996 1997 19982005 2006 2009 2010 Year World total output GT output CST outputFigure 4 World output of turpentine 1989 - 2010Table 5 World production of turpentine 1989-2011 (10 3 tons)Items 1989 1993 1994 1996 1997 1998 2005 2006 2009 2010World totalproduction282 296 311 249 269 262 254 256 252 250GT production 87 88 88 91 105 94 92 98 103 102CST production 195 208 223 158 164 168 162 158 149 148From the quantity of CST now, the output of CST anethole is estimated to be about 1500~2300 tons.According to the analysis of CST development, its gross output is limited and is descendingconstantly, though slowly, and this will intensify the supply pressures on anethole. But this situation isa good opportunity for synthetic anethole, which can develop rapidly and gain a higher and highermarket share in these conditions with its inborn advantages.Synthetic anetholeWith the effects of weather and production costs, the output and price of natural anethole fluctuatesmore. The gross production of CST anethole decreases by degrees. But the overall trend of price anddemand for anethole is increasing gradually, with its uses broadening constantly. The supply of109

anethole does not meet the demand, thus creating a shortfall. In this situation, there is a newopportunity to synthesise anethole from basic petrochemical materials.The main materials of synthetic anetholeare anisole and propionic anhydride, whichare easy to get, so their supply is sufficientand the price is stable. Synthetic anethole isvery easy to expand and the production costis fairly stable. After more than one year'sanethole production in my company,Jianzhong Flavors and Fragrances (JZFF),we have solved the problems of productioncost, quality and pollution. The synthetictechnology of my company is green andeconomical. The by-products from theprocess are useful intermediates, which aresold as products. There is virtually no wasteproduced in the synthetic process, in linewith the trend of scientific development inthe world now.LaboratoryAnetholeJianzhong Flavors and Fragrance (JZFF)Packing workshopHeliotropinJianzhong Flavors and Fragrance (JZFF)Synthetic anethole can make up the supply gap comingfrom natural anethole and CST anethole. Moreimportantly, synthetic anethole has advantages such asprice and supply stability with production expandingeasily. Its quality is suitable for food use. My companycan supply synthetic anethole with super quality and acompetitive price for customers all over the world. Withtime ticking away, synthetic anethole will occupy theleading role after competing with natural and CSTanethole, finally replacing the other two kinds of anetholebecause of its inherent advantages.CONCLUSIONSA commercial production line for syntheticanethole has been built in Jianzhong Flavors,and "Jianzhong" brand anethole will bereliably supplied to any customers all overthe world at a stable and competitive priceand at outstanding quality. As for thecompetition between natural origin andchemical synthesis, the synthetic product willgradually beat and replace natural originproducts. It is like the conclusion that I cameto about heliotropin in Cochin India 2005:"Synthetic heliotropin would soon becompletely substituted for the heliotropincoming from natural safrole completely" Thisprophecy was realised in 2010. Moreover the4 Conclusions• A commercial production line for synthetic anethole hasbeen built in Jianzhong Flavors, and "Jianzhong" brandanethole will be reliably supplied to any customer all overthe world with a stable and competitive price andoutstanding quality.• Regarding competition between natural origin and chemicalsynthesis, the synthetic product will gradually beat andreplace natural origin products like heliotropin. Because theprice and supply of synthetic anethole is very stable andcompetitive. Only monomer synthetic flavours have thischaracteristic.• It will take some time for synthetic anethole to replace thenatural product. Downstream customers will be active intaking the lead to use synthetic anethole. This is thedeveloping trend in the modern world.110

price and supply of synthetic heliotropin is very stable. Only monomer synthetic flavours have thischaracteristic.Now that synthetic, natural and CST anethole producers are competing, the advantages of syntheticanethole will gradually appear. It will take time for synthetic anethole to replace the natural product.Downstream customers will be active in taking the lead to use synthetic anethole. This is thedeveloping trend in the modern world.Thanks a lot!Huang Zongliang graduated from Tianjin University in 1997, majoring inchemical engineering. Since 1997 he has worked at Chengdu Jianzhong Flavorsand Fragrances Co. Ltd. where he is currently deputy general manager, mainlyin charge of production management. In 2005 he made a presentation onBurmese essential oils at the IFEAT Cochin Conference.111

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!!!!!!!!!!!THE ESSENTIAL OIL INDUSTRY IN SRI LANKAFazal MushinLink Natural Products (Pvt) Ltd.Sri Lankafazal@linknaturalproducts.comINTRODUCTION1The paper provides an overview of the essential oilindustry in Sri Lanka with reference to cinnamon leaf andbark oils, nutmeg oil, clove bud oil, pepper oil andcitronella oil. The presentation also covers the major spicecrops in the country, production and exports of essentialoils and a glance at the flavour and fragrance industry inSri Lanka. The paper will include the challenges facingthe industry and new developments.THE ESSENTIAL OIL INDUSTRYINSRI LANKA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"#"$%&'()*+%%!!!!!!!!!!!!!!!!!"#$%&'($!)!*+,($'-!.!/#0!"%12!!!!!!!!!!!!!!!!!!3#45!67'8$79!:$(;8&'-!$#!37457!!!!!!!!!!!!!!!!!!*?@7#9!A!B7079C9#4547'8$79,$(;8&'-2&(@!GEOGRAPHICAL LOCATION AND DEMOGRAPHIC OVERVIEW OF THE COUNTRYFor those who are not familiar about Sri Lanka, it is an island off the southern coast of India inSouth Asia.PopulationTotal area20.8mn65,610sq.kmGDP Growth Rate 8.3%Per capita GDP USD 2,836.00113

AGRICULTURAL SECTOR IN THE COUNTRYThe agricultural sector in Sri Lanka is a major component of theeconomic and social development in the country with about 70% ofits population connected to agriculture. Currently this sectorcontributes about 12% to GDP. Some 2.6 million people, orapproximately 33% of the total labour force of 7.8 million, aredirectly employed in the agricultural sector. In the past, the SriLankan life style has been closely linked with agriculture, which hasbeen a great influence on our culture and economy.When we look at the history of the agricultural activities, it goes backto 1st century B.C. when the then ruling kings engineered and builtdams and waterways to irrigate the lands. These dams and waterwaysare still being used in present agricultural activities. Thereafter continued the colonial era ofPortuguese, Dutch and finally the British. Historically Sri Lanka has been dependent on ricecultivation and after colonial rule of Sri Lanka for 400 years the agriculture land space was changed tomainly tea, rubber, coconut and coffee, which were the sort after crops for cultivation during thatperiod. Before that, the people mainly cultivated paddy and other field crops, which were used fortheir day-to-day consumption. Since independence from Britain in 1948 the agricultural sector hascontinued to play a significant role in the Sri Lankan economy. Presently 42% of the country’s totalarea is under cultivation.Climatic changes have had an impact on agricultural productivity. Rain is a major component, whichaffects the crop output. For example, paddy is highly sensitive to rain and high temperature. Likewiseother crops too are also depending on adequate rain and sunlight.!"#$%&"''%"$(%)'#*"+)%,-$./%• 7''819!1:#.1;#!.10',9!• !!!!!?10'

!!"#$%&'(')%*+,-(((The graphs below provide a clear picture of the climatic changes during last three years, 2010 - 2012:!1. Rainfall (mm) 2. Temperature ( o C)6455!6555!F55!E55!D55!455!5!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!3. Sunshine (Hrs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ri Lanka is well known for its spices since ancienttimes. Currently the export market for all spices isexpected to reach US$ 1billion by 2020, which isan indication of the spice agricultural sector in SriLanka becoming a major source of foreignexchange generation.A significant proportion of the rural population inthe upcountry districts of Sri Lanka rely on theexport agricultural crops for their livelihood. Allspice crops including clove, pepper, nutmeg,cardamom, cinnamon, ginger and turmeric areconsidered to be major export agricultural cropsand make a considerable impact on the economy ofthe rural Sri Lanka.!"#$%&'(&#)'*+,%(-#*.*/011*!• "#$%&!&%'(!)'(*+!,)&-.%-#'!!!!!!!!!!!!!!!!!!!!!!/!!01!2341555!6%!730809:!• ;*+ ! !B*DD*+!!!!!!!!!!!!!!!!!!!!!!!!!!F#,#')$ ! !F&#.*!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!B%((I ! !F%+(%G#G!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!J)$G*

ESSENTIAL OILS PRODUCED IN SRI LANKACinnamon OilCinnamon is the main spice crop of Sri Lanka. The cultivation of cinnamon is centred in the southwestern coastal area of the country. Total area under cultivation is about 30,523 hectares. Some 90%of true cinnamon is grown in Sri Lanka.Both cinnamon leaf and cinnamon bark oils are obtained by steam distillation.Crop production:18,250 mtOil exports:Cinnamon leaf oil: 231mtCinnamon bark oil: 8mt!"#$$%&'$!! !!!JC'2#;D'&!01',)!23#4)!K0/&!.'&

Pepper OilPepper, which is known as the "king of spices", is widely grown in central upcountry and is now alsobeing cultivated in the southeastern area too. The total area under the cultivation is 31,296 ha. SriLankan black pepper has a high level of piperine and volatile oil content.A fair amount of black pepper ends up with the distillers, as farmers tend to harvest the light berrypepper. Black pepper oil is produced by the steam distillation of the dried berries.13!!"##"$%D,#90:;#)!K%-)!L#).;$0')$.!Crop production:10,800 mtOil exports: 8.5 mt!!&'()"%*#+,"%•!!"#$%&!'($')$!#*!+'++',!!!!!!-.!%/#0$!1234567%8!!!•!!"#$%&!+'++',!+,#90:;#)!!!!!!!-)!4

Clove Bud OilCloves are used in the form of whole cloves. The crop is mainly grown in the upcountry wet zone. Thetotal extent of clove is 7,605 ha. Most of the cloves are exported, mainly to India. The eugenol acetatelevel is higher than other origins.Clove bud oil is produced by the steam or water distillation of the flower bud of the plant.14!"#$%&I?&@#/A&%!J.8%!K&%9A0#"%09!Crop production: 5,553 mtOil exports: 13 mt)*#"%&+,(-%&• 4&0.'!"50"%0!&6!/'&7"!89!!!!!!!(:3;)&?0!7&'#E"!89!!!!!!!):21)=FE0!G8%!B;22H!!"#$%&'("&!•!"#$"%&'!!!!!!!!!!!!!!!!()*+,)*!•!"#$"%-'!./"0.0"!!!!1*+23*!!!"#$%&'()&*+$,-&.,("/(01*"$,(23$4%#5,#$&(Major constituentsPhysical appearanceOdourSpecifications ofClove Bud Oileugenol (75-85%)eugenyl acetate (9-16%)Pale yellow clear liquidWarm, spicy and eugenolicSpecific gravity at 20 °C 1.040 to 1.060Optical rotation at 20 °C -1.5 to 0Refractive index at 20 °C 1.5280 to 1.5370Nutmeg oilNutmeg is mainly a home garden crop in the central wet zone of the Island. Nutmeg and mace are themain two products of this tree and both are mainly used for culinary purposes and other food products.The total extent of nutmeg is 954 ha. Although the land area is relatively small yields are relativelyhigh. Most of the trees are 25 to 50 years old with high productivity. The nutmeg found in Sri Lanka issimilar to that found in Grenada. Sri Lankan nutmegs are low in safrol and myristicin and at the sametime high in sabinene, when compared to Indonesian variety. Nutmeg oil is produced by the steamdistillation of the seeds of the plant.118

15Crop production: 2,700 mtOil exports: 30 mt!"#$%&'()*'+(,%'!J8

Citronella OilThe citronella plant is a 1-2 metres tall bush and cultivation has largely been spread in southern part ofthe country. Total extent of citronella is 1,174 ha. The geraniol content of Sri Lankan citronella oil ishigher than Java citronella oil.Citronella oil is produced by the steam distillation of the leaves of the plant.16Oil production: 25 mtOil exports: 11.7 mt!"#$%&'(()*@-#56+7#)!+,%('*-."/'*• !!"#$%&!'($')$!#*!!!!!+,$-#)'&&%!,.!/0/123%!!• !!"#$%&!+,$-#)'&&%!#,&!!!!!4-#56+7#)!,.!89:$!,)!!!!!8;//

vated as a mono crop in the Central hills and used mainly in the food industry, as a flavour, the driedfruit is the commodity of trade. The total extent of cardamom is 2,795 ha. The terpinal acetate level ishigher in Sri Lankan cardamom oil when compared to other origins. There are good prospects fororganic cardamom, production of which is expanding.Cardamom oil is produced by the steam distillation of the fruit of the plant.17!"#$"%&%''@,#-9+:#)!+,&*-'./)0-'A%/)!B#)0:$9')$0!!"#$"%&%'()*'Crop production: 57 mtOil exports: 1.5 mt!• !!!"#$%&!'($')$!#*!!!!!!+%,-%.#.!/0!123456%7!!• !!!"#$%&!+%,-%.#.7!!!!!!!8,#-9+:#)!/0!53.$!/)!1;

DEVELOPMENT PROJECTS IN ESSENTIAL OILSThe growing demand in industrialised countries for natural products has created a wide market foressential oils. Therefore, the development of the essential oil industry is important since the countryhas the raw materials and appropriate climatic conditions for the initiation of crop cultivations. Thiswill also result in increased foreign exchange revenues.The main distillers in the country have shown their interest in cultivating new plants such as coleus,sandalwood, ginger, and turmeric etc. Further they are moving ahead with producing organic certifiedessential oils and extracts since there is a growing demand for organic products in the market.18!!!"#$%&'()%$*)+,"-.)-&./%.01! 60*7%.!5)4)*)!2%34%.!!!!!!!!"#$%&'!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!()*+)$,##+!!!ESSENTIAL OIL SECTOR: STRUCTURE AND TRADEStructureIt is apparent from the above discussion that there are seven major essential oils produced in SriLanka, namely cinnamon bark and leaf oils, nutmeg oil, clove bud oil, black pepper oil, citronella oiland cardamom oil.The complex supply chain network in the essential oil sector is illustrated in the following diagram.Since there are a large number of smallholders it is difficult to organise them into a continuous andsteady supply chain that provides a regular supply of raw materials as well as controls the quality andsustainability of supply to keep the industry operating throughout the year. There are usually three offour levels of traders before the product ends up with the processor, exporter or consumer. The systemhas worked reasonably well for many hundred of years but the industry is trying to reduce thecomplexity of the supply chain in order to ensure the quality of the material coming into the factory.There are 4 main distillers in the country, as well as 12 other small/medium distilling companies and itis anticipated that this number will grew in the next 2-3 years. With regard to the number of field122

distillation units there are 135 field distillation units for cinnamon leaf oil and 30 field distillation unitsfor citronella oil.The spice industry in Sri Lanka is a very old industry but during the last 30 or so years has madesignificant progress and the country has become better known for supplying a range of products otherthan cinnamon.!"##$%&'()*+&+,-./01&/2&3#*',&'0/#3&&19!!!!!!!!!!!!!!!A*$&B*3>$$,03&?@#/0-&6/$$,'-/03&:(/$,3)$,03&40/5"',03&="'>/+3&?@#/0-,03&7*$$)8,&90)5,03&9/.+&90)5,03&;,-)*$,03&6/+3"

This volume could be increased since only about 10% of the available leaf is used for oil extraction.Most leaf is used for fertiliser since the relatively low prices does not encourage the farmers to use itfor oil production.Export of other oils are much smaller but have shown an upward trend in recent years. Thus, exportsof pepper oil are growing and it is anticipated that this will continue with India being the dominantmarket. Nutmeg oil exports are growing; the crop is growing and has not suffered from any diseaseproblems or low productivity. The export volume can definitely increase since there are 600 – 800 ofnutmeg available and only about half of it is used for distillation. Cardamom oil exports are small butgrowing, especially organic oil, but Sri Lanka cannot compete with Guatemala with regard toconventional cardamom oil. Citronella oil exports are growing slowly but the major problem is thefluctuating prices, which make it difficult to induce farmers to grow the crop and produce the oil.Cinnamon bark oil is relatively stable but there has been a growing demand for the spice, especiallyfrom Latin America for culinary purposes. This is likely to grow further especially for organic oil.Exports of clove oil have been increasing recently and the dominant market is India.The export destination of the essential oils is illustrated in the following table, which shows thedomination of the USA, EU and Indian markets. In recent years India has become a much moreimportant market for Sri Lankan oils.!!!"#$%&'()*+"*$+)&$,&())(+*"-&$.-)&/&0122&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"#$$%&'$!()%*!'#(!345&6&37&6&8%"+9(&6&:+'."&6&;(%! +! :!124

MAJOR CHALLENGES IN THE INDUSTRYThough the industry – both the government and the private sectors - have initiated many developmentprogrammes there are still many constraints to be overcome if Sri Lanka is to be competitive in themarket. Some of the limitation factors associated with the essential oil industry include:• Instability of market prices which has an undesirable impact on both the farmers and theprocessors• Lack of long term backward integration for new cultivation• Establishing effective supply chain• Lack of initiatives for moving up the value chain; need to move beyond essential oils• Environmental/climate changes affecting everyone globally and we have to deal with themwhen they occur.DEVELOPMENT PROJECTS IN THE INDUSTRYSri Lanka offers very good opportunities for the expansion of the organic essential oil business as wellas various added value products. The smallholder families use very little fertiliser; there is very littlepollution; the industrial base is not that large; the underground water streams are not contaminated, sothere is negligible pesticides or heavy metal pollution. So organic essential oils is a niche market areawhich is growing and in which Sri Lanka can compete. In addition, investments are taking place todevelop new products including fractions, isolates and CO2 processing – both conventional andorganic.Companies also realise that they must integrate backwards in order to ensure raw material supplies.Companies are developing new plantations for new crops and expanding the existing cultivation area,including working with existing plantation companies to encourage them to plant spices alongsidetheir traditional plantation crop production. Also they are trying to collectivise smallholders as well asorganising buy-back schemes. The end of the civil war has led to the opening up of the northern andeastern parts of the country and is offering new opportunities to develop new areas of production.Donor agencies are also assisting in the development of lands, which are now free.INSTITUTIONAL SUPPORTWithin the country there are a number of institutions that support the spice and essential oil sector. TheSri Lanka Export Development Board, which is the apex body, drives the marketing, value additionand promotion of the industry. It has supported the attendance of a few companies to the IFEATSingapore Conference to expose them to the international industry. The government places a lot ofemphasis on the minor crops and there are two ministries involved, namely the Department ofAgriculture and the Department of Export Agriculture, which overlook spices. This reflects theimportance of spices to the development of the rural economy.In addition, there are two private sector trade associations working alongside the government inhelping to promote the industry, namely the Spice Council and The Spices and Allied ProductsProducers’ and Traders’ Association.125

28!"#$%&$'"()*#&++',%*!"#$%&#'$()*+$!,-"#./$"#$%&'(#)'!*+!,-&./01'0&#!"#$%&'(#)'!*+!23$*&'!,-&./01'0&#!!.0*#$%//)1203)4$!!45#!6$./#7!!%)8!,11.#8!9&*80/'7!!!9&*80/#&7:!%)8!4&%8#&7:!,77*/.%;*)!45#!6$./#!

THE FLAVOUR AND FRAGRANCE INDUSTRY IN SRI LANKAThe flavours and fragrance sectors in Sri Lanka have been growing quickly, thanks to rising incomes,the cessation of the civil war and the opening up new markets in the north and eastern regions,changing social and cultural habits, as well as the growth of tourism. Both the food manufacturing andbeverage industries have shown tremendous growth.Flavours and fragrances are used as ingredients for the food industry. Fragrances are also used in thepersonal care industry and the household care industry. These raw materials might be of natural originlike essential oils, which have been discussed earlier, or a composition of synthetic chemicals. Orange,lemon, and lime are the widely used flavours and rose, jasmine are the fragrances that are movingquickly in the market.Tea, carbonated beverages, nutritional drinks, RTS (ready to serve) and concentrated juices, alcohol,confectionaries, cosmetics, detergents and toiletry are the industries which are using considerableamounts of flavours and fragrances. The total trade value of above markets is US$ 1,284 millionduring the last year. The value of flavours and fragrances imported during last year was US$ 25.68million (HS Codes: 3302.10.10; 3302.10.20; 3302. 10.90; 3302.90.00 and Others). The value isprobably higher because ingredients may be included in other code numbers.In 2011, there was an 8.7% growth in the food manufacturing industry compared to 2010. Expandingthe FMCG sector to Northern and Eastern provinces was a major factor behind this growth. Thebeverage manufacturing industry saw a 10.2% growth in 2011 compared to 2010. A key factor was thegrowth of the tourism sector. The value of consumption in various beverage sectors is illustrated in theslide.The total market value of the industries that use flavours and fragrances are listed below.32!"#$%&'("#)"*)+,-"%.$),#/)*.,0.,#12$)• !"#$!%&'$()*+#,!"#$-!.+##/!"#$-!0'$12!"#$3 ! !4567!!!!!89!:/!!!!"#$%&'(")'*%)+,'• !;$+#?! ! ! ! !4567!!!8@A!:/!!!!-."$/"&'• !B*=+CD)/$'!E+C/2?! ! ! ! !4567!!!!!9A!!:/!!!!!!--!• !F"5!G!;)/1#/=+$=#,!H*C1# ! ! !4567!!!!!!8A!:/!!!!!!--!• !I'1)J)'! ! ! ! ! !4567!!!!KKA!:/!!!!012./"'3456'!• ;)/L#1D)/#+M ! ! ! ! !456!!!@NA!:/!• ;)?:#D1? ) ))))) ) ) )456!!!8O9!:/!• E#=#+>#/=?!G!")C'#=+M)))))))) ) ) )456!!!89A!:/!!127

There is an increasing number of key international F&F companies represented in Sri Lanka and theyare servicing the F&F industry.!"#$%&'"(&)*+&),$-,)#"(.$("-("."&'"/$%&$0(%$1)&2)$31• 344$• 5+6"('"'$• 4%(7"&%89$• :)2).);+$• /)&$• 0#7(%."$!Thank you for your attention – and I look forward to welcoming you to Sri Lanka for a futureinternational conference.128

THANK YOU!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"#"$%&'()*+%%!!!!!!!!!!!!!!!!!"#$%&'($!)!*!+!,"!!!!!!!!!!!!!!!!!!-#./!01'2$13!4$(52&'6!748'9!-'5!!!!!!!!!!!!!!!!!!:$#!-1./1!!!!!!!!!!!!!!!!!!*;1?13@3#./.1'2$13A$(52&'6B&(

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INTRODUCTIONOVERVIEW OF THE AGARWOOD OIL INDUSTRYDr. Pakamas ChetpattananondhDepartment of Chemical EngineeringPrince of Songkla UniversityThailandpakamas.p@psu.ac.thAgarwood is a resinous, fragrant and highlyvaluable heartwood. The scientific name isAquilaria. It is also known as aloeswood,eaglewood, krissana in Thailand, gaharu inMalaysia and Indonesia, Oudh in the MiddleEast, chen-xiang in Chinese and jin-koh inJapan.Aquilaria TreesIntroductionInfected tree barkAgarwood chipsHealthy agarwood is relatively light andpale coloured. When the wood is infectedby a disease in the wild, the infectionprocess produces a dark aromatic resin inresponse to the attack. This results in a verydense, dark, resin embedded hardwood.This resin is highly prized and commandsan exceptionally high value because of itsdistinctive fragrance and medicinal benefits.Agarwood oil, also known as Oudh oil or Oud oilThe international trade in agarwood involves wood, wood chips, powder and oil.Agarwood oil is also known as Oudh oil or Oud oil. The oil is conventionally obtained by the waterdistillationprocess.IntroductionUsesAgarwood oil can be applied directly to theskin. Pure agarwood oil has a slow releaseeffect lasting at least 8 hours.Pure oil form, oil blends and theperfume industryBurning as incenseA small amount of agarwood oil can beadded to other oils to give a rich andcomplex depth and to fix the aroma ofmiddle or top notes in perfume blending.Pure agarwood oil is also burned asincense, especially in Japan. It is used inspiritual ceremonies or holy occasions as atemple offering in the Muslim, Hindu andBuddhist traditions.131

THE GLOBAL AGARWOOD MARKETGlobally, there are two major agarwood consumption regions:• North-east Asia and the markets of Taiwan, Japan, and the Republic of Korea, and• West Asia or the “Middle East” which centres on the countries of the Arabian Peninsula.The uses of this resinous wood includemedicinal, religious and cultural applications invarious societies across Asia. No agarwoodproducingspecies is known to grow west ofIndia, and yet it has been a traded item withinArab-speaking commerce for over 2,000 years,being sourced from both India and further east inSouth-east Asia.Global Agarwood MarketTwo major Agarwood consumption regions• north-east Asia: Taiwan, Japan and Republic of Korea• west Asia or the Middle East centred on Arabian Peninsula countries.• Medicinal, religious and cultural uses in various Asian societies.• No Agarwood-producing species known to grow west of India.• Traded within arab-speaking commerce for over 2,000 years, sourced fromIndia and south-east Asia.AGARWOOD OIL: POSSIBLE USES AND HEALTH BENEFITSAgarwood Oil:Possible Uses and Health Benefits• Aromatherapy: may help treat anxiety, stress,depression and other nervous system disorders.• Cirrhosis of the liver, kidney problems, and lung andstomach tumours.• Anti-rheumatic, anti-convulsant, anti-asthmatic,carminative diuretic as well as an aphrodisiac.When used in aromatherapy agarwood oil (Oudoil) may help to treat anxiety, stress, depressionand other nervous system disorders.Agarwood oil is used to treat cirrhosis of theliver, kidney problems and lung and stomachtumours.Agarwood oil is also used as an anti-rheumatic,an anti-convulsant, an anti-asthmatic, and acarminative diuretic as well as an aphrodisiac.132

AQUILARIA SPECIES PRODUCES AGARWOODThere are 17 species of Aquilaria, which can produce agarwood. Among them A. agollocha, A.malaccensis and A. crassna are the best known. One of the main reasons for the relative rarity andhigh cost of agarwood is the depletion of the wild resource. The endangered A. malaccensis has beenprotected worldwide under the CITES convention since 1995 while all Aquilaria species havereceived CITES protection since 2004. However, a number of countries have reservations outstandingregarding this. In Bangkok, we are doing research work in conjunction with Asia Plantations todevelop the growing of Aquilaria trees in plantations to develop a sustainable source of Oud Oil.Table 1 Aquilaria species produce agarwood1234567891011121314151617SpeciesAquilaria apicultinaAquilaria acuminataAquilaria baillonilAquilaria baneonsisAquilaria beccarainAquilaria brachyanthaAquilaria crassnaAquilaria cumingianaAquilaria filarialAquilaria grandifloraAquilaria hirtaAquilaria khasianaAquilaria malaccensisAquilaria microcapaAquilaria rostrataAquilaria sinensisAquilaria subintegraCountryPhilippinesPapua New Guinea, Indonesia and PhilippinesCambodia and ThailandVietnamIndonesiaMalaysiaCambodia, Malaysia, Thailand and VietnamIndonesia and MalaysiaPhilippines, Indonesia and Papua New GuineaChinaIndonesia, Malaysia and ThailandIndia and PakistanThailand, Malaysia and IndiaIndonesia and MalaysiaMalaysiaChinaThailandFACTS ABOUT AGARWOOD• An 80-year-old Aquilaria tree can yield6-9 kg of agarwood oil.• A 50-year-old Aquilaria tree can yield2.7 to 3.6 kg of agarwood oil.• The amount of oud oil that is extractedfrom each tree is not constant. Amountsvary from using 1.2 kg to 3.6 kg of woodto produce 1 tola (12 ml) of oud oil.• The yield is totally dependent on theinfection level of the tree, also known asresin formation.FACTS about Agarwood• 80 year old Aquilaria tree can yield 6-9 kg of agarwood oil• 50 year old Aquilaria tree can yield 2.7 to 3.6 kg of agarwood oil• Inconsistent amount of oud oil extracted from each tree• 1.2 kg - 3.6 kg of wood to produce 1 tola (12 ml) of oud oil.• Yield totally dependent on tree infection level, also known as resin formation133

NATURAL RESIN FORMATIONThe production of resinous compounds is a resultof a plant defence mechanism associated withwounding; insects possibly assist fungalinvasion.Phaeoacremonium parasitica is an importantfungus dealing with the resin formation process.Naturally, the process of resin accumulation maytake many years and the longer the process, themore expensive and highly valuable the resin.Natural Resin Formation• Production of resinous compounds a result of plant defense mechanismagainst wounding and fungal invasion; possibly assisted by insects.• Naturally, the process of resin accumulation may take many years• Longer the process, the more expensive and highly valuable the resin.Phaeoacremonium parasiticaARTIFICIAL RESIN FORMATIONArtificial Resin Formation• Tree drilling• Injection of liquid inoculum by syringe• Observation of inoculation efficiency by peeling a tree bark• 7-8 year old plantation tree yield 2-4 tolas of oud oilFirst, a tree is drilled to make a hole about 5 mmin diameter, with a 25 cm space in between theholes.Second, one ml of liquid inoculum is injectedwith a syringe.One month after inoculation, the effectiveness ofthe process is checked by peeling the tree bark toobserve the disease symptoms.A 7-8 year old plantation tree yields between 2-4tolas of Oud oil.RESINOUS COMPOUNDSThe resinous compounds in agarwood oilare detected by the Gas Chromatography-Mass Spectrometry (GC-MS) method.Many chemical compounds are found inOud oil. Some major chemicalconstituents that make agarwood oilsdistinctive from other oils include:• Agarol• Agarospiral• !-agarofuran and "-agarofuran• Eudesmol• Jinkohol-eremol• Guaiol• Selinene• 2-(2-phenylethyl) chromoneGC-MSResinous Compounds• Agarol• Agarospiral• !-agarofuran and "-agarofuran• Eudesmol• Jinkohol-eremol• Guaiol• Selinene• 2-(2-phenylethyl)chromone2-(2-phenylethyl)chromone134

RESINOUS COMPOUNDSSome of these chemical compounds werescientifically reported to have medicinalbenefits.Resinous Compounds• Agarol is an effective, gentle andpleasant tasting laxative• Agarospiral and Jinkohol-eremol• Agarol is an effective, gentle and pleasant tasting laxative• Agarospiral and Jinkohol-eremol are considered to be neurolepticare considered to be neuroleptic• Agarofuran is an anti-tumor compound• Agarofuran is an anti-tumour• !-eudesmol can protect against brain injury• Guaiol can be used as skin lightening productcompound• Selinene has anti inflammatory effects• !-eudesmol can protect against• 2-(2-phenylethyl)chromone shows cytotoxicity against human gastric cancercell line brain injury• Guaiol can be used as skinlightening product• Selinene has anti inflammatoryeffects• 2-(2-phenylethyl) chromone shows cytotoxicity against the human gastric cancer cell line.EXTRACTION PROCESSThe extraction process also affects the oil yields.Water distillation methods using traditional apparatus is timeconsuming with high-energy consumption and low yields. Thepicture on the left shows the conventional distillation plantwith wood fired stoves.Conventional distillation plantThe right hand picture is a modified distillation plant with gas firedstoves and agitation systems. Energy and mass transfers have beenimproved on the later model. However, the distillation system stillrequires on-going research and modification.Modified conventionaldistillation plant135

Solvent extraction can be used in combination with distillation.A hydrocarbon solvent is put in with the wood dust anddissolves the essential oil. The resulting solution is then filteredand put through a distillation process that concentrates the oil toproduce a resin. The remaining substance is a combination ofwax and essential oil called "concrete".Solvent extraction unitThe supercritical fluid extraction method is non-flammable,non-toxic, and chemically stable and consumes less energy. Itprovides some advantages over the classical method, sincesupercritical carbon dioxide has low viscosity, high diffusivity,and good transport properties and gives faster extraction andhigh yields.Supercritical fluid extraction unitThe extraction process can be further enhanced by a pre-treatment process that is affected by manyparameters including wood chip size, solid to liquid ratio, pH, soaking time and agitation speed. Forthe distillation process more study and research is still required. There are questions such as whetherwater or steam distillation is better. The impacts of pressure, temperature and distillation time shouldbe further investigated.For solvent extraction, the effects of the different types of solvents, pressure, temperature, extractiontime and agitation speed should be studied.Extraction ProcessPretreatment Distillation Solvent extraction• Wood chip size• Solid: liquid ratio• pH• Soaking time• Agitation speed• Water-steam• Pressure• Temperature• Distillation time• Type of solvents• Pressure• Temperature• Extraction time• Agitation speed136

OIL QUALITY GRADINGCurrently, there is no common grading standard or method for agarwood oil. The oil is sometimesclassified into three grades. Grade B is for the oil with purity less than Grade A. This oil’s price isapproximately 180-200 USD/tola. 1 tola is 12 ml. Grade A is for the oil with 95-99% purity. Oilsproduced in Thailand usually fall within this grade with a price of 200-260 USD/tola. Grade A+ is theoil with 100% purity, which is only found in Assam India. Its price is 260-350 USD/tola. Pricefluctuates within all grades. These data are for guidance only.Oil Quality GradingGrade A+Grade BOil Purity

CHALLENGES FOR THE AGARWOOD OIL INDUSTRYThere are many challenges facing the agarwood oil industry.The trade on the black market needs to be more highly regulated and banned. With a legally tradedmarket, oil quality standardisation can move forward.Global demand for 100% natural organic oils for fragrance production has increased dramatically overthe last few years. One of the goals of an agarwood oil manufacturing company is to obtain anInternational Fragrance Organisation (IFRA) license.A high efficiency extraction process is required to obtain a high oil yield with savings in energy andtime consumption.To make the industry more profitable, agarwood oil itself can be utilised to produce other products forother industries, such as cosmetics and food. In addition, all parts of agarwood have value. The leavescan be used to produce tea. Agarwood dust after distillation can be made into incense sticks.Agarwood distilled water can be used as an ingredient in soap production.Finally, more investigation into the medicinal benefits of agarwood is required.Challenges for Agarwood Oil IndustryOil quality standardHigh efficiency extraction processIFRA licenceChallengesValue-added productsLegal marketMedical proof of oil benefitsDr Pakamas Chetpattananondh is an Assistant Professor at the Department ofChemical Engineering, Prince of Songkla University, Thailand. She obtainedher Ph.D. degree from Cranfield University, UK. She has been producingcomprehensive research on agarwood since 2005. She conducts research inconjunction with Asia Plantation Capital to advance technology in theagarwood industry.138

VALUE ADDITIONIN THE INDONESIAN FLAVOUR AND FRAGRANCE INDUSTRYAli HalimanHaldin Pacific Semesta, PTPlant 1 - Cibitung MM2100Jl. Irian V Blok MM-2, Cibitung Industrial Town MM2100Bekasi 17520, Indonesiaali.haliman@haldin-natural.com!"#$%&'(()*+,&),&-.%&/,(+,%0)",&1#"2+$3&",(&13"43",5%&/,($0-36&!"#$%&"#'&()$*+,(-./$0$1/.2#-.(3$%&"-#($$4,(-&5$6 37 $3+$87,/2-&5$9 37 $:+;.'?=$@&/#(&$A&5$4&(-2$%+3."$4#(B&C+/.$!"#$%&'(! "#$%#&'()*'+,('-%.(/)0+1%0&+! "#$%#&'()+20)3%4.+)#$+2.)5.)#/&+"#$4'-.6+! 7&3&0%89&#-+%:+;)04&+#.#(%6'"#5-6'?-&&,''! @A;-&'B%&-1(5'C#2%3&DB&#(&#5:-':%9+#51-.'/ 8&3A#&%96'E;#&#*%A6'@(#F#6'G#.-(#F#6'H%*-&A-A6'I1)46'

!"#"$%&'"()*%+*,-$."*/00"0*12%0.3)4*512%0.3)46*7-).2-$*8-4"0*&2%0.3)4*• !""#$%&'()*'"(• !""#$%&'()*'(+#,*-&%-#"(• .&/0,&'(1)'#20'#"3*")'&/#"(• 45*2#"(• 6$7,#+*#$/"8(#9/,&2/"(9:"';3-$4+7'**%+-0-0$+*,#'$-#)+! 8%(9:*+#*-?%0107@+. 2))*%)#'$#*A+;'0&:-#)+B'0C+D$1&(%+++Essenstrate Products from Haldin• A multi folded essence which delivers ahigh impact top note• Produced by a counter current extraction,capturing the top note.• Further concentrated into 15 or 30 foldproductsEssenstrate (and Applications)Products currently available:• Tea• Coffee• Cocoa• Strawberry• Cucumber140

!"#$$%&'%()*&)+#$,%)-..*&'))!""#$%&'()*+,-,Upstream,! "#$%&'(')*+, -+&##.+/'+0'12$#+/#$%&'(')*+32'4+562'5.+! 7#0#52$%+5&.+.#8#('94#&/+, :';+79#&.?/12#0+! 75;+45/#2?5(0+, @&$'&0?0/#&$*A+0#50'&5(+5&.+?&5.#B15/#+0199(*+! C145&+$59?/5(+, -+25/%#2+&#;+?&.10/2*+/'+/%#+$'1&/2*+! @&8#0/4#&/+, +D59?/5(+?&/#&0?8#+• !"#$"%&'()&*+'$#',%-&'./*• !"%01'%"1/*• 2$&.*1$34%55,%*• 64%1'(7./*4-$#81.&9*$-:("'1;*-('"*

