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The “next normal” – what will this mean for the Flavor & Fragrance industry?

It has been sometime since my last Blog post, but as we are all at home, I thought you may appreciate some “wisdom” from yours truly.

While a lot has happened in our industry since my last communication, and don’t get me started on the IFF, Frutarom merger let alone the subsequent DuPont merger, this global pandemic has not only become a global health crisis but also a major shock to the economy and the way we all live.

Firstly however, I would really like to wish you and your family all the best and hope you are safe and well in these crazy times and wish you all the best as you deal with so much uncertainty.

Secondly, unless you thought otherwise, I don’t have a crystal ball! Things are happening so fast that any real prediction of the future would be premature, but one thing is certain.

It won’t be the same!

Once we come out the other side of this pandemic, we will be confronted by the new or “next normal”, that was succinctly opined in a recent McKinsey & Company article, which you can read here in its entirety.  https://mck.co/2WRe5VH

Undoubtedly the greatest challenge right now is to ensure business survival and operational continuity. The current health crisis has triggered the necessity for remote work and has increased our dependency on telecommuting. This is testing our personal resolve and the robustness of our business models.

We must evolve through adaption. This crisis has created an imperative to escalate the adoption of new technology across all aspects of life, from e-commerce to remote working and learning tools.

Now that we are forced to change our social, industry and professional behavior, it has become easier to distinguish between the “must-haves” and the “nice-to-haves”? While the list of “must-haves” tends to reduce in times like these, one dramatic addition has been the absolute dependence on technology.

Parents are increasingly reliant on online lessons and virtual playdates. Those of us working from home – the majority of the planet now! – have replaced meetings with video conferences, and a multitude of platforms facilitating team sessions have proliferated. Zoom is a great example of this exploding demand, but there are now security concerns as more and more Governments and Business pile on board. Restaurants and Cafes are closed but take away is booming and so are the meal delivery services, which were until recently much maligned. As for entertainment, the daily use of yoga, meditation, workouts and party apps has skyrocketed. I am certain that some of the above trends may be short lived, but equally others will stay. Any company so reliant on in person meetings, that its operations have been seriously impacted will have to rethink its business model very seriously.

From what we know most countries have varying degrees of restrictions and “lock downs” in place and manufacturers are either open or closed depending on whether that company’s products are considered “essential”. India for instance, has introduced a total lockdown since March 25th, and at present the F&F industry is currently not considered essential, so many manufacturers are closed, and if they are open, are hamstrung by the lockdown of all logistics capabilities. As India is a major F&F Ingredient supplier, this is having a dramatic impact on the global supply chain for the F&F industry. China as the largest supplier of F&F ingredients has already had a dramatic impact, and despite restrictions being eased, will continue to have an impact for the forseeable future. In the USA, Flavors are considered essential and so most Flavor companies are still manufacturing but Fragrance companies have up until recently, not being classified as essential. Fortunately, Fragrance manufacturing was officially added to the list on March 28, 2020, by The Cybersecurity and Infrastr­ucture Security Agency (CISA).

The International Fragrance Association (IFRA) has issued a statement, as a represen­tative of the global fragrance industry, to urge governments around the world to include fragrance manufacture as an essential service, due the use of fragrances in cleaning and sterilizing materials.

In the “next normal”, will supply chains need to be reconfigured to remove vulnerabilities that have been exposed by the pandemic? The current crisis has shown that the worlds dependence on global supply chains is a weak link. This could lead to restructuring of existing supply chains with production and sourcing being moved closer to end users and companies could localize or regionalize their supply chains. How this will play out we can only speculate at this time.

Apart from the obvious global supply chain disruptions, the biggest impact that I can see is the impact on all activities that require face to face interaction. Customer seminars; Exhibitions; Meetings and Customer visits between sales, marketing, purchasing, technical and product development teams and any other activities that do not comply with social distancing rules.  This is the sticky end of the industry that drives business development. Contactless commerce could become a permanent norm in the future and so businesses need to have a plan to deal with this.

Disruptive technologies in the past were considered novel but not critical to success, but the old ways of doing business will be challenged and what was considered a novelty may now be an imperative if a business is to survive let alone succeed in the  “next normal”. A good example being iSense AG, www.isensegroup.com, a Swiss startup founded last year. I have been working with iSense to bring their innovative business model to the industry, which provides a fundamental shift in how Flavor companies engage with their customers. It was always meant to be an additional tool in the tool box of small to mid-size flavor companies to reach new customers, so it’s quite ironic that in these unprecedented times, iSense may be one of the only routes to market for the Flavor industry at present and maybe for the foreseeable future. 

Those who have already signed up to iSense should be better placed to weather this crisis but it’s not too late for other companies. Damage control is necessary, but resources still need to be dedicated to the future otherwise it may be too late to change.

iSense is working hard with the industry and is pushing out all stops to also get as many Food and Beverage companies to also sign up for the Flavor Market Place.

One would think the Global F&F companies are well resourced to survive through this pandemic, but they are not my concern – it is the family owned companies, the backbone of the industry, that I am concerned about the most. Many of these companies do not have the human resources or the financial resources needed to survive this pandemic and successfully emerge on the other side!

It may also be time for SME F&F companies to consider working together in a more collaborative way. I have always thought a network approach made a lot of sense with many benefits, but now even more so. This idea has application for both Flavor and Fragrance companies and Focus International is working on introducing this “Consortium” model shortly, but one thing is certain, working together makes more sense than trying to go it alone. If you are interested in learning more, please contact me.

“It is increasingly clear our era will be defined by a fundamental schism: the period before COVID-19 and the new normal that will emerge in the post-viral era: the “next normal”. , say K. Sneader & S. Singhal of McKinsey & Co, who then go on to say: “In this unprecedented new reality, we will witness a dramatic restructuring of the economic and social order in which business and society have traditionally operated. And in the new future, we will see the beginning of discussion and debate about what the next normal could entail and how sharply its contours will diverge from those that previously shaped our lives”

Focus International is a global collaborative network of industry experts who have all had very successful careers in the industry. We provide critical advisory services with the capability to execute on our recommendations. Focus International was founded to 2009 to support SME companies in the F&F industry to execute on essential strategic initiatives or solve critical problems. I cant think of anything more critical now than the pandemic we are now facing.

If you’re interested to learn more about iSense or how Focus International may be able to assist, please contact me at [email protected] or [email protected]

Stay well and please Stay at Home!

Trevor

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