REPORT HIGHLIGHTS

• The total u.s. market for food additives reached nearly $5 billion in 2001 and is expected to rise at an average annual growth rate (AAGR) of 3.2% to $5.8 billion in 2006.
• Flavorings and flavor enhancers are the largest of all classes of additives, almost $1.25 billion in 2001, growing to $1.46 billion in 2006.
• Formulation aids are a $1.1 billion dollar market that should grow to almost $1.3 billion in 2006 at an AAGR of 2.7%.
• Calorie reduction agents, while a billion dollar market, are not as large as previously expected because of the economic slowdown and product competition.
• Processing aids and others should reach $629 million in 2006.
• The market for acidulants should grow at a 3.3% AAGR to $483 million in 2006.
• The smaller preservatives and food colorants/adjuvants segments are each growing at an AAGR of 3%.

REPORT SCOPE

INTRODUCTION

This is an update of a BCC report with the same name last published early in 1998 and with data and forecasts from 1996 to 2002. Much has happened in the intervening years to justify this complete and new overview and update of food additives in the United States.

Many in the general public consider foods and the additives that go into them rather mature, dull, prosaic products and markets. As we show in this BCC report, nothing really could be further from the truth. Food additives are a complicated and quite technical , one that is getting more complicated each year as food and food additives suppliers work to create products that meet modern American society's demands for convenience, safety, taste, etc., while also being more "natural" and less suspect of being "chemicals."

The last point, i.e., the chemical nature of food additives, deserves more attention, for it focuses on some of the most important aspects of this report. By studying food additives, one can meet and interact with many or most of the variables that currently affect American (and world, for that matter) , public perceptions and politics. Consider some of these factors:

• First of all, food additives are, after all, chemicals, either synthetic or natural, and therefore, this is a "chemical" study with all its concomitant public and political perceptions and problems. Modern chemical technology is responding to public demands for new, convenient, yet still tasty and nutritious food.
• Second, these chemicals are in the foods we eat. This makes them even more suspect by an increasingly suspicious and nervous consuming public that demands a risk-free society. Witness the current brouhaha over genetically modified grains and foodstuffs to see just how concerned the public is (and how easily it can be manipulated by activists.) But that is another story.
• Third, chemicals that go into consumer products, by their presence can influence consumer-buying habits. Food additives are affected by societal and demographic changes. These are especially noticeable in the United States, with the many changes that have taken place over the last generation, e.g., two-breadwinner families, an aging population, increasing influence of different ethnic groups and other factors.

Mix all these factors together and we find problems, ironies, and yet also opportunities for those companies who can exploit both public desires and concerns. Researchers consistently find that what the public says it wants, and what it actually buys, often are not the same. By the same token, public desires and realities also are often at opposite ends of the spectrum. People want prepared foods, such as microwave foods, to look, smell, and most of all, taste as good as those prepared at home and come out of an oven. To accomplish these desires, more, not fewer additives usually are needed and are added to prepared foods.

STUDY GOALS AND OBJECTIVES

Our objectives in this study include the following:

• An overview of the changing U.S. food industry and its climate, including data and discussion of the American diet and food distribution systems and some major factors that affect markets for food and food additives.
• Definition and delineation of the food additives field by classifying these additives into workable categories, and technically describing these major categories and the most important individual products that compete for places in the market.
• Market analyses and forecasts for U.S. food additive market values, in constant 2001 dollars for our base year of 2001 and a 5-year forecast to 2006; in these market analyses we segment dollar markets and growth rates for food additives both by type of additive product (e.g., acidulants) and by food product application groupings (e.g., bakery goods).
• Discussion of current and new developments in food additive research and development, and reviews of important new technology areas.
• Discussion of important factors in the marketing of food additives, including distribution channels, impact of large food processors and end-user selection criteria.
• Trends and factors that will have the greatest effect on future food additives markets.
• Elaboration of the competitive atmosphere among food additive suppliers, both basic producers and formulators/distributors, including their relationships with end-user food processor companies.
• Discussion of environmental and regulatory considerations affecting food additives and their impact on products and markets.
• Identification and profiles of many of the most important food additives suppliers, their products, and their strengths and weaknesses.

REASONS FOR DOING THE STUDY

BCC commissioned this study to provide a comprehensive and updated reference for those interested in food and food additives, and for those in industries that both serve and benefit from foods and food additives. Unlike some other market studies that focus in great detail on one specific segment of food additives, such as acidulants or calorie-reduction agents, this report covers all the major categories in sufficient detail. This enables the reader to get a picture of the entire industry, including interactions between (and competition among) different classes of food additives.

Not surprisingly, considering the rapid demographic changes that have taken place in recent years in U.S. society (ongoing at this time and probably will remain so for the foreseeable future), the nature of foods sold in America continues to change. Not so much in basic unprepared foodstuffs such as fresh meats and produce, but in the increasingly popular prepared foods bought and served by a public that seems no longer to have the time to start every meal from scratch. We report_highlights many of these changes in this report and note their effect on markets for food additives.