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MARKETING TRENDS OF AMBIENT SCENTING IN ASIASimon Faure-FieldEqual Strategy, Singaporesimon.faure-field@equalstrategy.comScent marketing techniques are being increasingly usedin the Asian region to make consumer, retail andhospitality environments more attractive to spend timein. Aroma marketing solutions have been adopted bynumerous local and regional businesses, notably hotels,banks and retailers seeking to increase customerinteraction through experiential marketing, anddifferentiate themselves from their competitors. Today Iwill be sharing with you the marketing trends of ambientscenting in Asia. The presentation discusses case studiesof leading brands from banking, retail and hospitalityand outlines the methods and notes used.Market TrendsAmbient ScentingSimon A. Faure-FieldEqual StrategySimon Faure-FieldCEO - Equal StrategySingapore – Malaysia – Hong KongIntegrated application of scent & music17+ years in AsiaBackground - Interior Design & MarketingPassion for transformationGlobal perspective of best practice & trendsCross industry trend applicationsMethods based on scientific behavioral researchTrusted advisor to leading global brandsAs CEO of Equal Strategy, based out ofSingapore, a company providing servicesinvolving the integration and application of scentand music to enhance customer experience andbrand loyalty. The company has operations inSingapore, Malaysia, and Hong Kong, and clientbase spanning from Dubai to North America, andTokyo to Sydney. Our methodologiesincorporate a global perspective of best practiceand industry trends, involving cross industrytrend applications and based on scientificbehavioral research.Our clients are from verticals within the serviceindustry.143

Over the years, Equal Strategy’s work and pioneering projects have been featured major mediachannels TV (CNBC, BBC, Channel News Asia), radio (938 Live) and a broad range of printedpublications.Our clients are the green fish. Forward thinking, dynamic,innovative and do not like to be the same as everyone else.We enable brands to connect with their customers on anemotional level, using scent and music applied upondecades of scientific behavioral research.We enable brands to connect with their customers on anemotional level, using scent and music applied upondecades of scientific behavioural researchOur services comprise four critical phases:- Strategy, Content,Technology, and ManagementStrategyContentTechnologyManagement144

Our fragrance partner is Drom with a high focus on FineFragrance.Fine Fragrance 34% Personal Care 24%,Home Care 23% Hair Care 16%,Others 3%Drom’s work includes the Anna Sui collection as well asconcept for Dunhill and Escada.When designing concepts we take into consideration:race, culture, tradition, religion, sophistication,international exposure, wealth, and lifestyle economics.StrategyScent DesignRaceCultureTraditionReligionSophisticationInternational exposureWealthLifestyle EconomicsBrands influence our preference - East and West differUpper-levelneedsWESTSelf-ActualizationPrestigeBelongingSafetyASIAStatusAdmirationAffiliationSafetyAsia is quite different to the rest ofthe world, and as the slideillustrates, in Asia you findMaslow’s hierarchy to differ, withstatus being at the top for Asia.PhysiologicalPhysiologicalLower-levelneedsBehavior Maslow’s hierarchy of needs and the Asian equivalentSource: Schutte with Ciarlante 1998. Martin Roll, Asian Brand Strategy.145

There are several very exciting projects inSingapore.SingaporeMarina Bay Sands was the most expensiveintegrated resort in the world to build, with anexperienced management from overseas. Thecompany designed the music profiles and selectedevery single piece of music heard across 98% of theproperty’s floor area, and designed the fragrancesused in suites and limousines.UOB took a creative and dynamic approach to high net worth banking with an integrated visual,tactile, audio and olfactory design.Description : citrus, green, woody, floral, muskTop: lemon, orange, limeMid: rose, ginger, jasmin,Bottom: musk, cedarwood, woody-ambery146

Hong KongHong Kong is the home to the most expensivebranch in the history of Standard Chartered.Description : oriental, citrus, woody, spicy, muskTop: tangerine, bergamot, mandarin, lavender, pineapple, cardamomMid: nutmeg, lily of valley, white roseBottom: cedarwood, patchouli, sandalwood, musk, vanilla, amberThe branch uses a combination of hospitalityinspired design themes with a scent based upon thebrands heritage.BeijingBeijing was where the world’s first New BalanceExperience Store was launched.The retail space was based upon a 1950’s BostonNew Balance store. The music reflects the conceptand scent is used to create a nostalgic old storeexperience.147

ShanghaiSix months after Beijing, we opened the new storefor New Balance in Shanghai.The store retained the 1950’s concept but had acontemporary twist. Scent and music were bothapplied to the outlet along Shanghai’s premier WaiHai Street.Creating Signature GuestExperiencesThe Asian PerspectiveSimon A. Faure-Fieldsimon.faure-field@equalstrategy.comEqual Strategywww.equalstrategy.comSimon Faure-Field is founder and CEO of the Singapore-based consultancycompany Equal Strategy, which has offices in China, Hong Kong and Malaysia.For more than a decade his company has been at the cutting edge of scent andmusic marketing techniques and his aroma marketing solutions have beenadopted by numerous local, regional and international businesses. A Britishnational he has lived in Asia since 1995 and his background is in interiordesign, management and business development. He has a passion fortransforming spaces using sound and scent. He is an expert in negotiating the legal minefield ofIntellectual Property and the deployment of recorded music in the business or retail environment.148

Sustainability and Market Issues149

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INTRODUCTIONSUSTAINABLE SUPPLYA CONSUMER PRODUCT GOODS COMPANY PERSPECTIVEArthur SchickWorldwide Flavors, PepsiCoValhalla, NY, USAArt.Schick@pepsico.comToday I’d like to discuss with you Sustainable Supply through the eyes of the consumer product goodscompany or CPG company as I call it, and particularly mine, PepsiCo. I will touch on the value ofbrands, how their reputation can be harmed or enhanced by sustainability efforts, what PepsiCo does,and finally what I’d like to see all IFEAT member companies do to start their sustainability journey.VALUE OF BRANDSMy first topic is the value of brands. Before Istart I would like to get to know my audience– how many of you have children,grandchildren, nieces, and/or nephews?Please raise your hand. Like me, I’ll bet allof us would do everything in our power to besure the children in our care are wellprotected, and will thrive and grow. Well,welcome to the children of CPG companies.Brands are the equivalent of our childrenTop 10 most valuable global brands – Marketing Week UK!"#$%! !"#$%&'#()*&+,-+&&./01!7#!-

For PepsiCo we have 22 brands generatingover $1bn in sales annually and one billiontimes a day a consumer consumes one ormore of our products. So our brand reputationand that of PepsiCo is tested over one billiontimes per day. Every experience must meetor exceed expectations. Quality andconsistency of taste are critical but so is theway we market our brands and developpersonalities for them. Clearly, the extractand aroma trades industry has a critical roleto play for us to maintain our productconsistency, quality, and reputation. Everysupplier in our supply chain can positively ornegatively impact our brands. We want all ofyou on the positive side! Hopefully by the end of my presentation today you will understand how youcan help or hurt our business – and yours. So I hope you can now understand how valuable brands areto CPG companies.REPUTATION AND SUSTAINABILITYPower of PepsiCo! ""#$%&'()#*&+,#-*'*%&.'-#/0*%#123443/'#3'#&''5&4#%*0*'5*##! !"#$%&''&("$)*#+$,$-,.#3'#"66#+/5'7%3*)#&'(#7*%%37/%3*)#&%/5'(#7,*#8/%4(#&#9*:)3;/#:%/(5+7#3)#+/')5

The internet age has dramatically changedthe landscape for CPG Brand reputations!"#$$%&'()*+(,-.'(/)*(0#&%(%)'1"2($%3(34%1&(0%'')$%(#53(3#(01""1#*'(6(74%34%&(&%)"(#&(*#38(94%&%()&%(1*3%&*%3(:5'1*%''%'(*#7((3&)/;1*$()*+(53)?#*'@(– !"#$%&'$()*+,($-.– /0&1*'0,($-.– 20#)'($"03",($-.– 4#*56'070,($-.– !75*"'0)5&0#*(890,($-.11 Companies With TheWorst Reputations InAmerica: Harris InteractiveThe Huffington PostHarry Bradford First Posted: 05/ 3/2011 10:03 amUpdated: 07/ 3/2011 5:12 amAs many businesses know the internet haschanged everything. There are hundreds ofbloggers and non-governmental organizationsall looking to express their point of view oropinion – whether real or imaginary. All thismessaging impacts our brands. Social mediais now so prevalent no one knows if a brandcommercial, as an example on YouTube, isproduced by the owning company or createdby an avid fan. There are even businesses thatwill track brand reputations and providecompanies monthly scores highlighting areasof risk. Of course as you know the internet isalmost “instant”. A message posted thisminute could be shared around the world in avery short period of time. There is no place tohide!CEOs around the world know sustainabilityin the broadest context is critical to the futuresuccess of their business – 98% of CPGCEOs believe it. 96% believe sustainabilityshould be built into their strategies andoperations. Note brand trust and reputation isa key factor driving them to take action onsustainability. The overwhelming majority ofCEOs want to integrate sustainability throughtheir supply chain – this is you! Yet few feelthey are where they want to be. Finally,consumers are watching. They will have thegreatest impact on the way companiesmanage societal expectations in the future.Sustainability & Corporate Reputationare in the strategic spotlight...98% of consumergoods CEOs believethat sustainabilityissues will be criticalto the future successof their businessOver the next " 5 years,which stakeholder groupsdo you believe will havethe greatest impact onthe way you managesocietal expectations?Consumers - 58%.Number One!Source: UN Global Compact-Accenture CEO Study 2010 “A New Era of Sustainability”"96% of CEOs believe thatsustainability issues shouldbe fully integrated into thestrategy and operations of acompany"" 72% of CEOs cite ‘brand,trust and reputation’ as oneof the top three factorsdriving them to take actionon sustainability issues."88% of CEOs believe that theyshould be integratingsustainability through their supplychain. Only 54% believe thatthis has been achieved withintheir company.!!"“Business cannotsucceed in a societythat fails.”Bjorn Stigson, formerPresident, WorldBusiness Councilfor SustainableDevelopmentLet’s face it – “business cannot succeed if societyfails” - as Bjorn Stigson former president of the WorldBusiness Council for Sustainable Development said.So sustainability is not a nice to have it is a must have.153

Global consumers care…and are willing to pay for it!"#$%&'()$*)+,"-%.$$/+)0$1+)$%&'2$$345'.%$(4$%&'2$$!"#$"%#&'()*+'",-#".+*$*+"/#"0(1"$+#)2",#+3"$#+2"4&5"6&7*'/"6&""%#).4&6*'"/-4/"867*"04%3"/#"'#%6*/1""9:;4&(*-5/#"%/0*#'( !(#$ !*#$ !%#$ !"#$ !%#$?*-:'(;"7=(4*3/4(5*.&-#$&#7@3*$$)#"79(*-5/#"%/0*#'(7*(-&6)3&(;/'7&(/#6(4"A&-(#$+,-./$011.$2,31$4,56781$$9:,-;$:39

Similarly, our customers want to know how our suppliers and we are treating the earth. Are we usingthe best agricultural practices, practicing sustainable agriculture, and preventing the dumping ofhazardous materials into the environment? CPG companies want consistent quality supply and want toget what we contracted for. Adulteration is no longer tolerable.Our company cannot turn a blind eye to these issues any longer. And if we can’t, that means everyonealong the supply chain can’t either – and that means you! While meeting local laws is a necessarygiven, I also want to point out that it is NOT always a safe harbour. You must use your judgment toconsider if “legal” is truly responsible.The Implications forNon-Compliance are Enormous!""#$!"#$%!&''()!*#+,--#(!+'$.,/0$,.#(!1#.!2''(3!!4')5$6!789"3!!",$:!('6)!,$(!+,.)!0$!;'*.

in legacy products in a difficult position. Should they reformulate and risk consumer alienation, orcontinue to make a product with supply risk.So I hope you can now see that sustainability has a direct impact on brand and company reputation,and consumers are watching.PEPSICO APPROACHI want to share with you PepsiCo’s approach to sustainability, which you will see is very broadcompared to traditional thinking.Performance with Purpose–The Promise of PepsiCoStrive to deliversuperior, sustainablefinancial performance.Encourage people to livehealthier by offering aportfolio of bothenjoyable andwholesome foods andbeverages.Protect the Earth’snatural resourcesthrough innovation andmore efficient use ofland, energy, water andpackaging in ouroperations.Invest in our associates to helpthem succeed and develop theskills needed to drive thecompany’s growth, whilecreating employmentopportunities in thecommunities we serve.PepsiCo is not just sitting back thinking our supply chain will act on their own. We have Performancewith Purpose. PWP deals with delivering sustainable growth by investing in a healthier future for ourpeople and the planet. The Performance is everything you’ve known PepsiCo for: responsible volumeand sales growth, and fair returns to our stakeholders. Human sustainability deals with ourcommitment to continue to develop products that address the needs of consumers around the world,whether they are treats that build off thecultural food heritage of the indigenouscountry or healthy foods that solve someof the toughest malnutrition issues.Environmental sustainability is as youwould expect: reducing, reusing orrecycling our wastes, plus being goodstewards of the earths environment.Talent Sustainability involves how wetreat and train our people. I could spendmy entire presentation talking aboutPepsiCo’s effort in this area. For those ofyou with a further interest I wouldencourage you to visit our PepsiCo.com&&website and look under the banner “purpose” for more information.PepsiCo Supplier Standards are part of PWP!"#$%#&'()*$+,*-.,$%/*01/#2#34$$51&&,(#/$)*/&*/.4#$5*0(.,$6#'&*3'(-(,(47$8)569$:''1/.30#$%/*;/.2$".'$4

A critical part of Performance withPurpose is our Supplier CorporateSocial Responsibility AssuranceProgram – CSR for short. Every yearour tier 1 suppliers are required tocertify that they have read, understandand acknowledge that they will abideby our CSR program. Our CSR policyis imbedded into our contracts as a keyterm and condition. Within the CSRprogram is our Supplier Code ofConduct which lay outs specificstandards we expect our suppliers tofollow related to items such as: fairlabour practices, complying with alllocal laws and regulations, safe andhumane working environments, andaccurate books and records.PepsiCo Supplier Standards are part of PWP!"#$%#&'()*$+,*-.,$%/*01/#2#34$$51&&,(#/$)*/&*/.4#$5*0(.,$6#'&*3'(-(,(47$8)569$:''1/.30#$%/*;/.2$".'$4

EXPECTATIONS FOR IFEAT MEMBERSI am certainly proud of the work PepsiCo is doing on sustainability and there is so much more we canall do. So what would I like to see from you – my suppliers, in fact all suppliers in IFEAT?So What Are CPG Companies Expectingfrom You? How to begin your journey?! "#$%&'()#$*+,-&*.,#/*(%&0*'-11%''*2'*3)'%$*-4,#*(5%*'-11%''*,6*,-&*7&)#$'*)#$*(5%2&*&%4-()8,#*! 9,*(,*,-&*:%3'2(%*)#$*-#$%&'()#$*,-&*;-&15)'2#/*

Earlier I talked about how our brands are our children. I also want you to remember that anyone whoharms one of my children will be remembered for a long time, the same applies to our suppliers and toour brands. I do not think anyone of you in this audience want to be in that position. Now, I am notsaying any of this is easy, but it can be done. Here is a video clip of a PepsiCo initiative in Mexicowhich further drives home my points today – I hope you’ll agreeWasn’t that fantastic! How can you look at thissituation and say it wasn’t a win-win for all partiesThank you for allowing me to share the perspective of a CPG company on this very important topic ofsustainability.Arthur Schick is Vice President of Purchasing at PepsiCo, the world’s secondlargest food and beverage company. After joining PepsiCo R&D in 1985 andthen working in finance, Art has, for the last twelve years, been purchasing rawmaterials for the manufacture of PepsiCo’s beverage products. In his currentrole he travels extensively to many essential oil and aroma chemical producingcountries. He has a BS in chemical engineering from New Jersey Institute ofTechnology and a MBA in finance from Xavier University.159

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INTRODUCTIONEFFORTS AND CHALLENGES FOR SUSTAINABLEESSENTIAL OIL PRODUCTION IN INDONESIADr Meika Syahbana RusliIndonesian Essential Oil CouncilBogor Agricultural Universitymrusli@ipb.ac.id or meikarusli@yahoo.comIt is really a great honour for me to have theopportunity to talk about the sustainability of essentialoil production in Indonesia on behalf of theIndonesian Essential Oil Council. My briefpresentation consists of an overview of essential oilproduction in Indonesia, its sustainability problems,the Cultiva Project as an experiment and thechallenges faced by the industry. I will end mypresentation with some conclusions.Efforts & Challenges onSustainable Essential OilProduction in IndonesiaMeika Syahbana RusliIndonesian Essential Oil CouncilINDONESIA AND NATURALSHistory and Some Figures• For centuries known as important source of spices• Since beginning of 20 th century producing patchouli oil• Since mid 20 th century producing vetiver, nutmeg, clove leaf oil.• Important raw material source of forestry based productsincluding turpentine oil (#2 producer), cajeput, and benzoin• Important source of many estate commodity products for foodindustry• Important source of new and unique essential oils and extractsFor centuries, Indonesia has been known asan important source of spices in the world.Since the beginning or the middle of the20th century, Indonesia has producedpatchouli oil, vetiver oil, nutmeg oil, cloveleaf oil, citronella oil and so on. Besidesthese traditional essential oils, Indonesia hasalways been a major producer of forestryrelated products for the flavour andfragrance industry such as turpentine oil,cajeput oil, and benzoin gums. Forturpentine oil, Indonesia is known as thesecond largest producer.Indonesia’s rich biodiversity has madeIndonesia an important source of new and unique essential oils and extracts. In addition to spices andessential oils, Indonesia is also an important source of many estate commodity products for the foodindustry e.g. palm oil, cocoa, and rubber, etc.The naturals such as spices, essential oils and estate commodities are grown and produced in almostall areas in the Indonesian archipelago. Indonesia is the world’s biggest producer of patchouli, nutmeg,clove leaf, cajeput, cananga, massoia, keffir lime and cubeb oils. Meanwhile, for cocoa, coffee, tea,pepper, tamarind, vanilla, cinnamon, ginger oil, sandalwood oil and vetiver oil, Indonesia is one of theworld’s biggest producers.161

History and Some FiguresBenzoinCinnamonCitronellaCoffeeNutmegPatchouliPepper!"#"$%!"&''%!(")'%Nutmeg*$+,(($%-$.#/"0(,%CajeputCloveNutmegMassoiahVanillaCajeputCanangaCapsicumCitronellaCloveCoffeeCubebGalangaGingerKaffir LimePatchouliTeaVanillaVetiverCloveCoffeeVanillaSandalwoodTamarindIndonesia: #1 grower ofCajeput, Cananga, Clove, Cubeb, Galanga,Kaffir lime, Massoia, Nutmeg, PatchouliIndonesia: # 2-6 grower of Benzoin, Cinnamon, Cocoa,Coffee, Ginger, Pepper, Sandalwood,Tamarind, Tea, Vanilla, VetiverIndonesian exports of essential oils and aromachemicals (excluding turpentine oil) are valuedbetween US$ 230 and 250 million. The top threeproducts, patchouli oil, clove leaf oil and itsderivatives and nutmeg oil contribute to morethan 75% of the value. Patchouli oil and nutmegoil each have a world market share of more than90%, while clove leaf oil and its derivatives fromIndonesia dominate more than 70% of the worldmarket share. Besides these three products, thereare approximately 50 oils produced on a regularbasis in Indonesia.Indonesian Essential Oil Industry• Export performance for essential oil and aromachemicals (ex. turpentine): US$230-250 Million/year• Top 3 products contribute more than 75% of values:– Patchouli oil (>90% world share)– Clove leaf oil & its derivatives (>70 world share)– Nutmeg oil (>90% world share)• Approx 50 oils produced on regular basis• Large economic effects on all levels of the society:– 1 clove distillation unit provide employment for >50workersThe essential oil industry in Indonesia has a large economic effect on all levels of the society. Oneclove distillation unit, for example, provides employment for more than 50 workers.The wide spectrum of Indonesian essential oilscan be categorized into four product groups. Thefirst group is the major traditional oils (the big 5),consisting of clove, patchouli, cajeput, nutmeg,and citronella oils. Specific traditional oilsincluding vetiver, cananga, cubeb, ginger, cassia,gurjun and kaffir lime oils belong to the secondgroup. The other group is for new and recentlydeveloped products e.g. black pepper oil, lajagoaoil, etc. Forestry based products is the last group;the country has massoia, sandalwood, agarwood,eaglewood, Santalum mcgregorii oils, etc.Essential Oil Product Groups• Major Traditional Oils (the big 5)– Clove, Patchouli, Cajeput, Nutmeg, and Citronella• Specific Traditional Oils– Vetiver, Cananga, Ginger, Cubeb, Cassia, Kaffir Limeleaves, Gurjun, etc.• New and Recently Developed Products– Black pepper, Lajagoa, etc.• Forestry based Products– Massoia, Sandalwood, Agarwood, Eaglewood,Santalum mcgregorii, etc.162

The following table provides an overview of the production of some important essential oils inIndonesia last year. It can clearly be seen how significant the role of clove oil and patchouli oil are forthe Indonesian essential oil industry.Essential Oil Production 2011ESSENTIAL OILS OUTPUT (MT) REMARKS TRENDClove (leaf/stem/bud) oil4,500-4,800 Mostly used to produce aroma chemicals StablePatchouli oil 1,200-1,400 New emerging source: Sulawesi UpNutmeg oil 350-380 Shortage of raw materials DownCajeput oil 300-350 Mostly used in domestic market StableCitronella oil 200-250 UpVetiver oil 25-30 StableCananga oil 17-20 Caterpillar pest DownMassoia bark oil 12-15 DownGurjun balsam oil 8-10 DownGinger oil 4-5 Both fresh and dried types UpKaffir lime leaf oil 2-3 StableAetoxylon oil 2-3 StableCubeb oil 1-2 StableLajagoa oil 1-2 DownSandalwood oil 0.8-1 DownBlack pepper oil 0.8-1 UpAgarwood oil

Estate Commodity Competition• Increase in the estate commodity prices in the past5-6 years resulted in opening more land forplantation.• Problem is most severe in Sumatra, just for palm oilplantation, 600,000 ha were added between2000-2009.• Other commodities: rubber, corn, cocoa, coffee,sugar-cane, and cassava.• Number of field distilleries in Sumatra hassignificantly decreased (>50%) in the past 6 years.The main source of economic growth inIndonesia’s agriculture sector is estatecommodities like palm oil, cocoa, rubber,coffee and so on. The increase in estatecommodity prices in the past 5-6 yearsresulted in the opening of more land forplantations. This problem is the most severein Sumatra. For the palm oil plantationalone, 600,000 ha were added in 2000-2009. All in all, more than 2 million ha ofnew palm oil plantation were established inIndonesia during the last ten years. This, inaddition to the development of other estatecommodities e.g. cocoa, rubber, and coffee,brings about a very strong competition inacquiring land for plantation fields.Through this situation, the number of field distilleries in Sumatra has significantly decreased up tomore than 50% in the past 6 years.The second factor is the increased labour and energy cost. The labour cost is currently Rp 50-60 K(US $ 5.5-6.5)/day for farmers; in some regions even up to Rp 75 K (US $ 8). For distillers, the cost isRp 100-120 K (US $ 10.5-12.5)/day; in some regions it is up to Rp 150 K (US $ 16). If compared tothe wages of the labour in developed countries, the labour cost in Indonesia is actually still farcheaper. With the increased wage level, we can imagine the level of welfare endured by the farmersand distillers of essential oil in Indonesia.On the other hand, the energy cost in terms of fuel price has risen to Rp 9.5 K (US $ 1)/litre and theelectricity has increased 30% within 5 years. Increased labour and energy costs have significantlyinfluenced the cost structure of essential oil production in Indonesia during recent years.The next factor is income uncertainty. This condition discourages the farmers and the distillers frominvesting or allocating more resources in growing plants and processing the oils. Through harvestfailure, which might be technology related, caused by drought (problems that usually affect seasonalplants), pest (for nutmeg), and diseases (for patchouli), farmers can lose their incomes.The decrease of demand in certainseasons and many farmers’ and smalldistillers’ limited financial capacity tostore the product generally cause the dropof the price of raw materials and essentialoil. Price fluctuations also contribute tothe income uncertainty for the farmersand the small distillers.Time series data show the evolution ofeugenol price between 2005 and 2010 inUS$. Due to extreme climate anomaliesin 2011, the price has rocketed up toabout US$ 32/kg. This year, the eugenolSource : PT Indesso Aroma164

price has recovered to normal andpredictable levels. The relativelysimilar pattern of price fluctuationoccurred also for patchouli between1995 to 2011. The price peaked forpatchouli oil twice during thisperiod: in 1998 at the level of Rp870,000/kg and in 2008 at Rp1,100,000/kg. In 2012 the patchoulioil price in Sumatra market wasabout Rp 350,000/kg.Sustainability problems in essentialoil production are also related tosome environmental issues. In someregions, patchouli is cultivatedwithin a conservation forest area(National Park). Slash-and-burn practices for land preparation, the use of firewood as fuel and soildamage, which is caused by the harvest of vetiver roots, are controversial topics for many people.These issues have to be addressed appropriately by the essential oil stakeholders.THE CULTIVA PROJECTIn order to improve the competitiveness of the essential oil industry in Indonesia and to ensure itssustainability, DAI, the Indonesian Essential Oil Council, has approached the government to obtainpolicy support and its stakeholders to build awareness. This effort has shown results. The Ministry ofIndustry has included the essential oil industry as one of the 32 prioritised industry clusters. TheMinistry of Agriculture has listed patchouli as a top 12 estate crop priority list, and the Ministry ofTrade considers essential oils as one of the potential products to be promoted.Principles of Cultiva• In accordance with Cluster Approach of GovernmentDevelopment Policy of Republic Indonesia• Good Agricultural Practice instead of nomadic farmingfor the sake of sustainability• Good Manufacturing (distillation) Practice instead ofcrude field distillation to improve quality & productionefficiency• Elimination of speculative trading• TransparencyTo address all sustainability problems,together with the government and itsstakeholders, DAI designed a new modelof essential oil value and supply chainsystem called CULTIVA. It is adaptedfrom the Cluster Approach ofGovernment Industrial DevelopmentPolicy. Some principles of the CultivaModel include implementation of GoodAgricultural Practice instead of “nomadicfarming” for the sake of sustainability;implementation of Good Manufacturing(distillation) Practice instead of “crudefield distillation” to improve quality andproduction efficiency; elimination ofspeculative trading and transparency.“Commitment” is the key word of the Cultiva concept to link all parties along the chain. It can bedescribed as follows. The first party, the farmer, does a Good Agricultural Practice and sells driedleaves to an appointed distiller. The second party, the distiller, does a Good Distillation Practice and165

sells crude oil to appointed cooperatives/privates. The next party is the cooperatives or privatecompanies that collect patchouli oil, conduct simple QC and manage the logistics of the oil fordelivery to champions. The champions standardise the collected oil; exert full control over the oilquality, package and market the product. The last party is the end user, who buys the good quality oilat an agreed price and quantity.Farmer- Good Agricultural Practice- Sells dried leaves toappointed distillerPrice = cost + premium = ACultiva ConceptCooperative/Private Champion End User- Collecs patchouli oil from appointed distillers- Simple QC + logistics- Sells crude oil to championPrice = B + cost + premium = CDistiller- Good Distillation Practice- Sells crude oil to appointedcooperative/privatePrice = A + cost + premium = B- Collectingpatchouli oilfrom appointedcooperativeor private- Standardizing,full QC,export packing,marking,exportingto end userPrice = C + cost+ premium= D- Buying withagreedquantity &price:patchouli oilde-ironizedto Championat price = DOptional supporting programs from Ministry of Industry,Ministry of Agriculture, Research Institutes, Universities,Community Development from champions/end usersKey:Optional financing programs from banks/other financial institutionsor from end users/championsThe first illustration I want to deliver is theCultiva Pilot Project of Patchouli in WestPasaman District, West Sumatra. This area,which has good soil and a suitable climate,has been known for a long time as apatchouli oil producer in Indonesia. Becauseof that, it is no wonder that there is an areanamed Bukit Nilam. There are more than9,000 farmers harvesting patchouli in a3,000 ha field area. It produces up to 250-300 tons of oil annually.Pilot Project 1: Patchouli OilWest Pasaman District – West Sumatra• District Potentials:– Good soil and suitable climate– Long tradition : Village Bukit Nilam– Labours & land availability : more than 9000 farmers and 3000 ha– Production capacity : 250-300 tons yearly• Programs Executed:– Seedling & Processing Equipment procurement– Capacity Building (GAP & GMP Training)– Setup of farmers group and/or cooperatives– Sales Contract Facilitation• Project Evaluation:– Not yet successful due to unsolved institution and financialproblems166

The activities of the patchouli pilot project in WestPasaman include seedling and processing equipmentprocurement for groups or cooperatives. Capacity buildingtraining for Good Agricultural Practices for farmers andGood Manufacturing Practices for distillers are held. Inorder to promote good organisation of productionactivities, farmer groups and/or cooperatives have beenformed. Meanwhile, regarding the marketing aspectcomponent, the pilot project facilitates the creation of salescontracts between producers and exporters.Cultiva Project West Pasaman :New Cultivation FieldCultiva Project West Pasaman :Stakeholder’s Field SurveyCultiva ProjectWest Pasaman:Commissioning ofNew DistillationUnitAfter being implemented for two years, the pilot project has not yet been successful. The main causesare unsolved institutional and financial problems.Another approach to a sustainable essential oil production is the OVOP (One Village One Product)model which has been implemented in Balai Batu Sandaran Village, Sawahlunto – West Sumatera.This village chose citronella oil as their product. Balai Batu Sandaran Village had started to cultivatecitronella since 2003. Now, the cultivation areareaches 80 ha involving 120 farmers, organizedthrough a farmer group, “Berkat Yakin”. Thespecific characteristic of Berkat Yakin is thatprocessing and marketing of the oil are managedby the group. Until now, the production stillprevails although the external challenge such asprice fluctuation has a strong enough impact. Thestrong commitment from village’s leaders is animportant factor for the success in the OVOPimplementation model in Balai Batu SandaranVillage. It makes villagers able to see the proveneconomic benefits of the citronella oil business.Success Story: Citronella OilBalai Batu Sandaran Village – West Sumatra• Started in 2003• 80 ha cultivation area• 120 farmers participated, organised throughfarmers group “Berkat Yakin”• One village one product concept• Processing and marketing of oil managed bygroup• Strong commitment from village’s leaders• Proven economic benefits for villagers• Production sustained until now167

The following photographs provide some additional visual information about the project.OVOP Model Balai Batu Sandaran Village :Citronella FieldOVOP Model Balai Batu Sandaran Village :Citronella Oil Processing FacilityOVOP Model Balai Batu Sandaran Village :Farmers InstitutionCHALLENGESConsidering the progress constraint, Cultiva Project is still facing two main challenges, namely theestablishment of local producer institutions and long-term partnership commitment. For the firstchallenge, building an effective and functional cooperative may be the right answer. Such anorganisation could play a significant role in introducing and promoting the Cultiva scheme,modernising the processing equipment, building the farmers’ capacity, managing the harvest,processing the products, and fulfilling an economic scale of production. Other required institutionsshould be responsible for marketing and giving financial support to the cooperative. Providing anappropriate credit scheme as well as marketing information (price and demand) services are expectedto be offered by this institution.The second challenge is how to build a strong long-term partnership commitment among parties. Themost important thing is the way to build trust between the producers and users; this can only beachieved if both parties set a long-term perspective for their business relationship. The producers andusers have to work together to develop a sustainable supply and value chain for the essential oil. Lastbut not least, sustainability issues need a holistic approach. A partial (e.g. Corporate SocialResponsibility) approach is not enough.168

CONCLUSIONSIn conclusion, considering the comparative advantages of agro-climatology as well as biodiversityfactors, Indonesia is still promising as an important essential oil producer. Sustainable essential oilproduction in the country can only be achieved through a long term partnership between producers andend users. This concern must be reflected throughout the whole purchasing policy of the end users andby an improved production system of producers.Dr. Meika Syahbana Rusli graduated in 1987 from Bogor AgriculturalUniversity, Indonesia in agroindustrial technology and obtained his doctorate in1998 from the University of Goettingen, Germany in agricultural engineering.Since 1989 he has been a lecturer and researcher at Bogor AgriculturalUniversity, specialising in essential oil processing technology and theirderivatives. He was actively involved in the founding of the Indonesian EssentialOil Council in 2006 and since 2010 has been chairman of the council.169

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THE INGREDIENTS SUPPLY CHAIN:PAST AND PRESENT BUT WHAT DOES THE FUTURE HOLD?Trevor RahillFocus InternationalP.O. Box 8624Cincinnati, OH 45208, USAtrevor.rahill@gmail.com or trevor@focusinternational8.comINTRODUCTIONIntroduction• !"#$%&''()$*"+,-$*.-/-&#%$0.$1#*.2#$2.3#$*.2'(#4$+-5$,-#6*,#-0$7,0"$2.3#$+-5$2.3#$3#8&(+/.-%9$:..5$%+:#0)$+-5$;&+(,0)$*.-*#3-%9$-+0&3+($5##$%##-$(,B(#$3#+($C8+2#$*"+-8,-8D$+5>+-*#%$,-$0"#$7+)$0"+0$7#$%.&3*#$,-83#5,#-0%$• A.$7"+0$.:$0"#$:&0&3#E$$• !",%$'3#%#-0+/.-$2+@#%$+-$+B#2'0$0.$*"+((#-8#$0"#$%0+0&%$;&.$+-5$'3.>,5#$.-#$>,%,.-$.:$0"#$:&0&3#$$F$The ingredients supply chain is the life bloodof the food and beverage industry, the largestindustry in the world but yet it is increasinglyweighed down with complexity, costs andinefficiency, as a result of more and moreregulations, food safety and quality concerns,natural versus synthetic definitions, globalsupply, and sustainability issues etc. Costshave been steadily rising and the growingcomplexity in the ingredients supply chainhas meant that industry participants bothlarge and small have to spend tens of millionsof dollars just to keep up without gaining anycompetitive advantage.So far we have seen little “game changing” advances in the way that we source ingredients but thetime has come when industry solutions need to be found.This presentation is not about traditional supply chain theory but rather a practical examination of thedynamics and problems we deal with daily. My aim is to challenge the status quo and introduce afuture state where companies actually collaborate to deal with industry wide issues that cannot besolved by individual enterprises.DID YOU KNOW - WE LIVE IN EXPONENTIAL TIMES?Technological change is happening at an incredibly rapid pace and will impact the ingredients industryin ways not yet obvious to most in the industry.Google, Microsoft and Intel as well as other tech companies are scrambling to reinvent their businessmodels now that the old model – a stationary customer sitting at a stationary desk – no longer applies.These companies once disrupted traditional businesses, from selling books and music to bookinghotels. Now they are being upended by the widespread adoption of smart phones and tablets.171

“Companies are having to retool their thinking, saying,‘What is it that our customers are doing through themobile channel that is quite distinct from what we aredelivering them through our traditional web channel?’ ”said Charles S. Golvin, an analyst at Forrester Research,the technology research firm. He added, “It’s hilariousto talk about traditional web business like it’s beengoing on for centuries, but its last century.”Five years ago Blackberry had 50% of the NorthAmerican market but now only has 5%, as IPhone andAndroid phones have taken over. It is not at allinconceivable that the ingredients industry is open tonew technology innovation as are all other industries. - Alibaba was a start but it doesn’t solveindustry problems. There are many examples of the virtual world winning out against the physical –look at Sears versus Amazon.We live in Exponential times• !"#$%&'&()#*'+#$*%("+),+$*--"%)%(+*.+*+/*-)0+-*#"+*%0+1)''+)2-*#.+.$"+3%(/"0)"%.,+3%04,./5+)%+1*5,+%&.+5".+&67)&4,+• !$"+8&&0+9+:"7"/*("+)%04,./5+),+.$"+'*/(",.+)%04,./5+)%+.$"+1&/'0+– ;+./)'')&%+)%+?@@A+*%0+",B2*."0+.&+/"*#$+;>=@+./)'')&%+65+?@CDE+• !$"+898+)%04,./5+*'&%"+),+"F-"#."0+.&+/"*#$+;?G=

HOW HAVE BUYERS AND SUPPLIERS CONNECTED?Now that we understand the pace of change and the exponential times we are in and the overall size ofthe ingredients industry, let’s take a step back and look at how buyers and suppliers have connectedand once connected, work together.This chart tries to show the historicalconnection points that have been the hallmarkof the ingredients industry for longer than Ican remember. As you can see, most of theconnection in the industry was more physical,whether face-to-face contact or in actualbrochures and booths at exhibitions. As theindustry has grown however, the complexityof these relationships has increased to a pointthat we needed tools to sort through the messand the increasing use of the internet and ITsolutions was expected to provide thesolutions for the future and change thedynamics of the industry, but so far this hasnot happened. Please note also that this chartis not a one-way street as all suppliers are buyers and all buyers are suppliers and so they allexperience the same problems but at differing levels depending on their size and needs.#$%&'$&%(")&*+,%&+"-./,01"2&3,0"4..51&"• Cloud impact –reduce cost of ITinfrastructure andsoftware• LinkedIn usedextensively to connectbuyers and suppliers• Search engines – wehave informationoverload which isadding more complexity• We are not yet usingthe internet effectivelyWhat is happening now?#$%&'$&%("6$"7,$&"8,'&/%.',&+"• Replaced paperdirectories• Created e-paperdirectories• No change in stepsneeded to verifysuppliers• Lack interactivecapabilities to transactbusiness2.*,1&";&/A$.1.5B"• Mobile technology isestimated to replacethe PC and Laptop• How will thistechnology impact theingredients industry?• Mobile opens upwhole new marketsand solutions thatwere not open before• Tools for on the spotInspection and qualityverification9$%&':',+&"#;"+.12"98#"• Work in a “one toone” or “one tomany” environment• Not suitable for a“many to many”collaborativenetwork• ERP solutions arenot the answer andcould becomeredundant overtimeHow have buyers and suppliers connected?/01$($2*3%"+"4*35.'.36.%"4*3&

