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Untapped markets like Indonesia, Thai & Korea hold lots of promise.
Dec 30, 2021

The South East Asian market holds immense potential for growth with a population in excess of 625 million. Large and small businesses must tap into this thriving market and increase their exposure across the region. The South East Asian taste market is valued at US$1 billion. The market for food flavours and flavour enhancers in South East Asia is expected to register a CAGR of 7.1% and 4.1% respectively during the period 2018-2023.

Japan and China remain dominant markets for food flavour and flavour enhancers. Consumer preferences are skewed towards regional/ ethnic flavours. The market for food flavours is classified into natural flavours, synthetic flavours and flavours that mimic natural flavours. Szechwan, Indian Tikka masala, Korean Sushi are the flavours that drive this market.Nestle has introduced more than 300 flavours of their products in Japan. The flavour market is segmented into beverage, dairy, savoury, bakery & confectionery, of which the beverage segment holds major share of the market (34%) followed by savoury and snacks. Spray-dried flavours in demand for use in beverages as they are easily soluble.However, the prohibitive prices of vanilla and natural ingredients remain a challenge in expanding the market for flavours.

South East Asian cuisine uses umami (an ethnic flavour associated with glutamate). These salts are used as taste enhancers in processed foods. Monosodium glutamate finds wider application in Japanese soups and in traditional cuisine. Combination of glutamates and nucleotides is used to reduce the salt content in food products without compromising on their taste.

The regulation on monosodium glutamate in countries like India however poses a major deterrent. Flavour enhancers are used in various food products, such as noodles, soups seasonings, and condiments. Noodle is a food of choice in South East Asia; so all ingredients used in noodles continue to witness an uptick in demand. Though China and Japan continue to be markets with a sizeable growth potential, untapped markets like Indonesia, Thailand and South Korea hold lots of promise. Inorganic growth (companies acquiring other companies making natural and organic flavours etc.) is another trend in this region.

Economic progress in South East Asia is a good development but it is squeezing the time available to consumers to enjoy a traditional meal at a leisurely pace. Snacking and on-the-go consumption of food is one of the developments.Convenience will remain the primary driving force in South East Asia food ingredients market. Focus has to be on matching taste and nutrition as these cannot be mutually exclusive.

As consumers increasingly become aware of holistic health they tend to scout for products that are healthy and nutritious. Traditional dietary habits are changing with people skipping meals or breakfast due to work pressure. Processed foods with a high nutritive quotient are sought due to the convenience that they offer. Consumers desire snacks that can act as a substitute for meals from a nutritional perspective. Shift in consumption patterns are observed wherein consumers are opting for low sugar/ high protein alternatives rather than consumption of chocolate and confectionery. Consumers are becoming more discerning as they correlate their digestive health with their dietary habits. There is a perceptible awareness among consumers in the South East Asia region that current consumption patterns will have an impact on their health and ageing in the future.

As consumers start associating their mental wellbeing with physical health, demand for products that aid recuperation and improve cognitive health will continue to rise. Indian herbs like Ashwagandha therefore have immense potential along with functional snacks that can be consumed on the go and are healthy too. Yogurt is a food item that holds great appeal and so ingredients for dairy market can be expected to grow in the future.

Indonesia holds a lot of promise in this region due to the rapid growth of middle class. Some 90% of ingredients are imported and this can lead to opportunities for local and international companies. Consumer interest in botanicals, organic and natural healthy foods and healthy snack options along with focus on improving children’s health (to fight obesity) are factors that necessitate deflection of the attention of food ingredient manufacturers on Indonesia.

If ingredient manufacturers can offer institutional customers (like hotels and restaurant chains) high quality low cost ingredients, this can elicit greater interest from the latter.

Working with local customers to innovate and deliver authentic tasting products will remain a priority for businesses in the F&B space. Taste will play a crucial role in formulation of innovative and sustainable diets. Smaller brands that can introduce new flavours and new formulations are assured of success. Low calorie and high protein fortified food products will continue to be in demand.

Affordable pricing and strong distribution will be factors driving growth. For example, fruit and vegetable shaped and flavoured ice creams are becoming popular in Indonesia with flavours such as mango, watermelon and corn. Granola bars are finding favour in Thailand with growing preference for ingredients like cereal, oats, chia seeds, almond, cashew nuts and malt. Consumers in Thailand prefer products that are free from ingredients like milk, wheat flour, refined sugar and monosodium glutamate. Flavours like green tea, strawberry, mocha, honey and banana appeal to the younger customers in South East Asian region. Japanese food like miso, yakitori and karaage along with Japanese food ingredients are becoming popular in this region.Lysozyme, extracted from egg white is an ingredient that can extend the shelf life of processed foods; Yuzu fruit (a source of antioxidants) has an aromatic flavour and is used to garnish dishes.

Product positioning around taste, nutrition and convenience will determine success in this market. Proliferation of digital channels has led to consumer research on healthy food ingredients. Besides proteins, innovations in ingredients like dietary fibres, probiotics, omega fatty acids meet the needs of savvy consumers seeking products to satisfy their physical and mental health goals. Innovation in food ingredients will remain at the forefront of new product development in the market for convenience foods.

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