The global specialty ingredients market size was valued at USD 93.3 billion in 2014 and is expected to expand at a CAGR of 5.4% over the forecast period. Increasing health consciousness among consumers is driving the demand for high quality and greener products, which, in turn, is expected to boost the market growth. Rising disposable income, along with changing consumer lifestyles owing to rapid urbanization, is expected to increase the demand for specialty ingredient in various end-use industries, such as food and beverage, pharmaceutical, personal care, and animal feed.
Increasing demand for leisure products in various countries including China, India, Indonesia, Malaysia, and Japan is expected to drive the food and beverage industry over the next seven years, which, in turn, is expected to positively impact specialty ingredients market growth. High demand for processed products on account of advancements in processing and preservation technologies like cold storage, climate control storage, and pasteurization is expected to fuel the product demand over the forecast period. Asia Pacific is expected to witness significant growth on account of increasing production of processed foods and innovation in segments, including bakery and confectionery, dairy, oils, and meat products. Therefore, such factors are expected to augment product demand in the food and beverage industry.
Decreasing use of harmful chemicals including phthalates, aluminum salts, and parabens, coupled with constant efforts by numerous multinational corporations to shift towards sustainable products, has contributed to increasing consumption of organic personal products. Cosmetics containing natural ingredients including aloe vera, tea extract, lime content, and black sugar are expected to gain traction among consumers over the next few years.
Increasing usage of natural ingredients such as herbs, vegetables, and fruits in skin care products with anti-aging properties is expected to fuel the product demand. Rising awareness among consumers regarding benefits of natural ingredients including dandruff protection, hair fall control, and shining effect is expected to have a favorable impact on the specialty ingredients market growth.
Growing health awareness among consumers is expected to shift their focus towards nutritional and healthy diets. Rising health complications such as diabetes, cardiovascular problems, and obesity, particularly among the younger generation, has prompted a shift in dietary trend towards healthy and nutritional diet and away from junk food, alcohol, and meat consumption.
A wide range of raw materials is used to derive specialty ingredients for various application segments. The type of raw material totally depends on the application segment including food, pharmaceutical, personal care, animal feed, paints and coatings, and building and construction. In recent years, customer requirements are changing mainly owing to increasing health issues, environmental impacts, lack of nutrition in diets, and skin anti-aging problems, which, in turn, is negatively impacting overall supplies.
The food and beverage application segment dominated the global market. Global manufacturers use specialty ingredients to enhance product quality, color, texture, and add nutritional value. Shift in consumer behavior towards organic products is expected to boost overall growth over the forecast period.
The food and beverage industry is mainly driven by increasing demand for organic items and consumer shift towards healthy lifestyle. The industry is expected to witness significant growth in developing regions, mainly Asia Pacific. The industry is expected to witness high growth in BRICS and Middle East in light of domestic consumption, which, in turn, is expected to drive global market in the near future. Based on the product type, food and beverage is broadly categorized as sensory and functional products.
The personal care segment accounted for a revenue share of 9.8% in 2014. The segment is expected to witness high growth over the forecast period owing to growing skin aging problems, coupled with skin diseases caused due to harmful UV radiations and other noxious constituents. The personal care industry utilizes specialty ingredients to develop skincare, haircare and oral care products. Manufactures are investing in R&D initiatives to develop technological solutions in the personal care industry. Personal care is further segmented into active and inactive products.
The pharmaceutical industry is expected to witness high growth over the forecast period on account of technological advancements, coupled with increasing customer expectations. The segment includes active and inactive ingredients. Government initiatives to develop well-established healthcare facilities and infrastructure in emerging economies, including Asia Pacific and Middle East and Africa, are boosting the segment growth.
North America dominated the global market and accounted for a revenue share of 31.7% in 2014. Increasing demand for organic products, mainly in the food and beverage and personal care industries, coupled with rising investments in R&D initiatives to improve health issues, is expected to drive industry demand in the region over the forecast period.
Asia Pacific was the second largest regional market on account of high product demand in emerging economies mainly India, China, Japan, and South Korea. Aging population, coupled with changing consumer lifestyle, is expected to drive the overall revenue in future. Europe also covered a significant share in the global market but is expected to expand at a lower CAGR over the forecast period.
Middle East and Africa and Central and South America are also expected to witness significant growth over the forecast period. Over the forecast period, consumers are expected to increase their spending on personal care products, mainly skin care, which, in turn, is expected to drive overall demand in the Middle East and Africa. The market in Central and South America is expected to expand at a CAGR of 5.4% over the forecast period owing to increasing demand for personal care ingredients in the region.
Key manufacturers involved in the business are Naturex; Frutarom; Ashland Inc.; Archer Daniels Midland; DuPont; Inolex; and Associated British Foods. There is a low degree of integration across the value chain. Most of the suppliers are based in North America. Key specialty ingredient suppliers include Eli Fried Inc.; St. Louis Food Ingredients; Additive Solutions; CK Ingredients; KF Specialty Ingredients; Vantage Specialty Ingredients; and Royal DSM. The market is marked by the presence of a number of multinationals and smaller firms. Small firms offer technical expertise but are generally financially unstable.
Therefore, multinationals are acquiring small firms in order to expand their business and gain technical expertise. Mergers & acquisitions are expected to increase in the market over the forecast period. Manufacturers are expected to expand their business in Asia Pacific to offer affordable and high quality products. New entrants are expected to enter into the industry in the future on account of high demand in the countries of Asia Pacific, mainly China, India, South Korea, and Japan.
Stringent regulatory framework in Europe for synthetic and unhealthy food products is compelling manufacturers to develop innovative, healthier, and greener solutions for the food and beverage industry. Regulatory framework is expected to favor in Asia Pacific over the forecast period. Growing consumer demand for specific and customized products is driving the need for high performance technological expertise as well as research & development initiatives.
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Weaker consumer demand for lifestyle and wellbeing products due to social restrictions and lockdown policies shall have a negative impact on the demand patterns of cosmetic ingredients and certain categories of food additives. However, easing restrictions and public discourse about restarting economic activities in the consumer goods marketspace indicates that, the recovery of demand is imminent. The report will account for Covid19 as a key market contributor.