“one to one” or “one to many” environment but are unable to operate in the “many to many”collaborative networks that I see as the future of the ingredients supply chain.SO WHERE IS THE INDUSTRY NOW?Every company in the industry has virtually the same supply chain marked by:• excessive complexity• cash tied up in excess inventory• rising costs• varying levels of purchasing power• continuing difficulty in finding quality products with acceptable specifications• increasing regulatory requirementsAll share these problems despite the fact that they all use many of the same ingredients (estimategreater than 65%) leading to shareholder dissatisfaction and management frustration. So why is thisso? Basically there is virtually no industry collaboration and while this has a lot to do with a mind-setof company managers and owners driven by competition and the need for secrecy and confidentiality,but even if this mind-set changes there is currently no solution at present to allow for suchcollaboration to occur.I think we would all agree that we have many tools open to us to connect suppliers and buyers, butthese alone, are not addressing the critical issues in the ingredients supply chain and certainly have nottaken advantage of the technologies available today, let alone preparing us for the future. Companieshave already received the majority of benefits of putting in systems and automating, but they’re stillpaying 25% of list price to Oracle and SAP for uplifting and maintenance and future improvementswill be incremental at best. After decades of companies seeking improvement through cost cutting,there’s little left to trim unless there is a dramatic change in the industry. Complexity and demandsfrom upstream add costs, which for the most part cannot be passed on, and so frustration grows.Companies spend too much time and money on non-value added activities under a mistaken belief thatthese activities somehow provide them a competitive advantage. The use of expensive, bespokeenterprise solutions speaks to this belief but it is impossible for enterprise solutions to address andsolve industry issues. Major changes are required to achieve real and valuable changes to the industrysupply chain dynamics.OH YES IF ONLY WE HAD A CRYSTAL BALL!There are many uncertainties ahead for theindustry and individual companies. Many of theabove issues are industry issues and need to beaddressed as an industry or by collaborativenetworks who work together to address “valuedepleting” activities together in order to allowthem to compete on their core “value added”activities. Collaboration leads to a future whereit’s all about “value for many” not “value formoney”.Sustainability?Technology?Simplification?So what about the future?NetworkCollaboration?Food SafetyFSMA?Outsourcing?Costs?Regulations?!"174

Let’s take a look at a few of these issues to examine them in a bit more detail. I hope you understandthat it is simply not possible to address all of these issues in a meaningful manner in this presentationbut you can see how each of these are critical in their own right and if addressed will have a dramaticeffect on reducing costs and complexity while enhancing efficiency at all levels of the supply chain.NETWORK COLLABORATIONFor a start let’s talk about network collaboration. I apologise that this may be a bit theoretical but it isimportant to understand some of the dynamics I am talking about in this presentation.!"#$%&'()%**+,%&+-%.(!"##$%&'()*+,&)-.&+/0&-.1*2.+0.3&.+44.,5&&• !"#$%&'()#"*&+",(-&(./01)0+(0+2+0,(3-&,*#&*04(5-,*0+(6-"(*7+(8+,*(3-.)+112+()-,%1-&,(9(*7%,(*/".-%0(3"+#*+,(%&+:3%+&3%+,(• ;/))04(

of the normal variation of the ecosystem and with each transaction and iteration, a new point ofbalance can be createdWhile the points of balance willalways be dynamic which is thenature of business – they need notbe so conflicted that they blind eachtrading entity to wider opportunitiesfor collective growth and profitopportunities - which is what oftenhappens in traditionally structuredsupply chains.Trading partners can be jolted outof this mode of behaviour by acompelling event that clearlydemonstrates how they can profitfrom serving the interests of theend-to-end supply chain not justtheir part of it. What is thecompelling event? At some time!"#$%&'()%**+,%&+-%.(• !"#$%&'()#*'(%)#$+,-.$%/"0%10-/230$%'1%-%4#','5#&-,%$.$/06%7%%– 0(**0$%53'89%+3'$+03%-()%)#0%-$%+-3/%'1%/"0%('36-,%:-3#-*'(%'1%/"0%0&'$.$/06%– 8#/"%0-&"%/3-($-&*'(%-%(08%+'#(/%'1%4-,-(&0%&-(%40%&30-/0)%• ;"#,0%/"0%+'#(/$%'1%4-,-(&0%8#,,%-,8-.$%40%).(-6#&%8"#&"%#$%/"0%(-/230%'1%42$#(0$$%7%/"0.%.""/(.%#(,"(0%(1%.231#"/(#4+#(#4"5(,*3./("+14(#&+/3.6(".-#5(#%($3/"&(%77%&#8.3-"0(9%&(1%**"1-:"(6&%$#4(+./(7&%;#(%77%&#8.3-"0(8"#&"%#$%8"-/%'&'6+0,,#(5%0:0(/?%/"-/%&,0-3,.%)06'($/3-/0$%"'8%/"0.%&-(%+3'@/%13'6%$03:#(5%/"0%#(/030$/$%'1%/"0%0()A/'A0()%$2++,.%&"-#(%('/%=2$/%/"0#3%+-3/%'1%#/%• !0&"(','5.%8#,,%)3#:0%/"0%#6+,060(/-*'(%'1%(0/8'3B$%7%$'60%#(%0C#$/0(&0%-,30-).%-()%$'60%/'%40%)0:0,'+0)%/'%600/%#()2$/3.%$+0&#@&%(00)$%• !"0%:-,20%+3'+'$#*'(%#$%6':#(5%13'6%('(%#(/031-&0)%0(/03+3#$0%$',2*'($%/'%D,'4-,%E#(B0)%F0/8'3B%G',2*'($%–

Illustrative example of a total industry networkF+2$&9())&4#%K/.L&$/)(;/4&5./:#&MN&-2))2/4&/9&1/$%$&/(%&/9&%+#&O.#$+&O.(2%&,45&P#0#%,-)#&$(66)C&1+,24&24&Q($%.,)2,&!"#$%&'#$()%$***&+,$&-./(0+%&,-/(%&,&1()%(.,)&$+23&,45&,&6),7/.8&9/.&/40/240&244/:,;/4/?.2))@&A52%/.&B(66)C&>+,24&B%.,%#0C&DEF@&G1%&HIIJ&This resulted in the development of a dynamic network architecture that supports many customers,suppliers and competitors to simultaneously share a common platform at many levels andfunctionality; and mass customise the common components to suit their individual business models,structures, capabilities, capacities and availabilities. Best Results ultimately provided enterprises withthe capability to seamlessly integrate any or all of their collaborative upstream and downstreampartner processes. Imagine how an enterprise might revolutionise its business model, product design,category management, merchandising, sales-operations-inventory-planning and execution to createnew net $ value, eliminate physical waste and permanently sequester carbon. All of this achieved withless data on fewer servers, using less energy, emitting less carbon, in smaller footprints.WHAT ACTIVITIES GIVE A COMPANY A COMPETITIVE ADVANTAGE?As I have mentioned earlier, companies spend too much time and money on activities that do not givethem a competitive advantage to the detriment of their reason for being in the business in the firstplace.If you look at the chart below, I have attempted to break down a typical organisation into itscomponent parts and then made a decision as to what I see as competitive, non competitive and inbetween (could go either way) activities. Now I know that each company will take a different view butI don’t think I am too far off from identifying the “value depleting” activities. These are the ones thatare a given and need to be done such as Accounting and Payables, or else are necessary points of entry177

to operate in the industry such as regulatory and vendor assurance, where you don’t get anycompetitive benefit as it is already expected that you can provide this as a matter of course.What activities give a company a competitive advantage?Admin/AccountingSourcing Technical Operations!/3/82&.*-$$#%(A(1*G0*!"#$%"&'&()**+&(,#"*-..%"/($&*045*-@@26$/A#(.*-(/23.6.*!"#,%$A#(*

ERP solution is provided as well as modules for CRM etc. that members can access and avoid payinglicense fees and investing in capital.Is it time for a new look at outsourcing?Company 1A B C D E FCompany 2!A B C D E FCompany NA B C D E FHorizontal outsourcing of noncompetitiveactivities will not only savecosts but also allow companies toinvest in their true competitiveactivities, and ultimately outsourcedactivities will achieve best practice forthose who participate.AA B C D E FAHorizontal outsourcing of non competitive activities will not only savecosts but allow companies to invest in their true competitive activities.Company 1Company 2..Company NFor way too long individual companiescontinue to spend millions on theirprocesses that they don’t have theexpertise. IT is one expense inparticular where companies investmillions in what they believe is a standout solution and try and invent thewheel to give themselves an advantageand in most cases they don’t achieve this but there are no other options so they continue down thispath. The idea behind the above concept is not just to save costs by outsourcing but also to build “bestpractice” networks where all participants can benefit from the advancements and efficiencies achievedin the future.SUSTAINABILITYI am not pretending to be an expert on sustainabilityand there is a lot more that could be devoted to thisvery topic alone but I did however do some homeworkon the topic and found this very simple summary ofsustainability built around the 3 E’s of Environment,Ethics and Economics.EEMy focus in this dissertation is on the economic side56!of sustainability and two economic factors, inparticular, that I feel have an impact on sustainability. These are the areas of excess inventorythroughout the supply chain and also the issue of divergent specification of ingredients.FF• !"#$%&'$()!"#$%&'%(&)&$*+&#+$,+-..$+$/.+'..0#+,1+$/.+23.#.'$+4&$/,"$+5,-23,-&#&'6+$/.+%(&)&$*+,1+1"$"3.+6.'.3%7,'#+$,+-..$+$/.&3+,4'+'..0#8++!"#$%&'!($))*++*$,!$,!-,.*%$,)/,0!1!2/./&$3)/,04!-9:*0;!-,.*%$,)/,07&!-8$,$)*8!SustainabilitySustainability• 70!87,!=/!=%$7'&;!+:))7%*?/'!:,'/%!0>/!@!-A+!$B!/,.*%$,)/,07&C!/9:*0;!7,'!/8$,$)*8!D;!B$8:+!*+!$,!E!/8$,$)*8!7+3/80+!$B!+:+07*,7=*&*0;!• !*$+"$,'-.F!G>/!&$,H/%!0>/!+:33&;!8>7*,!0>/!)$%/!*,./,0$%;!,//'/'!0$!I&&!0>*+!3*3/&*,/!J>*8>!&/7'+!0$!/K8/++!7,'!%/':,'7,0!+0$8L+!• !/0"1%#12&'$3F!0>/!.7%*/0;!$B!+3/8*I87M$,+!87,!&/7'!0$!7!)*++!)708>!J*0>!=:;/%!,//'+!7,'!%/+:&0+!*,!J7+0/'!%/+$:%8/+!!!1. Excess InventoryThe problem of excess inventory permeates theingredients industry. I estimate from 15% to 25%of the total industry inventory at any one timecould be considered redundant to current needs orobsolete, which would be billions alone just inthe F&F industry.Shelf life and limited product lives constantlycreate inventory issues that lead to write offs,Inventory/Excess Inventory• !"#$%%&'&($)*+),+-&.+/$+-012&3$14$,-$%&-5$&6+71$)6$+-%&6+)*%-128&– .43,#-&9:;&-0&&6+/$+-012&– ?5$&>0+7$1&-5$&%*33>2&#5,6+&-5$&401$&%3$#*>,@0+&,+)&50,1)6+7&,+)&-26+7&*3&0=&1$%0*1#$%&– !%@4,-$&&AB:;&0=&-5$&%,4$&6+71$)6$+-%&*%$)&C2&,>>&– .-&6%&/$12&)6D#*>-&-0&%$>>&6+/$+-012&,+)&3*1#5,%6+7&3$03>$&,1$&+0-&700)&%,>$%&3$03>$&– E5,-&643,#-&F0*>)&-5$&)$/$>034$+-&0=&&,&%$#0+),12&4,1G$-&5,/$&=01&0*1&6+)*%-12H&&• .+/$+-012&#0*>)&40/$&401$&=1$$>2&-0&F5$1$&6-&6%&+$$)$)&• I10/6)$&%$#0+),12&>6J*6)6-2&C$+$K-%&,+)&1$)*#$&50>)6+7&#0%-%&– .4,76+$&6=&20*&#0*>)&-1,#G&-5$&56%-012&,+)&C,#G710*+)&0=&,+&6+71$)6$+-&L*%-&>6G$&,&40-01&/$56#>$&M.N&+*4C$1&01&O,1&P,"&1$301-&0+&,&40C6>$&)$/6#$H&&9B&179

costly dumping fees and high holding costs. At present, there is no easy way of putting this excessinventory back on the market. My question is what would the impact be for our industry if a viablesecondary market could be established? At the outset it would mean lower inventory levels, less cashtied up in the supply chain through excess inventory and a more efficient use of resources.The illustration in my slide is to indicate a better use of inventory across the industry, whether througha secondary market, through some disintermediation of the industry or just through better sharing ofdemand and supply between members of a network or most likely a combination of all three.2. SpecificationsWhen a supplier and buyer connect for the first time one of the first questions asked is what is yourspecification and depending on this answer will mean whether they continue to talk or move on. Somuch time and effort is wasted in the pursuit of the correct specification especially when mostcompanies do not share this information, for whatever reason.The variation in specifications can lead to a miss match between the needs of users and the productsproduced and held in inventory by suppliers. In addition this matching of specifications is a manualand slow process. In a collaborative network automatic matching of specifications would be possibleand would also focus producers on making the right products– Specifications would be more closely aligned to a “gold standard”– Result in Increased efficienciesReal collaboration would not only allow automatic matching of specifications between suppliers andbuyers but it would also focus producers to make the products that buyers need and are interested inbuying, thus reducing the amount of resources tied up in products that no one needs. In a collaborativenetwork, demand and supply dynamics could lead to specifications more closely aligned to the targetor gold standard of the network.UNRAVELLING THE SUPPLY CHAINThere are literally thousands of ingredientsfrom commodities to specialties. The industryand its companies are spending $ millions onnon-core activities as they see no other way toget these things done. On top of this there aremany steps and middlemen in the supplychain that have led to increased complexityand costs. Ingredients are sourced from allover the world – it is a truly global industry.Government regulations such as the FSMAare adding further complexity and cost.To simplify the supply chain will allow moreoriginal manufacturers to connect directlywith end users. The aroma chemicals andManufacturerUnravelling the Supply Chainessential oils industry is a classic example where there are many intermediate steps and on-sellers. It isdifficult to know who actually manufactures what and its place of origination.!"#$%"&'()*"(+,*#"&1"#2%))#"&!"#$%"&'()*"(+,*#"&1"#2%))#"&!"#$%"&'()*"(+,*#"&1"#2%))#"&!"#$%"&'()*"(+,*#"&1"#2%))#"&-./&0)%"&• 3(456(7289#.&#:&*;%&),556(.86&48.,:82*,"%")&*#&2#..%2*&/("%2*6

Traceability from the origin and verification of manufacturers demanded by FSMA (Food SafetyModernization Act) will force the unravelling of the supply chain to a certain extent butdisintermediation can only happen if there is a way to connect suppliers with buyers in a “many tomany” network that would act as virtual shop fronts for members. Please don’t get me wrong,distributors play a part and have met the needs of the many manufacturers who don’t have theresources or capabilities to expand internationally but what if they didn’t need distributors – whatwould happen then?There will always be a place for middlemen but their business model may change and this has to beconsidered by these companies whose only value they add is to be a transition point in the movementof ingredients and making a margin for this service.FOOD SAFETY REGULATIONS / FOOD SAFETY MODERNIZATION ACT (FSMA)Last but certainly not least in my presentation and what I consider to potentially be the “compellingevent” that will lead to the establishment of a collaborative network is the ever increasing Governmentregulation around the world and the impact this is having on all suppliers and buyers in the industry.There’s ever-increasing regulatory pressure on the food and beverage and flavour and fragranceindustry. Compliance standards require all materials used in manufacturing to be documented as foodapproved and safe. The Food Safety Modernization Act (FSMA) will mandate by January 2014, newindustry standards for traceability to the point of initial manufacture or source – farm to fork. Thereare thousands of suppliers of food flavour and fragrance ingredients supporting this huge industry andeventually all food ingredients will need to be in compliance with traceability standards. This is muchmore advanced than just being able to trace your supply down one or two levels as needed in yourrecall procedure. In addition, the FSMA law mandates that every food importer establish a risk-basedforeign supplier program and audit trail – imagine the workload on suppliers just trying to satisfy theserequirements for all of their buyers. Increasing EU regulations as well as the potential for Asianregulatory compliance cooperation in South Korea, Japan and even China will make things even morecomplicated – will they follow EU or USA or start their own Food Safety initiatives?Food Safety Modernization Act• The Food Safety Modernization Act (FSMA) will impact the global supply chain and allstakeholders one way or another• It will become a “barrier to entry” for many companies• The FDA is putting the responsibility on individual firms to ensure that their suppliers meetappropriate standards• Supplier verification and enhanced traceability requirements will make it more difficult forimporters of ingredients• Companies need to collaborate to avoid “inventing the wheel”• Vendor audits should be done once and be accepted by allThe USA government is putting more responsibility on importers of ingredients and so are the globalCPG companies who are pushing their sustainability agendas down to their suppliers and expectingthem to sign legally binding agreements that they will abide by these conditions or else be excludedfrom being a supplier. It is no wonder that company owners and management are increasingly feelinglike the meat in a sandwich.181

SO WHAT WILL THE FUTURE LOOK LIKE?Imagine the impact of collaborative networks of suppliers and buyers working for a true “win-win”result. It is not inconceivable that the future could look something like this:• Original manufacturers will be able to find end users more easily and reduce the number ofintermediaries• Inventory and cash flow will be dramatically improved through the development of secondarymarkets to clear excess inventory• Matching of specifications across the network will increase efficiency and speed up theprocess of finding the right product and supplier• Purchasing power will improve as members will be able to access ingredients at costsformerly reserved for high volume buyers• Companies will need to be certified to global quality standards before being accepted asmembers• Regulatory documentation will be prepared once and all members will have online access• Verification of suppliers will be handled once, cutting costs and eliminating duplication ofvendor audits and certification• Cloud based IT solutions provided by the network will avoid license fees and capitalinvestment• Formerly fixed costs will now become variable• Companies will be able to outsource non competitive activities and benefit from the increasedefficiency this will achieve• Traceability of ingredients and value added products will become common place• Inspections will be handled on site with real time mobile technologies• FSMA requirements will be met by the network to cover all of its membersOne thing is certain, the future is uncertain, but collaborative networks will definitely be part of thesolution for the improvement of the ingredients supply chain that will affect all stakeholders one wayor another!CONCLUSIONSThe way I see it the key questions that must be addressed going forward are the following:• To what extent are individual businesses and the industry prepared to meet the long-term foodingredients supply challenges?• What impact will these future states have on the long-term growth prospects of individualcompanies?• The future will see the emergence of collaborative networks that will address many of thepressing issues in the supply chain – it is not a matter of if but soon.• In view of the fact that the ingredients and food and beverage supply chains consist ofthousands of companies, which ones are going to take the initiative and are the others willingto co-operate?• Whatever the solution it needs to be seen as neutral and for the benefit of the networkmembers in a true “win win”182

Those who embrace this new dynamic will share inthe rewards, while those who do not will be leftbehind. The vision I have presented to you today willnot happen overnight but to get to this point requires a“start” to think outside of the box and challenge theold way of thinking one step at a time.!"#$%"&'#(')*"+#,-+.')-/#0"12'1#31'*4.'+&#"0##&5'#6'3%7)48#"0#9"%&5#:0148-;##!"#$#%&'(#)*%+)',-.%&'#$'%&/0'123,4#&56'7-.%&'(#)*%+)'8#$#%&'#$'4323/0'(,$.&5'.436'9+)'8#$#%&'(#)*',-.%&'-,&'23,//0'-*,&53')*3'(%2/16:!

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New Sources of Natural Ingredient Supplies185

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AROMA CHEMICALS FROM THE TROPICS VIA BIOTRANSFORMATION OFSUSTAINABLE BIOMATERIALSINTRODUCTIONAroma chemicals are odour-active compoundswith applications in the flavour, fragrance andcosmetics industries. Aroma compounds fall intodifferent categories such as alcohols, acids,aldehydes, esters, ketones, lactones, terpenoids,sulphur-containing compounds, amines andmiscellany. These compounds possess variousodour properties, depending on their structureand concentration.Shao Quan LIUFood Science and Technology ProgrammeDepartment of ChemistryNational University of SingaporeSingaporechmLsq@nus.edu.sgIntroduction• Aroma chemicals – aroma-active chemicals forflavour and fragrance• Classes of aroma compounds – alcohols, acids,aldehydes, esters, ketones, lactones, terpenoids,sulphur compounds etc• Synthesis – traditionally chemical methods• Emerging trend – naturalness• Natural compounds – biotechnological methodsThe bulk of aroma chemicals are still producedby chemical synthesis, which faces a number ofchallenges: environmental, sustainable andconsumer attitude changes, just to name a few.There is a trend of consumer preference for natural aroma compounds that are produced in asustainable and environmentally friendly manner, although not all consumers are willing to pay apremium for such products.Introduction• Biotechnological methods – plant and plant tissueculture, fermentation and biocatalysis• Extraction of plant materials – low yields, costly• Plant tissue culture – better yields, met withchallenges• Fermentation and biocatalysis - biotransformation ofcheap and abundant precursors, most promisingTraditionally natural aroma compounds areproduced through solvent extraction of plantmaterials but with low yields, high costs and landconstraint. More promising methods arefermentation and biocatalysis with better yieldsand lower costs without land constraints. Thesebiotechnological approaches includebiotransformation of cheap, renewable andabundant precursors to high-value aromachemicals.187

THE RAW BIOMATERIALSCoconut oil and palm kernel oil are two of themost abundant, natural and renewablebiomaterials available in the tropic re gions suchas South East Asia. Coconut oil is extracted fromthe kernel of matured coconut and the mainproducer is the Philippines. Palm kernel oil isextracted from the oil palm kernel (note: ! palmoil, which is extracted from the pulp of oil palmfruit) and is a co-product of palm oil production;the main producers are Malaysia and Indonesia.The raw biomaterials• Coconut oil – from kernel of matured coconut, mainproducer: the Philippines• Palm kernel oil – from oil palm kernel (! palm oil, frompulp of oil palm fruit), a co-product of palm oil, mainproducers: Malaysia and Indonesia• Natural, renewable biomaterials• Food uses – e.g. cooking, specialty fats• Non-food uses – e.g. oleochemicals, soapBoth coconut oil and palm kernel oil are utilizedin a wide range of food applications such asspecialty fats (as cocoa butter substitutes), filling creams, toffees and caramels, ice cream, imitationwhipping cream, non-dairy creamers (coffee whiteners), filled milk, margarines and medium-chaintriglycerides (MCT, for medical purposes and as flavour carriers). Coconut oil and palm kernel oil alsofind non-food uses, e.g. pharmaceutical use (in suppositories), soap and certain oleochemicals such asfatty acids, fatty acid methyl esters and fatty acid alcohols.FAT/OIL STRUCTUREOil/fat structure• Triacylglycerol – glycerol esterified with 3 fatty acidsFats and oils are triglycerides (triacylglycerols),which are glycerol esterified with three fatty acids.The type and carbon-chain length of fatty acidsvary with fats and oils. The fatty acids on theglycerol backbone serve as precursors to a varietyof aroma compounds such as esters and methylketones. Therefore, fats and oils, especially thosewith short-to-medium-chain fatty acids, are suitableand sustainable biomaterials for biotransformationinto value-add aroma compounds.FATTY ACID COMPOSITION OFCOCONUT OIL AND PALM KERNEL OILCoconut oil and palm kernel oil are similar incomposition and properties. Both are rich in themedium-chain fatty acid, lauric acid (C12) (close to50% of the total fatty acids). Coconut oil containsalmost twice as much as palm kernel oil in terms ofthe shorter-chain fatty acids, caprylic (C8) andcapric acids (C10). Palm kernel oil contains morethan twice the amount of the unsaturated fatty acid,oleic acid (C18:1) compared to coconut oil, and ismore prone to oxidation.Fatty acid composition of coconut oiland palm kernel oilFatty acid Coconut Oil (%) Palm Kernel Oil (%)Caproic (C6) 0.5 0.5Caprylic (C8) 7.5 4.0Capric (C10) 8.0 4.0Lauric (C12) 48 47.5Myristic (C14) 18 16Palmitic (C16) 9.0 8.5Stearic (C18) 2.5 2.5Oleic (C18:1) 6.0 15.5Linoleic (C18:2) 1.7 1.5188

FROM BIOMATERIALS TO OLEOCHEMICALSBy definition, oleochemicals are chemicals fromthe oil, which may be natural or fossil-based. Arange of oleochemicals is produced via chemicalprocesses from coconut oil and palm kernel oil.These oleochemicals include fatty acids, fattyacid esters, fatty alcohols, polyglycol ethers, fattyamides, fatty amines, as well as soap. Some ofthese basic chemicals serve as ingredients in themanufacture of other industrial products such asemulsifiers, surfactants and lubricants withspecific applications in the cosmetics, detergentsand other chemical industries. However, few ofthem find uses in the flavour and fragranceindustries.From biomaterials to oleochemicals• Oleochemicals from coconut oil and palm kernel oil –e.g. fatty acids of C8-C14, fatty acid methyl esters,fatty alcohols, glycerine• Oleochemicals – mainly used as basic industrial rawmaterials, some in cosmetics, hardly as aromachemicals• Current industry status – chemical processes, hightemperature, high pressure, high energy consumption,catalysts (acids, alkali, heavy metals), environmentalissuesOleochemicals derived from natural fats and oils can be termed “natural”, however, the chemicalprocesses involved in their production are not necessarily environmentally friendly. The chemicalprocesses include acid hydrolysis, esterification, transesterification and hydrogenation, among others.High temperature, high pressure, high energy consumption and/or catalysts (acids, alkali and heavymetals) are often indispensible part of the chemical processes.THE BIOPROCESSGiven the inherent environmental issuesassociated with the chemical processes, there is aneed to call for environmentally more friendlyalternative processes. Biotransformation by wayof microbial fermentation and enzymaticbiocatalysis is one promising biotechnologicalmethod. Coconut oil and palm kernel oil aresuitable biomaterials for enzymatic (lipase)biotransformation into value-add aromachemicals. Lipase-catalysed reactions can beperformed under mild conditions of much lowertemperatures, normal atmospheric pressure, lessenergy consumption, no heavy metals and noacids/no alkali. Furthermore, lipase-catalysedThe bioprocess• Biotransformation – use of enzyme (lipase) to convertcheap precursors (oil) to value-add products (esters)• Mild conditions – lower temperature, normalatmospheric pressure, less energy consumption, noheavy metals, no acids/alkali, green chemistry, moreenvironmentally friendly• More costly – enzymes, lower yields (vs. chemicalsynthesis)• Balance – cost, environment, clean label andmarketabilitybiotransformation of coconut oil and palm kernel oil into esters is an one-step process(transesterification or alcoholysis). The higher costs of enzymes may be compensated for by re-use ofimmobilized lipases, clean label, better marketability and price premium. A balance between cost andenvironment should be struck.189

BIOCONVERSION OF COCONUT OIL AND PALM KERNEL OILTO AROMA-ACTIVE ESTERSBoth coconut oil and palm kernel oil are rich infatty acids of C8-C14 (~70%). There is atremendous potential to unlock the value of C8-C14 fatty acids as aroma chemicals, especiallyaroma-active esters. Lipase-catalysed conversionof coconut oil and palm kernel oil into esters is asimple one-step reaction: alcohols + oil " esters.This creates an opportunity to build a library ofnatural esters by exploiting naturally producedalcohols of short- to medium-chain carbons suchas methanol, ethanol and propanol. One sourceof natural alcohols is fusel oil (also known asfusel alcohols or higher alcohols), which ismainly composed of active amyl and isoamylalcohols and is a by-product of the alcoholdistillation industry. Theoretically, 20-30 aroma-active esters can be generated by using alcohols ofappropriate carbon chain length.THE BIOPRODUCTS – ESTER EXAMPLESQuantitatively lauric acid (C12) is the major fatty acid, followed by myristic acid (C14), in coconut oiland palm kernel oil. As such, it is imperative to unlock their value as aroma compounds from theperspective of yield and cost-effectiveness. Due to the relatively longer carbon chain length of the twofatty acids, the carbon chain length of alcohols to be paired with the oil is critical so that the estersgenerated can be sufficiently volatile to be odour-active. Two examples of such alcohols are methanoland ethanol. Other alcohols such as aromatic alcohol (e.g. 2-phenylethanol) and branched-chainalcohol (e.g. active amyl and isoamyl alcohols) may also be used to exploit the value of the shorterchainfatty acid octanoic acid (C8) as aroma chemicals.By pairing methanol and ethanol with coconut oil or palm kernel oil, methyl and ethyl laurate as wellas methyl and ethyl myristate are produced as quantitatively the major esters, in addition to othermethyl and ethyl esters. Methyl and ethyl laurateimpart various flavour notes such as coconut,waxy, sweet, floral or green. Methyl and ethylmyristate possess sweet, petal, waxy or violetnotes. On the other hand, by selecting isoamylalcohol or 2-phenylethanol, the odour-activeesters isoamyl octanoate and 2-phenylethyloctanoate are generated. Isoamyl octanoate givessweet, fruity, green, pineapple, coconut orcognac odours, whereas the odour of 2-phenylethyl octanoate is described as sweet,fruity, floral, winey or cognac-like. All theseesters have applications in flavour, fragrance andcosmetics.Bioconversion of coconut oil and palmkernel oil to aroma-active esters• Rich in fatty acids of C8-C14 (>50%)• Potential to unlock value of C8-C14 as aromachemicals• Enzymatic conversion to esters: alcohols + oil!esters (one-step reaction)• Potential to build a library of natural esters – byselecting alcohols of C1-C5• 20-30 aroma-active esters can be generatedThe bioproducts – ester examples• Methyl and ethyl laurate – coconut nut, waxy, sweet,floral, green• Methyl and ethyl myristate – sweet, petal, waxy,violet• Isoamyl octanoate - sweet, fruity, green, pineapple,coconut, cognac• 2-Phenylethyl octanoate - sweet, fruity, floral, winey,cognac-like• Applications – flavour, fragrance, cosmetics190

Bioconversion of coconut oil to esters –using fusel alcohols and lipaseBioconversion of coconut cream to esters –using 2-phenylethanol and lipases3503002-Phenylethyl octanoate(GC-FID Peak Area x 10 6 )2502001501005000 5 10 15 20 25 30Incubation Time (h)BIOCONVERSION OF COCONUT OIL AND PALM KERNEL OIL TO AROMA-ACTIVEMETHYL KETONESIn addition to esters, the fatty acids in coconutoil and palm kernel oil can be converted intomethyl ketones by fungal fermentation. Methylketones impart “fruity” odours and constitute thecharacter-impact aroma compounds in bluecheeses, the so-called “blue flavour”. Thesecompounds have flavour and fragranceapplications, even as insecticides, insectrepellents or animal repellents. Bioconversion ofC8-C14 fatty acids to methyl ketones by fungalfermentation results in the production of 2-heptanone (C7), 2-nonanone (C9), 2-undecanone (C11) and 2-tridecanone (C13) with2-undecanone being the dominant volatile due tothe abundance of lauric acid. This biotransformation process offers a great potential to build a libraryof natural methyl ketones from the biomaterials, coconut oil and palm kernel oil.COMMERCIAL AND PRACTICAL CONSIDERATIONSBioconversion of coconut oil and palmkernel oil to aroma-active methyl ketones• Methyl ketones – fruity, blue cheese aroma• Flavour and fragrance applications, even asinsecticide, insect repellent or animal repellent• Bioconversion of C8-C14 fatty acids to methylketones by fungal fermentation – 2-heptanone, 2-nonanone, 2-undecanone, 2-tridecanone• Potential to build a library of natural methyl ketonesThe commercial aspects of the bioprocess andproduction of bioesters from coconut and palmkernel oils depend on several factors such as costof oil, prices of natural and synthetic esters, scaleof operation and yield of esters. The yield ofoctanoate esters was about 7% (g/100 g coconutoil). The yield of laurate esters could be higherdue to the higher laurate content in the oils. Theprice of coconut and palm kernel oils is currentlyaround US$1000 per metric ton (Sept 2012).Information on natural and synthetic laurateesters is not available. A number of lipases canCommercial, practical considerations• Scale up – from current lab scale of 100 mL or less to 10L, 100 L and higher volumes• Yields – 7% (g/100 g oil) based on octanoate esters,may be higher for laurate esters• Cost of coconut oil and palm kernel oil – currently aroundUS$1000 per metric ton (Sept 2012)• Other economic aspects – prices of natural vs. syntheticesters (information not accessible)• Enzymes (lipases) – Palatase and LIPOZYMEs (TL IM,IM RM, Novozym435 etc)• Product recovery – not studied yet, distillation andmembrane separation (possible options)191

e used, e.g. palatases and immobilized lipases (LIPOZYME TL IM, IM RM and NOVOZYME 435).Future work should consider scale-up from the current lab scale of 100 mL or less to 1 L, 10 L, 100 Land even higher volumes to assess the commercial potential. Product recovery also needs to beexplored, possibly by the traditional distillation and/or the newer technology of membrane separation.THE IMPLICATIONS – FOOD FOR THOUGHTCoconut and oil palms are not major food crops,and thus, are not expected to have a negativeimpact on food availability. By contrast, cornused for bioethanol production is a major foodcrop at least in some parts of the world and thiscould have an adverse impact on foodavailability. There are some controversies overoil palm plantations such as deforestation.However, palm kernel oil is a co-product of theexisting palm oil industry and consumption ofaroma chemicals is small relative to consumptionof palm oil derived biofuel and palm oil for fooduses (volume wise). Therefore, biotransformationof coconut oil and palm kernel oil for aromaThe implications – food for thought• Social – coconut and oil palms are not major foodcrops, food vs. fuel• Environmental – some controversies over oil palmplantations, deforestation, palm kernel oil is a coproductof palm oil industry• Consumption of aroma chemicals – small volumerelative to biofuel and palm oil (food)• Commercials – costings vary with scale of productionchemicals is not expected to lead to new agricultural land being diverted away from food production.Commercially speaking, process scale-up and product recovery should be explored, which could havesignificant ramifications on product costing and economic feasibility.FURTHER INFORMATION1. Gervajio, G.C. (2005) Fatty acids and derivatives from coconut oil. In: Bailey’s Industrial Oiland Fat Products. 6th edition. Six volume set. Edited by Shahidi, F. John Wiley & Sons, Inc.2. www.thegoodscentscompany.com.3. Pantzaris, T.P. and Mohd, J.A. (2011) Properties and utilization of palm kernel oil. MalaysianPalm Oil Board (MPOB).4. Sun, J.C., Yu, B., Curran, P., and Liu, S.-Q. (2011) Quantitative analysis of volatiles intransesterified coconut oil by headspace-solid-phase microextraction-gas chromatographymassspectrometry. Food Chemistry. 129, 1882-1888.5. Sun, J.C., Yu, B., Curran, P., and Liu, S.-Q. (2012) Lipase-catalysed transesterification ofcoconut oil with fusel alcohols in a solvent-free system. Food Chemistry. 134, 89-94.6. Sun, J.C., Chin, J.H., Zhou, W.B., Yu, B., Curran, P., and Liu, S.-Q. (2012) Biocatalyticconversion of coconut oil to natural flavour esters optimized with response surfacemethodology. Journal of the American Oil Chemists’ Society (JAOCS). (In press, doi10.1007/s11746-012-2099-6).7. Sun, J.C., Chin, J.H., Yu, B., Curran, P., and Liu, S.-Q. (2012) Determination of flavour estersin enzymatically transformed coconut oil. Journal of Food Biochemistry. (In press,doi:10.1111/j.1745-4514.2012.00660.x).8. Sun, J.C., Yu, B., Curran, P., and Liu, S.-Q. (2012) Optimization of flavour ester productionfrom coconut cream catalyzed with lipase Palatase using the Taguchi method. FoodChemistry. (In press 10.1016/j.foodchem.2012.06.119).192

Shao Quan LIU is an Assistant Professor at the National University ofSingapore (NUS) and teaches Flavour Science and Food Fermentation. Hisresearch area is flavour and fermentation and he has published widely in thisfield. He worked in the dairy industry in New Zealand from 1994 to 2007 beforejoining NUS in 2008. He obtained his Bachelor’s Degree from South ChinaAgricultural University and PhD Degree from Massey University, New Zealand.193

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BIOTECHNOLOGY AND THE CHANGING ROLE OF THE SALES AGENT IN THEFRAGRANCE AND FLAVOUR INDUSTRYINTRODUCTIONThomas PlocekAroma Chemical Services International (ACSI), Inc.,Hightstown, NJUSAt.plocek@acsint.comMost naturally occurring ingredients will soon beable to be produced via biotechnology from lowcost renewable feedstock. Next year, theintermediate for the manufacture of one of themost effective anti-malaria drugs, formerlyproduced from sweet wormwood oil, will becommercially synthesised via fermentation fromsugar. Cost reductions of over 90% are expected.Using a modification of the same yeast,farnasene is now being produced as anintermediate for biodiesel fuel as well asproviding a low cost route to squalane, animportant cosmetic ingredient formerly madefrom shark liver oil. Last year, valencene becamecommercially available from another engineered yeast, providing a tremendous cost advantage for theproduction of nootkatone. The rapid advance of synthetic biology will soon enable the manufacture oflinalool, geraniol, menthol and hundreds of other specialty chemicals through similar fermentations.Initially sugar will be the primary raw material but soon nearly any available biomass will be able tobe used as feedstock. The international bridge that sales agents have forged between manufacturersand users of fragrance and flavour ingredients must now add another lane to those of product, quality,availability and regulatory compliance, namely the communication of technology and its inclusion inthe planning strategies of both manufacturers and consumers of raw materials. This presentation isintended to help describe the magnitude of the changes we can expect over the next few years andsome of the innovative ways now available to deal with them.DNA AND THE HUMAN GENOME!"#$%&'(#)#*+,-,,.'%,&'/(*"(*,0#)%,#1,$'%,2/)%2,/*%($,"(,$'%,10/*0/(&%,/(3,4/5#60,"(362$0+,!"#$%&'()#*+,''-.#$%'/"+$0*%)'1+.20*+&'345+.4%6#4%)'7-/138'''789:.,;"(*/#5%?@%0,ABCA,A.C.S.I. is a member of the German Aroma Chemicals and Fragrance Manufacturers Association ( DVRH )!"#$%&$'%()$*+,%-).")$/0(1%2#-0#($%&$.33$4+#$Ten years ago, a fairly large group of internationalscientists completed one of the most importantdiscoveries in human history. Their discoveryinvolves a single strand of material, (about an armslength long i.e. 6 ft.) and it would take over 100,000of them to equal the width of one finger.!"#$%&&'$()*+$,-$.$/&'&012$34&0$5667666$')$&89:($';"*+&0$195

