Marcum and Cornell's Johnson School of Management Study of U.S. Fragrance Industry Shows Impact of Commodity Price Volatility and Consolidation
Inaugural survey examines current trends and future growth in the U.S. fragrance industry; findings to be published in three-part series in Perfumer & Flavorist magazine
NEW YORK and Ithaca, New York – August 29, 2011 – The twin forces of volatile commodity prices and consolidation are driving the growing maturity of the U.S. fragrance industry, according to a new study released today by Marcum LLP and the Samuel Curtis Johnson Graduate School of Management at Cornell University.
The study, which will be published in a three-part series in Perfumer & Flavorist magazine beginning August 2011, examines the major growth drivers, competitive challenges and opportunities in the U.S. fragrance industry and is based on a survey of 70 companies.
“With heightened pressure on profits due in large part to fluctuating commodity prices and the move among major players to gain efficiencies through consolidation, the U.S. fragrance industry is showing clear signs of maturity,” said Kevin McGann, CPA, a partner at Marcum LLP and the firm’s fragrance industry practice leader. “In launching this annual survey, we are looking to provide U.S. fragrance companies with the industry insight and guidance they need to help grow their businesses in a challenging economic environment.”
Key survey findings include:
The largest U.S. fragrance companies (those with $80 million or more in annual revenues) are most impacted by volatile commodity prices: Seventy-five percent of all “large company” respondents strongly agreed that commodity prices “significantly impact” their profit margins while only 35% of small- and medium-sized companies (those with annual revenues between $1 million and $80 million) felt the same way.
Larger companies are gaining cost efficiencies through input cost sourcing as well as automation: Large companies automate 60% of their total manufacturing volume, while medium-sized companies automate a little over one-third of their volume and small-sized companies only 20%.
U.S. market growth is being driven largely by acquisition and consolidation while growth outside the U.S. is driven by innovation: Half of all survey respondents either strongly agreed or agreed that the majority of growth in the U.S. comes from “taking competition’s market share” while three-quarters of those surveyed agreed or strongly agreed that market growth outside the U.S. comes from “market expansions.”
Aroma chemicals and essential oils are either/both a rapidly expanding market segment and/or a highly profitable product segment in the U.S. fragrance industry: The highest growth companies in the study, those that experienced over 6% growth year-over-year, generated 20% of their overall revenue from the sale of aroma chemical and essential oils while “low-growth” companies (those with 1-2% growth year-over-year) generated half as much of their revenue from this product segment.
“We are pleased with the opportunity to partner with Marcum LLP on this industry study,” said Professor Manoj Thomas from Cornell University’s Samuel Curtis Johnson Graduate School of Management. “It is an excellent example of the Johnson School’s unique ‘performance learning’ approach wherein our MBA students partner with reputed companies to jointly address important business problems.”
This study was based on a survey of 70 U.S. fragrance companies by student researchers from Cornell University’s Samuel Curtis Johnson Graduate School of Management and was shaped via quantitative research with industry experts. The total of 70 companies was achieved after the elimination of bad data (i.e. participants that took less than 15 minutes to fill in the survey or skipped vital information such as revenue or number of employees). Survey respondents were offered modest incentives.
About Cornell University’s Samuel Curtis Johnson Graduate School of Management The Samuel Curtis Johnson Graduate School of Management is Cornell University’s graduate business school. It offers four MBA programs, as well as a PhD program. The student researchers involved in this progress did so during one of Johnson’s unique immersion programs—the Strategic Marketing Immersion. This intense, hands-on semester of integrated course and field work in a specific industry or career interest prepares students for summer internships and careers through:
Cutting-edge course work
Coaching by leading business practitioners
Problem solving under actual business conditions
About Marcum LLP
Marcum LLP is one of the largest independent public accounting and advisory services firms in the nation. Ranked among the top 15, Marcum LLP offers the resources of 1,100 professionals, including over 130 partners, in more than 20 offices throughout New York, New Jersey, Massachusetts, Connecticut, Pennsylvania, California, Florida, Grand Cayman and China. Headquartered in New York City, the Firm's presence runs deep with full-service offices strategically located in major business markets. Marcum is a member of the Marcum Group, an organization providing a comprehensive range of professional services spanning accounting and advisory, technology solutions, wealth management, and executive and professional recruiting. The Marcum Group companies include Marcum LLP; Marcum Technology LLC; Marcum Search LLC; Marcum Financial Services LLC; Marcum Bernstein & Pinchuk LLP; MarcumBuchanan Associates LLC; and Marcum Cronus Partners LLC.