CONTRIBUTION OF THE STUDY AND FOR WHOM

As we discuss in detail in this report, the U.S. food industry is very large, and the food additives industry that serves it also is large. Because of this huge infrastructure that includes many different kinds of companies ranging from small compounding shops to huge multinational chemical and food companies, this report should be of interest to a wide group of organizations and individuals. This includes people who are involved in the development, design, manufacture, sale and use of food additives, as well as politicians of all stripes and the general public. BCC feels that this report will be of value to technical and personnel in the following areas, among others:

• Marketing and management personnel in companies that produce, market and sell both foods and food additives, as well as those in organizations serving these industries, e.g., those who produce and install food processing equipment and parts, components, maintenance materials, and chemicals for cleaning and other uses.
• Personnel in companies and other organizations who may not work in, or serve the food additives industry, but who may want to do so.
• Financial institutions that supply money for such facilities and systems, including banks, merchant bankers, venture capitalists and others.
• Personnel in end-user food companies, communities and industries who purchase and use food additives.
• Government personnel, because food additives, since they are deliberately incorporated into foods, are watched and regulated by governments at all levels from the local to the federal.

SCOPE AND FORMAT

Depending on who is doing the categorization, there can be a large number of food additive categories, and no report can attempt to cover them all, especially low-volume exotic additives with small markets. In this study, we focus on the most important classes of food additives, both the older and mature products such as acidulants and colorants, and several newer, exciting products. This latter group primarily is the large segment we call "calorie reduction agents," including fat replacers and nonnutritive sweeteners.

The scope of this study is limited to those chemical products and materials specifically considered food additives. Two terms describe the type of materials considered here:

• Direct food additives, i.e., those intentionally added to food, as opposed to chemicals that for example, can migrate into food from packaging materials; the latter are called indirect food additives and are outside our scope.
• Nonnutritive food additives, as opposed to food ingredients. The simplest way to differentiate food additives from food ingredients is that additives tend to improve the food but do not add nutritional value. Thus, we exclude caloric sweeteners such as sugar and high fructose syrups, mineral and vitamin supplements, caloric flavorings like butter and chocolate usually added in larger than trace amounts, and other food ingredients.

This study covers food additive markets in the United States, and all forecasts are for U.S. sales. Some important food additives are imported, especially exotic plant-derived products from specific locations throughout the world. These are noted and included where appropriate; some of them are quite important. Because food additives are, for the most part, high value-added specialty chemicals, often produced to an end user's specifications, volumes in pounds are less meaningful than market values in dollars. For this reason, all our market analyses and forecasts are in constant 2001 U.S. dollars.

Because of the inherent imprecision in market forecasts for dynamic and proprietary markets such as food additives, all values are rounded to the nearest million dollars. Due to this rounding, some forecast values might not exactly agree with the percentage compounded average annual growth rates (AAGRs) that accompany the dollar forecasts. This discrepancy will be most apparent in small markets where 5-year growth, when rounded to the nearest million dollars, does not fit the projected AAGR.

This report in segmented into sections, of which this is the first.

The second section is a summary that encapsulates our findings and conclusions, and includes summary major market tables. It is the place where a busy executive can find the major findings of this study in summary format.

The third section is an overview of the food and food additives industries and their products. We start with a general discussion of food markets, diet, and distribution in the United States. Then we define and classify food additives, introduce readers to suppliers of these materials, and end with a discussion of some factors that influence food additives markets.

The fourth section is the first of our market analysis sections, this one devoted to market analysis by type and/or materials used. We segment food additives into seven major categories: acidulants, calorie reduction agents, colorants/adjuvants, flavors/flavor enhancers, formulation aids, preservatives and processing aids/others. The last group listed includes food additive enzymes, gelling agents, humectants and several other types of additives that do not fit into other categories.

The next section looks at food additive markets by major applications and end uses in a number of markets. These include bakery goods, beverages, confectionery, dairy products, meats/seafood, snack foods and some others. It concludes with two major matrices that array the materials and markets for the years 2001 and 2006.

The next is devoted to technology, with sections covering some important current and new technologies, competitive processes and products, and the state of research and development in the food processing and food additives industries.

The section following looks at structure, competitive factors and trends in the U.S. food additives industry, along with a broad sweep of global and markets. We look at suppliers and distributors of raw materials and food additives. We end with a discussion of the marketing of food additives and some international aspects.

The next section is devoted to a discussion of environmental, legislative, and regulatory factors affecting the food additives industry. These include federal laws and the regulatory process, state and local regulations, and packaging/disposal of food additives; also included is a comprehensive status report on the Nutritional Labeling and Education Act of 1990 (NLEA). We end with a discussion of public perceptions and policies relating to what goes into food.

The last narrative section is devoted to profiles of almost 100 of the leading supplier companies in the industry.

The report ends with an appendix containing a glossary of some important terms, abbreviations, acronyms, etc. used in the food and food additives industry and related technologies.

Some topics and materials covered in the text of this report are not included in our market-forecast tables. We include these topics and materials for completeness and to give the reader a full picture, for example, of new product R&D. However, they are either outside the scope of this study (such as discussion of many international activities) or may be too new to have yet developed into a measurable commercial market.

Many or most of the food additives covered in this report are chemical compounds or entities. Some of them have complicated chemical names, and often, more simple generic names or acronyms, such as BHT for butylated hydroxytoluene. Many of these are listed and defined in our glossary. Product trade or brand names usually are given, at least for the first mention, with ® or ™ symbols to indicate registered or other trademarks. Generic names are lower case without registration symbols. Many chemical names often are abbreviated and shown as acronyms, such as BHT shown just above.

METHODOLOGY AND INFORMATION SOURCES

Extensive searches were made of the literature and the Internet, including many leading trade publications, as well as technical compendia, government publications, and information from trade and other associations. Much product and market information was obtained from principals involved in the industry. Information for our company profiles was primarily obtained from the companies themselves, especially the larger publicly owned firms. Other sources included directories and articles.

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