The Invisible Architects of Emotion: A Deep Dive into the Flavors & Fragrances (F&F) Industry

Scent has always been part of our human story. Think of the rosewater used in Persian kitchens, the attars that traveled along the Silk Road, the citrus colognes worn by generations in Spain. Each carries not only a smell but also a history: of trade and craftsmanship, of gardens cultivated, of migrations and exchanges that shaped the world we live in today.

Today, the Flavors & Fragrances (F&F) industry continues to play a pivotal role in shaping consumer experiences. Often unnoticed, its influence stretches from product appeal to brand loyalty, and even purchasing decisions. India, with its rich history in aroma and growing market share, is becoming a key player in this global industry. Let’s explore why the F&F industry is worth paying attention to.

The flavors and fragrances industry (F&F) creates scents and tastes for use in a broad range of consumer products, including prepared foods, personal care and household products, fine fragrances, cosmetics, and beverages.

Industry Segments:

The flavors and fragrances (F&F) market is primarily divided into three key segments:

1. Formulated flavours constitute the largest segment, making up approximately 71% of the market share. These complex mixtures combine natural extracts, essential oils, and aroma chemicals, and are available in various forms such as liquids and concentrates, depending on their specific use.
   
2. Aroma chemicals, which account for around 15% of the market by value, are organic compounds derived from petrochemicals, natural resource isolation, and turpentine fractionation. They can be further categorised into types like terpenes, benzoids, musk chemicals, and others based on their chemical structure.
3. Lastly, essential oils, which represent about 14% of the market.  The essential oils market is growing rapidly, driven by increasing demand from industries like cosmetics, personal care, nutraceuticals, and pharmaceuticals. This trend is further supported by the growing preference for natural and eco-friendly ingredients in a variety of consumer products.

Global Market:

The global flavors and fragrances market, valued at USD 39 billion in 2024, is poised for robust growth, projected to reach USD 55 billion by 2029. This represents a healthy compound annual growth rate (CAGR) of 6.9%. Fragrances dominate the market, accounting for nearly 55%, while flavors contribute the remainder.

A major shift is occurring in the Asia-Pacific region, which now drives over 30% of global demand. This surge is fueled by rising disposable incomes, an increasing appetite for FMCG products, and the growing formalization of food and personal care sectors.

India’s Historic Bond with F&F

India’s fragrance heritage dates back centuries, long before modern aroma chemical processes. In the 16th century, Mughal Empress Noor Jehan discovered rose oil when droplets formed on a canal filled with rose petals. This attār-e-gulab became central to perfumery, with pure rose oil now costing up to ₹23 lakh per litre, as 40 kg of petals yield just 300 grams of oil.

India’s connection to jasmine, particularly Jasminum sambac, is equally significant. Known for its sweet aroma, jasmine oil is a prized extract, trading at ₹15 lakh per litre. This rich tradition in fragrance has since expanded globally.

India F&F market

The Indian Flavors and Fragrances market is estimated at USD 2.7 billion in 2025 and is projected to reach USD 4.1 billion by 2030, growing at a CAGR of 8.5% over the forecast period.

Unlike developed markets, formulated flavors and fragrances have a smaller share in India. Instead, there is a higher demand for aroma chemicals and essential oils, primarily driven by the unique incense stick market, which has specific fragrance preferences. Essential oils, in particular, are expected to experience the fastest growth, with a CAGR of 8.8%. Their popularity is driven by their natural, eco-friendly nature and health benefits, making them the preferred choice for many consumers. India holds a strong position in the global market, especially for natural ingredient supply, with a significant export focus.

For Instance: India is the world’s leading producer of mint oil, accounting for over 80% of global supply. It is also the top processor of mint-derived aroma chemicals, such as menthol and menthone. In FY24, India’s mint oil market was valued at USD 456 million, representing 58% of the global market, with a production volume of 34,000 tonnes.

Why do we find this interesting:

1) Sticky customer:
The formulated flavors and fragrances (F&F) segment is largely controlled by global suppliers, who have established significant entry barriers through extensive R&D investments, robust intellectual property protections, and powerful brand identities. FMCG companies are hesitant to change suppliers, as altering fragrance or flavor profiles could compromise customer loyalty.

2) Long-term demand visibility:
The F&F industry relies heavily on long-term contracts, particularly in formulation and aroma chemicals, where high switching costs—due to product approvals and regulatory requirements—ensure stable, ongoing demand.

3) Supply chain shift to India:
Global companies are increasingly shifting from in-house production to outsourcing to Indian companies, attracted by better economies of scale (almost 30-40% reduced production cost). This move allows them to maintain intellectual property protection while benefiting from cost efficiencies and high-quality production capabilities offered by Indian suppliers.

4) Premiumization tailwinds:
Global and domestic consumers are increasingly choosing products with ‘natural’, ‘clean label’, and ‘sustainable’ credentials. These claims allow F&F inputs to command a 15–30% price premium over conventional variants. Market segments like natural essential oils, fermentation-based aroma actives, and plant-derived molecules are growing at 2–3x the industry average.

5) Green compliance premium:
Companies that have adopted green processes, such as low-VOC solvents and bio-based feedstocks, are benefiting from pricing premiums as customers increasingly prioritize sustainability and compliance.

Conclusion

The F& F industry is more than a supplier of pleasant experiences—it is a strategic enabler of consumer trust, brand identity, and product differentiation across the global FMCG landscape. As the world shifts toward naturals, regulatory stringency, and cost rebalancing, India’s deep raw material base, process know-how, and growing R&D capabilities position it not just as a supplier—but as a partner of choice. What was once an artisanal legacy of roses and resins is now evolving into a high-margin, IP-driven export story.

For long-term investors, this is a space where sensory value translates into financial value—with predictable cash flows, expanding global interest, and room for both consolidation and innovation. The invisible architects of taste and scent are no longer operating in the background—they are stepping into the spotlight.