It is similar to a tiny zipper with billions ofteeth. However each one of these “teeth”,actually consists of one of only four types ofmolecules, Adenine, Thymine, Cytosine andGuanine, abbreviated as A, T, C and G.Everything that lives on earth consists of thesefour molecules arranged in a long line of pairs,always A across from T and C across from G.This was illustrated by a video:http://www.hhmi.org/biointeractive/dna/DNAi_paired_strands.html!"#$%&"'()*"+,--$%".()/,/0)*"(1"1(2%"34$$456""!"7"8"9":"!"#$%&'(#)#*+,&#-$-,'./%,01#22%0,$1%3%(0#4-)+,,• -567589:8;,

Why is this so important to us? How will it affect our daily lives and our businesses? What can we doabout it?These are the three questions I will begin to address during my presentation. I say begin, because thisfield is so huge and is moving so fast that most textbooks are obsolete by the time they are printed.We will barely scratch the surface during this presentation. Nevertheless, the tools of understandingare available to us all and I will discuss some of them as we progress.DNA, Deoxyribonucleic acid, is the code of life. As mentioned earlier, it is a specific sequence ofonly four component molecules represented by the four letters, A, C, T and G. Before the HumanGenome Project it was assumed that humans had many more base pairs that other living species andthat we had millions of genes that made us so different and special. We now know that, at leastbiologically, we are not so different either from each other or from the other living animals and plantsthat share our world.All humans have 99.5% or more identical DNA. Less than one half of one per cent is all that makesus different from everyone else in this room. Every person in the world no matter how high or howlow is separated by less than half of one per cent of his or her DNA. We are all related.Perhaps even more surprising are the similarities weshare with other animals, plants and even insects andbacteria. All life is related. Many of the sequences invarious plants, animals and bacteria are also found inhuman DNA. The differences may be quite small.About half the DNA in a banana is also found inhumans. I like bananas! Many human genes, whichare the stretches of DNA that do most of the actualwork of living, are found in plants. The rapid drop inthe cost of sequencing has led to an explosion of plantDNA sequencing. One of the genes that are present inour livers is also present in a weed that has a life cyclemeasured in weeks. It is far faster and less costly toexamine how a gene works in a plant than in a human.In examining a gene, a scientist wants to know what itdoes, how it is turned on and off, and how its activity isregulated. This can be thought of as locating the on/offswitches and the volume control. Scientists are alsointerested in mutations or defects in genes and whatthey do as well as how they can be controlled. Thesediscoveries have a huge impact on understandingdisease and human health and can result in radical andrapid cures of deadly diseases. They provide afoundation of understanding that is leading to majoradvances in medical treatments for a wide range ofdisease.!"#$%&!'()&*+,&-.#/0)&12,&3.4)&5+,&36%)&7+,&38$9:6;

SYNTHETIC BIOLOGY PATHWAYSIn addition, as a by-product of this medicalresearch, we are gaining much greaterunderstanding of plants and the products theyproduce. This is where health-relateddiscoveries are already starting to impact theavailability of various flavour and fragranceingredients. The pathway to a major treatmentfor malaria is also the pathway to farnacene,menthol, patchulol, citronellol and many othermaterials of interest to our industry and otherindustries. All these metabolic pathways startwith sugar and rely on fermentation to makethe desired product.)8*=;D+>2*E2&1-+F,.D2G:*0*A12E*82+F,2H8/A8/-D,2/-=2H0/I*82J-=;>+8122!!"#$%"!!#$%&$'(&()!*$+(&,(&()!-../0$/.&()!123$+$&(!&""'"!4(5!,.67.&(&/'!.8!*(9:(%)!;$/,$+?..>!$&>!./

and in the San Francisco Bay area (http://biocurious.org/) where ordinary people can take courses andperform synthetic biology experiments in a few days for a few hundred dollars.Do-it-yourself biology groups are being organised throughout the world (http://diybio.org/). However,this rapid spread of knowledge and techniques does not make synthetic biology easy. It is still verydifficult to actually build a living organism that will produce the items you would like to produce atcompetitive costs. Most experiments fail. Commercial organisations are spending hundreds ofmillions of dollars to discover and scale up new organisms to make products for sale. Despite theobstacles, in our industry farnasene and valancene are now commercially available using modified bioorganisms and sugar. More products will be brought on the market each year for the foreseeablefuture. As the knowledge base expands the speed of introduction will increase and costs will decrease.The changes in relative value will spur major reformulations. Those firms and individuals who areunprepared may experience considerable difficulty in adjusting to the new economic environment.The research needed todiscover the metabolicpathways is expensive anddifficult. The techniques tomodify the organisms andtest them are equallyexpensive and difficult.However, the cost toduplicate discoveries thathave been reported in thepatent or other literature willbe much less expensive. Itwill be very difficult to proveinfringement since the endproducts will be identical tothose found in nature, exceptprobably purer. How will itbe possible to prevent the useof patented organisms inplaces with little or no IP protection? How will it be possible to prevent low cost competition fromthese locations? What about when the patents expire? Our industry’s traditional business models mayhave considerable difficulty surviving these competitive challenges. However, the creative challengesand the rewards for solving them will be high during this period of rapid change.THE HUMAN IMPACTA#+2+)#:02%B0."

terrible consequences are also easy to imagine. The fact that there has not been a catastrophe or adeadly escaped virus is not overly comforting since we all know of the fear of bio-weapons. Howeverit is very difficult to design and build pathogens. They are far more difficult to make syntheticallythan the benign organisms used to make medicines, fuels and chemicals. Nature is very resilient.Most modified organisms are much more fragile than their “wild” cousins. The changes that causethem to make the products we want render them unable to survive except in our protectedenvironment. They are similar to cows bred to produce milk that cannot readily survive without thefarmers to care for them. Secondly, the modified DNA present in the organism that produces ourdesired products is not included in the products they make. This is different from GeneticallyModified (GM) foods, where the modified DNA is contained in the product. However, even here, thebenefits are often thought to outweigh the risks and genetically modified plants are now present inmany parts of the world. My understanding is that nearly all the cotton grown in Pakistan comes fromGM plants and modified DNA is present inmuch of the rice grown in India. GM corn,soybeans and sugar beets are now widespreadin North America. It is not possible any longerto remove GM plants from use. Investigation,research and regulation may be appropriatewhen needed, but I believe it cannot be stopped.I think we can only encourage education andresponsible behaviour. The more people knowabout biotechnology and the proper uses for thistechnology, the better able we all are to policeand guide its proper application. Policies andrestrictions are in place to prevent thedistribution of harmful organisms. Harmfulorganisms are very difficult to obtain or tomake.80'6%$(45$&1/0.()$&$3(9&1%$.:((;:&':#"%3+:#9.%/#0%$#%=#(-,+$-%,456?%@"6"#0"%,456%=+2%A-%5-B-,-%http://www.vrp.com/detoxification/genetically-modified-foods-are-they-putting-your-health-at-risk200

The tools that have been developed over the past tenyears have broad applications in many areas. The rapidlyexpanding field of environmental epigenetics will have amajor impact on the entire chemical industry, especiallyin the area of safety testing.!"#$%&&'($&)$*&'#+,'-.$/0&'&12$-.#$-33'0+-4'#$%&$567&+.06#$80(.,39&6$-67$7#:&6(%.-%#$$#;#+%($06$3-.%($3#.$%.0''0&6$!"#$%&'()%$"*)%+(#,%$'%-).%!• "#$%&'!&%()*+!#&!,-*,%*&.#)-*(!#(!/-0!#(!!"#$%&!'#&$#())(*+&&• 1#*'!,2%34,#/(!5#**%6!#(!%*6-,.4*%!64(.78&-.(!9!(&#.)*+!04&2!:;?@!-*!ABCD!/4(&!!• E/#((!#,)-*!/#0(74&(!• 1#*7$#,&7.%.(!37(&!4*(7.%!,-38/%&%!$.%%6-3!$.-3!%*6-,.4*%!64(.78&-.(!9!3#F-.!8/#*&!.%6%(4+*!=!%G7483%*&!.%8/#,%3%*&!!!!• 1#*'!,2%34,#/(!3#6%!H4#!$%.3%*&#)-*!$.-3!(7+#.!#*6I-.!54-3#((!(75()&7&%!$-.!8.-5/%3!,2%34,#/(!!It can now be established with a high degree ofcertainty that very low levels of chemicals in theparts per billion and parts per trillion can impacton the development of the embryo and canproduce damaging effects for severalgenerations.During 2013 it is highly likely that some widelyused materials will become the focus of severeregulatory action. This is likely to spill overinto all other materials.Endocrine disruptors will not be tolerated andmajor changes in production facilities andingredients will be required.201

http://www.nytimes.com/2012/05/03/opinion/kristof-how-chemicals-change-us.html?_r=0http://www.nytimes.com/2012/08/26/opinion/sunday/kristof-big-chem-bigharm.html?ref=nicholasdkristofThomas Plocek is one of five equal partners who own and operate AromaChemical Services International (ACSI) a sales organisation with branchesworldwide and its specialised manufacturing arm, Aroma Rise, located inRomania. Since its founding in 2004, Tom has helped ACSI and Aroma Risegrow into a major distributor and manufacturer of a number of importantfragrance and flavour ingredients. In over 40 years of strategic positioning inthe fragrance and flavour Industry he has built aroma chemical plants in China,New Jersey and Puerto Rico and has introduced novel technology to themanufacture of a number of important aroma chemicals. He was involved in the formation of IFEAT,FMA, and RIFM and served on their Board of Directors for many years. He is a chemist from RutgersUniversity and an alumna of the Owner/President Management Program at Harvard Business School.202

CAN BIO-SYNTHETIC BIOLOGY BE THE NEXT DISRUPTIVE TECHNOLOGY INTRANSFORMING THE FLAVOUR AND FRAGRANCE LANDSCAPE?INTRODUCTIONDr P. M. MuraliEvolva Biotech, Ticel Bio Park Ltd., TaramaniChennai 600 113, Tamil Nadu, Indiapmmurali@evolva.comLet me try to make my presentation as exciting aspossible, something like a sci-fi, James Bond movieof some sort, so people get absolutely energisedabout this space. Because I am part of the mostfrontier science, and there are only about six or eightpeers globally.@3E$2F*%G$3*-%The earlier two speakers have given you quite aninsight into the science and cautions so I am going tobe talking from a very company perspective on whatit is that we have been doing for quite some timenow. So if you bear with me for the next 20 minutes, B3,(##3%I will try to run through and tell you what is happening in this exciting field.A-$6(3%A3D2",%;"4$0(,%C%!"#$%"&%'(")*+,-.$/0%-$0.,"#"1+%(,%-23,*&"24(,1%-.$%536"72%8%&23123,0$%#3,9*03:$%;&)+(*#5&! 627#1&*%"*89277*8#%(:*;1"*! 2J&

Now let me explain the technology, and how we are using it. First of all there are a lot of drivers thathave changed this field to a certain extent in recent times. So if you see what the Agilent CEO hasbeen saying, he likens synthetic biology to what semi-conductors did to our lives. A lot of us believethat this is how it is going to be, and the reason is because you can take up a lot of problems in theindustry space that can be solved – or can be addressed at least, if not solved – from using some of thetechnologies that are now currently available.You must have heard fromearlier speakers that basically !"#$%&'()*+,-,.")/)*+,0!"#$%&'()1&(%#,-,.")synthetic biology createsartificial biosynthetic! !"#$%&'()*+,-.-/#*00*)1$*&12'*13*45-6-7$8*1$*,941)%*,$*pathways. Largely you might %&'*:;3%**,$*%&'*:?%&@**have heard that it’s on account ! /*$$&01$$*"%23&4!5&&67*$+2,&8+9:;&?0!@&6A3&6)(*$&BCDD&&&of the tremendous advancesDEAFGO)that sequence technology thatY

!"#$"%&'(#)(*+,%(-&.%,+(*%$&contains many valuable compounds, because that’s one of the reasons we really do eat, otherwise whywould we do it. So if you see, a lot of these compounds – and if you see this particular sentence here –many food compounds have the functionality of pharma libraries – there are, at least I know theIndians and Chinese have the traditional knowledge here – which they talk about, their food ismedicine, medicine is food, so this is an interchangeable way of looking at things. And food obviouslyhas locked up many of these valuable compounds there.!"##$%&'()*+&,$-.&$/0"#"12$1+$345#+"1$167$8+&(.9+5"'$+*$:++;$$! :++;$")$$$$:&'F"#7$1+$741&'9D+($In reality, what happens is, to address thechallenge of feeding so many, you can seethat most of the chemistry is technicallynot reachable in practice. Which meansyou need to have strategies for masscultivation, sometimes its not possible, youmight have to get to chemical synthesis,like you have other types of areas, eventhis is being resisted by customers. Andthen you may have a lot of times functionsor the presence of molecules that are notyet discovered or not available. So webelieve that synthetic biology can unlock afew of this diversity and can be used veryeffectively in nutrition, consumerhealthcare and pharma. So you can see theillustrations on the side that tell you what exactly is the benefit of using such a science. If you take oneof the compounds in the sweetness phase, all of you must have heard and must be using thesesweeteners, some of them are artificial, some of them come from natural plants, one of the mostpopular ones, the next generation of sweeteners, is from Stevia leaves, quite extensively grown in thispart of the world and also in China. But it comes with its own little set of, I won’t say drawbacks, butlimitations. The problem is that there are certain types of molecules in the Stevia which is sweeter thanthe rest, but unfortunately they are available in such small qualities that if you are going to be using aconventional method of isolating them through an extraction process or through any other process, youend up not getting enough that is commercially viable. So you may have to then use other methodslike this where you can clone all the genes that are responsible, put them in an organism and fermentit. So that’s the type of chase you can do with synthetic biology.The other is the most exotic plant in the universe, namely saffron. So if you have to – and I think someof the Indian cooking today which was left at lunch had those threads of saffron on it, I don’t knowhow many of you noticed it – but if you see that we need almost a kilo of saffron, and to make a kiloof saffron we need to have 250,000 of these plants picked, so whatever little sweet dish that was theremust have been a few thousand plants before you actually get that.And there are other constraints for several countries. For example, 90% of it is grown in Iran, so youmight not have a lot of other countries being able to obtain access, so there is a supply chain issuewhich comes with it. And then you also have issues where the quality has to be maintained, and Iknow the chief adulterant for saffron threads is a very simple product that comes from the corncob,you know, those threads that are there, they are unadulterated. So you have to solve a lot of issues thatare connected in terms of how you make a product.Slide 6205

So these examples will give you an idea of what sort of compounds and what sort of limitations ofthese so-called geography and supply chain are limiting its use to commoditise, and those are thethings that my company is trying to use.So this is a quickoversimplification of the mostcomplex thing we are doing.Because we started in 2004, andwe are still learning everysingle day, so what do we do?This is nothing but acombinatorial genomics that weassembled in baker’s yeast, sowe can identify multiplesources of genes from differenttypes of species, all natural andliving. We can stitch themtogether, put them in yeast,make the desired compound byidentifying what we have to do,and then we can de-replicate(#$$01-&;0,02&&>&2?,-@02+A0&%.BC1+%$&&1@.#)#2#)02&D.#)&1#)*+,%B#,2&#D&;0,02&!"#$"%&'(#)(*+,%(-&.%,+(*%$&!"#$"%&'&(#)*+,%-#.+%$&/0,#)+12&+,&3%40.52&60%2-&(.0%-0&*+$$+#,2&#D&10$$2&&E+-@&,0E&;0,0&0,1#F0F&=%-@E%?2&G&&%,F&20$01-&-@0&*02-&the process to find out how we have done it. And by this we can make one particular yeast, make theproduct that we desire, which ultimately can be scaled up. Which means you use beer, I mean everysingle day a brewery is going to brew tonnes and tonnes of beer there, yeast is the organism, so whenyou want to make a compound, this is going to be very similar to the way beer is brewed, but insteadof making alcohol there you will be making one of the compounds which is required. It’s a very highlyIP focused area, and we as a company also spend a lot of time trying to navigate through the maze ofpatents which are there before you can actually produce something which will be useful for theindustry.The next two slides explain how we do it. I have used the example of Rebaudioside This is a problemthat was not solved for more than two decades, so for twenty years people have been trying to figureout whether they can clone the genes that are required to make the compound Rebaudioside. We as acompany did this in about 18 months using all the resources and the manpower that we have in ourhands.The reason we did it is because we knew that it is the most important sweetener molecule in the Steviafamily. We felt that they will have to be individually made, because when you put them all together itends up giving you a bit of an aftertaste which a lot of the beverage companies in the world are notexactly excited about, because their customers do tend to have something in their mouths after theydrink their most preferred drink. So one of the ways you have to solve that is to probably separate outthe different compounds, and its not easy to do it otherwise, because you have such low quantities, sothe best thing to do is to probably synthesize them, put them in yeast and make them ferment.The three bullet points summarise what this technology can do. The first one is that you can buildproduction routes that are not in existence any more. In the sense that if there is an enzyme which hasto work faster, it has to have a better conversion, a better industrial proficiency, then you end up doingthis through this science.7)%$$&8#$019$02&:%.;0-&&&21%$0'9=&Slide 7206

!"#$%&'(')*+",-.*/+01&')&23".4.56'74+8.*/'! 9+"':%#4;'

So what actually it does is to make a more robust microbe that can be used industrially to get yieldsand titres that are very important. Now, we have achieved titres in certain types of compounds to about25g plus, which is very very important because if you don’t achieve those yields, commercially this isjust academic, you don’t have to do anything but just talk about it.The third and most important point is we can also build routes that take us to something absolutelynew. If you don’t see something novel, if you haven’t seen it in nature, you could also build it, in thesense that you could also make compounds that are not present. Now I believe is very important for afew types of functions, like if you wanted to look for an antimicrobial, because a lot of our antibioticsare almost gone, for UV protection, cancer and so on.And the most important thing is after the genome sequencing, you could have multiple targets thatneeds validation. And you could also end up making drug like molecules that are part of this biologyhere.The next one is the key. We have built this pathway,just for your information, and we have this pathwaybeing sort of, I mean the products, being evaluatedby one of the largest flavour houses, and I’m suresomebody must be sitting here, so that’s alreadybeing looked at. And if you see here, basically yeastcan make up to this blue, so you see the captionhere, so yeast is anyway going to make thiscompound. So what we are actually telling yeast is,yeast we are going to give you two other genes here,so when you start making glucose, when we pushthese two genes here, yeast can you make vanillin.And that’s basically what it does. So the yeast now,can, instead of making alcohol, starts makingvanillin.!"#$"%&'(#)(*+,%(-&.%,+(*%$&!"#$%#&'()*+(,-")+()-(.&+(/0-%"1)(2(3+)4(5-"(6-(.)*+0(/0-%"1)4(Now, once you do that, synthetic biology then opens up something very new. In the sense that onceyeast starts making vanillin, the same yeast can be asked to start making other compounds in otherareas of application. They do not really have to be in the same place. For example, if this is the majorcrossroad, and if you are able to put the genes that are responsible for making lets say anthocyanin,which is a colour, you can make the yeast do that.3$"1-4+(7+*8%0-24*#9#:;)+(/0-)-1;)+1*"#1(;1#%(/0-)-1;);&#$$#&((/+%0,&1+,%2#$*,+&3%4*$$%&5$%"#(0&6+$+7,+8&9,:+(&'(#8;7,0&&!"#$"%&'(#)(*+,%(-&.%,+(*%$&!"#$%#&'()*+(,-")+()-(.&+(/0-%"1)(2(3+)4(5-"(6-(.)*+0(/0-%"1)4(;&)*-1#&+(3$"1-4+(?+*

small additive, wherein you could have I’m assuming I’m just referring a cola with no specificreference, you could have a cola of resveratrol that’s 45, so you don’t have the guilt of drinking a colaand feel that you’re doing this because it’s a health hazard, or anything like that.So you could make some of these products, and for example you could make a eugenol, you couldmake a curcumin that is a colour. So any of these possibilities exist once you have yeast cloned, andyou can ask it to make a series of other ones.So another example here, you could also be ending up making an anaesthetic, or you could have avanillic acid coming out, or you could have something from ginger, or something from capsaicin thatis chilli that I showed you in the previous slide.!"#$%#&'()*+(,-")+()-(.&+(/0-%"1)(2(3+)4(5-"(6-(.)*+0(/0-%"1)4(3$"1-4+(C&)*-1?:&#&4(2(=-$-04(,+4B+0:)0-$(2(,+%(D#&+(!+&E-1:#&+(2(C&:+4)*+F1(G+*?%0-24*#H#9:)+(/0-)-1:)+1*"#1(:1#%(/0-)-1:)I(C$%+*?%+((>"'+&-$(2(=$-B+4(="01"9#&(2(6"09+0#1(@:&#$$#1(C1#%(A#&'+0-&+(2(3#&'+0(@:&#$$#&((>)*?$(@:&#$$#&((=:;4:#1#&(2(=*#$$#(!"#$"%&'(#)(*+,%(-&.%,+(*%$&7-1"4(-&(8+1-9#&'(:(4;+1#:$#4)(9:&"

Now how do we look at it, this is a very familiar picture for a lot of people who have been to England,and who come from there. We have taken a lot of inspiration from the metro picture here. So we lookat synthetic biology basically as some sort of metro, so there’s a point-to-point there, and then youcould keep extending these points in the biosynthesis by trying to move them all over.!"#$%#&'($)#(*+$ ,,$#-&./#'$0&-1$2&/3&./#$4*+536('$!"#$"%&'(#)(*+,%(-&.%,+(*%$&From the IP point of view, we would try to control the trunk routes of these pathways, so that peopledon’t go above and below you, and at the same time you try to see that you are in the position toextend these pathways to make a different set of molecules each time.So it could be in the flavour, in the fragrance, in the wellness, it could be in any space, it could be inperfumery, it could be in a lot of other places.The challenge here is to keep growing this pathway. So we as a company have been growing this.210

And you can see that any of these compounds here is technically possible if you know the pathway,and you know how to extend it. And some of the pictures that you have here, we have already done afew of them. So in my last slide I will tell you what those compounds are. So you could make anendless number of compounds that come from here. Which means you’re going to supplement some ofthe agricultural and supply chain issues which you normally find by using this in a fermentationmedia.!"#$%#&'($)#(*+$ HH$#.&B4#'$;&.G$>&45&B4#$@*+C52('$A;B#*8*1'$FG*#("*1.$:&-#1.#$E@1&(#'$:+2+&$,&.C&4D++C$,(#>1&$,&-*+.$)5'0$/*&.01.2#.'#$:&>1&*$)1.($:&@'1&(#$!&3+4$&&?@A&)%,+0,&5%6*$*+4&! :#14*&#(&.((#"%7"08&+.;+&"%$408&*4*,%.(%

want to do saffron, availability cannot be a limiting factor in terms of how it can be put to a lot ofhuman beings in the world. So this is one of the things that we are very very keen on.You can see that is one of the reasons we chased the four types of products listed. This is what is likelyto be in the market between 2013 to 2015, so we are not probably in the next generation, or we are notin 2030, because these are all compounds which we believe will take us very quickly there. Of coursethere are all these regulatory issues that I do not want to get into, which we are presently doing, andpursuing and things like that.Vanillin because we believe that the natural vanillin is so expensive, the synthetic version is certainnot a very preferred choice for a lot of people. So this is giving us a very niche space wherein we aregiving them a fermented vanillin. We have done a taste panel, we have evaluated it, some of theleading players have checked it and they find that this is so good that it is as good as what they haveseen possibly in the natural space.Then we have a set of anti-fungals, which are absolutely an inspiration from pomegranate, and youknow this is now becoming another plant that is so good. And that’s another product, and we havesome anti-fungals that we are using and want to use for the food industry primarily.Stevia, as you know, is going to be the next big thing which is happening in the world and we are verymuch there. We have made Rebaudioside D in sample forms, and it is been tested by a lot of people,particularly some of the companies that are sitting here, and they feel this is absolutely good. I thinkwe are the first in the world to have a very high purity Rebaudioside D, even for testing purposes orevaluation purposes by a panel of people who could actually taste it. So this is one of the otherproducts, so this is likely to come out after all its regulatory issues in 2015.Saffron, obviously that is something that I really think has been a game changer in terms of how wehave used the synthetic biology. There are three compounds which constitute what is within what iscalled saffron, the smell, the colour and the taste and we have separated out all the three, picked outthe genes which are responsible, and put it into yeast. So technically this yeast now can make all thethree separately, it can make the colour, it can make the aroma, it can make the taste as well. I mean itsabsolutely amazing because you really don’t need to go and get 250,000 plants to get a kilo, and youreally don’t have to be in Iran to harvest any of this. So this is one of the things that you may like toknow.We have a very interesting model. We are a B2B company, which means obviously we do not go outto the people there, we sell our ingredients and we apply our technology. Among the partnerships Ithink the previous speaker mentioned BASF so I assume they have moved to Switzerland now, morethan to Germany, so they are working with us on this, and this is hardcore synthetic biology again.So we presume that, as a company of about 8 years old, we are actually addressing some of the unmetneeds in the industry, and we are chasing compounds which will be really useful and which can beindustrially scaled up, so this explains to you in a nutshell what we are doing. And just to give you anindication, that these compounds through fermentation is not really far off, I mean they are just about acouple of years away. In the USA, I believe there are already a few compounds which are through thesame technology, and so I think you are going to see more of these companies coming in in the future,in terms of how they can assembly pathways and put them together to get to the stage where they canindustrialise them and make them available through fermentation routes for companies.So this is all I wanted to present today, thank you very much for your attention.212

Dr. P M Murali, is the Managing Director of the Swiss International DiscoveryCompany Evolva Biotech. He established Evolva Biotech as India's uniquepublic private partnership in Hyderabad, India before the facility moved toChennai. Dr. Murali has a Ph.D. in Microbiology from Madurai KamarajUniversity and a D.Sc. with over 20 years of experience inPharmaceutical/FMCG R&D. He was the Founder and Director of the DalmiaCentre for Research and Development for 16 years and prior to this he hasworked as an Indo-US researcher at the Battelle-Kettering Research Centre,Ohio, USA. He has a long track record in launching innovative products in theFMCG space. He serves as the Chairman of the Biotech panel for Tamil Nadu with the Confederationof Indian Industries Tamil Nadu and also as the President of Association of Biotech Led Enterprises(ABLE) the only industry body for biotechnology in India. Dr. Murali guides students for their Ph.D.at the Bharathiar University and is an Adjunct Professor of the Deakin University in Australia.213

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THE SOCIO-ECONOMIC IMPORTANCE OF THE FRAGRANCE INDUSTRY ANDINSIGHTS INTO THE GLOBAL REGULATORY SYSTEMINTRODUCTIONPierre SivacIFRABrussels, Belgiumpsivac@ifraorg.orgAt IFRA we are trying to deal with regulatoryissues in the fragrance industry but I will try not tobore you too much with these issues, its not myforte. Let me walk you through my presentationand the topics covered:• Why naturals are important to the fragranceindustry; this is a good forum to talk aboutthis.• The pressures that we are facing as anindustry.The socio-economic importanceof the fragrance industryand addressing regulatorychallengesNovember 5, 2012Pierre Sivac,President IFRA• The strategy that we have put in place and what we have achieved so far and what still needsto be done.• Why we need your support, the support of IFEAT members and the industry on the allergensissue.NATURALS: THEIR ROLE AND IMPORTANCEThe Naturals – Role and Importance• IFRA members produce 60-80,000 proprietaryblends per year with naturals playing asignificant role• Recent meeting of top perfumers from acrossfine fragrances, personal care and householdproducts sectors emphasized the importance ofthe naturals:– Richness and complexity– Diversity– Uniqueness– Quality3The fragrance industry produces about 60,000 to80,000 unique blends each year and these proprietyblends play an important role in the business of ourcustomers and the business of our customers’customers all the way down to the final consumer.When it comes to naturals, IFRA recently organised aperfumery workshop to deal with certain issues, suchas allergens. During the workshop it was really clearthat the naturals are an integral part of the fragranceindustry. They bring uniqueness, they bring value andthey bring what is really sought after by the perfumers to make their creativity worthwhile, and toexpress all the passion that they have for what they do.217

THE ECOLOGY OF THE FRAGRANCE VALUE CHAINNow let us look at where all of this fits into a global ecosystem. I guess this is the catchword of thenext few years; it is what we call the ecology of the fragrance value chain. Looking at this value chainyou see two extremes; at the entry to the value chain you have the naturals, and at the end of the valuechain you have the consumer. In the middle you have how it really works between the naturalingredients, the way they are included in the blend, how it goes to the manufacturers, whether they area detergent household or whether they are cosmetic or toiletry companies, and then it goes through theretail and finally it reach’s the consumer. That would be a very nice, straightforward, no hassle kind ofvalue chain.The Ecology of the Fragrance Value ChainCreativeNeedsPressureNGOsConsumerConcernPressureIFEATMembers:NaturalsIFRA Members:Fragrance Houses(60-80,000 Blends)ManufacturersPCPC, CE, AISERetailVariousEndConsumersVariousInputs/IntermediariesMore Science/BetterDefinitionRegulatorPressureCommission(Risk Management)SCCS(Risk Assessment)AllergensUnfortunately life is a bit more complicated than this, and we have little interaction between the topand the bottom of this relatively simple straightforward value chain. The hurdles we face comeprimarily from the top, and as you can see this is the top box called NGOs. Now the NGOs are veryspecial animals, they are either self-starters, they take on issues, or their issues are fuelled byconsumers. So they get consumer pressure to act. Anyway these NGOs put pressure on several stagesof the value chain: on IFRA members, on fragrances houses, on fragrance house customers, onmanufacturers and on the retailers.Then at the bottom the other pressure comes from regulation. Currently regulation - and I have takenthe European example - really stems from issues such as allergens. You are probably all familiar withthe famous EU SCCS (Scientific Committee on Consumer Safety) Opinion, which is probably theheight of the pressure on the industry that we are getting from Europe. We have to know this and wehave to deal with it. We cannot just say “OK, not interesting, not a concern”. No. We have to take thisinto consideration in the way we do our business. Unfortunately, life is about dealing with issues andmaking some hard decisions,218

The issues affecting the fragrance industry come from various parts of society, and they manifestthemselves in some very specific topics such as endocrine disruptors, CMRs (cargo movementrequirements), allergens, the right to know (involving disclosure of fragrance formulas). Then youhave different opinions coming from different scientists and different medical communities, that isrelayed by the media which is obviously looking for a nice angle to sell what they want to sell. Ourclients are deselecting certain ingredients because they are too dangerous from a media viewpoint,even though from a science point of view there is no reason to deselect.Fragrances – An Industry Under PressureRetailersAnimaltestingNGOsEndocrinedisruptorsRight toknowRegulatorsPoliticiansFragranceIndustryCMRsAllergensIntellectualpropertyManufacturersScientistsMediaConsumersBrandholdersOK, so we are under pressure. You all know this, or if you don’t know it first hand then it is becauseyou are supplying to people who have this pressure maybe even more than you do at this point. Lastyear at the height of the pressure we had a very interesting exchange with the PEW charitable trust.Although it is not an NGO per se it is a purveyor of funds to causes and to other NGOs. PEW has a $5billion trust fund that enables it to spend about $1 million a day on certain causes, and they have astaff in excess of 650 people to make sure that these causes get attention. Over the course of ourdiscussions with PEW, it wanted access to one of the treasured possessions of the industry, which isthe RIFM database. They wanted access to this database to start digging into our science. At the endof the day we refused to give them access on very legal grounds, and they backed away. But we knowfrom discussions with them that they had some very clear intentions. They really wanted to know howsafe our ingredients were, and the slide includes a quote from a memo that we received from PEWwhich clearly was not intended for us bythe way, so this was a confidential memothat PEW inadvertently sent us, but itclearly states their intention. From that dayon, the industry clearly got the messagethat we could not stay either too secretiveor maybe stay in the shadow of our clients.We have to express ourselves and expressall the good work that we are trying to doon a daily basis to make sure that ouringredients are safe.NGO Pressure on the FragranceIndustry“If they deny us access, it will undermine the industry claims oftransparency and openness about health and safety information. Ifthey allow us access, we expect that there will be major informationgaps in research and safety data on fragrances and flavors.”Pew Memorandum, July 2011• Over $5 Billion in assets• $1.0 Million a day budget• 650 staff6219

THE FRAGRANCE INDUSTRY’S RESPONSETo this effect the industry has taken a verycourageous decision – to which I am surethat Dave Wilcox, the president of RIFM,who is sitting here in the Conference Hallwill attest. RIFM has taken on thechallenge to transform and progressdramatically on its safety assessmentprogramme, coming from a programme,which was based on what we calledgrouping, and moving now towards asubstance-based approach programme.The importance for you and for theindustry in general is that this substancebasedapproach will be able to addressmore clearly some of the issues that theNGOs or the regulators are pointing out onspecific endpoints. More importantly, itwill enable the industry to put into thesystem the priority ingredients that itwants to see assessed. A priorityingredient does not mean per se that theseare high volume ingredients. Priorityingredients cannot only be priority from asafety point of view, but also they can be -and more importantly - priority from acreative point of view. This means thatevery ingredient is equal, and everyingredient will be judged for its merits onan individual basis. Once they have gonethrough the system they, in exchange withthe independent panel that RIFM operatesOur Response – Overall ScienceProgramOur Response – The Impact of OurValue Chain• Why should the regulator care?– Impress the importance of our industry forjobs and wealth creation– EU, The USA and Global– A major exercise– Well received in EUwith, will come to the point where IFRA may or may not issue a safety standard on this or thatingredient.This was probably one of the biggest steps we took.Nevertheless, we have to continue to go further. Sowe decided to embark on a more thorough reviewof what the industry is about, because although welike to look at ourselves we do not express this tothe outside world. So we decided to embark on asocio-economic analysis (SEA) and very recentlythis analysis was presented to the EuropeanCommission. At the top of the slide is AntonioTajani, vice-president of the European Commission,who actually endorsed our document along withone of the leading MEPs, Amelia Sartori. Thus, theefforts that the industry has been doing over the last18 months to present itself and to present a face tothe regulators is paying off.8220

THE IFRA SOCIO-ECONOMIC ANALYSIS PROJECT 1The project’s objectives were to expose theindustry and to define it more precisely andgive it a unique selling proposition. Theunique selling proposition that we areproposing today is that we are a platformtechnology industry. We bring not onlycreativity but also we bring technology to ourcustomers, and this technology enables themto make money.The Project• Fragrance industry is integral to thousands ofproducts and millions of people– It is an industry without a profile• It is an art, but– It is also a platform technology producing proprietaryblends that are vital to innovation across a wide range ofsectors and products– IP protection is key to the process• A brief description of our approach to this SEA• An overview of the key numbersBefore we go into how much this platformtechnology unique selling propositionrepresents, let me explain how or what weare trying to value.10The chart below shows what we have scoped so far, starting from the fragrance houses at the top of thechart, from all shapes and sizes, and the speciality ingredients suppliers, and then we have looked intowhere this all goes. It goes into fine fragrances, personal care products, household products, andindustrial cleaning products. Then as you go down, before you get to the consumer obviously you haveto go through a funnel, which is the retail funnel, which has been put at the bottom of the chart. Butmore importantly you have another sector of the industry that “feeds” off of all the good work that hasbeen done by the fragrance houses, and those are the businesses that act on behalf mainly of themanufacturers, which could be advertising agencies, marketing operations, packaging agencies and soforth.Fragrance Industry Value Chain1 The Socio-Economic Impact of Fragrance Technologies in Europe The Huggard Consulting GroupSeptember 2012 IFRA221

Thus, if you take a woman’s magazine e.g.Vogue, Cosmopolitan or Elle magazine,you will see all the advertising that is doneon either high-end cosmetics or high-endfragrances, just imagine the destruction ofvalue should this business dwindle. Thesame thing if you watch television and youwatch a 60s commercial or a 30scommercial or a 15s commercial on ashampoo, just imagine the amount ofmoney that would disappear in the valuechain if fragrances, or what we call thisplatform technology industry, did not exist.Valuation Factors• Identify distinctive contribution of fragrances• Fragrances low proportion of total cost but highimpact on product value• In FMCG markets, fragrances key driver of repurchase• With perceived functional equivalence in manyproducts, fragrances a key point of difference• Brand image often depends on impact offragrances• Typology of benefits12Then we had to go into the valuation of the products. The chart illustrates the architecture of how wehave tried to value the global business. We looked at the different benefits of fragrances (right handcolumn), then we looked at the applications (left hand column), and then in the middle we tried to givethe value that the fragrance represents in the overall value of that category.Classification of Product ApplicationsCategory:Role of Fragrances/Typology ofBenefits“Masking Benefits” – Non BeautyApplications% of Category ValueDepending on Fragrances20%ApplicationsDishwashers, (Tablets/ powders/ liquids), Rinse AidsStain Removers (Textiles), Insecticides, Shoe Polish,Silver & other Metal Polishes, Car Polishes, OtherPolishes“Masking Benefits” – BeautyApplications30% Hair Colorants, Hair Control Products, Face Care, BodyCare Lotions, Hand Care,Sun Care, Make-up, Shaving Products, Feminine Care“Articulates the Benefit” 40%Anti-Perspirant, Shampoo, Conditioner, Toilet Soaps(liquid/bar), Oral Hygiene, Laundry Detergents,Dishwashing Liquid (Hand), Kitchen Surface Cleaner,Bath/ Shower/ Toilet Cleaner, Window Cleaner, Floorcleaner, Carpet Cleaner, Furniture Polish“Articulates the Benefit” and MeetsWider Emotional Needs60% Shower Gel, Bath Products, Deodorants & Body Sprays,Baby Care, Fabric Care ConditionersPrimary Functional or EmotionalBenefit80% Fine Fragrances, Air Fresheners, CandlesSo if you take the first category, the benefit - its a masking benefit - a masking of the mal-odour of theproduct itself, but its not a beauty application; this could go into dishwashers or stain removers,insecticides, shoe polish and so forth. Probably the perceived consumer value of the fragranceincluded in that product would only equate to 20 per cent of the product’s value. As you move downthe column, you see that the fragrance benefit increases because the category is definitely more relatedto the final appreciation of that fragrance. At the high end is the fragrance category itself, i.e. the finefragrance category. There we can say that on average, probably 80 per cent of the value of a finefragrance is linked to the olfaction perception that the consumer may have.13222

