Flavours and fragrances: Cycles

Why flavour demand holds up even in hard times

What this tab covers How its prices and margins move: past booms and busts with price levels, the spread or margin that the industry watches, the drivers of the cycle and the metrics to track.

F&F compounds do not trade on public prices, so cycles show up in listed companies' growth and margins. Demand is defensive because it follows consumer staples, but customers destock when inflation or recession hits. Input costs (naturals, petrochemicals, energy, tariffs) are passed through with a lag of two to four quarters, so margins dip when costs rise fast and recover when price increases land. Aroma chemicals are more cyclical, with Chinese supply capping prices. Natural raw materials have their own spikes driven by weather.

The spread to watch Gross margin of F&F houses

Givaudan gross margin (43.5% in 2025) shows how far price increases cover input costs. SHK's gross margin was 42.7% in Q1 FY27.

Booms and busts

2022-2023
Energy, raw material and freight inflation; houses raised prices repeatedly, then customers destocked in 2023 (indicative).
not public; Givaudan like-for-like growth slowed before rebounding to 12.3% in 2024 (Givaudan 2025 results)
2024
Restocking and price increases drove the strongest growth in years.
Givaudan like-for-like growth 12.3%, EBITDA margin 23.8% (CHF 1,765 million) (Givaudan)
2025
Growth normalised; tariffs and input costs squeezed gross margins; Chinese competition hurt fragrance ingredients.
Givaudan sales CHF 7.47 billion, like-for-like +5.1%, gross margin 43.5% vs 44.1%, EBITDA 23.4% (Givaudan)
FY2026-27 (India)
SHK's quarterly margin swung with raw material costs and inventory build.
SHK EBITDA margin 9.4% in Q4 FY26 and 13.4% in Q1 FY27 (SHK results)

What drives the cycle

Consumer staples volumes. Sales of food, drinks and home and personal care set demand.
Natural raw material harvests. Weather and disease in mint, vanilla and citrus regions cause sharp price spikes.
Chinese aroma chemical supply. New Chinese capacity pushes down molecule prices and squeezes ingredient margins.
Regulation. IFRA restrictions and EU allergen rules force reformulation, which creates new briefs.

Metrics to track

Metric	Why it matters	Where to track it
Givaudan, Symrise, IFF and dsm-firmenich organic growth	Sector demand read	company results
Gross margin trend	Pass-through of input costs	company results
Indian mint and menthol prices	Natural menthol supply	Spices Board, trade press
Chinese aroma chemical export prices	Pressure on ingredient makers	trade press (indicative)