So we have taken this grid, and estimated theannual global worldwide sales of thefragrance industry. Thus, IFRA is a $10billion or !7.5 billion industry. However, thisis not enough since these are just the sales ofthe fragrance houses to their clients. That iswhy we did all this valuation, and then wemoved into taking the valuation and lookingat it from the overall perspective of what werepresent in the world. So this nucleus of!7.5 billion translates into !172 billion inoverall gross added value and on aworldwide basis, this represents 4 millionjobs.Annual World-Wide Sales ofThe Fragrance Industry: EUR 7.5 billionEUR 2.6 billionUSD EUR 6.5 4.9 billionRevenues fromsales of proprietaryfragrance blends todownstream usersSales of rawmaterials used infragrance blends byfragrancecompanies and byspecialist suppliersof ingredients14Now there are different colours to these stacks, because we have tried to split it between what isdirectly derived from the fragrance business and its direct customers, from what is indirectly derivedfrom these businesses. For example, indirectly it could be trucking, the palette, market research etc.and this is what we called the induced gross value. The induced gross value is the fact that the incomefrom the first two boxes is then spent and supports the life of other people. So you could say that fivepeople that are in the fragrance world support one person that is not in the fragrance world. This is theway we have looked at it.Global “Narrow” Value ChainJobs & GVA Uniquely Dependent on Fragrances223

This is on a global basis. If you look solely at Europe, we are down to 945,000 jobs, and we are a littleabove !50 billion in value. This is what we claim to currently represent in Europe, and what thefragrance industry provides as gross value added in Europe. This is a conservative approach but wecould have looked at it from a less conservative approach and you could probably have doubled thefigures. However, to remain credible vis-à-vis the authorities we took a conservative approach.EU “Narrow” Value ChainTotal Jobs Dependent on FragranceTechnologies16EU “Narrow” Value ChainTotal GVA Dependent of Fragrance Technologies17224

The data have been broken down between the USA, Europe and the Rest of the World. One interestingaspect is that from an employment viewpoint, the Rest of the World is twice that of Europe and theUSA combined. We have looked at it also from a sales point of view, from a gross value added pointof view, and here it is a bit different; the USA and Europe are approximately the same size as the Restof the World. So more people work for the industry in other parts of the world than in Europe and theUSA, but on the other hand, the value still remains pretty even between these three blocks, when youadd the Europe and the USA versus the Rest of the World.Breakdown by Region of Jobs“Narrow” Value Chain – Uniquely Dependent onFragrancesBreakdown by Region of Gross ValueAdded (GVA)“Narrow” Value Chain – Uniquely Dependent onFragrances225

So the outcome of the study shows that fragrances are really a clear discriminator of products, ofconsumer choice, they fuel the growth of entire sectors, and they have made new sectors possible. Wehave taken L’Occitane as one example. What would L’Occitane be without the fragrance industry, butthere are many more examples. If you look at the overall job situation, obviously this study enables usto show that the implications derived from fragrances expand the picture and the number of peoplethat are employed by the industry, as opposed to only looking at the people employed in the fragrancehouses.The Outcome• Study shows the fundamental role of theindustry and the innovations it has engendered– It provides the discriminator for many new householdproducts coming from the R&D of leading brandssupporting jobs and adding value to the economy– It has fueled the growth of the entire air care sector– It has been the basis for new retail formats such as“L’Occitane en Provence”– It is basis of many jobs in the informal economy, e.g.,direct selling, making a critical contribution to manyhouseholds in these trouble economic times20ALLERGENSLet’s move on to another topic, and this isallergens. As you are probably all aware, theSCCS, which is the scientific committee of theEuropean Union relating to consumer safety, hasissued an Opinion and let’s not be misled by this,an opinion is only an opinion. OK, if I asked youfor your opinion, “Do you like my tie?” somewill say “yes” some will say “no”. At the end ofthe day, it is only an opinion and it will not makeme change my opinion that I want to wear my tietoday.Allergens• The SCCS, an independent scientific bodyin the EU, has delivered its opinion• DG SANCO is the risk manager who mustrespond to the SCCS opinion• SANCO’s easy option is to simplyimplement all the SCCS recommendations• Our objective: Influence the Commission,as risk manager, to take data-driven view21226

Nevertheless, it’s the SCCS, so DG Sanco, which is the health authorities of Europe, cannot simplytake this Opinion and shelve it because it does not like this Opinion. DG Sanco actually asked for theOpinion and it has to do something with it. Because it has to do something, it is looking at it from arisk management point of view. What do we do with this Opinion is the question it is asking rightnow. Should we simply take it and implement what is in the Opinion. To make a long story short, asyou are all aware, the Opinion has three components. It has a banned component, and it says weshould ban these two ingredients. It has a restriction component, and says we should restrict thesetwelve ingredients to 100 ppm, and it has a labelling component because labelling is part of theregulation in Europe. Should it do that? When you speak to DG Sanco, they tell you at the end of theday, this is not really a matter of life and death, and we all agree this and I know this and you can readthis in a lot of women’s magazines, and perfumers like to repeat this ad nauseum, that fragrances havenever killed anyone. We all know this. But the point is not about killing or not killing, the point isabout the intrinsic safety of the ingredients.“If the current SCCS opinion were to beimplemented, implications for naturals wouldbe severe”22227

So the Commission is now faced with an issue. We have pointed out to the Commission that if theyare faced with an issue, we are also faced with a very big issue, which is that these ingredients are ofkey importance to our industry. These ingredients are in excess of 90 per cent of all fine fragrances.They are overriding, and the palette of the perfumers cannot do without them. We have presented thisto the Commission, which understands from a creative viewpoint. We have taken members of theCommission to fragrance houses to talk to perfumers and they understand the issue.EU Commission PerceptionNaturalsFragrance IndustryManufacturersRetailersConsumersAlso we have made a separate valuation of the business impact for the fragrance houses in terms ofreformulation. Just to give you an idea, to reformulate these 35,000 formulas would take the fragrancehouses in Europe four years. They would be unable to take any new briefs and this would be there 4years, 24/7 of reformulating. The Commission understands that Europe would lose competitivenessand would lose innovation. The cost involved would be out of all proportion; I won’t say it here,because it is just mindboggling, but its very expensive to reformulate all of these formulas.So if we just pause for a second, where is the Commission today on the SCCS’s Opinion? Theyunderstand the issue for the fragrance industry; the manufacturers have been very vocal and theposition from the manufacturers viewpoint is understood. The retailers are not very vocal but theyhave other ways to become vocal if they want to. The retailers are very well known in Europe for otherreasons, especially in the selective distribution and have been very good at defending their model inEurope. So retailers are very well known to the Commission. As for the consumer, so far the consumerhas not really expressed any interest in the issue; but they still want to buy their products - so that’sOK.NATURALS VULNERABILITY AND THEIR PROTECTIONWhen it comes to the naturals, the Commission is a bit lost. They do not really see how essential oilsin general fit into this value chain. So we have tried to explain this to them, and our explanation waspretty convincing when it comes to explaining how a perfumer creates, and also on how we use theingredients from an industrial point of view in the fragrance houses, but what they do not know iswhat naturals represent in the world. They do not have this feeling as much because of what we havedone on the other side of the industry with the socio-economic analysis.Here again, what could the SCCS Opinion trigger with DG Sanco? If you go back to a few examples,such as the Cosmetics Directive, which became the Cosmetics Regulation; REACH, which Hans vanBergen, will talk about next; the ban on animal testing, then you know the industry has always cried228

wolf: “Ah we can’t do anything, we’re going to die, this is the end of the world, and it’s going to costus a fortune.” Well the industry has survived and it is still out there, maybe not everybody, but by andlarge the industry has survived. So theCommission looks at a piece of legislation, andsays the industry is going to cry wolf, we aregoing to pass it and they will adapt, they will findthe innovation and they will survive. TheCommission are not going to look at who isgoing to die to the left, who is going to die to theright, because by and large the big numbers workout for the Commission. Things move on andsafety is increased and everybody is happy. Theyget political kudos because consumers and NGOsare happy; the politicians are happy and so forth.This is what we call the default model of theindustry.Naturals are Particularly Vulnerable• The Commission’s default model:– Propose legislation– Industry protests– Enact legislation– Industry adjusts (via innovation)– Business as usual• SEA– Only addressed downstream– Positioned the fragrance industry as innovative• “Industry would be “different” if SCCS opinionenacted” – Top perfumers24Protecting the Naturals – Our Actions• Show that the fragrance industry value chain willbe harmed– EU competitiveness will suffer– European innovation and creativity will suffer• Engagement by the fragrances houses andperfumers• Missing a critical piece - where is commitmentof the naturals?– Showing that the naturals industry is committed viapolitically savvy programs– Science– Socio-economic assessment25We do not want this; we believe this is wrong,and that we definitely need to do somethingabout it. One of the issues we have today is thatwe need to show how the industry would beharmed if the naturals were to be heavilyregulated through DG Sanco’s risk managementmeasures. So what we are really missing now isto show the commitment that the naturalsindustry has towards the industry, per se, what isthe natural’s political platform to speak on, andwhat are the sciences of the naturals, and whatare the socio-economics of the naturals.The Allergens Work PlanBecause separately we also have - what we call -an allergens work plan. This is a commitmentfrom the industry to show that we are seriousabout the allergens. So as DG Sanco looks at itsmeasures, it will also look at the commitmentthat the industry is willing to make for the futureof safety assessment and understanding allergensin the world and in Europe in particular. So onthe one hand they know how big we are and howmuch value we bring, and they see that we havea commitment to do something about theallergens, but on the other hand we need to givethe Commission again the true impact of thenaturals on the business.Our Allergens Work Plan• We have developed detailed proposals fora multi-faceted program– What is an allergen?– Induction versus elicitation (98% versus 2%)– Risk-based approach – QRA– Requires investment of Euros 1.0 million over5-year period• Understands Commission’s political context26229

Socio-Economic Impact of NaturalsAnd to that effect, we would like to launch a study and I will very briefly go into what we would liketo do. We recently briefly outlined this to some members of the IFEAT Executive Committee, but weunderstand that the way we did our socio-economic analysis for the fragrance industry would not begood for the naturals, because it is a totally different ball game. You are more about how does afarmer/smallholder live off naturals. It has got nothing to do with the number of jobs in retail, or thenumber of jobs in manufacturing by the large multinational companies, but its more about howresilient is a farmer to any kind of change that would be imposed on him by any new kind ofregulation. And that’s what we need to look at. So there is more granularity, and it needs to be moredefined at a very local level.Justifying Our Regulatory Needs• Illuminating the Commission on the socioeconomicimpact of the naturals (plusenvironmental)– The socio-economic impacts (Vulnerable groups)– The commitment of the producers to the issue• The producers are “doing the right thing”• Engaging with global agencies– Putting structure on current achievements– Gaining recognition• Commission – protecting the vulnerableand joined-up policy thinking27Background/AdditionalConsiderations• High Value Agricultural (HVA) Products not welladdressed in literature– No immediately identifiable literature on impacts– Will need to develop specific criteria and outputs• Flavour and fragrance materials not subject tofresh food safety requirements• Traditional jobs and gross value added (GVA)not appropriate metrics for developing countries28230

The process would be to start from looking at the literature, and reviewing the direct impacts on thedaily lives of the people that are producing the ingredients. These types of studies have already beenconducted on other topics, and they are fully endorsed by the authorities, whether they are theEuropean Commission, the United Nations, or other institutions.231

This is an example of one that was done in Kenya. The idea is to look at how resilient the incomeearner is to any change in regulation. Because do not forget that one euro, or one dollar, does not havethe same value in a small agricultural community in Haiti as it does, as that one-dollar or that one-eurohas in Europe from a retail or a manufacturing point of view. We have to take that in perspective, andyou cannot look at that same dollar for what it is; we have to look at it in this way.32232

I will not bore you with all of these details,but I will just give you an example of amonograph of what we would be looking atand how this would be then be put into amodel to find out how this would be impactedby change. So we have taken Singapore snakeoil, a very well known fragrance material! Itis made, processed and harvested here in theSingapore Straits. 10 kg of eggs are needed tobe harvested to make 100 cl of this oil, youhave the valuation here and how its splitbetween the harvester and the processor, andthe processor is – it’s a very rudimentaryprocessing that is done, its harvested by lowwage employees that usually are probably theExample of Sourcing Scenario Model• Singapore Snake-oil• Made of Processed, MerLion eggs, harvested in the shallows of SingaporeStrait.• 10kg of eggs need to be harvested to make 100cl of oil.• Valued at SGD1,000 per liter (FOB) with annual harvest of 2,000 liter spilt40:60 between harvesters and processors• Processing is done by a very small number of processors/agents usingprimitive equipment• Harvesting is done by low-wage employees in addition to other jobs andonly in the mornings due to tides.• Best Matches a “Year-round Processed Sideline Harvest” Sourcing ScenarioModel.• Small but stable income generation means this ingredient primarilycontributes to livelihood resilience amongst subsistence laborers inindigenous communities as well as ‘processors’other part of the household, maybe the female of the household so its supplementary income, and atthe end of the day it’s a small stable income which contributes to probably that extra ability to survivefor that household.So once we have this monograph, we put it in a model and we look at what the impacts of regulationwould have on this snake oil producer. This is how we would come up with a model to explain to theEuropean Commission and to other authorities around the world, what is the valuation platform of thenaturals industry. So I leave it to the Executive Committee of IFEAT to decide whether or not theywant to partner with us in this study, and in the end you will understand why we need it.34Other Considerations• Complements downstream SEA• Initiating this research:– Demonstrates commitment of naturalsindustry– Allows immediate levering of what is alreadybeing done– Puts immediate pressure on Commission torecognize the existence of adverse impact35Because it really complements the socioeconomicanalysis (SEA) that we have done,it demonstrates your commitment, thecommitment of the naturals industry to theoverall process. It allows us to leverage whatwe already have, because we have done a lotof work, and it puts a lot of good positivepressure on the Commission, because whenwe talk about the naturals there is a lot ofsympathy that comes out of the naturals, soyou need to leverage this sympathy from justbeing nice guys to being nice guys with areal economic purpose. And that will make adifference.233

So, in the end, this is what I want to do. Iwould like to bridge what has been doneupstream between the fragrance houses, themanufacturers and the retailers, and Iwould like to bridge this with the naturals.That is the purpose of the Industry - with acapital “I” - to present itself as a unitedfront in front of people that do not want toregulate for the sake of regulating; theywant to regulate because they have theirown pressures, and the more we can talk tothem, the more we can present our case in avery holistic way, the better chance wehave of going into a regulation that we canall live with. And that’s what we have tolook and seek for. Thank you very much.Putting Structure on the Whole ValueChain• Extend the downstream SEA upstream tonaturals• A high profile project validated by internationalagencies• Demonstrate the socio-economic importance ofthe naturals for vulnerable groups• Integrating current achievements into astructure and gaining broad recognition36Completing the SEA pictureNaturalslFragranceIndustryManufacturersRetail37Pierre Sivac is a French national, educated in both France and the USA. He isan experienced industry executive having worked for major global companiessuch as Coty, Unilever and Henkel. Pierre’s responsibilities at Coty includedthe brands Calvin Klein, Cerruti, Chloe, Marc Jacobs and Davidoff.Experienced in the global fragrance market, Pierre is now President of theInternational Fragrance Association (IFRA) the global trade associationrepresenting fragrance material manufacturers and compounders. He took upthis post in November 2010.234

REACH: AN UPDATE OF EFEO’S PROGRAMMEFOR NATURAL COMPLEX SUBSTANCES(I.E. ESSENTIAL OILS)Dr. Hans van Bergen 1European Federation of Essential Oils (EFEO)Sonninstraße 28, 20097 Hamburg, Germanyefeo@wga-hh.deINTRODUCTIONThe Regulation of the European Union on theRegistration, Evaluation, Authorization andRestriction of Chemicals (REACH) came intoeffect on June 1st, 2007 and is now well underway.Its obligations were extensively covered at previousIFEAT conferences and are reported in theirproceedings. A major task for companies in theEuropean Union is the REACH registration of thesubstances they produce and import. Thisobligation applies also to Natural ComplexSubstances (NCSs), if the company’s volumereaches 1 t/y or more for downstream uses likefragrances for cosmetics, household cleaning andair care products. The volume part used in flavoursand foods is exempt.REACH :UPDATE OFTHE EFEO PROGRAMfor Natural Complex SubstancesHans van BergenEFEOIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen1! Phase-3: Preparation & Survey! Phase-2: Work in Progress! Phase-1: Completion & Maintenance! Experiences! ReminderAs a service to the membership EFEO developedearly on a REACH Road Map with a Program toFacilitate a Smooth Implementation of REACH forthe Supply and Downstream Use of NCSs. Thatprogram is in time aligned with the three phase-inperiods for REACH registration, which is spreadout over the 10 years from 2008 to 2018. Otherinterested parties than EFEO members arewelcome to join in the registration activities ofcompanies, who cooperate in consortia for groupsof NCSs that have certain constituents in common.IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen2This presentation gives an update and proceedings of the program. Emphasis is given to thepreparation for phase-3, scheduled to start in 2013. Work in-progress by the phase-2 consortia and thestatus and experiences of phase-1 are subsequently highlighted.1 Contact details: Para-Celsus Concept, Boterbloem 14, 3984 CT Odijk, The Netherlandsinfo@para-celsus.eu235

THREE PHASES OF EFEO REACH ROAD MAPThe actual registration is spread out over aten year phase-in period and is divided intothree parts with deadlines of• December 1st, 2010 for allsubstances exceeding 1000 t/y, bioaccumulatingsubstances exceeding100 t/y and carcinogenic, mutagenicor toxic to reproduction (CMR)substances as of 1 t/y per producer orimporter.• June 1st, 2013 for all othersubstances exceeding 100 t/y perproducer or importer.• June 1st, 2018 for all othersubstances exceeding 1 t/y per producer or importer.A Program to Facilitate a Smooth Implementation of REACHfor the Supply and Downstream Use of NCSs! Is Aligned with PHASE-IN of REACH! Gives a Grouping of NCSs by Constituents! Gives a Schedule for Consortia Formation per NCS Group! Is Updated as NEEDED2008 Phase 1deadline deadline2010 Phase 2 2013 Phase 3IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 3Only companies who made use of the opportunity to pre-register their substances prior to June 1st,2008 can benefit from the phase-in scheme. Late pre-registration is possible, but only in case acompany produces or imports a substance for the first time after June 1st, 2008.! COVERAGE OF EFEO PROGRAM (~ 150 NCSs)Survey 2005(> 1 t/y perlegal entity)Consortiaphase-1Consortiaphase-2ConsortiaPhase-3Need ofregistrationNumber of NCSs1504 consortia 129 consortia 906 consortiaexpectedStand-alone NCSs???? (35)???? (12)EFEO NEW SURVEYto Investigate Current Needs of Members andOther Reach Registrants for Phase-3IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 4We are here toprepare for phase 3deadline2018ENDWell before the introduction of REACHEFEO conducted a survey among itsmembers, resulting in a portfolio of about150 NCSs that would need registration. Thisportfolio was divided in 20 NCS-groupswith the same or structurally similarconstituents. Per NCS-group consortia areformed to share the workload and optimisedata collection. By now four phase-1 andnine phase-2 consortia are functioning. Theycover respectively 12 and 90 NCSs, which istwo thirds of the 2005 REACH portfolio.They accomplished in time the registrationof 4 NCSs before the 2010 deadline.Dossiers for another 8 NCSs are scheduledfor submission in 2013. The registration of the other NCSs of these consortia is legally due by the2018 deadline.PHASE-3 PREPARATIONNCSs are for the most part low volume products with a deadline for registration in 2018. However,spreading the registration work for NCSs over three phases in the ten year period was stronglypreferred, because of the learning curve and workload. While the phase-1 and -2 consortia continue towork on the dossiers of their NCSs, EFEO initiates now the formation of phase-3 consortia for theremaining part of the NCS-portfolio for REACH.236

Based on the 2005 survey 47 NCSs are not covered by the existing consortia, of which 35 are dividedover 5 NCS-groups and consortia. Another 12 NCSs are rather unique in constituent composition andare regarded as stand-alone (STA) cases. For the registrants of STAs a suitable organisation to preparethese registrations should be found. As such REACH offers the so-called SIEF structure (SubstanceInformation Exchange Forum).! EFEO Circular Letter No. 14 of Sept. 24, 2012! To Members & Other Interested Parties! OVERVIEW of REACH Portfolio:! Currently covered 150 NCSs (2005 survey)! Grouping of these 150 NCSs! Consortia assignment per phase 1, 2 , 3! Status per NCS:! Lead Registrant assignment! Cases with NO interest for registrationThe market situation has certainly changedsince the 2005 survey. Therefore EFEOdecided to organise another survey to updateits NCS-portfolio for REACH registration.With EFEO’s circular letter no. 14 ofSeptember 24, 2012 members and otherinterested parties are invited to submitNCSs, which are not yet covered by the2005 portfolio. This letter was alsodistributed by IFEAT and IFRA to reachalso interested parties outside the EFEOcircle.IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 5An overview of the current portfolio of 150 NCSs was attached for comparison with the registrationneeds of individual companies. The overview includes:• The currently covered NCSs by common, botanical and EINECS name.• EINECS-number and the EINECS CAS-number.• Assignment to the consortium, based on grouping by dominant constituents.• The schedule for phase-in (1, 2 or 3).• Adoption of a volunteer Lead Registrant (assigned / pending).• NCSs for which the consortium has currently no interest to register.EFEO REACH PORTFOLIO_ OVERVIEW Aug. 2012 (EXAMPLE)EFEO NCSCOMMON NAME BOTANICAL EINECS NAME CAS no EINENCS No. LEAD REGISTRANTPhase CONSORTIUM OF PRODUCT NAMEof EINECS(LR) and Status1 CITRUS Orange sweet oil Citrus sinensis Orange, sweet, ext. 8028-48-6 232-433-8 registered in 20101 CITRUS Orange sweet oil, Citrus sinensis Orange, sweet, ext. 8028-48-6 232-433-8 LR pendingTerpenelessqualtities1 MINT Peppermint oil Mentha piperita Peppermint, ext. 84082-70-2 282-015-4 LR assigned,nearly completed2 CINEOL Eucalyptus oil Eucalyptus Eucalyptus 84625-32-1 283-406-2 LR assignedglobulusglobulus, ext.2 CARVONE Pennyroyal oil Mentha pulegium Mentha pulegium,ext.90064-00-9 290-061-1 No interest by consortium(< 1 t/y)2 CARVONE Caraway oil Carum carvi Caraway, ext. 85940-31-4 288-921-6 LR pending2 LINALOOL / LIN.ACETATE2 LINALOOL / LIN.ACETATELavandin oilSage oil (Spanish) Salvialavandulifolia,Labiatae3 EUGENOL Clove bud oil Syzigiumaromaticum3 ACYCLIC Geranium oil, PelargoniumTERPENE ChinagraveolensALCOHOLS/ESTERS3 TBD or STAND-ALONEPeru balsam oilLavandula hybrida Lavender,Lavandula hybrida,ext.MyroxylonpereiraeSage, Salvialavandulifolia, ext.91722-69-9 294-470-6 LR assigned90106-49-3 290-272-9 LR pendingClove, ext. 84961-50-2 284-638-7 follows in phase 3Pelargoniumgraveolens, ext.!""#$%&'%$( $!"%')"%"( follows in phase 3Balsams, Peru 8007-00-9 232-352-8 follows in phase 3IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 6237

A standard survey-2012 report form should be used to inform EFEO of:• Additional NCSs to be includedin phase-3.• The intended volume band forregistration.• An interest to join consortia ofphase 1 and 2 as a late member.• Other useful information (remarksection).Companies, who are not yet participatingin one of the existing consortia and whohave an interest in the registration ofphase-1 or -2 NCSs can make thatinterest known to EFEO with the samereport form. EFEO will pass that interestonto the respective consortiumcoordinator for further contact.! Company Survey Report Form:! Additions of NCSs for Phase-3! Intended Volume Band for Registration! Interest to join Phase 1 or 2 Registrations! Other useful InformationREPLY:• by December 15, 2012 (extended date)• to efeo@wga-hh.de and cc. info@para-celsus.eu.All replies will behandled as confidentialinformation to EFEOIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 7COMPANY NAMEAddressContactpersonemailTelephoneFaxDateEFEO PROPOSED NCS COMMON NAME BOTANICAL NAME EINECS NAMEPhase CONSORTIUM: OF THE1, 2 or 3 - namePRODUCT- stand alone- do not knowEFEO REACH SURVEY 2012 REPORT FORMCAS noof EINECSEINENCS Volunteers asNo. LEADREGISTRANTyes / noHIGHESTVOL.BAND0= 1000!! !! !! !! !! !! !! !! !! !!!! !! !! !! !! !! !! !! !! !!REMARK, e.g.- constituent compositionavailable?Reported NCSs will be includedwith Phase-3 ConsortiaFormationIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 8Participation in EFEO’s REACH program is also open to manufacturers of NCSs in other parts of theworld than the European Union. They can participate in the consortia via an Only Representative, towhom they have delegated the REACH obligations.238

Therefore, all manufacturers and suppliers ofNCSs for fragrance applications should takethe 2012 survey seriously to be on board intime for the third and last period of REACHregistration. The responses to this survey willbe treated as confidential information byEFEO. The submitted NCSs will be includedwith the process for phase-3 consortiaformation, which will start in 2013. The timeto respond 2 has been extended to December1st, 2012.RECOMMENDATION:! Review Company Needs against:! EFEO Circular Letter No. 14 of Sept. 24, 2012! OVERVIEW of EFEO REACH Portfolio! See: www.efeo-org.org or contact: efeo@wga-hh.deEFEO Members and Other REACH RegistrantsSubmit Company Survey Report Form with NCSs• For addition to Phase-3 portfolio• To be part of Consortia formation Reply byextended deadlineofDECEMBER 15, 2012IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 9PHASE-3 CONSORTIA FORMATIONThe procedure for the organisation of NCS consortia was developed in phase-1. The same structurewas adopted for phase-2 and is also the model for the consortia of phase-3. The formation of consortiais a time-consuming process and takes at least a year until they are operational (see section 5).! STEERING COMMITTEESize:7 to 50! All members, equal votemembers! One lead company as chair & coordinator! TECHNICAL COMMITTEE! At least all Lead Registrants! External SERVICE PROVIDER* for! Data evaluation, CRO testing, dossier preparation! Consortium management! Trustee work, accounting, fee collection & payments! CONTRIBUTIONS are proportionate to level of interest.* the same consultant for all supporting tasksIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 10Each consortium has a Steering Committee(SC) that takes decisions on investments forservice providers, data access, testing,accounting, membership fees and other policymatters. It chooses one of the members aschair and coordinator. All members haveequal voting rights. The consortium’sTechnical Committee guides in closecooperation with the contracted serviceprovider the process of dossier preparation.The service provider brings in experts ofvarious disciplines like toxicology,ecotoxicology, risk assessment and REACHrules and guidance. Based on previousexperiences, phase-2 consortia chose forefficiency reasons the same service provider for technical, trustee and management tasks. Asdemanded by the REACH regulation the consortia apply a fee structure, which is proportionate to themember’s level of interest per NCS and per volume band. Membership varies from 7 to around 50companies and depends on the nature and number of NCSs covered.2 Responses should be sent to efeo@wga-hh.de with copy to info@para-celsus.eu.239

At the moment consortia for 5 NCS-groups are scheduled for phase-3. These groups have as dominantconstituents:• Eugenol• Estragol and anethol• Cyclic terpene hydrocarbons andalcohols• Monoterpenes and sesquiterpenes• Geraniol, citronellol and estersthereofAlso consortia formation for two types ofcomplex NCSs is foreseen, namely:! Oak and tree moss! Benzoin products.NCS Groups & Main ConstituentsName Main Constituents Nr. of NCSs*EUGENOL Eugenol 7ESTRAGOL/ANETHOL Estragol, Anethol 6TERPENE CYCLIC ALCOHOLSTERPENE CYCLICHYDROCARBONSALICYCLIC TERPENEALCOHOLS / ESTERSMOSSBENZOINCyclic terpene hydrocarbons &alcoholsMonoterpenesSesquiterpenesGeraniol & estersCitronellol & estersNot applicable,Type 2 NCSNot applicable,Type 2 NCSSTAND-ALONE Various 12* Based on 2005 surveyIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 1166622In addition, ways have to be found for a coordinated approach to the registration of Stand-Alone cases(currently 12 NCSs). The results of the 2012 survey might influence the above phase-3 coverage.PHASE-2 WORK IN PROGRESSPre-ConsortiumphaseINTERIM PRIMARYCONTACTMoUConsortium formedSelectTrustee /ConsultantData owner agreem. RIFM,CompaniesData gaps, contract testsExposure projectLR submissionOther submissions06/10 12/10 07/11 01/12 01/13 06/13Funding & admin.Data reviewSTATUSvaries perconsortiumNew Data for gapsIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van BergenLetters of AccessPhase 2 NCSs:1 for 201372 for 201817 no interest12Consortia formation is a timeconsuming process. EFEO’sannouncement and call forinterest in phase-2 was issuedin early 2010. About a yearlater the membership wasformalised by signingagreements and agreeing onkey roles (SteeringCommittee, TC andcoordinator). The start-upperiod was guided per “preconsortium”by an EFEOBoard member as InterimPrimary Contact (IPC). Thenthe procedure for the selectionof service providers followed,which was a combined effortcoordinated by EFEO.By the end of 2011 the phase-2 consortia had become operational and had started with their serviceprovider to work on the sameness check and data collection. Subsequently data gap analyses and testplans were prepared. The registration deadline of June 1st 2013 will be met for cases for which thevolume band demands so. For the lower volume NCSs of phase-2 the time to completion will takelonger.240

As a result of EFEO’s phase-2 initiativenine consortia were formed, whichstarted with 90 pre-registered NCSs ofthe EU’s inventory of existingsubstances.NCS Groups & Main ConstituentsName Main Constituent Nr. of EINECS NCSs(no interest)CARVONE Carvone 8 (-2)CINEOL Cineol 10 (-2)CINNAMATES Cinnamic aldehyde, derivatives 4 (-1)CITRAL/CITRONELLALCitralCitronellal6 (-1)PINE !, " – Pinene, Limonene 16 (-3)SESQUITERPENES Sesquiterpene hydrocarbons & alcohols 19 (-3)LINALOOL / L.ACETATE Linalool, Linalyl Acetate 15 (-2)THUJONE Thujone, Camphor 8 (-1)BERGAMOTLinalool/ Linaly AcetateLimonene4 (-2)These consortia deal with groups of NCSs rich in:IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 13* Carvone (8 NCSs) * Cineol (10)* Cinnamates (4) * Citral / citronellal (6)* Pinenes (16) * Sesquiterpenes (19)* Linalool / linalyl acetate (15) * Thujone (8)* Linalool / linalyl acetate / limonene (4 bergamots)By the end of 2011 the phase-2 consortia had become operational and had started with their serviceprovider to work on the sameness check and data collection. Subsequently data gap analyses and testplans were prepared. The registration deadline of June 1st 2013 will be met for cases for which thevolume band demands so. For the lower volume NCSs of phase-2 the time to completion will takelonger.In each of the consortia several cases of EINECS entries were identified for which the consortiummembers had no interest to pursue a registration. For that reason 17 cases were put on hold. They aremarked with “no interest” in the 2012-survey.PHASE-1 COMPLETION AND MAINTENANCECONSORTIA NEEDS:1. Technical support* for! Data evaluation! Additional testing! Dossier preparation2. Trustee services* for! Fee collection! Letter of Access services up to 20183. Consortium management assistance*4. Time tracking for cost sharing & reimbursementThe four phase-1 consortia were formedand started their work in 2008. Theyfunctioned as pathfinders and paved theway for the subsequent phases. Alreadyat the start they contracted a serviceprovider for the technical support: dataevaluation, data gab analysis, additionaltesting, exposure and risk assessmentand dossier preparation. The accountingpart was outsourced to another externalparty.* Preferably one and the same partnerIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen14241

Phase-1 learned that it would be more efficient to outsource the technical and trustee services to thesame external party. For the larger consortia support and guidance for the consortium’s managementwas also desirable to reduce the workload of the active members. The recommendations werefollowed and implemented for phase-2.The phase-1 consortia accomplished before the 2010 deadline the registration of four NCSs:• 2 large volume citrus oils (orange and lemon oil)• 2 safrol-containing NCSs (nutmeg and cinnamon leaf oil)The Citrus consortium has for its five otheroils the dossiers in principle ready, but haspostponed submission pending ECHA’s 3evaluation of already submitted dossiers.The dossiers of the two NCSs of the Mintconsortium are reaching completion andwill be submitted before their 2013deadline. Also the Vetivert dossier is readyfor submission.ECHA carried out a compliance check onone of the citrus dossiers and questions thefollowing points:• The identification of NCSs as aUVCB 4 , which consistpredominantly of one main constituentNCS Groups & Main ConstituentsName Main Constituents Nr. of NCSs NCSsRegistrationCITRUS Limonene 7 2 registered5 in 2013• The coverage of multiple qualities of an NCS obtained from different processing steps.• Spectra needed for identification• Possible assignment of new identification numbers.MINTSAFROLcontainingVETIVERTL-mentholMenthoneTriggered bypresence of SafrolNot applicable,Type 2 NCS2 2 in 20132 2 registered1 Dossier isreadyIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 15! NCS Substance Identification:! UVCB versus Mono/Multi Constituent Substance(80 % criterion)! Dossier coverage of Multiple Qualities:! Same hazard classification! Independent from processing steps(REACH recital 45).! Characterisation:Justificationper NCSdossier! GLC, HPLC, MS, IR, UV, NMR, Optical Rotation! New Identification NumbersThese subjects are currently subject ofdiscussion with ECHA. A careful review ofREACH rules and the guidance indicatesthat NCSs are in general UVCBs, of whichmultiple qualities can be covered by oneregistration dossier if their hazardclassification is the same, despitedifference in processing for theirproduction.Discussions with ECHA on these aspectscontinue.IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 163 ECHA: European Chemicals Agency in Helsinki, the agency to whom dossiers must be submitted.4 UVCB: substances of Unknown and Variable composition, Complex reaction products or Biologicalmaterials.242

EXPERIENCESThe data requirements for a valid REACHregistration are demanding, not onlybecause of the number of data but also dueto the quality criteria to validate the existingand new data for REACH purposes. Firstthe registrants must agree on substanceidentification, which includes agreement on:• The botanical origin (species andpart of the plant)• The composition by constituents(typical percent concentration andranges)• Method(s) of manufacturing andrefinement.! Source & manufacturing process! Constituent composition (% typical & ranges)! Physical Chemical Data:! Few valid existing data! Partly in-house and external analysis! Toxicological Data:! Few valid existing data! Gaps to fill partly by read-across & testing! Environmental & Eco-tox. Data:! Few valid existing data! Gaps to fill partly by read-across & testing! Uses Downstream & Exposure ScenariosOnce the specifications are agreed representative samples for testing and data collection must beselected, usually the main quality of the lead registrant. For the validity of existing data the descriptionof the test sample must confirm that it meets the agreed specifications. Data are only valid if the testmethod is properly described and are obtained by a recognized protocol or otherwise can add to theweight of evidence for the considered end point.In general few valid data for REACH on NCSs seem to exist. For physical-chemical, toxicological aswell as eco-toxicological end points additional testing has to be conducted. If the NCS consists of afew dominant constituents read-across to their data is an acceptable option for (eco-) toxicologicalproperties.Most physical-chemical data are obtained by testing the NCS as such, except for water solubility andthe partitioning coefficient, which are determined for the constituents for the purpose of theenvironmental risk assessment.NCSs of EFEO’s REACH program have in common that their downstream use is in fragranceapplications. Therefore, a standard set of exposure scenarios can be taken from the guidance issued byIFRA 5 .REACH registration is resource demanding. Manufacturers and importers of NCSs are at the source ofthe supply chain and are asked by customers if their products are REACH compliant, meaning amongothers that• products must be (pre-) registered for the company’s volume band• downstream use and exposure scenarios are covered• safety data sheets are upgraded to new rules.5 IFRA: International Fragrance Association.! Substance Characterisation:IFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 17243

It illustrates that REACH compliance is vital for doing business in the EU. Therefore REACH tasks incompanies are best assigned to a coordinator, who knows the Regulation and coordinates theimplementation by:• monitoring the company’sportfolio and identifying productsrequiring registration• coordination of productinformation and responses tocustomers• organising the dossier preparationand submission• participating in consortia andSIEFs• indicating budget needs forregistration• monitoring the REACH IT accountand ECHA’s messages.! REACH responsible/contact person(s)! Identify/monitor company REACH portfolio! Organise company dossier submissions! Monitor REACH-IT account & ECHA messages! Initiate timely actions for legal compliance by:! up-to-date product documentation (e.g. eSDS)! coverage of customer needs (e.g. uses and exposure scenarios)customer satisfaction! Consortium Representation in:! Steering Committee! Technical Committee! Quality control:! Substance identificationREACH registration isNOT A ONE-TIME EVENT,but needscontinuous monitoring and maintenanceIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 18REACH registration is not a one-time event. Submitted dossiers must be maintained and kept up todate because of:• comments by ECHA• new knowledge ono properties impacting the hazardso exposure scenarios impacting the risk assessment• identification of new uses• an increase in volume band• a change in the registrant’s identificationThe Lead Registrant and co-registrants shall on their own initiative update their dossier, if abovechanges occur.! Fair and Proportinate to Level of Interest and depends on:! Number of Consortium Members! Number of NCSs per Member! Volume Band per NCS per Member! Cost Elements:! Existing Data evaluation! Letter of Access! New data collection! Exposure Assessment & CSR! Dossier preparation! Consortium Administration & Management! Company registration fee! Reimbursement of LRs and Other Active Members! Revenues:! Letters of Access to Data & Joint DossierIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 19REACH compliance leads to costs andinvestments, which must be budgeted. Thesecosts include the fees for participation inconsortia giving rights to the lead dossier.Non-members can obtain access by payingthe consortium for a Letter of Access. Abasic rule of REACH is that costs should beshared in a proportionate and transparentmanner. The cost sharing for dossierpreparation in consortia is determined bythe agreed cost sharing key, which isderived from the number of members, thenumber of NCSs of a member’s interest andthe corresponding volume band.Administrative costs are shared equally. Main cost elements concern• data evaluation and data collection• fees for letters of access of data owners244

• exposure and risk assessment• dossier completion in the prescribed IUCLID format• administration and management.Time spent by active members for the Technical Committee and the consortium coordination isrecorded and at the end reimbursed by the membership as a whole. The consortium can generate someincome by providing against a fair fee Letters of Access to generated new data and their lead dossiersto companies external to the consortium.As an additional benefit to its members the consortia organize support for the preparation of the coregistrantsdossiers.CONCLUSIONSIn 2008 EFEO developed a REACH RoadMap to facilitate the registration of NCSsin three phases by its members and otherinterested parties. EFEO’s NCS-portfoliofor REACH registration covers about 150NCSs and is based on a survey of 2005.This portfolio was divided in about 20NCS-groups of structurally similarconstituents with the aim to organise pergroup consortia of companies, who jointlyprepare the registrations. In the programEFEO functions as facilitator to organisethese consortia in three phases aligned withthe phase-in scheme of REACH. In phase-1 (2008) four consortia for 12 NCSs werecreated, followed in phase-2 (2010) bynine consortia covering 90 NCSs.1. Review Company REACH Needs against EFEOREACH portfolio2. Reply to EFEO with additional NCSs (Dec. 1)3. Join Phase-2 Consortia as late member4. Plan and Organise Resources5. Consider Active Role for Company Key NCSsJoin early to get overthe REACH mountainIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 20EFEO has now started with the preparation of phase-3, which shall cover the remaining part of theportfolio for REACH registration. The first step is a survey among members and other interestedparties to update the portfolio dating from 2005. Coverage of phase-3 should reflect the currentsituation of companies and be as complete as possible because it will be the last opportunity to preparejointly NCS registrations in EFEO initiated consortia. On the occasion of IFEAT’s Singaporeconference EFEO invites all companies with an interest in NCSs for the European market(manufacturers and importers) to review their REACH needs and compare it with EFEO’s NCSportfolioas distributed with circular letter no. 14 of September 24, 2012. Until December 15 of thisyear companies can report additions to the current NCS-portfolio to EFEO as explained in theletter. These additions will be included in the preparation for phase-3, for which consortiaformation will be initiated in the course of 2013. The survey reply form can also be used to indicatethe interest to join existing consortia as a late member.The first two phases of the NCS REACH program are moving forward so that REACH legal deadlinesare met. After a learning process the phase-1 consortia submitted in time the four dossiers, which weredue by the 2010 deadline. Three more dossiers are due by the 2013 deadline, for which the preparation245

is on schedule. The other NCSs of the phase 1 and 2 consortia are of lower volumes and must legallybe submitted by 2018. A welcome benefit of the NCS-grouping and phased consortia formation is anearly submission of dossiers for several lower volume phase-1 NCSs expected in 2013. Likewise workby phase-2 consortia on the lower volume items is steadily moving forward, which should result inmany more registrations well in advance of their 2018 deadline.Experience of the past years confirms the expectation, that dossier preparation for REACH registrationis a complex, resource intensive and time consuming process. EFEO anticipated the complexity anddeveloped a REACH Road Map by which the work is logically spread over the 10 years phase-inperiod. By initiating the third and last phase for consortia formation in 2013 companies will haveample time to implement a REACH compliant situation by 2018. You are invited to join now.A Program to Facilitatea Smooth Implementation of REACHfor the Supply and Downstream Use of NCSsTHANK YOUFOR YOUR ATTENTIONIFEAT INTERNATIONAL CONFERENCE, Singapore, November, 2012, Dr. Hans van Bergen 21Dr. Hans van Bergen served for 20 years until 2005 in a Director position onProduct Safety & Chemical Regulations for fragrances, flavours and aromachemicals with IFF in Europe. Previously he worked for the Dutch Ministry for theEnvironment and for Dow Chemical in the area of ecology and occupationalhygiene. By education and training he holds a Ph.D. in organic chemistry fromGroningen University, did a post-doctorate at the Ohio State University (USA) andis registered as EUROTOX toxicologist. In 2006 he started his consultancy Para-Celsus Concept withexpert services on Product Safety and the EU’s REACH Regulation for the production, import and useof substances. He has been instrumental in developing the REACH programs for EFEO, the EuropeanFederation of Essential Oils and EFFA, the European Flavour & Fragrance Association.246

EFEO – THE FIRST DECADE AND BEYONDPeter Meschede and Jens-Achim ProtzenEuropean Federation of Essential Oils (EFEO)Sonninstr. 2820097 HamburgGermanyPeter Meschede fpm@eramex.de, Jens-Achim.Protzen@kaders.de!"#$%&"'(%')*+,-(./0'!"!#$%$&'!$()*&$+!,-+!$-.+$/!0#.+$-$12#3.4!$&-251$/!&6!!.$!"#"$%&"'()"*"7$*!,#.+$8-*&$8)!*9+!.&$+",'-.()/&%!$0#1",7$8)!*9+!.&$!"#$$%%%&'%!!$(%%)*+,-./%%%%011*234%!"#$%&$'"&$(&)*&+,$-$• %.+)&$/001$%2$34+2"($)%*+($• /5$)66+*'+2+($• *+78"2(%,+*)9"2$• 1:;0

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F. Peter Meschede is the owner-manager of the family business, ERAMEXAromatics in Meerbusch, Germany, which was founded in 1973 and tradesworldwide. He has been active in the essential oils business for 35 years. He is afounder member of the EFEO, which celebrates its 10 th Anniversary in 2012 andpromotes the interests of producers and traders of essential oils and relatedproducts within Europe. He was President of EFEO until June 2006 and is stillan EFEO board member.Jens-Achim Protzen represents the third generation in the family business, PaulKaders of Hamburg, which imports essential oils, spice oleoresins and aromachemicals. He graduated as a chemist in 1994 from the University ofWuerzburg, joined Kaders in the following year and became Managing Directorin 2001. Jens-Achim is actively involved with several German and Europeanindustry organisations, He was a founder member of EFEO, where is theChairman of the Technical Committee and will be President from July 2012. Heis also a member of IFEAT’s Executive Committee.252

Country and Other Studies253

254

THE FLAVOUR AND FRAGRANCE INDUSTRY IN RUSSIAINTRODUCTIONMaria NovozhilovaLeko Style, OOOChugunnaja str. 14Saint PetersburgRussiamaria.novozhilova@lekostyle.comToday’s Russia is perceived as a developing economy, a growing consumer market and the source ofnew potential for businesses. Being the 9 th largest economy by nominal value (after Italy), the 6 thlargest by purchasing power parity (after Germany) and 9 th in the world by population (afterBangladesh), with public tastes more or less corresponding to those in Europe and the USA, Russiaattracts attention as a prospective market. Starting from the late 1990s, the local flavour and fragranceindustry in particular has been developing intensively, thus attracting attention from industry playerselsewhere in the world.Having been actively involved in the business of aromatic ingredients in Russia for many years, I amoften asked about its state, size, trends, and perspectives. The aims of my presentation are to outlinethe facts simply and coherently, and then give my personal opinion about the current state of theindustry in Russia. With the facts in hand, one can draw one’s own conclusions about the potential ofour country.Although I will briefly touch on the history of the business in Russia, my presentation will be mainlydevoted to the current state of the economy, the chemical, cosmetics and food industries, plus businessactivity and its indicators, which could be interesting and useful for F&F companies. I hope thisinformation will give you ideas about how to enter the Russian market and develop your businessthere, which products to market, and if it is really worth the pain.255

FROM THE 1990s UNTIL TODAYThe reason why I am not going into a detailed historical discussion is that, after the collapse of theUSSR, the F&F industry was destroyed almost completely. However sad it was, we had to start againfrom scratch, with new people, new technologies, and a new market. Only one flavour producersurvived in Russia from the Soviet time, and it had to deal with the new situations, including strongcompetition from imported products and a new ingredients market as Chinese output in the industryexpanded and diversified.In the Soviet era, the industry was mostly self-sufficient, with a few occasional contacts with majorEuropean companies like IFF or Givaudan.As soon as the market opened up in the early 1990s, it was flooded with imported goods includingfragrances and flavours. Major multinationals set up their representative offices, branch companies ordistribution agreements.Russian F&F production began to recover in the late 1990s as the business environment grew stronger.At first the newly established producers simply mixed imported flavour or fragrance concentrates withsolvents. Then they went farther and started to make their own formulations.After the crisis in 1998, when the rouble fell by almost 300% against the USD, the economy receivedan unexpected boost. Foreign brands tripled in price, became less competitive and some of themtemporarily left the market. This encouraged local producers to develop further.The world financial crisis of 2008 led to stagnation in some industries such as construction, marketingand banking. In the production of consumer goods in Russia, the negative impact was small. Thecosmetics and food industries did not face any decline at all, but the demand structure changedconsiderably. Previously booming interest in the luxury segment seized up, while consumer demandturned back to mass-market products. Now the trend is in reverse. Since 2010, the interest in selectedbrands and luxury products has slowly regained its position on the market.Starting from the late 1990s, the local flavour and fragrance industry in particular has been developingat a dynamic pace. Today there are 28 producers of flavours and fragrances in this region. In Table 1you can see how the number of companies has grown from 1995 until today:Table 1. Number of F&F producers in Russia and Ukraine per decade*RussiaandBelarusUkraineTotalFlavourproducersFragranceproducersBoth1995 3 - 3 3 - -2000 6 - 6 5 1 -2005 13 3 16 10 2 42010 19 3 22 11 7 42012 23 5 28 16 8 4* Only currently operating companies are counted, including one in Belarus256

Major business activity is still concentrated in and around Moscow. In Table 2 you can see thedistribution of business elsewhere:Table 2. F&F producers per regionNumberRegion/CountryofcompaniesMoscow and surroundingareas 14St. Petersburg 4Other regions 4Belarus 1Ukraine 2RUSSIAN AROMA INDUSTRY STRUCTUREIn 2012, the total Russian market capacity for aromatic chemicals is estimated to be about 500 metrictonnes. This includes both natural and synthetic chemicals, and also commodities like menthol, d-limonene and vanillin, excluding solvents. 99.8% of them are imported.The institutional sourcing of aromatic ingredients is illustrated in the following scheme:Russian Food and Cosmetics ProducersDistributors/localrepresentativesF&F producers inRussiaBigSmallRussian F&Fingredient tradersInternational F&FproducersInternational F&F ingredienttraders.F&F ingredient producersRussian consumer goods and food producers can purchase flavours and fragrances from localproducers, local distributors of international companies, or import flavours and fragrances directly.257

Producers of flavours and fragrances in Russia can, in their turn, buy ingredients from local traders orimport from European traders, or even directly from producers, though the latter is not usually costeffective for various reasons.Challenges for local F&F producersSome of the major challenges faced by local flavour and fragrance producers include:• Lack of qualified employees - when the industry collapsed, education stopped. We still have acourse for flavourists at Moscow University, but no training is available for perfumers andthere are no books or relevant periodicals in the Russian language.• Another challenge is the bad image in customers’ eyes. Generally, products of Russian originare considered to be of poor quality. Unfortunately, this belief is mostly based on realexperience, but happy exceptions also exist.• The greatest problem is the long lead-time for ingredients. Door to door delivery from Europeto central Russia usually takes 4-8 weeks; for deliveries from China, 2-3 months are normal.Because of this, local traders are important participants in the market.F&F industry challenges (for both local and foreign companies)• Ethanol usage is strictly and expensively regulated, which practically bans its inclusion inflavour and fragrance applications;• Benzaldehyde is also a regulated substance: products containing more than 10% of BA aresubject to licensing;• Regulations on customs procedures and certification of aromatic ingredients are obscure andnot transparent: they prevent new industry players from entering the market. In imports,samples are not generally distinguished from regular commercial cargoes, which makessampling difficult and expensive.• Certification: as food ingredients, flavours must be certified with a CSR (Certificate of StateRegistration). Fragrances, as cosmetic ingredients, are not subject to any obligatoryregistration.Aromatic ingredients fall into a controversial group of materials that can be classified either asfood or as cosmetics ingredients, or even as potentially hazardous ingredients. The legislation isnot transparent. Read negatively, every single chemical should be certified with a CSR (approx.cost of one certificate is !1300), which is not viable commercially, so market players areconstantly looking for ways to avoid this.Advantages for local F&F producers• Relatively cheap labour force leading to lower costs of production;These allow small product runs.• Better understanding of customers’ needs, tastes, formulations; customers’ support in theRussian language;• Short delivery time inside the country;258

Important service provided by local producers:- Small packages (standard minimal package is 1 kg comparing to 25 kg from foreign brands);- Low price range (average price for flavours and fragrances is around USD 10/kg);- Short delivery time;- Fast sampling and customer support in the Russian language.LOCALLY PRODUCED INGREDIENTSAlmost all the ingredients (including solvents) for the production of flavours and fragrances areimported. A few exceptions are listed in Table 3:Essential OilsTable 3. Essential oils available for local consumption and for export (tonnes)Essential Oil Botanical Name Production in 2011 (tonnes)Siberian Fir Needle OilAbies sibirica L100Dill Oil (mixture of seeds and Anethum graveolen L. 4weed)Coriander Seed Oil Coriandrum sativum L. 50Coriander Weed Oil Coriandrum sativum L. 1Siberian Fir Needle Oil is a by-product of the forest industry. Many private individuals produce crudeoil during the woodcutting in Siberia. Processors collect the oil from these people and re-distil it toobtain a standard quality. The production season usually starts in May, after the spring flooding isover; the season ends in October, when the first strong frosts begin. The needles are very fragile infrost, so it is not practical to distil in winter.Dill and coriander are also cultivated in Krasnodarskij Kraj, for use as spices and essential oildistillation.Other plants distilled in limited quantities are illustrated in Table 4:Table 4. Essential oils available only for local consumption (tonnes)Essential Oil Botanical Name Production in 2011Spruce Oil Picea abies L. Less than 1 tonnePine Oil Pinus silvestris L. 3-4 tonneJuniper Berry Oil Juniperus communis L. 200-300 kg (upon demand)Blue Chamomile Oil Matricaria recutita L. Was not produced in 2011 dueto low harvestHelicrysum Oil Helichrysum 5-10 kg (upon demand)Brassica juncea L.No dataMustard OilThese ingredients are generally consumed in the local market and are not available for export.259

Aromatic ChemicalsThe following chemicals are produced in Russia in limited quantities:• Gum Turpentine• Turpentine Oil• Pinenes (Fig.3)• Ethers of acetic acid• Allyl isotiocianatePotential products:• Benzaldehyde• BornylacetateBoth of them were produced only a few years ago, but production has since stopped.Table 5 also provides information about the annual output of some basic chemicals in Russia:Table 5. Production of major items, chemical industry (selection) 1 (tonnes)1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Calciumcarbide290 153 192 190 177 161 139 137 155 147 133 80.8Sulphuricacid as 12767 6946 8258 8209 8458 8759 9173 9452 9379 9689 9068 8452monohydrateSodiumcarbonate(without 3240 1823 2201 2339 2385 2386 2576 2582 2938 2939 2820 2322potassiumcarbonate)Sodiumhydroxide2258 1156 1241 1197 1146 1113 1188 1245 1267 1297 1259 1115Sodiumsulphate708 354 385 398 454 519 508 568 596 643 672 702Butanols andisomers343 239 233 243 254 268 284 281 267 272 245 258Plasticisers 282 86.9 114 131 103 102 77.6 93.5 112 124 129 92.3Rectifiedmethanol(including 2508 1523 1914 2129 2269 2894 2911 2943 3158 3534 3513 2344crudemethanol)Benzene 1444 738 869 983 968 1056 1168 1183 1152 1204 1153 1053Ethylene 2318 1596 1889 1944 1996 2097 2155 2101 2147 2121 2338 2277260

F&F BUYERS – DOMESTIC MARKETIn the following part of my paper I will briefly outline some aspects of consumer goods productionand consumption in Belarus, Kazakhstan, and Russia. My goal is to describe the state of localindustries and their trends. The data presented can give some useful ideas about the market capacityand the prospects for foreign flavours and fragrances suppliers.Talking about Russia as a potential market, I should mention two major obstacles to business activity,which are the language and local authorities’ regulations. English is still not very widespread, thoughthe situation is slowly improving. English language has been included in primary school education forabout 10 years; today children start learning it from 7 years old, and the quality of teaching isimproving. Still, it may take another 10 years before the current younger generation reach managerialpositions.Customs procedures are traditionally expensive and time consuming. As a result, not many companiesare involved in import/export operations. As of now, there is no real business advantage for countriesthat used to be part of the Soviet Union or had close relations with USSR (like the Baltic States,Western European, or CIS countries). Now they are separated from Russia with the state border as allother countries are.World Trade OrganizationRussia had been seeking WTO membership since 1993. Finally, the official protocol on Russianaccession was signed in December 2011. Not long before that, the WTO accepted all the documents,including Russia’s commitment to give access to the domestic market. Domestic ratificationprocedures were due to be finalised by July 2012.For local production of consumer products the outlook is not so good. From today until 2017 thecustoms duties on many consumer goods will be reduced, and local producers fear that they may losetheir current competitive edge. On the other hand local producers may benefit from lower importduties for production equipment and ingredients.In our industry, we expect a general improvement in the business environment and positive changes inlegislation, which should correspond with European standards. Along with the numerous fears sharedby local producers, domestic businesses also cherish a hope that, after actual accession to the WTO,business regulations will become clearer and more sensible.Customs UnionOne great improvement has come with the creation of the Customs Union among Russia, Belarus andKazakhstan. The agreement on the customs union was made in 2007. In 2009 legal procedures wereestablished and came into force in 2010. We are now enjoying the positive consequences. Businesscontacts among the three countries have notably become more active, with customs procedures nottaking time and money as they used to.Quality requirement regulations are now being updated in all industries to homogenize the quality andsafety standards in all three countries. This means that you can perceive the Customs Union as anintegrated market.261

Table 6. General information about Russia, Kazakhstan and BelarusPopulation (est. 2012)Total 169,2 million% of population living in big cities(0,7-10 mn)Urban/rural population ratioLife-span (m/f, 2008)Average monthly wage USD 760Inflation rate (2011) 6.1%Russia Belarus Kazakhstan143 mn 9.5 mn 16.7 mn24% 19% 13%73.8 / 26.2% 74.3/25.7 % 56/44%61.8 / 74.2 64.7 / 75.6 68.4 (61 / 72)USD 210(USD 527 beforeMarch 2011)108.7% (9.9% in2010)USD 6007.4%Table 7. Gross domestic product, constant prices, % change 2Country 2000 2002 2004 2006 2008 2009 2010 2011* 2012*Russia 10.046 4.744 7.151 8.153 5.248 -7.800 4.000 4.286 4.083USA 4.139 1.814 3.468 2.658 -0.337 -3.486 3.030 1.527 1.782Euro area 3.777 0.916 2.172 3.206 0.409 -4.252 1.786 1.620 1.086* estimateThe Russian economy is heavily dependent on world prices of raw materials, especially oil. The lackof security and stability holds back private investment and long-term business projects.However, those who decided to take the risk and entered the market during the last 10 years did notlose. Between the two crises in 1998 and 2008, many consumer goods markets experienced 20-30%annual growth. This boom inspired positive public expectations and interest in luxury products.After the crisis in 2008, the food and cosmetics industries recovered relatively fast, but consumerpreferences shifted from the luxury segment (booming before 2009) to mass-market goods. A numberof customers turned their minds back to familiar brands and recipes, which were popular in late 1990s.Food products sold loose were again on the rise. In response to that, local producers of flavours andfragrances put premium items aside and invested their efforts in economy-class collections withtraditional aromas.On-line research done by Nielsen Russia in the 1 st quarter of 2010 showed that 15% of respondentsclaimed that they switched to the cheaper brands of consumer goods; and, as for food products andalcoholic beverages, this share amounted to 30% 3 .Today’s range of consumer and food products supplied by local producers is structured like this:Mass-market 80%. In order to compete with giants like Unilever, local producers go for the lowestprices possible. Quality here is not the first priority, and hence low quality cheap raw materials and262

ingredients are in demand. The average price for a flavour or a fragrance in this segment is USD10.00/kg. Dumping is a popular pricing policy.Middle-class 18%. Needs of the middle class are still mostly covered by imported niche goods, butsome local brands are also present in the market. Producers are ready to pay higher prices for qualityingredients, but their production size is usually very small.Luxury/organic/naturals 2%. The previous paragraph also holds true for the luxury segment.Organics and naturals are a small but growing segment covered by private farming and importedbrands. Another example: local flavour producers express vivid interest in natural aroma chemicals.Though demand is limited, their ability to formulate and offer natural flavours improves their imageand raises customers' confidence.The luxury and natural segment is slowing, gaining back its share lost during the crisis of 2008 – 2009.Local consumers and producers warmly welcome modern world trends.Some market information for the most important flavour/fragrance-containing products follows.FRAGRANCE CONSUMPTIONWhite cosmeticsFacial creams and lotions are the main cosmetics items produced in Russia. Other goods comprisedifferent skin care products like body care creams, tan lotions, make-up removers and facial cleaners.Products of this type comprise more that 90% of all cosmetic output in Russia. The remaining 10%include make-up, hair-care etc. The production volume of cosmetics of all types (including creams,mouth- care products, shaving, make-up and deodorants) increased by 23% in 2010. In 2011 there wasa slight decline. The cosmetics manufacturers are mostly located in the Central and Urals FederalDistricts. Russia’s largest cosmetics producer is Concern Kalina which was bought by Unilever in2011. Other important producers are Nefis-Kosmetics, Nevskaya Kosmetica, Novaya Zarya, Svoboda(listed in alphabetical order).Makeup74% of the make-up market is covered by imports 4 . Local producers take up the remaining small sharesupplying the low-price market segment.PerfumeryPerfumery is a huge market in Russia with a peculiar structure. Almost 100% of perfumes areimported. There is only one perfume producer located in Russia now – Novaya Zarya, – with a verylimited range of traditional and new aromas because of the time and money-consuming ethanolregulations. The integrated automatic state informational system of ethanol accounting was introducedin 2006. Under this system, perfume production is subject to licensing with the same requirements asspirits production. The difficulties and costs are so great that even the largest cosmetics producerKalina (belonging to Unilever since 2011) decided it was not worth the effort and closed theirperfumery division, when the new regulation system was introduced.As for alternative perfumery solvents, there is no real market for them. The public taste in perfumerygenerally follows European and US trends; all major and niche brands are available in the retailmarket. There is no substantial demand for perfumes based on other solvents, like Arabic oil-basedperfumes that form a small niche in the market.263

Amendments to the law are being discussed at the moment. There is a chance that the situation willimprove in future. Indicative figures about market capacity are given below in the Diagram 1:Diagram 1. Turnover dynamics for perfumery and cosmetics retailing in Russia in 2005-2011,and 2012 forecast 5 .! % growth rate in roublesSolid and liquid soapIn the market for solid soaps a large part belongs to local producers. In 2011 local production supplied63.3% of the soap available in the market. The majority of consumers prefer domestic brands, becauseof lower prices, trustworthy quality and a wide product range, from the cheapest items with soliflorefragrances to the luxury ones. However, most of the locally produced soap still belongs to the low- andmiddle-price market segment.In 2010, solid soaps production volume was 182,500 tonnes, of which 56.7% goes for laundry soap,and 43.3% goes for toilet soap. Aggregate import of solid soap in 2010 was 51,000 tonnes (90% ofwhich goes for toilet soap). The soap consumption is 1.2 kg per capita (170,500 tonnes in 2010), with0.4 kg laundry soap and 0.8 kg toilet soap.About one third of the solid soap produced in Russia goes for export to Ukraine, Kazakhstan,Kyrgyzstan and Afghanistan.The share of liquid soap comprises 16.7% of the total soap production volume. It grows every yearalong with imports.In Belarus, the volume of production in 2010 amounted to 1,275,000 tonnes, which is 14,4% morethan in 2009.264

Household chemicalsSince the late 1990s, the market for household chemicals in Russia has witnessed dynamic growth –more than 20% of the annual turnover growth in some years. Household treatments, which came intothe European and US markets during 20 th century, were all introduced to Russian households in thepast few years. First, some important international brands bought local facilities and startedproduction. Numerous commodity traders distribute imported items. Domestic producers arevigorously competing, and as a result we have a wide diversity of products, brands, and productranges.Today more than 50% of the demand for household chemicals in Russia is covered by importedproducts by volume. The structure of locally produced chemicals is as follows (for 2010 6 ):• 67% synthetic laundry detergents and chlorine bleachers;• 17% cleaners of all types (laundry treatments, multi-purpose cleaners, window-wipes,sanitary, carpet-cleaners, etc);• 11% dishwashing liquids;• 5% repellants.In 2011 the volume of output grew in the following groups of products:• liquid synthetic detergents: 6.5%• laundry treatments: 19.4%• all-purpose cleaners: 2.5%• sewer pipes cleaners: 20%.The registered volume of output fell in• synthetic powder detergents: 3.4%• detergent pastes: 8%• bleachers: 4.8%. 7In 2011, the total share of enterprises with foreign capital in this industry was 77.8 % (1.5% lowerthan in 2010). It is an important indicator for ingredients suppliers, because international companiestend to source the most important ingredients and fragrances from their head production facilities.Generally, the market is dominated by Procter & Gamble and Henkel (53% of all sales in money termsin 2010); the most important local producers are Nefis Cosmetics, Nevskaya Kosmetika, and Aist.The dominating share of synthetic detergents for laundry is produced in powder form (94.8%). Theestimated potential total production capacity in Russia is more than 1.2 mn tonnes per year. The shareof local Proctor & Gamble production is 25% of the whole capacity, Henkel’s 18% in 2006 8 . Localproducers focus their attention on low-price product ranges.The total market demand in Russia is estimated to be 0.9 mn tons per year. The level of detergentconsumption is considered to be the lowest in Europe (less than 6 kg per capita). A quarter of locallyproduced detergents is exported to Kazakhstan, Belarus and Ukraine.Almost half of all detergents produced in Russia is washing-up liquid (47.7% in 2011). The market issaturated and more or less stable. The product range develops only with the introduction of newfragrances.265

Toilet cleaner/disinfectant has been a fast growing segment during the last 10 years. In 2003 only27% of households used specific chemicals for this application, and 77.3% by volume was supplied byimported products. The first company to enter this market was Unilever with Domestos. Now gelproducts are the most widespread, with only 1% of powders in this segment.Most of the bleaches in the market contain chlorine (4.5 times more than bleaches without chlorine).In this segment Russian producers are traditionally strong and occupy the largest share of the market,but the output volume has steadily declined since from 2000 (see the Table 8 below).As for laundry treatments like conditioners and wetting agents, this market is small and satisfied byimported goods. The dominating brand of conditioner is Lenor by Procter & Gamble 9 .The most active growth can be found in liquids and gels for automatic laundry washing. The luxurysegment also grew very fast until the crisis of 2009. Now it is slowly resuming its pace.Some official statistical data about production of major cosmetic and household products by volumeare given below:Table 8. Production of major cosmetics and household items in Russia (selection) in thousands tonnes 10• 1990 1995 2000 2005 2010 20111 Laundry soap 327 107 85.8 143 103.5 114.92 Toilet soap 190 60.8 99.8 88.2 79 77.73 Detergents 690 275 439 762 "955 "1.3mn4 Powder synthetic detergents ... ... 407.0 635 735.5 ...5 Bleachers ... ... 139.6 129.5 102.1 97.26 Toothpaste (tubes), mn.pieces ... 135 282 265 ... ...Please, note that official statistics do not include illegal imports and domestic production. The blackmarket for cosmetics and household chemicals is estimated to be as large as 25% of the whole marketvolume.Another interesting point is that local production of consumer goods (both cosmetic and household) isvery import-dependent – more than 80% of ingredients are imported and do not have locally producedalternatives.FLAVOUR CONSUMPTIONConsumption activity is high among the Russian population with a very large local market for foodand beverages. Russia is now 12 th in the world rankings of consumer markets, but according toEuromonitor International it will rise to 7 th by 2020. Today the middle class accounts for 20% of thetotal population and this share is growing. Private expenditure on food and beverages amounts to 40%of aggregate spending.Compared to other countries, the Russian food market is far from satiety. Average consumption ofpackaged food products is 170 kg per capita, while for example in Germany this figure is 276 kg. In2011 the total volume of food product consumption grew by 12%, with annual growth forecasts of11% till 2015 11 .266

Consumers’ habits are also changing. They show growing interest in new packaged food products, andalso in instant and ready-to-eat products. Demand for this type of product is growing along withdistribution of modern super- and hypermarkets through the country. Production of the major fooditems in Russia is shown in Table 8.Ice creamIce cream production is a strong and growing industry in Russia with both old traditions and newtrends.The total market capacity is approx. 400 thousand tonnes. The largest market share belongs toUnilever (20%). Together with following three largest Russian companies they take almost half of themarket.Major market players 12 :• Unilever 20.7%• Iceberry 8.2%• Russky Kholod 6.9%• Talosto 5.5%Total: 41.3%The remaining half is shared among multiple small producers.In 2010 ice cream production increased by 18.6% over the previous year and regained the loss of thebad seasons in 2007-2009. The main trend in the industry is optimisation of the product range and areduction in diversity. The items in most demand are fruit based ice-creams and fruity ice, as well as atraditional ice-cream cup. The following fillings are the most popular:• Vanilla• Full-cream• Caramel cream• Chocolate• Blackcurrant (Fig.4)• Fruit IceDiagram 2 shows the trend in production volume since 1995 13 ;267

Diagram 2. Production Volume, '000 tonnes5004504003503002502001990 1995 2000 2005 2010 2011 2012We see that the highest level of 1990 has never been matched since, and after the following peak in2005, the industry experienced decline. This year preliminary data shows 8.6% growth.Butter IndustryThe most prominent trend in this industry is a shift from traditional types of butter to specialties likelow-fat butter, flavoured butter, and spreads. The total production volume of butter and relatedproducts grew from 279, 000 in 2006 to 370,000 tonnes in 2011. The growth is mostly accounted forby the rise in the spreads markets (it has jumped 4 times since 2006), while the output of pure butterhas declined by 20% since 2008 14 .Please refer to Table 9 below for data on annual output of butter and its substitutes in Russia.Tobacco productsThere are 80 tobacco producers in Russia (37.5% of them are large enterprises), and they employabout 65 thousand workers. Major tobacco producers are Philip Morris International (Moscow),British American Tobacco, Russia (Moscow), ZAO Liggett-Ducat (Moscow), OOO Petro (Saint-Petersburg), OOO Tabachnaya Fabrica Reemtsma-Volga (Volgograd, belongs to the Imperial TobaccoGroup).In 2010 total production volume of cigarettes and tobacco products amounted to 409.3 bln pieces ofwhich 15 :- filter cigarettes – 384.0 bln;- non-filtered cigarettes – 18.2 bln;- cardboard mouthpiece cigarettes (papirosy)– 2.8 bln;- cigars and cigarillos (classic) – 4.3 mn;- pipe tobacco – 5.0 tonnes;- smoking tobacco – 7.2 tonnes;- hookah tobacco – 120.6 tonnes;Please also refer to Table 9 below for data on annual output of cigarettes in Russia.268

Alcoholic beveragesThe most popular alcoholic beverage in Russia is beer. Annual beer consumption is about 99 litres percapita 16 . In 2011, of all the alcoholic beverages consumed in the country the share of beer was 76.53%(in dL). The share of vodka and strong liquor was 11.76%. Low alcoholic beverages were 2.4%, wines7.33% (more than half of wines in the market are imported), and sparkling wines 1.98% 17 .Please refer to Table 9 below for data on annual output of alcoholic beverages in Russia.JuicesThe annual per capita consumption of juices in Russia is 20 litres, and the industry has great potentialfor further growth. By production volume Russia takes 4 th place in the world after the USA, Germanyand China. But the market for juice concentrates strongly depends on imports. In 2010 the juiceconcentrates import volume was 152.3 million litres which is more than twice the volume of localproduction 18 .Local juice producers follow world trends in their marketing strategies. Like in many countries of theworld, there is a growing interest in natural and healthy ingredients, and also in beverages withoutpreservatives, synthetic colourants and additives. Functional beverages are not yet widespread in thecountry, but cold teas, beer-based mixes and Near Water drinks are getting more and more popular.Please refer to Table 9 below for data on annual output of non-alcoholic beverages in Russia.SnacksThe Russian snacks market is estimated to be not less than USD 3 billion in money terms and 324, 008tonnes in quantity terms. Traditionally, candy bars and cookies are not included in snacks butcalculated as confectionary products. The increase in money terms amounted to about 7.1% in 2010,which was the lowest figure for 5 years. The reason lies in saturation in key segments like potatochips.Potato chips occupy 30% of the snacks market. In 2010 production volume of chips grew by 11% inquantity. The main market players are PepsiCo, Kraft Foods and KDV (the largest local producer withthe market share about 10-12%).269

Table 9. Production of major items of food industry in Russia (also beverages and cigarettes) 191990 1995 2000 2005 2006 2007 2008 2009 2010 2012Meat semiproducts,‘000 1075 268 244 987 1093 1254 1451 1538 ... ...tonnesSausage products,’000 tonnes2283 1293 1052 2014 2198 2411 2454 2238 ... ...Fish products(including tinned 4.3 2.4 3.0 3.4 3.5 3.8 3.7 3.9 ... ...fish) mn tonnesVegetable oils,‘000 tonnes1159 802 1375 2200 2755 2735 2485 3271 ... ...Margarine typeproducts, ‘000 808 198 462 642 664 752 762 693 ... ...tonnesWhole-milk(calculated as 20.8 5.6 6.2 9.7 10.0 10.5 10.3 10.9 ... ...milk), mn tonnesButter, ‘000 tonnes 833 421 267 254 268 272 272 233 ... "220Fat cheeses(including sheep 458 218 221 378 421 437 430 442 ... ...cheese) ‘000 tonnesIce Cream, ‘000tonnes466 232 346 407 389 383 365 354 385 364 20Tinned food, mnconv.tins8206 2428 3223 9406 10871 12596 12727 11659 ... ...Bread and bakeryproducts, mn 18.2 11.3 9.0 8.0 7.8 7.8 7.5 7.2 ... ...tonnesConfectionaryproducts, ‘000 2869 1372 1628 2419 2557 2739 2845 2779 ... ...tonnesTea (pure), ‘000tonnes80.7 29.5 6.9 109 129 137 120 93.7 ... ...Vodka and strongalcogolic beverages 138 123 123 132 120 131 122 113 107 96,8(liqueur), mn dLCognacs, ‘000 dL 5921 887 1749 4512 6442 8060 9932 12646 ... ...Grape vines (exgrape), mn dL75.7 15.2 24.1 31.7 47.4 51.3 50.3 50.1 57.6 51.2Fruit vines, mn dL - 7.6 2.8 3.0 3.0 3.4 3.9 4.2 ... ...Champagne andsparkling wine, mn 8.3 8.2 6.8 14.1 15.4 21.6 20.8 19.4 22.4 21.8dLBeer, mn dL 336 213 516 910 1001 1147 1140 1091 988.5 981.5Mineral waters, mndL44.2 27.6 98.5 265 299 363 413 399 457,1 21 ...Non-alcoholicbeverage, mn dL288 84.7 214 484 549 598 571 548 531,5 22 …Cigarettes, blnpieces151 141 348 407 414 401 413 416/405 23 404.5 24 …270

BIBLIOGRAPHY1. http://www.gks.ru/free_doc/new_site/business/prom/natura/natura35g.htm2. International Monetary Fund, World Economic Outlook Database, September 20113. http://www.ruhim.ru/article/Nielsen.htm4. Analyses of make-up market in Russia in 2006-2011, forecast on 2011-2015; http://businesstat.ru/5. http://www.ruhim.ru/news/news.htm6. http://www.ruhim.ru/article/rinok_tov_rek.htm7. “Bytovaya Khimia” news and research magazine, #44, 20128. http://www.rcc.ru/Rus/Conferences/?ID=4666279. http://www.omar.ru/news/6371/10. Sources of data: Lines 1,2,3,6 from 1990 to 2009 -www.gks.ru/free_doc/new_site/business/prom/natura/natura35g.htm, 2010 and 2011 – based onexperts opinions from interviews published in internet;Lines 4 and 5 – publications in industry magazine “Bytovaya Khimiya” (Household chemicals), #44April-June 201211. Magazine “Food Ingredients business”, #1-2012, pp 40.12. http://expert.ru/data/public/316813/316825/expert_755_042-3.jpg13. http://expert.ru/data/public/316813/316826/expert_755_042-2.jpg14. “Milk processing” magazine, March 2012, p.615. http://tabakprom.ru/statistika/ocenka/16. http://www.pivnoe-delo.info/2010/11/19/srednij-rossiyan-vypivaet-sto-litrov-piva-v-god/17. Russian trade magazine “Beverage industry”, #1-2012, pp 40-4118. Magazine “Business of food ingredients”, #1-2012, p 5.19. 1990-2009: http://www.gks.ru/free_doc/new_site/business/prom/natura/natura31g.htm; 2010-2011–data from different sources based on official state statistics.20. RBC. http://marketing.rbc.ru/news_research/15/05/2012/562949983837920.shtml21. http://www.foodmarket.spb.ru/current.php?article=167222. http://www.foodmarket.spb.ru/current.php?article=167223. http://tabakprom.ru/statistika/ocenka/24. http://tabakprom.ru/statistika/ocenka/Maria Novozhilova is the commercial director at Leko Style based in SaintPetersburg, Russia. Since joining the company 9 year ago, she has beendeveloping the F&F ingredients range, gaining profound experience inpurchasing, marketing and business development in this field. Maria obtained adegree in International Management at the University of Economics andFinance in 2004, and a degree in English Linguistics at the State University ofSt.Petersburg in 2008. Leko Style is a private company founded in 2000. It isone of the largest aroma ingredient suppliers in Russia with 3 offices andwarehouse facilities and 54 employees, and a leading exporter of Russian firneedle oil. Leko Style has been an IFEAT member since 2009.271

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IMPROVED IDENTIFICATION METHODS FOR AUSTRALIAN TEA TREE OILJerome ChopardMaria River PlantationPO Box 1680 Crows Nest NSW 1585Australiajchopard@newellpalmer.com.auINTRODUCTIONOn behalf of my fellow growers of Australian tea tree oil,I want to thank you for attending this presentation andIFEAT for the opportunity to launch our “improvedidentification methods” awareness campaign here today.To understand why improved identification methods forpure tea tree oil are necessary, we need to go back to thehistory of tea tree oil as a key ingredient in personal careproducts.Bronson & Jacobs and Maria River PlantationImproved Identification Methods for Australian Tea Tree OilTea tree oil has substantial medical properties that have been established by equally substantialresearch. This research was conducted using pure tea tree oil. It is this established research on the“efficacy” and “safety” of tea tree oil that has seen a proliferation in its use in personal care productsand more importantly, enabled manufacturers to make claims on the performance of their product andthe consumer to have confidence in these claims.In the past two years however, we have seen an increase in the amount of adulterated tea tree oil beingsold in the market as low priced tea tree oil. Manufacturers and consumers have not been warned thatthis cheap oil is adulterated and that no tests have been done to prove its “efficacy” or “safety”.To reduce the risk faced by manufacturers and consumers from this adulterated oil, our industry hasembarked on a programme to introduce improved identification methods for pure tea tree oil.Adulteration of essential oils is a common problem inthe market place. However, our industry believes that theadulteration of tea tree oil is a matter of great concernbecause of the types of personal care products it is usedin and the healing properties the consumer relies onwhen using these products. When untested, unresearchedand un-controlled adulterated tea tree oil isbeing used in products which are then being appliedtopically or orally to cuts, burns or infections – there is avery real safety concern which is a matter of greatinterest.Improved Identification MethodsProtect The Public Interest• What is ATTIA• History of pure Australian tea tree oil• What is the tea tree industry concernedabout• Emergence of adulterated tea tree oil• New specification – Chiral testing• How can you minimise your risk?Let me now introduce you briefly to the organisation thatwill be prosecuting this case.273

ATTIA stands for the Australian Tea TreeIndustry Association. It is the AustralianGovernment approved industry body promotingtea tree oil.In 2003, Richard Davis and his father from GRDavis presented at the IFEAT conference inSydney where they spoke also about tea tree oil.At that time, if you talked to Richard or anyoneelse about tea tree oil, it was overwhelminglyunderstood that (a) it was 100% pure and (b) itwas from Australia.This is not the case today.What Is ATTIA• ATTIA is the Australian Tea Tree Industry Association. Itis the Australian Government approved industry bodysupporting the tea tree oil industry.• Branding of Pure Australian Tea Tree Oil [PATTO]• It collaborates with the Australian Rural IndustryResearch Development Corporation to improve andenhance the production and uses of PATTO• Provides a forum and channel for regulators, growers,researchers, manufacturers and consumers to raiseissues concerning PATTOPurely by chance, I am able to make this point today with the help of an advertisement appearing inthe 2012 IFEAT Singapore conference programme. This advertisement is promoting tea tree oil thatoriginates from China – Chinese tea tree oil.It so happens that I can speak from personal experience on this matter as I met the owner of thiscompany in China when IFEAT had its conference in Shanghai. He openly told me that his oil did notresemble pure tea tree oil and offered me the opportunity to blend our oil with his and to then sell thisadulterated oil off as pure tea tree oil.I rejected the offer and it appears that this company has found other ways to overcome their problem.What is also worth noting in the advertisement is his reference to a new Chinese National Standard fortea tree oil. This may provide him with some flexibility to deal with the non-conformance of his oil. Inany event we now have identified “Chinese tea tree oil” as a product.ATTIA’s response is to promote the brand Pure Australian Tea Tree Oil as a simple identificationmethod for manufacturers and consumers to now specify when they are purchasing tea tree oil.It is also worth noting that ATTIA collaborates with the Australian Rural Industry ResearchDevelopment Corporation. This is an Australian government corporation that has been involved indeveloping the science around the production and uses of pure Australian tea tree oil.We have available today as a hand-out, a publication produced in conjunction with ATTIA entitledThe Effectiveness and Safety of Australian tea tree oil. It is a very useful starting point formanufacturers and consumers and is available free of charge. You or your customer will gain morefrom spending 30 minutes reading this publication than you will from hours of web based research.I have a few hard copies available here today or Ican send you the electronic version if you preferthat.I would now like to move on and talk about theimportance of the history of tea tree oil.Tea tree oil is produced from the native Australianplant – Melaleuca alternifolia.History Of Natural Australian Tea Tree Oil• Tea tree oil is an essential oil distilled from the Australianplant Melaleuca alternifolia• It has been used medicinally for centuries and wasidentified as an antiseptic by the New South Wales chiefchemist in the 1924• Published research has shown that tea tree oilhas also been found to have substantial anti-fungal,antibacterial, anti-viral and anti-inflammatory properties• Tea tree oil has become an established ingredient inmany personal care products274

Australian aboriginals have used the oil for hundreds of years but it was only in 1924 that its antisepticproperties were established. Since then, research has also proved the oil’s:Anti-fungalAnti-bacterialAnti-viral andAnti-inflammatory properties.Based on its history and established research – tea tree oil has grown to be a valuable and widely usedingredient in personal care products.This research into the medical properties of tea tree is on-going and indeed moving into areas thatcould yield significant benefit to people suffering from diseases.Examples Of Recent Medical ResearchProf Thomas Riley - 2010“The demonstration that 4 applications of topical TTO can inhibittumour growth and even induce tumour regression of subcutaneousmodels of mesothelioma and malignant melanoma with local toxicityin the form of skin irritation completely resolving, is extremelyencouraging.” [referenced]Dr Christine Carson - 2010“Firstly, when applied during the wound cleansing step as a woundirrigant, 3.3% tea tree oil was unable to decolonise methicillinresistantStaphylococcusaureus from wounds. Secondly, wounds towhich this tea tree oil irrigant was applied began to heal; mostwounds (8 of 11) were smaller after the tea tree oil product wasused and this included chronic wounds” [referenced]I refer here to two recent research papers.Both are referenced later in the presentationso you can read them in more detail.Prof Thomas Riley’s research looked at howtea tree oil can inhibit tumour growth inmodels of mesothelioma and malignantmelanoma. His conclusion – tea tree oil didinhibit tumour growth and also inducedtumour regression.Dr Christine Carson did research whichestablished that tea tree oil used as a woundirrigant was successful in reducing the sizeof wounds caused by the super-bug “goldenstaph”. I quote “wounds to which tea tree oil irrigant was applied began to heal – most wounds (8 outof 11) were smaller after tea tree oil was used and this included chronic wounds”I draw on these two examples of valuable research to reinforce our argument that tea tree oil is anessential oil with significant medical prospects and why it is vital that improved identification methodsbe made available and adopted to ensure that such work and the consumer confidence in the medicalbenefits of tea tree oil is not undermined by adulterated oil.You have heard me refer to the terms“efficacy and safety” of tea tree oil. TheAustralian Government’s RIRDCpublication title also refers to“effectiveness and safety”. These qualitiesin tea tree oil have been established fromresearch conducted using pure Australiantea tree oil. It is this research that gavemanufacturers the confidence to formulatepersonal care products using tea tree oiland the consumer the confidence to usethose products.What Is The Industry Concerned About• Research published on efficacy and safety of teatree oil was done using PATTO• Market interest in natural products drove demand forPATTO to be used in personal care products because ofits medical properties• ATTIA concerned that adulterated oils are now beingsold as pure tea tree oil• ATTIAs analysis of tea tree oil samples showed thatmany of these were not complying even with the ISOstandard• Manufacturers and consumers are being misled275

The fact that many consumers use tea tree oil products for its healing properties, places a burden ofresponsibility on traders and manufacturers to ensure that they are selling and using the correct type oftea tree oil in personal care products.This comes to the crux of what the industry is concerned about.Some adulterated oil is being sold as tea tree oil and being used to manufacture personal care products.This adulterated oil has not been tested for its “efficacy” or “safety” and the consumer is not beingwarned when such adulterated oil is being used.In recent analysis done by ATTIA on a range of oil samples, we were shocked to find that most of theoils identified to be adulterated oils, were not even complying with the ISO standard.Despite this, manufacturers and consumers are buying these oil and products made from these oilsbecause they are not being warned that these oils are adulterated and are not ISO compliant.Our contention is that manufacturers and consumers are being misled and being placed at risk.ISO Specification• The oil of Melaleuca alternifolia has113+ components• The International Standard for Oil ofMelaleuca (ISO 4730) list only 15components• The most observed of these isterpinen-4-ol, Cineole and p-cymenelevels• An increasing number of othernational and international standardsapply to tea tree oil. The BP, EP andthe World Health Organisation haveproduced international monographsand Australia, France and Germanyhave published national standards.You might well ask – how can thathappen?Well let’s look a little closer at this.Pure tea tree oil has over 113components in it.The ISO 4730 standard only measures15.Many traders focus on just 2 or 3 ofthe components as their measure ofoil standard.What appears to be occurring is thatpoor quality oils are being adulterated with cheap Terpinen-4-ol and at times with limonene - to looksimilar to the key compounds found in pure tea tree oil.So if all you look for is the level of Terpinen-4-ol, cineole and p-cymene, you may well be ignoringthe high limonene levels or the non-existence of the bottom 5 minor sesquiterpenes that wouldotherwise warn you of the adulteration.It is worth noting that there are a number of national and international standards that are there to guidethe consumer but even these are at times not being fully observed.What really surprises us - is when you consider that the difference in cost per kg between pure andadulterated tea tree oil is under US$10 per kg and the quantity of tea tree used in products is mostlyless than 1% - manufacturers may be saving less than 5 cents off the selling price of a product and forthis small profit, risk product withdrawal or prosecution for misleading conduct.276

Another interesting point is thenumber of products with tea tree oil inthem that may not comply with theINCI nomenclature for tea tree oil,which isINCI Name For Tea Tree OilInternational Nomenclature Cosmetic Ingredient- The Personal Care Products CouncilMelaleuca alternifolia (Tea Tree) LeafOilThe oil described here is an ingredientthat is a natural product and it comesfrom a single plant.Melaleuca alternifolia (Tea Tree) Leaf Oil• It is a Natural Product from a Single Plant• Product manufacturers using adulterated teatree oil cannot use the INCI name on theirproduct labelsWe have a small gift here for youfrom Integria Healthcare of Australia.It’s a tea tree foam face wash undertheir successful Thursday Plantationbrand. If you get hold of one of these you will clearly see the correct description of the ingredient onthe packaging.This poses a real problem for manufacturers who use adulterated tea tree oil and sell their product incountries that have adopted the INCI standards. At the very least they will not be able to identify teatree as an active ingredient to avoid being in breach of these standards.It makes little commercial sense to us and we suspect that manufacturers must not be aware that theyare being sold adulterated tea tree oil or the commercial risk they may be facing because of this.So let me crystallize the issue as we see it:On the one hand you have:What Is The IssuePure Australian tea tree oilThis is a 100% natural product made up ofover 113 components. The INCInomenclature specifies this as oil from aspecified plant. This pure oil was the basisfor the research done to establish“efficacy” and “safety”. This knowledgeand confidence has promoted the use oftea tree oil in personal care products.On the other hand you have:Pure AustralianTea Tree OilAdulterated TeaTree Oil113+ ComponentsNaturalFewer than 15componentsBlended orextendedThe basis forresearch work &INCI referencePersonal careproducts relyingon establishedresearch to makeclaimsNo supportingresearch to baseclaims onNo disclosure tomanufacturer orconsumerAdulterated tea tree oilThere is no disclosure that it is adulterated or what the source material of the adulteration is.There is no research to support what the efficacy or safety is for adulterated oil.The public is not being warned of this risk.277

Fellow attendees, the potential victims from this adulteration are the consumer and the integrity of somuch of the valuable research being currently undertaken using pure tea tree oil. Our industry is veryconcerned about this and we intend to make our voice heard.Our industry believe that the best way to deal withthis very serious issue is to:a) Make the adulterators aware that we are awareof the issue and that we intend to let the regulatorand consumer know about it andb) To continue to rollout a variety of improvedidentification methods for people purchasing teatree oil to rely on when they are buying pure teatree oilWhat Is The Industry Doing?• Market Awareness Program(a) Public Presentations - IFEAT and In-Cosmetics(b) ATTIA website, Facebook and other social media(c) Topic papers for circulation• Code Of Practice [CoP](a) Develop an industry code of practice to providePATTO users with confidence of quality. ATTIA CoPhas been endorsed by SCCP(b) Conduct strict field audits prior to certification(c) Produced CoP stainless steel drum seal to preventadulterated tea tree oil from passing off as PATTOToday’s presentation here in Singapore and a similar one occurring at In-Cosmetics in Bangkok at thisvery moment is the start of an official public awareness campaign to make this issue public.ATTIA launched its Facebook page in the middle of the year to be ready to support this initiative andwe are delighted with the response we have received even before the public campaign begun.Another major ATTIA initiative has been the development of the Industry Code of Practice to promotethe quality and reliability of pure tea tree oil being produced in Australia.What Is The Industry Doing?• Branding To DifferentiateATTIA promoting use of Pure Australian Tea Tree Oilas a brand to enable users to identify the higher quality oilwhere Efficacy and Safety has been established• Applying for Chiral testing in the new ISO standardLast but most importantly is the applicationunderway with Standards Australia to havechiral testing included as part of theAustralian Standard and subsequently theISO.For those of you who are not familiar withchiral testing, I hope the diagram is of someuse to you.Growers wanting to be accredited under thisprogramme need to be audited and demonstrate thehigh standard of record keeping and practices requiredto maintain this status. This ATTIA CoP has beenendorsed by the SCCP.An important part of this CoP was the introduction ofstainless steel drum seals that are only available toaccredited growers. This is another identificationmethod you can now rely on to know that you arepurchasing pure Australian tea tree oil.New Specification – Chiral Testing• Nature makes compounds in specificenantiomeric (chiral) forms (i.e. d-glucosenot l-glucose)• In TTO we have three compounds whichare enantiomeric– Terpinen-4-ol– !-Terpineol– LimoneneNature makes some compounds in what isreferred to as enantiometric forms –compounds having a mirror imagerelationship. Because of this, you can278

perform a chiral test on these compounds to identify if they have chiral ratios that are similar ordifferent. Tea tree happens to have some compounds that are anantiometric.The best illustration of this given to me is the example of the shape and composition of our hands.When you look at your hands, you will note immediately that your left and right hands are mirrorimages of each. However, when you place one on top of the other, you can see that they cannot besuperimposed on each other. Chiral testing can help spot such differences in certain compounds.The next three slides look at theresults of chiral test done by ATTIAon a sample of oils we obtainedfrom the market.First, the chiral ratios of terpinen-4-ol were analysed.You can immediately see thedifference between the group ofsamples on the left, which are puretea tree oil, and the group on theright, which are adulterated.The same disparity occurs againwhen we look at the chiral ratios ofalpha terpineol.We are now looking at the chiralratios for limonene. Again, thedifferences are apparent.Chiral testing when adopted in thestandards will make it easier foryou to identify pure tea tree oilfrom adulterated oil.279

Until the standard is adopted, please make sure you get the full ISO 4730 analysis.Showing the 15 key componentsWhat a Certificate of Analysis Looks LikeThe key physical propertiesWhat a Certificate of Analysis Looks LikeThe image cannot be displayed. Your computermay not have enough memory to open theimage, or the image may have been corrupted.Restart your computer, and then open the fileagain. If the red x still appears, you may haveto delete the image and then insert it again.And also request a Pesticide Residue TestreportWhat a Certificate of Analysis Looks LikeThe image cannot be displayed. Your computermay not have enough memory to open theimage, or the image may have been corrupted.Restart your computer, and then open the fileagain. If the red x still appears, you may haveto delete the image and then insert it again.280

If you are buying oil in 185 kgs stainlesssteel drums, then having drums with theATTIA CoP seal cap is an easyidentification method for you to rely on.If your oil has been re-packed, ask yoursupplier to confirm if the oil they receivedcame with the seal cap.Where is the Specification Headed?• Chiral testing can differentiate the enantiomers• ATTIA making a submission to ISO to include chiral testing as partof the ISO standard• Is Chiral testing used for other oils?• Lavender Oil already has chiral testing in the pharmacopia• Does chiral testing benefit the manufacturer and consumer?• Guarantee of safety and efficacy of product performanceIn summing up, I would like to confirm thatATTIA has begun the lodgement process tohave Chiral testing included in the AustralianStandards as a simple to use identificationmethod.This type of testing is being used for lavenderoil and is in the pharmacopeia.Will this benefit the manufacturer andconsumer?We believe that it certainly will and it isextremely necessary to ensure that the“efficacy” and “safety” record of pure tea tree oil is not compromised by adulterated oil.As this message is being rolled out, you can minimise your risk from any fall-out from dealing inadulterated tea tree oil by making your customers aware of the risk they face when not using pure teatree oil. There is very little to gain and much to lose!Your starting point should be to specify“pure Australian tea tree oil”. You can alsodemand your supplier provide you whereappropriate with;a) A CoP certificateb) A certificate of origin and a certificateconfirming the oil is 100% naturalc) Try to only buy oil with an ATTIA sealcap andd) Please always ask for the full ISO 4730analysisHow Can You Minimise Your Risk?• Make your customer aware of the risk of using un-researchedadulterated tea tree oil when relying on safety and efficacy claimsthat arose out of research using PATTO.Ask for Pure Australian Tea Tree Oil• Demand that your supplier provide you with(a) CoP Certificate of Accreditation(b) Certificate of origin and 100% natural(c) Ensure all 205 ltr stainless steel drums come with CoP seals(d) Ensure you receive a complete analysis to ISO 4730, EP 2012• If you are suspicious about any oil being sold as tea tree oilthen contact ATTIA or provide ATTIA with a sample for chiral testing281

Finally, if you are suspicious of any oil being sold to you, you can contact me or ATTIA and we willbe happy to assist you with testing the oil.That concludes my presentation. I am happy to take questions from the floor but first want to thankPhang and Johnny Lim from Bronson & Jacobs Singapore and Phillip Daley from Bronson JacobsSydney for their assistance here today and also to Andrew Alchin of Bronson & Jacobs, Sydney forhelping facilitate this presentation with IFEATReferences• Greay SJ, Carson CF, Beilharz MW, Kissick HT, Ireland DJ, Riley TV.(2010), Anti-Cancer Activity of Tea Tree Oil, RIRDC Publication 10-060,available at https://rirdc.infoservices.com.au/items/10-060• Carson CF, Edmondson M, Carville K, Newall N, Smith J, Riley TV. (2010),The Role of Tea Tree Oil in the Decolonisation of MRSA Positive Wounds,RIRDC Publication 10-006,available at https://rirdc.infoservices.com.au/items/10-006• Anon. (2007), The Effectiveness & Safety of Australian Tea Tree Oil,RIRDC Publication No 07-143,available at https://rirdc.infoservices.com.au/items/07-143Websites• ATTIA www.attia.org.au• Bronson & Jacobs www.bronsonandjacobs.com.au• Maria River Plantation www.mariariverplantation.com• Thursday Plantation www.thursdayplantation.comJerome Chopard is a Director of Newell Palmer Securities Pty Ltd, a boutiquefinancial adviser in Sydney, Australia. Jerome advised on the establishment of 3tea tree farms between 1994 and 2000 in Port Macquarie, some 400 kms northof Sydney. The total area planted was 487 ha. In 2000, Jerome advised on thepurchase of these farms and with his partners, established the Maria RiverPlantation group. The operations have expanded and the group today managesover 550 ha of tea tree farms and is the largest producer in Australia with anannual production of approximately 100 tons. Jerome is responsible for thegroup sales at Maria River Plantation and sits on ATTIA committees responsible for the promotion ofAustralian Tea Tree Oil. He is a Fellow at Finsia Australia and Senior Associate FPA Australia.282

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IFEAT ANNUAL REPORT 2011Ramon BordasChairman IFEAT Executive CommitteeGood morning Ladies and Gentlemen, it is so good to see so many of you at this event. I am pleasedto report that in common with the rising number at conferences likewise the IFEAT membership hascontinued to grow, so that at the year end of December 2011 the total number of members was 421.Alongside this growth the services provided by the Federation have continued to develop and expand.It was a great pleasure for me that the Conference last November was in my home country of Spainand that we welcomed a record number of 917 participants at the conference with 117 accompanyingpersons from 55 countries. The lectures covered a wide range of topical and technical issues withexcellent networking opportunities provided at the reception, dinner and banquet in Barcelona.The 2012 Conference here at the Marina Bay Sands, in Singapore, has been organised under thechairmanship of Ravi Sanganeria and I am confident that this will be a worthwhile and enjoyableconference with its excellent facilities. There are many motivating topics and speakers at the lecturesand this year, and instead of a field trip, there will be a one-day trade exhibition held here tomorrow toprovide companies with an opportunity to showcase their products.Plans are well in hand for next year and under the Chairmanship of Colin Ringleib, the 2013Conference is to be held in San Francisco.Study Tours are now becoming part of our annual programme. Last year there was a study tour inIndonesia, which was an excellent ‘hands-on’ experience for all those involve. This year a verysuccessful study tour took place in Brazil and Paraguay. George Paul heads a Committee looking intoarrangements for the study tour in 2013 to be held in southern India.Our Committees continue to look at ways to improve services and benefits for members. TheMembership Committee under the Chairmanship of Raul Amigo oversees the election of newmembers and launched a new Global Membership Package so that any member may add othercompanies/branches of their group from other countries at a reduced membership subscription.Under the Chairmanship of Csaba Fodor the Strategic Planning Committee reviewed the servicesprovided to members and also reviewed the Committees undertaking the Federation’s work so thatnew streamlined committees will be undertaking our work for the coming year.Antonella Corleone chairs the Publications Committee and produced four editions of IFEATWORLD,which are available now by email and on the Federation’s website. Also, work is in hand for a newwebsite.Under the Chairmanship of the President Michael Boudjouk the Education Committee continued tooversee the Federation’s Education programme. We have this past year again donated funds to thetraining programmes for both Reading and Plymouth Universities’ courses. During the Conference aFlavour Workshop was provided by John Wright and also a Perfumery Workshop was arranged byICATS at the end of the Conference in Barcelona. An Intermediate Perfumery Workshop is being heldhere tomorrow.285

Alain Frix chairman of the Scientific Committee has monitored many proposals for legislation,emanating mostly from the European Union, but also from the USA, such as limits for pesticides andtheir concentration factors in essential oils; allergens and environmental sustainability in production,not forgetting REACH issues.Kim Bleimann chairs the Finance Committee that is responsible for the Federation’s accounts. Thisyear our finances continue to strengthen and for the year ended 31st December 2011 there was a£231,544 surplus of income over expenditure. It has been decided that the sum of £1 million from thecash reserves will be ring fenced in order to provide the Federation with a fund to protect it againstany losses that might arise as a result of cancellations or failing attendance at future conferences.Michael Torre chaired the Nominating Committee seeking candidates for the Executive Committeeand Founders Award and we were very pleased that during the Annual General Meeting in Barcelonatwo new Members were elected to the Executive Committee; Jalal Charaf and Jen-Achim Protzen. Iwas also very pleased to be present the Founders’ Award at the Conference to Stephen Manheimer inrecognition of his contribution to the industry in general and as an IFEAT member in particular.Katrina Neale having completed her term of office on the Executive Committee retired from theCommittee at the last AGM and we were very sorry to lose her skills at our meetings. I should like torecord a vote of thanks for Katrina for all her hard work on many conference organising committeesand as Chairman of IFEAT.I am highly honoured to be your Chairman and conclude with special thanks to my colleagues on theExecutive Committee for their hard work and to all IFEAT members to thank you for all of yourcontinued support.286

INTRODUCTIONICATS / PLYMOUTH UNIVERSITY REPORT FOR 2012Dr Tony CurtisICATS / Plymouth UniversityPlymouth Devon PL4 8AAt.curtis@plym.ac.ukThe main development in the ICATS / IFEAT Diploma programme this year was the introduction ofthe new Flavour pathway. Two completely new modules have been written by John Wright (author of‘Flavor Creation’ – the course textbook). These are:• Flavour Creation• Application of Flavours to Flavoured ProductsAll other modules have been revised to incorporate new flavour relevant material. In addition Dr.Brian Lawrence has specially written four new essential oil profiles for the programme. These are:• Rose• Basil• Lime• PepperAnother major development is the growth of links withother organisations such as IFRA UK. ICATS wassupported with a stand and promotion of the IFEAT /ICATS Diploma Programme at the second IFRA UKFragrance Forum ‘From Flower to Shower’ October2012 at the Royal Society, London.ICATS Team Sharon Heard and Kate Smith atIFRA UK Fragrance Forum 2012Other discussions in hand arewith the British Essential OilsAssociation and the School ofChemical & Life Sciences ofSingapore Polytechnic. The aimof these discussions is to providebetter and regional support forICATS / IFEAT students.Fragrance Evaluations Facilities at Singapore School ofChemical & Life Sciences287

This year’s ICATS / IFEAT ‘Best PerfumeryStudent 2012’ is Suzanne Wlaschin. HerSpecial Study Topic was ‘An Investigation intothe Resurgence of Natural Perfumery’. TheIFEAT examiner commented ‘This is a verywell-researched, interesting, entertaining andchallenging report. Both primary andsecondary research resources have been usedvery effectively. The case studies lendconsiderable weight to an impressive review’.Suzanne WlaschinIFEAT Best Perfumery Student 2012The 1st David Williams Prize Winner 2012 for thebest course work submitted was Pia Long of LushUK. The prize was presented at the BSP NewMaterials for the Perfumer Symposium May 2012.Pia Long of Lush UKThe 1st David Williams Prize Winner 2012John Ayres, Sharon Heard and Dr Tony Curtis presented a new‘Intermediate Perfumery Workshop’ (reported in more detailedelsewhere in these proceedings) at the conference. The morningsession concentrated on odour language, the perfumer’sdevelopment of accords and the criteria for the successfulintroduction of new aroma materials. In the afternoon session JohnAyres set the scene for the practical compounding activity where the19 participants competed to produce the best muguet accord.John Ayres prepares theperfumery organs for theworkshop’s compoundingpractical288

A key ICATS activity, supported by IFEAT, will be the 2013 biennial BSP Perfumery Workshopaimed at young professionals in the fragrance industry. IFEAT support is invaluable and without it theworkshop is not viable. The workshop will be from the 15th to 17th March 2013 at Whittlebury Hall,UK. The workshop is limited to 24 participants. This will be a very special workshop as 2013 is the50th anniversary year for the British Society of Perfumers.RETIREMENTThis is my last IFEAT conference as ICATS Director of Studies. At the 2012 conference I announcedmy retirement in 2016. This will be phased over the four years and a transition team has been formedwith Dr. Alison Green (ICATS Director Designate), Sharon Heard and Andy Reece-Pinchin. Allmembers of the team have worked for higher degree qualifications by part-time study, have over 10years experience of ICATS distance learning and have formal teaching qualifications and experience.Dr. Alison Green will present the 2013 report to the conference.Dr. Alison GreenSharon HeardAndy Reece-PinchinACKNOWLEDGEMENTSThe author gratefully acknowledges the support of Takasago (Singapore) for the provision of samplesand equipment for the practical work in the ‘Intermediate Perfumery’ workshop.Many thanks are due to the team who have made these developments possible: Dr Alison Green(Director of Studies Designate), John Ayres (IFEAT Examiner), Sharon Heard (Research Associate),Andy Reece-Pinchin (Field Tutor), the administrative team (Bob Baggott, Leon Thompson, KateSmith and Lorraine Kirby), contributing authors (Brian Lawrence - essential oils and John Wright -flavours) and Four Degrees West (communications consultants).ICATS and the Plymouth University gratefully acknowledge the support of Michael Boudjouk and theIFEAT Executive. None of this work would have been possible without their help and encouragement.289

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REPORT ON THE 2012BRITISH SOCIETY OF FLAVOURISTS TRAINING COURSEAT THE UNIVERSITY OF READINGPresented by Charlotte MillsFlavourist Training Course 201296 delegates from 37 countries have participated since 2002As you are aware, IFEAT places a high priority on supporting education programmes within thisindustry. Besides giving financial assistance to support the Plymouth training courses, IFEAT alsosupports the annual course run by the British Society of Flavourists (BSF) at the University ofReading’s School of Food and Nutritional Sciences in the UK.The first training course was held in 2002 and the programme has subsequently evolved into a threeweek intensive annual event with a well proven and successful formula. This year delegates attendedthe course from nine countries spanning across the world.The overall objectives of the course are:• To improve the training available to graduates, including M.Sc. and Ph.D. postgraduates, whowish to develop and apply flavourings for food and beverages• To emphasise the practical nature of flavour creation and its relationship to chemical structureand the biochemistry of foodstuffs• To use the combined expertise of Reading University and experienced BSF Flavourists tobenefit the flavour and food industries.291

While lectures are given by the BSF expertsand University staff throughout the course,hands-on, practical and creative training is thecore element.The course commences with gaining practicalfamiliarity with the taste and smell of over100 natural and nature identical rawmaterials, plus the art of creative flavourings.The training ingredients include: herbs andspices, essential oils, extracts, isolates andoleoresins, natural defined chemicalsubstances, nature identical and artificialsubstances, process flavourings and smokeflavouringsIngredient training• Naturalo Herbs and spiceso Essential oilso Extracts, isolates and oleoresinso Natural defined• Flavouring substances• Process flavouringsThe course emphasises the development of individual creative flavouring skills.This involves practical ingredient training, thus:• Each ingredient is evaluated afterdilution in sugar syrup or salt solutionby the students• The emphasis is on practicalparticipation• Each ingredient is odour assessed andtasted by the students and ratedagainst selected organolepticparameters. The group rating wasplotted against a previous expertscore and the differences discussedby the group• 150 ingredients were assessed in 6working days.Practical ingredient training• During the first week 150 ingredients were assessed• Odour and flavour were discussed and individuallyrated for specific organoleptic properties• The groups ratings were collated and comparedagainst those of expertsThe course also emphasises practical creative training, in particular the emphasis is on individualcreativity.• Each student is given an initialbriefing on how to use the results ofthe ingredient evaluation in thecreation of flavourings.• Then working in pairs the studentscreate simple flavourings and thegroup then evaluates these.• As part of their final assessment, eachstudent then has to produce two finalcreations for evaluation, for example,yoghurt and alcoholic drink.Practical creative training• Emphasis was on individual creativity• Each student was shown how to usethe results of the ingredientevaluation in the creation offlavourings• As part of the final assessment, each student had toproduce two final creations for evaluation in differingmedia, e.g. Yoghurt or alcoholic drink• IFEAT award a prize for the best student292

As the course progresses, flavour creation exercises continue to more sophisticated levels. Thestudent’s knowledge base is extended through lectures and demonstrations of processes. The studentsvisit a flavour company specialising in the manufacture of essential oil and extracts, where differentextraction methods are demonstrated.Additional flavour topics covered include:• Flavour chemistry and biochemistry• Practical and theoretical flavouranalysis• Flavour legislation• Solvents, carriers, encapsulation andflavour release• Practical generation of modernprocess flavourings and their use incombination with herbs, spices andother food ingredients.Other topics• Flavour chemistry and biochemistry• Practical sessions on state-of-the artflavour analysis• Flavour legislation• Solvents, carriers, encapsulation and flavour release• Practical generation of modern process flavouringsand their application in combination with herbs, spicesand other food ingredientsEach of the trainees is required to demonstrate their flavour creations and to undertake a writtenexamination. All participants in the 2012 course were successful in obtaining diplomas.Participants seemed to thoroughly enjoy the course.So what happens to the trainees after they have successfully completed the course?The students have returned to their companies as much more accomplished flavourists and severalhave since been promoted. Several students from the previous courses are now Senior Flavourists orTechnical Managers.293

The flavourist training course has clearly proveditself as beneficial to our industry. This has beenbrought about by effectively combining theresources of the British Society of Flavourists, theUniversity of Reading and IFEAT and its members.Long may this continue.The next flavouring course is from 7-24 May 2013.11 th Flavourist Training Course...7 th - 24 th May 2013For information, please contact:Professor Don Mottramfood@reading.ac.uk ord.s.mottram@reading.ac.ukSome comments on 2012 Course• a pleasure !!!! a good time and I haveimproved my knowledge soooo muchPaula Furlanetto - Brazil• a wonderful three weeks at the University of Reading.Selection and implementation of the lectures, friendlyrelations, pleasant environment, wine tasting, excellentdinner at Hinds Head ... It was just perfectAndrej Nose – SloveniaCharlotte Mills being awarded the Best Student Medal by Michael Boudjouk, IFEAT President294

BRAZIL & PARAGUAY IFEAT STUDY TOUR 2012Britta KipckeH. Reynaud & Fils (Deutschland) GmbHbritta.kipcke@reynaud-hamburg.deINTRODUCTIONOn August 10th, nearly 40 IFEAT members from 17 countries checked in at the first hotel in SaoPaulo. It was the starting point for the great IFEAT Study Tour to Brazil and Paraguay. The group wasa good mixture of both first time Study Tour attendees and Study Tour experts. The group was afusion of people from different sectors of the F&F industry and with different reasons to join. But thebottom line was that everybody was there to learn and get a better understanding and a closer view ofF&F ingredient supplies coming from Brazil and Paraguay.WHY WAS BRAZIL CHOSEN?We cannot ignore the fifth largest country of the World, we have to learn about it. Brazil has thelargest economy in South America and the sixth largest in the World. And it is still one of the fastestgrowing economies!The decisive factor to bring the Study Tour to Brazil was that Brazil is the major producer of orangejuice and orange oil.Why Brazil?!!" fifth largest country of the world!" huge biodiversity!" one of the fastest growingeconomy!Text!Text!Text!" the sixth largest economy in theworld and the largest in SouthAmerica!" largest producer of orange oil!" major producer of orange juice!295

Following an early wake-up call (thefirst of many!) we started our trip in ourluxury coach to Fazenda Alpina, whereIvo Gregori’s enthusiam for the organicproduction and processing of essentialoils was there for all to see. It wasreally interesting to see the benefitsshared between the different plants.How they protect each other and avoiddamage through pests.For some of us, it was our first contactwith the fruit pitanga and its essentialoil.Text!Text!Text!August 12, 2012!!Visit to Fazenda Alpina!* pitanga, lemongrass, jathropha curcas, malphiga glabra!The second day saw a visit to Dierberger’s processing operations for essential oils and candied fruits atBarra Bonita.Text!Text!Text!August 13, 2012!!Visit to Dierberger!* bergamot, mandarin, grapefruit, lemon, bitter orange!* vetiver, palmarosa, lemongrass!At the farm, we left our coach andhopped onto 4x4 jeeps to get as close aspossible to the plantations of bergamot,mandarin, grapefruit, lemon, bitterorange, vetiver, palmarose, citronellaand lemongrass.The following dinner and campfire wasaccompanied with a gorgeous andimpressive starlit sky.The next early wakeup call wasfollowed by a breakdown of our bus, sowe started with a delay a boat trip alongthe River Tiete, including a lunch, to seesome of the environmental changes thathad been implemented over the years.Text!Text!Text!!August 14, 2012!!Boat trip along the River Tiete!296

After the return of the boat, we droveto the Tres Barras company to see theirwhole processing operations fromplanting, harvesting and distillation ofeucalyptus citrodora.In the evening we had an invitation tothe 50th anniversary party of TresBarras. I think everybody was deeplyimpressed about the hospitality andenjoyment of life of Samir and hisfamily and friends.August 14, 2012!!Visit to Tres Barras!* eucalyptus citriodora!Text!Text!Text!August 15, 2012!!Visit to Cutrale!!* orange, orange juice!Text!Text!Text!The visit on Wednesday saw a veryearly wakeup call and a visit toCutrale’s massive orange production.During the guided tour and informativepresentation at Cutrale’s factory, welearnt about their key product orangejuice and saw the huge productionprocess. The company operates 43farms, totaling an area of 60,000hectares. Cutrale operates seven plantsand processes, on average, more than150 million boxes of oranges perseason.In the afternoon we drove to one of Cutrale’s farms and saw orange trees to the horizon in everydirection. At different places, employees showed us how to manage the crop.This was followed the next day byvisits to Louis Dreyfus farms andprocessing operations both of whichwere true eye openers for many of theparticipants who were amazed by thescale of the operations. Everybody wasespecially interested in the refinementof orange trees to get the maximumyield out of them. Dreyfus currentlyfarm over 30,000 hectares of orangegroves in Brazil and is the third largestglobal orange processor, processingclose to 15% of world production.Text!Text!Text!August 16, 2012!!Visit to Louis Dreyfus Commodities!!* orange, orange juice!Following the Dreyfus plant tour a farewell party took place at the Dreyfus Guest House where aSamba School showed the Brazilian way of dance.297

After a very, very early wakeup call onFriday morning it was time to say goodbye. We returned to Sao Paulo airport,where the group split in half – someheading home while others flew toAsuncion in Paraguay.Text!Text!Text!August 17, 2012!!* return to Sao Paulo and group splitting!* half went home and the other half continued the study tour toParaguay !!!In Asuncion, we got a warm welcome. A Welcome Dinner had been organised along with gifts andvideos of Paraguay.WHY WAS PARAGUAY CHOSEN?Paraguay was chosen for the study tour because of its unique position and landscape in south America.Besides this, Paraguay is the major producer of guaiacwood oil and petitgrain.Why Paraguay?!!" unique position and landscape!Text!Text!Text!" still agricultural country!!" major producer of petitgrain!!" major producer of guaiacwood oil!!!298

Saturday was one the highlights of theTour as the two chartered small aircraft,each holding 10 delegates headed to theChaco to visit the Mennonitecommunities and the CooperativaChortitzer Ltda. and their variousagricultural operations includingguaiacwood oil production as well astheir extensive water conservationtechniques.August 18, 2012!!Visit to Chaco!!* guaiacwood oil!Text!Text!Text!Text!Text!Text!August 19, 2012!!Visit to Amigo & Arditi!!* petit grain, guaiacwood, cabreuva!Sunday could not have been moredifferent. We drove to San Pedrodistrict where we visited the warehouseof Amigo and Arditi and then on to thevillage of Nuclear to visit by ox-cart thesmallholder bitter orange tree areas towatch the harvesting and distillation ofpetitgrain oil. The most interesting pointof the visit was, how the whole processcould work with just really simple tools.On our arrival in Nuclear village we were entertained by some wonderful traditional Paraguay dancingand music as well as shown a superb display of local fruits, vegetables and arts and crafts.On the same day we also visit Alpacasa. Alpacasa is producing guaiacwood oil as well. They are alsointo the planting and processing of vetiver.At the Alpaca operations we saw theprocessing of guaiacwood oil as wellas the harvesting of vetiver, eucalyptus,cabreuva, palmarosa and patchouli.Both hosts on Sunday are deeplyinvolved in the social work of theircommunities.The day ended with a farewell dinner,which included more traditional musicand dancing and a superb guitarconcert by one of Paraguay’s mostfamous musicians.Text!Text!Text!August 19, 2012!!Visit to Alpacasa!!* guaiacwood, vetiver, eucalyptus, cabreuva, palmarosa, patchouli!299

Another outstanding feature of the tour was the level of intra group discussions amongst theparticipants, each one willing to share information about what is perceived to be a very secretiveindustry. This is a very healthy sign for our industry.The days were long and full, starting with the early wake up calls, followed by the company visits andhuge hospitality of every host.The participants witnessed the growing, harvesting and processing of a range of essential oilsincluding orange, petitgrain, guaiacwood, eucalyptus citrodora and vetiver. The site visits and qualityof information dissipated by the hosts were outstanding; these keep improving with each tour. Thevisits were very well organised and there were some excellent gifts from the various companies andsponsors.Text!Text!Text!!Many thanks to all companies who hosted the tour, the Dauras travelagency and to the IFEAT Study Tour Committee.!Special big thanks to Raul Amigo and Stephen Pisano for all theire"orts.!Thanks to the local committees and IFEAT Study Tour Committee and particularly to the companieswho hosted and sponsored the Tour as well as the Dauras Agency in Brazil, Raul Amigo in Paraguayand Stephen Pisano for all their efforts.300

IFEAT 2013 SAN FRANCISCO CONFERENCE PRESENTATION IN SINGAPOREINTRODUCTIONColin RingleibIFEAT Executive Committee MemberChairman IFEAT San Francisco Organising CommitteeAs Chairman of the IFEAT 2013 Conference OrganisingCommittee, it is my pleasure to give you a brief preview ofthe next time that we will meet up.The next IFEAT conference will be held in the USA in SanFrancisco at the Fairmont San Francisco Hotel, USA fromSunday 29th September to Thursday 4th October.WHY SAN FRANCISCO?! San Francisco is one of the greatest and mostphotogenic cities in the world with many cultural, visualand historic attractions.! In August 2013 San Francisco is hosting the 34 thAmerica’s Cup, leading to big changes and upgrades allalong the waterfront.! San Francisco is the financial, cultural, andtransportation centre of the San Francisco Bay Area, aregion of more than 7.4 million.San Francisco has just topped Lonely Planet’s top 10 citiesto visit in 2013. It is considered one of the greatest andmost photogenic cities in the world. It’s attractions aremany – the Golden Gate Bridge, the Bay, the food, thetheatre, the hills and the surrounding areas.Also the 34th America’s Cup is coming to the city inAugust 2013, and big changes and upgrades are takingplace all along San Francisco’s waterfront.With an estimated population of 816,000 San Francisco isthe 12th most populous city in the USA. San Francisco is the financial, cultural, and transportationcentre of the San Francisco Bay Area, a region of more than 7.4 million people.SF has successfully hosted many large international conferences. Its high quality facilities and safetystandards make it a preferred destination for many international organisations and companies.Why San Francisco? Climate - TemperatureSan Francisco and the Bay area enjoy mild weather all theyear round with temperatures seldom rising about 70degrees Fahrenheit (21 degrees Celsius) or falling below40 degrees Fahrenheit (4 degrees Celsius)Late September early October is a perfect time to visit SanFrancisco with average monthly maximum and minimumtemperatures 65 degrees F and 44 degree Fahrenheitrespectively.! San Francisco enjoys mild weather all yearround.! Temperatures seldom rise above 70 o Fahrenheit(21 o C) or fall below 40 o F (4 o C).! Late September early October is a perfect timeto visit San Francisco.! Sept/Oct is the hottest time of year.! September and October are high occupancymonths for the hotels.September and October is the hottest time of year.September and October are high occupancy months for the hotels.301

Why San Francisco? TransportationIt is easy to access San Francisco from around the world.San Francisco International airport (SFO) is served bydirect international flights. It offers non-stop flights to over30 international destinations on 26 international carriers.Also SFO connects non-stop with more than 65 cities inthe US on 21 domestic airlines offering many choices withcompetitive fares from its easily accessed and efficientterminals.! Transport to and within San Francisco is excellent.! San Francisco International Airport (SFO) offers non-stop flights toover 30 international destinations on 26 international carriers.! SFO connects non-stop with more than 65 cities in the U.S. on 21domestic airlines offering many choices with competitive fares from itseasily accessed and efficient terminals.! Transportation within the City and the Bay Area is excellent with acombination of taxis, the world famous cable cars, ferries and BARTTransit.In addition, within the city, transport is relatively easy given the relatively small size of the city and itsfamed cable cars.The Fairmont San Francisco Hotel, 950 Mason Street,has been chosen as the main venue for the 2013 IFEATConference. This is one of the best hotels in SF.! One of best hotels in San Francisco – an unmatched blend ofluxurious accommodation, elegant meeting spaces andsuperb services.! Centrally located – with a short cable car trip from bustlingDowntown, Financial District, Union Square and Fisherman'sWharf.! Located on Nob’s Hill – and at the only spot in SF where eachof the City's famous cable car lines meet.! Panoramic view of the City and the Bay.Famous for its gorgeous lobby and opulent public roomsthe Fairmont is the grandest of all the grand hotels at thetop of Nob Hill. Reopened in 1907 after the SFearthquake it has been much admired since. Thepanoramic views of the City and the Bay are unbeatable.The hotel is centrally located – only a short cable car tripfrom bustling Downtown, the Financial District, UnionSquare and Fisherman's Wharf.The Fairmont is located at the only spot in San Francisco where each of the City's cable car lines meet.In the Fairmont there are 591 rooms and a variety of excellent room types are available. Fairmontrooms have recently been restored to their original splendour. Rooms are cosy and quiet andbeautifully decorated with all the amenities you would expect of a 5 Star Hotel.In addition, within the hotel there are some55,000 square feet of total meeting space with agrand ballroom of 13,000 square feet and threejunior ballrooms of 4,500 square feet each. Theyhave 15 smaller rooms meeting rooms rangingfrom 350 to 4032 square feet.The Fairmont San Francisco hotel has anunmatched blend of luxurious accommodation,elegant meeting spaces and superb services,making for an unforgettable stay.! Guest Room Description:! A variety of excellent room types areavailable. Fairmont Rooms have recentlybeen restored to their original splendour.Rooms are cosy and quiet and beautifullydecorated with all the amenities you wouldexpect of a 5 Star Hotel.! Number of Rooms Available: 591! Meeting Space:! The hotel features 55,000 square feet oftotal meeting space with a grand ballroomof 13,000 square feet and three juniorballrooms of 4,500 square feet each.! They have 15 smaller meeting roomsranging from 350 to 4,032 square feet.302

The Fairmont has excellent dining facilities. Thereare three renowned restaurants and lounges thathave won many awards.The Tonga Room and Hurricane Bar offer exoticAsian cuisine in a rainforest setting.The Laurel Court Restaurant and Bar offers anorthern California dining experience with freshindigenous ingredients.! Excellent dining with three renownedrestaurants and lounges.! The Tonga Room and Hurricane Baroffer exotic Asian cuisine in a rainforestsetting.The Laurel Court Restaurant and Baroffers a northern California diningexperience with fresh indigenousingredients.IFEAT WELCOME RECEPTION AND CLOSING BANQUETThe Fairmont’s excellent facilities will be used tohost two IFEAT events:! The Fairmont San FranciscoHotel’s excellent facilities willbe used to host:! The IFEAT Welcome Receptionon Sunday September 29 th.Plans are for a Street Party inthe front of the hotel!! The IFEAT Closing Banquet willbe held in the Grand Ballroomwith a banqueting capacity of970.First, the Welcome Reception on Sunday September29th. Plans are underway to host the reception in thestreet in front of the Fairmont.Second, the IFEAT Closing Banquet on ThursdayOctober 3rd will be held in the magnificent GrandBallroom with a banqueting capacity of 970.MAP OF AREASan Francisco offers many options forparticipants of the conference to stay at anumber of business and other hotels that arelocated nearby. Among these are:1. Hilton Union Square2. Four Seasons3. Hyatt Regency4. Marriott Marquis303

IFEAT DINNER USS HORNETThe IFEAT Dinner will be on the USSHornet.This unique venue is an historic aircraftcarrier, now a museum, and with a variety ofspaces that are ideal for meetings andbanquets.The Hornet seating capacity up to 3,000, andonly 30 minutes by coach from SanFrancisco.The Hornet offers spectacular views of theSan Francisco skyline and the Bay Bridge.! The IFEAT Dinner will be on theUSS Hornet.! This unique venue is an historicaircraft carrier, now a museum,and with a variety of spaces thatare ideal for meetings andbanquets.! Has seating capacity up to3,000, and only 30 minutes fromSan Francisco.! Offers spectacular views of theSan Francisco skyline and theBay Bridge.CONFERENCE THEMEFollowing the usual IFEAT Conferenceformat, there will be three days devoted topresentations, Monday, Tuesday andThursday – with a field trip/trade exhibitionand essential oils workshop on theWednesday.The Conference Programme will provideanalysis of the F&F sectors includingsustainability issues. There will bepresentations reviewing global market andtechnical developments. There will also bepresentations on US essential oils as well asdevelopments in neighbouring countries. Asusual there be a session reviewing legislative and regulatory issues,ACCOMPANYING PERSONSAs usual at an IFEAT Conference there willbe a full programme of optional activities foraccompanying persons.A range of half-day and full-day excursionswill be on offer for accompanying persons. Inaddition, our local DMC, Allied PRA, will beoffering pre- and post-conference tours thatwill enable APs and delegates to explore theregion in greater depth. Details on theoptional tours will be given in the conferencebrochure that will be distributed by IFEAT early in the New Year.! As usual Monday, Tuesday and Thursday will bedevoted to presentations.! Presentations will cover a wide range of issuesrelating to sustainable growth, related papers onUS and neighboring countries’ essential oils andF&F industries, regulatory and legislative issuesand interesting global developments.! On Wednesday there will be a Trade Exhibition orField Trip and Essential Oils and HazardousShipping Workshop.! There will be a full programme of optionalactivities for accompanying persons including fulland half day tours.! These will be arranged by Allied PRA which hasbeen appointed the tour agent for the IFEAT SF2013 Conference.! Details on the optional tours will be given in acustom website that will be available early in theNew Year.304

VISASWhat is IFEAT proposing to do?Citizens from many countries will requirevisas to enter the USA.! Citizens from many countries will require visas to enter the USA.The USA has a new programme “BusinessVisa Center” designed to support foreignvisitors attending conferences in the US andwe hope it will provide some assistance forvisa approval. The US Business Visa Centerrecommends applying at least 90 days beforethe planned travel.We strongly recommend that intendingdelegates contact the US Embassy in theircountry as soon as possible regarding the current visa situation.! The US has a new program “Business Visa Center” designed tosupport foreign visitors attending conferences in the US and wehope it will provide some assistance for visa approval.! We strongly recommend that intending delegates contact theUS Embassy in their country as soon as possible regarding thecurrent visa situation. The US Business Visa Centerrecommends applying at least 90 days before the plannedtravel.! IFEAT is implementing a pre-registration process for delegateswhich will assist early visa applications.IFEAT is implementing a pre-registration process for delegates that will assist early visa applications.Members will shortly be informed of the process.All that there remains for me to say is that I look forward to meeting up with you next year in SanFrancisco – and I would like to finish with a video on a a day in the life of San Francisco.Thank you!Look forward to seeingyou in San Francisconext September305

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THE IFEAT 2013 STUDY TOUR TO SOUTH INDIAJUNE 9 - 18 2013George PaulIFEAT Executive CommitteeChairman of Local Organising CommitteeINTRODUCTIONAs Chairman of the India Study Tour Local OrganisingCommittee it is a great pleasure to give you a brief preview ofthe next IFEAT Study Tour.Following the success of the past five study tours to SriLanka, Egypt, southern Italy, Indonesia, Brazil and Paraguay,IFEAT is organising a sixth Study Tour to southern Indiafrom Sunday June 9th to Tuesday 18th June 2013.Summary of ItineraryFirst Leg! 9 – 11 June (Sunday to Tuesday) - Madurai! 12 June (Wednesday) - Coimbatore! 13 June (Thursday) – Ooty! 14 June (Friday) - Mysore! 15 June (Saturday) - Bangalore/CochinSecond Leg! 15 - 18 June (Saturday to Tuesday) - CochinNo. of Participants: 40Tour Operator: Mr. Lancy George, Govan Travels, CochinMost of the arrangements are now in place. Thereare two legs to the Tour, and delegates can selecteither or both. The first leg of seven days coversMadurai, Coimbatore, Ooty, Mysore andBangalore, while the second leg of three days iscentred on Cochin (or Kochi as it is now known.)The Tour will be limited to 40 participants. TheTour Operator who is assisting us in organising theTour is Govan Travels, a well-established touragency based in Cochin.STUDY TOUR OBJECTIVESThis study tour has been designed to allowparticipants:To gain an intimate knowledge of the field,production and processing facilities of floralextracts, oleoresins and essential oils in the flowerbelt and spice extraction farms of southern India.The global importance of Indian flowerextracts and oleoresin production was illustrated inthe two of this morning’s presentations.Participants will visit facilities producing jasmine(grandiflorum / sambac), mimosa, tuberose,champaca, and rose, palmarosa, eucalyptus,geranium, rosemary, marigold, sandalwood, as wellas spice oleoresin and other essential oils.To see the field/production and processing facilities of floral extracts, spice oilsand oleoresins including:- Jasmine (grandiflorum/sambac), mimosa, tuberose, champaca, rose etc.- Concrete/absolute manufacturing unit- Palmarosa, eucalyptus, geranium, rosemary, marigold distillation units• Spice oleoresinsStudy Tour Objectives• To have the opportunity to meet up with producers, processors and exportersas well as other delegates from the F&F sector• To achieve this with just over a week out of the office307

The Tour will also provide an opportunity for participants to meet up with producers, processors andexporters. The Tour also enables participants to meet up other F&F industry people from a variety ofcountries – there were participants from 17 countries on the IFEAT Brazil Paraguay Study Tour 2012.The aim is to achieve these objectives in just over a week out of the office.WHY SOUTH INDIA AND WHY JUNE?South India is the world leader in floral extracts, spiceoils and oleoresins.India is one of the fastest growing economies in theworld with rapidly expanding market for F&Fingredients.Agriculture is the most important sector in southernIndia where a wide range of crops is grown.Why South India and Why June ?South India is a world leader in jasmine floral extracts aswell as spice oils and oleoresins.India is one of the fastest growing economies in theworld with rapidly expanding market for F&F ingredients.Wonderful cultureJune is the harvesting season for flowersIndia has many fascinating cultures.WHY JUNE?The timing of the tour has been selected to match the cropping and processing of the major aromaticbotanicals in the region. We shall visit a number of flower growing areas.June is the most convenient time for the hosting companies who all agree with the period proposed.Climate wise this is a good time to visit – although it can be hot since during the summer months,including June, the temperature varies between 27 degrees C and 40 degrees C. Also the monsoon mayarrive in Cochin!STUDY TOUR PROGRAMMEThe detailed programme is contained in the Indian Study Tour brochure which can be downloadedfrom the IFEAT website (www.ifeat.org), while a flyer was included in the Singapore delegate bag.Itinerary First Leg – June 9 - 15ConnorCoimbatoreThe Study Tour promotional brochure advisedparticipants to expect tough travel and a busyschedule…the tour ‘is for the dedicated industryenthusiast’. As you will see, we will be meeting upwith a number of processing and exporting companiesand will have the opportunity to visit their operations.As you can see from the map, the Tour begins inMadurai and we travel by luxury coach toCoimbatore, Ooty and Mysore. The first leg of theTour ends in Bangalore – some will then fly home –while participants in the second leg will fly down toCochin from Bangalore.308

Sunday 9th JuneParticipants arrive at Madurai meet at the TajGateway Hotel for cocktails, study tour briefing anddinner. There are flights to Madurai only fromChennai on the east coast.• Arrive at Madurai• Meet and transfer toTaj Gateway Hotel• RegistrationWelcome Reception• Study Tour briefingDinner• Stay 3 nights atTaj Gateway HotelSunday June 9 thMaduraiThis city is known as Madhurapuri orMadurai - the city of Jasmine Flowers.Famous Madurai Meenakshi TempleMonday, 10th June – Day 1Monday June 10 th Day 1MorningVisit Sambac fields at Sankarankoil, followed by visit to flower market and templeAfternoonVisit Palace and Meenakshi Amman templeEveningDinner and Entertainmentsponsored by M/s Chennai Bioflora and Jasmine Concrete ExportsThere will be an early departure from hotel to visitthe sambac fields at Sankarankoil, followed byvisits to the flower market and temple. In theafternoon there will be a visit to the Palace andMeenakshi Amman temple.Dinner and entertainment sponsored by M/sChennai Bioflora and Jasmine Concrete ExportsTuesday, 11 June - Day 2On Tuesday morning delegates will visit ChennaiBioflora at Nilakottai Road some 50 km fromMadurai, where they will also have lunch. In theafternoon there will be a visit to Jasmine ConcreteExports at Dindigul some 15 km from Bioflora.Then we return to Madurai.Chennai BiofloraTuesday June 11 th Day 2MorningVisit Chennai Bioflora at Nilakottai Road (50 km from Madurai)AfternoonVisit Jasmine Concrete Exports at Dindigul (15 km from Bioflora)Return to MaduraiJasmine Concrete Exports Dindigul309

Wednesday, 12 June - Day 3Wednesday sees a 4.5-hour drive to Coimbatore“the Manchester of the South”. En route visit therose fields before checking into the Taj Surya Hotel.In the afternoon there will be a visit to Nesstate andthe grandiflorum fields.Dinner hosted by Nesstate at Taj Surya Hotel.Wednesday June 12 th Day 3MorningDrive to Coimbatore 220 km/4.5 hoursEn route visit rose fields. Check in Taj Surya HotelAfternoonVisit Nesstate and grandiflorum fieldEveningDinner hosted by Nesstate at Taj Surya HotelCoimbatore “the Manchester of the South”is famous for its textile industry and is the second largest city inthe Indian State of Tamil Nadu. The city was part of the Kingdomof Mysore and remained so until its conquest by the British EastIndia Company in 1799Thursday 13th June – Day 4Thursday June 13 th Day 4In the morning there is a visit to the Synthite factoryat Maradur followed by lunch. In the afternoon thereis a visit to Encee Aromatics at Mettupalayam.Synthite – Fragrance DivisionEncee AromaticsDrive to OotyMorningEn route visit Synthite factory at Maradur followed by lunchAfternoonVisit Encee Aromatics at MettupalayamEveningArrive Ooty (65 km/3 hrs from Mettupalayam)Check in at Holiday Inn, OotyThursday June 13 thOoty – the Queen of Hill StationsDay 4 contd.Ooty is the capital of Nilgiris District – and situated 2,240 metresabove sea levelThen there is a 3-hour journey (only 65 km!) toOoty – the Queen of Hill Stations - to check into theHoliday Inn Hotel. Ooty is the capital of NilgirisDistrict – and situated some 2,240 metres above sealevel. Nilgiris means "Blue Mountains". An addedattraction is the winding road up to Ooty throughverdant vegetation and tea gardens.Nilgiris means "Blue Mountains”An added attraction is the mountain train journey which wends itsway through many hair-raising curves and fearful tunnels andbeside deep ravines full of verdant vegetation, gurgling streamsand tea gardens310

Friday 14th June – Day 5Friday 14th see the drive to Mysore (some 160 kmtaking 3.5 hours). Mysore is the second largest cityin the state of Karnataka. En route we will visit theHope Plantation with various essential oil bearingplants and field distillation facility. This is run by anNGO. The night will be spent at the JP Palace Hotelwith dinner and entertainment at WindflowerResort, Mysore sponsored by Nesso.Drive to Mysore (160 km / 3.5hr)Friday June 14 thMorningVisit Hope (an NGO) Plantation with variousessential oil bearing plants and field distillation facilityEnroute lunch at Serai Resorts, BandipurDay 5 MysoreEveningArrive JP Palace Hotel, MysoreDinner & Entertainment by NessoMysore is the second largest city in KarnatakaState. It lies about 146 km southwest ofBangalore, the capital of Karnataka. The nameMysore is an anglicised version of Mahish!ru,which means the abode of Mahisha (a demon fromHindu mythology)EucalyptusThis slide illustrates the JP palace at Mysore andsome of the plants and oils that we will see.Sandalwood ForestGeranium FieldMimosaJasmineJ P Palace MysoreSaturday 15th JuneFor those that have only booked the first leg theTour – this is the last day. In the morning there willbe a visit to NRRS production facility and then theNesso factory. In the afternoon we proceed toBangalore Airport – a total of 220 km, about 5 hoursby road. Those that are participating in the secondleg of the Tour will take the 45 minute flight toCochin. Delegates only participating in the first legwill stay overnight in Bangalore and depart thefollowing day.NessoSaturday June 15 thSandalwood factoryMorningNRRS production facility visit and then Nesso factoryAfternoonProceed to Bangalore Airport (220 km, 5 hr) by roadand to Cochin by Air (45 min)Delegates of 1 st leg stay in Bangalore and depart on 16thDay 6 MysoreTuberose311

The second leg of the Tour starts with the flightfrom Bangalore to Cochin.Itinerary Second Leg – June 15 - 18ConnorEveningArrive Abad Airport Hotel, CochinKochi was the centre of Indian spice tradefor many centuries, and was known to theYavanas (Greeks) as well as Romans,Jews, Arabs, and Chinese since ancienttimes. The origin of the name "Kochi" isthought to be from the Malayalam wordkochu azhi, meaning 'small lagoon'.Saturday June 15 Day 6COCHIN – THE QUEEN OF ARABIAN SEACochin was the centre of the Indian spice trade formany centuries.Participants will stay overnight at the Abad AirportHotel where there will be dinner.CardamomNutmegSunday 16th June – Day 7In the morning delegates will check out of the hoteland visit Kancor Flavours & Extracts. After lunchthey will travel to the Ramada Resort in Cochin andvisit heritage towns of Fort Cochin and MattancheryMorningCheck out from hotelVisit Kancor Flavours & ExtractsSunday June 16 Day 7After lunch, proceed to Ramada Resort CochinKancorIn the evening there will be a dinner sponsored byKancor.Overnight at Ramada Resort.AfternoonVisit heritage towns - Fort Cochin andMattancheryEveningDinner sponsored by KancorOvernight at RamadaRamada ResortMattanchery312

Monday 17th June – Day 8In the morning there will be visit to Plant Lipidsfollowed by lunch.Then in the afternoon a visit to Synthite Industries.In the evening there will be a Farewell dinner atRamada sponsored by Synthite.Tuesday 18th June sees the end of the Tour.MorningVisit Plant Lipids followed by lunchAfternoonSynthiteEveningFarewell dinner at Ramadasponsored by SynthiteMonday June 17 th Day 8Pepper plantsPlant LipidsSynthiteTuesday June 18 th Day 9Transfer to AirportTOUR OPERATOR AND STUDY TOUR COSTSAs mentioned earlier, IFEAT is working with a local Indian travel agent to assist in theimplementation of the Tour. Govan Travel, one of the largest travel agencies in the region, will beacting as the tour operator in India and the company can offer pre and post Study Tour trips ifrequired.With regards to costs of participant in the Tour, there are two options:Option 1:First leg only, Madurai to Mysore: US$4,000. Thecharge per person covers seven nights single roomaccommodation, all programme meals andreceptions and transportation as detailed in theitinerary. Participants not joining the second leg ofthe tour will be transferred to the hotel in BangaloreCity for onwards travel to their home.Price includesCosts: US$ 4,000 per person (First leg)US$ 2,000 per person (Second leg)Total : US$ 6,000• Accommodation at 4/5-star hotels on single occupancy basis (with breakfast)• Eight meals (lunch and dinner)• Air conditioned 42 seat coach for the tour as per the itinerary• Arrival and departure assistance at the airport• Current applicable taxesOption 2:First and second leg, Madurai to Mysore andMysore to Kochi: US$6,000. The participant chargeper person covers nine nights accommodation, allprogramme meals and receptions and transportationas detailed in the itinerary.The Tour is filling up rapidly.Book now to ensure a place. For more information on the study tour programme, see the brochure onthe IFEAT website, where on line bookings can be made.Looking forward to seeing you in India next June!313

Local Organising Committee to Facilitate the TourChairman : Mr. George Paul (Synthite Industries)Members : Mr. Pradeep Kapoor (Jagat Aroma Oils)Mr. Geemon Korah (Kancor Ingredients)Mr. John Nechupadom (Plant Lipids)Mr. Raja Palaniswamy (Jasmine Concrete Exports)Mr. Pavan Ranga (N. Ranga Rao)IFEAT Study Tour Committee ChairmanRavi Sanganeria (Ultra)IFEAT Study Tour CoordinatorPeter GreenhalghTour Operator: Govan Travels, CochinLancy GeorgeTHANK YOU !314

INTRODUCTIONICATS INTERMEDIATE PERFUMERY WORKSHOPIFEAT CONFERENCE SINGAPORE 2012Dr. Tony CurtisICATS / Plymouth UniversityPlymouth Devon PL4 8AAt.curtis@plym.ac.ukThe Singapore workshop was built on the successful earlier ‘Introduction to Perfumery’ workshopsheld at the Montreal, Shanghai and Barcelona Conferences. The key feature of the intermediateworkshop was a chance to put the concepts into effect by delegates creating a muguet accord. Thetutorial team consisted of John Ayres (Pandora), Sharon Heard (ICATS) and Dr. Tony Curtis(ICATS). There were six presentations to lay the foundation for the afternoon’s practical work.ODOUR LANGUAGE, NATURAL AND SYNTHETIC INGREDIENTS AND THEIR ROLEIN FRAGRANCE FORMULATIONJohn Ayres opened the proceedings. Knowledge of natural and synthetic materials is central to ‘AromaTrades Studies’ and for the Creative Perfumer. The typical major creative perfumery house works with1,500 to 3,500 aroma ingredients with additional compounded bases. To use such a range of productsan odour classification scheme is required, a framework for an international odour language.Odour GroupCitrusMintGreenFruityMarineAgresticAldehydicConiferousFloralHerbaceousWoodySpicyMedicateMossyBalsamicAnimalicTypical example ingredientLemon OilPeppermint oilLeaf alcoholAldehyde C14 PeachCaloneGeosminAldehyde C11 undecylenicalpha TerpineolRose ottoLavender oilCedarwood oil VirginianClove bud oilEucalyptus oilOakmoss abs.Vanilla absoluteCivet absolute syntheticTable 1 Fragrance ingredients and odour groups315

Perfumers not only consider the odour groupbut also classify materials as ‘Top’ ‘Middle’and ‘Base’ notes.Top NotesCitrusMintyGreenFruityMarineAgresticAldehydicConiferousHeadMiddle NotesFloralHerbaceousWoodySpicyMedicatedHeartBase NotesMossyBalsamicAnimalicSoulFigure 1 Odour Groups by type of note (relativevolatility)Can I smell it?Is it strong or weak?Is it pleasant or unpleasant?Is it fresh or stale?Is it sweet or dry?Is it warm or cool?Is it rough or smooth?What does it remind me of?How does it make me feel?In the smelling of the first set of samples participants were alsoinvited to consider a number of other odour characteristics byconsidering a number of questions?Figure 2 Questions to ask whensmelling a materialThe participants were then taken through an olfactoryjourney with some of the detail and complexity of eachof the major classifications being introduced. Here onlythe odour concept of ‘green’ is presented. There is theleafy green of fresh cut grass, the floral greenness ofhyacinth, the cool green of a fresh salad with cucumberand the vegetable green of earth / sliced green beans.Green odour groupTypical ingredientscis-3-Hexenol, Leaf alcoholGreen, leafy, fresh, sappy, grassyPhenylacetaldehydeGreen, floral, hyacinthNonadienal, Cucumber aldehydeGreen, cucumber, oily, butteryGalbanum oilGreen, agrestic, earthy, pyrazinicBlackcurrant bud absoluteAbsolute bourgeons de cassisFresh, green, fruity, blackcurrant, cattyFigure 3 Variations of green odours withexamples316

WHY FRAGRANCE PRODUCTS?There is only so much smelling that can be done before people needed a break. Tony Curtis provided afragrance free interlude before the first coffee break by reviewing the place of fragrance in themarketing of perfumed products. Products are complex and just as perfumers classify odour materialsto make complexity manageable and provide structure the ‘Plymouth’ model of products provides aframework to analyse the contribution of the various elements of a product to the total user experience.IntegrationIntangible BenefitAttributesTangible BenefitFeature AttributesProduct[Benefits]Signal AttributesLegal ConformanceAccount ConformanceTechnicalSafetyEnvironmental/ Life cyclePerformanceComplementary ProductsRangeObjectivesExtensionRange & DepthDepthFeedbackServiceStandardize / AdaptFigure 4 The ‘Plymouth model of product’A brief overview of the total model was given with the main focus on the specific parts that fragranceplays in the total marketing concept of product. The first and key issue is to unlearn the word‘product’. Formulators create ‘products’ but consumers want to experience ‘benefits’. This can besummed up by the old industry saying ‘In the factory we make cosmetics. In the shop we sell hope!’This quotation introduces a second key concept. Much of the role of fragrances in a product isassociated with ‘intangible’ ‘benefits’. All shampoos clean hair, at least we would hope so! Theconsumer buys product A rather than product B as they perceive it has a better value and set ofbenefits. These include benefits such as freshness and wellbeing. The label intangible is given as thesebenefits may not be measured. It is not possible to buy 2 litres of well being. One may be able todevise a protocol to measure the shininess of hair for a conditioning shampoo but not the sense ofwellbeing that its use may confer on the user.317

SafetyWellbeingLoveSelf-confidenceSexual desirabilityTable 2 Selected intangiblebenefitsThe function of the fragrance is tocommunicate benefits. The role of thistype of product communication iscovered in the ‘Plymouth’ model with‘Signal attributes’. Messages that canbe communicated include luxury, fresh,clean, soft, tranquil, invigorating andnatural. As with the odour descriptionsdiscussed earlier each major group hassub-groups. This is illustrated in Figure5 for the concept of freshness.Selected odour messagesLuxuryFreshCleanSoftTranquilInvigoratingNaturalFreshAlpine mountainHerbalWoodlandstreamWinter snowSea sprayMedicatedCitrusFigure 5 Signal Attributes: selected odour messages forfreshnessFRAGRANCE CREATION:FROM INGREDIENTS TO ACCORDS TO THE FRAGRANCE FAMILIESCITRUSCOLOGNEFougèreFruityOzonicALDEHYDICFLORALFLORALFloral OrientalORIENTALGourmandJohn Ayres presented the ‘Pandora’model of modern fragrances familiesand took the group through anolfactory journey of over a hundredyears of fragrance developments.WoodsCHYPREFigure 6 Fragrance families (‘Pandora’ model)318

In this paper for the conference proceedingswe highlight just one of the groups, afragrance family which can be said to beover 500 years old, the citrus colognefamily.The original concept ‘Hungary Water’ wasintroduced in the 14th century. ‘4711Original Cologne’ (Muelhens) wasintroduced in 1782 and is still on the marketbut the concept also has moderninterpretations such as ‘cK 1’ (Calvin Klein)1994.Eau SauvageChristian Dior (1966)4711 Original CologneMuelhens (1792)CITRUS COLOGNECitrus oilsNeroli oilCitrus cologneaccordFigure 7 Citrus cologne familyLavender oilPetitgrain oilcK oneCalvin Klein (1994)John’s olfactory exploration concluded with consideration of the value and role of synthetic andnatural aroma materials. The value of synthetic aroma chemicals include:! Unleashing the hidden power of natural materials (e.g. Javanol® from sandalwood oil)! Inspiring new creative originality! Providing strength and structure to a fragrance! Capturing the true essence of nature (head space analysis)! Consistent quality, availability and cost! Performance and substantivity in consumer productsJohn Ayres finished with his view that ‘Fragrance classics and modern classics owe their success tothe creative combining of natural and synthetic ingredients’. Naturals give richness, complexity,radiance and vitality, while synthetic aroma chemicals can provide depth, substance, power andcreative originality. René Laruelle, quoted by Luca Turin, expressed it as ‘Synthetics are the bones offragrance, naturals the flesh.’ Luca Turin in his book ‘The Secret of Scent’ added ‘Too muchsynthetics and you have bleached skeletons, too much naturals and you’re stuck with invertebrates’.WHY NEW AROMA MATERIALS, THE SUCCESSFUL INTRODUCTION OF NEWAROMA MATERIALSAfter the epic olfactory experience of the fragrance families Tony Curtis returned to marketing. In thissession we considered the business-to-business challenge of an aroma producer wanting to introduce anew aroma material to a client. Most creative houses have an inbuilt resistance to change:• If it is not broken, why fix it? ‘We have 50 years experience of using our existing materials.’A variant of this is ‘Not invented here’ syndrome.• KISS (Keep It Simple Stupid): each new material increases the complexity of inventorymanagement and production planning. There has to be a good commercial reason to overcomethis objection.• Unknown track record for consistent supply and quality. Using a novel material, particularlyfrom a new supplier, involves risk and a step into the unknown. Creative houses and theirclients tend to be risk adverse.319

• Regulatory compliance issues: a key gatekeeper is the regulatory compliance function. All thecompliance issues must be covered or the sample will not even reach the creative perfumers.Good reasons for the creative house to change are:• Price: margins are under continual pressure and synthetics may provide better odour valuethan natural isolates.• Replacement of a problem material: at the moment tree moss and oak moss are underpressure; this will provide the energy to seek replacements without problems. An historicalexample is the rich range of musk materials developed to replace natural musk.• Novel effect: some synthetics have odour characteristics that are not found in natural productsand as John Ayres stated earlier ‘Inspiring new creative originality.’• Selective effect: natural products such as essential oils are often rich and complex. However,in some circumstances only part of the total effect may be useful. Here novel isolates andsynthetics can have a place in the perfumers’ palette.• Solve a product problem: aggressive bases such as bleaches have driven the need for superstable aroma materials such as tetra hydro geranyl nitrile as a stable citrus product to replacecitral.• Exclusivity: it is not practical to patent a fragrance formulation. However, the use of apatented novel ingredient can provide a measure of protection.Suppliers may adopt a variety of approaches to discover new aroma materials such as:• Analysis of essential oils and other natural materials: Early examples are vanillin from vanillaand geraniol from rose. Odour GC and headspace analysis have added to the analytical insightand this approach continues to unearth new materials.• Variations on a theme: given an interesting odour material the chemist is never going to resistthe temptation to hydrogenate a double bond or add a methyl group and see what the result islike. Interestingly the ionones (naturally occurring) are much less used in perfumery than themethyl ionones (synthetic, not naturally occurring).• Solve a problem: as discussed above tetra hydro geranyl nitrile was developed as an attempt tosolve the stability problem associated with double bonds and aldehyde function in other citrusaroma chemicals• Exploit a technology: super critical carbon dioxide has allowed the development of a wholerange of novel ‘more natural’ extracts.• Happy accident: In developing aprocess to manufacture aroma materialanother molecule may be made, often asan impurity. It is still useful to evaluatethe ‘undesired molecule’. In a processto manufacture l citronellol methoxycitronellene, epoxide was anintermediate. The next stage of theprocess was to hydrogenate the epoxideto primary alcohol. However, totalselectivity was not possible and somesecondary alcohol was obtained as a byproduct.The process to l citronellol didnot prove economic but the secondaryalcohol ‘Osyrol’ has become a standardsandalwood addition to the perfumers’ palette.OOMeMethoxy CitronelleneEpoxideHydrogenationOMeOsyrolOHCH 2OHOMeMethoxy CitronellolFigure 8 Osyrol production from methoxy citronelleneepoxide320

FRAGRANCE CREATIONThis was a short presentation by John Ayres with a focus on the part ‘accords’ play in the fragrancecreation process. This was the curtain raiser to the afternoon practical session where participantscreated their own muguet accord and the group evaluated the results. The classic muguet accord startedwith perfumers noting that:Rose + Jasmine = Lily of the valley (muguet)The participants had a larger palette of materials to create their own accord and some ‘modifiers’ toput their own distinctive stamp on their creation.Figure 9 Participants’ compounding workstations for accord creationACKNOWLEDGEMENTThe ICATS Team gratefully acknowledges the support of Takasago (Singapore) for the provision ofsamples and equipment for the practical work in the ‘Intermediate Perfumery’ workshop.321

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