By Allen Liao
Along with rapid development of China’s tobacco industry, continued formation of big competitive cigarette brand families and further improvement of tobacco varieties, the demand for high-quality cigarette fragrance and flavor has kept growing over recent years, creating broad prospects for future development of the business of cigarette fragrance and flavor production in China.
Changes in demandDemand for cigarette fragrance and flavor changes in keeping with the development of cigarette markets.
In a recent interview with Chinese news media, Dr. Xiong Guoxi, a technician with China Tobacco Hubei Industrial Corporation (CTHIC) in central China’s Hubei province, said that as the largest cigarette consuming country in the world, China annually consumes more than 2 trillion cigarettes. Over the past 10 years, the domestic cigarette fragrance and flavor production sector has developed rapidly and has played an important role in promoting the development of cigarette brands and the development of the flavor of Chinese-style cigarettes (CSC).
Presently, domestic sales of medium- and high-grade cigarettes are increasingly concentrated on a small number of big cigarette brands, meaning that the demand for high-quality cigarette fragrance and flavor is also on the increase. Of the 36 key cigarette brands designated by the State Tobacco Monopoly of China in the first half of 2009, the single-brand sales volume of Baisha, Mount Hongtashan and Honghe each exceeded 1 million cases (50 billion cigarettes), and Hongmei, Huangguoshu, Double Happiness, Yunyan and Mount Huangshan each exceeded 700,000 cases, accounting for 68.57% of the Top Ten big cigarette brands sales.
The formation of several types of CSC has also contributed to development of cigarette fragrance and flavor.
So far, the four flavor types represented by the four members of the Huaxiluowang brand series (Chunghwa, Yuxi, Yellow Crane Tower and Furongwang) have all met with consumer approval. In particular, Chunghwa is a representative of the strongly aromatic type, with its strong, rich, sufficient, sweet-smelling and harmonious tobacco aroma. Yuxi is a representative of the delicately aromatic type, with delicate, natural and mild tobacco aroma, generating a strong mouth feel of the original flavor of tobacco. The Yellow Crane Tower (YCT) is a representative of the lightly aromatic type, with a fine combination of the original flavor of tobacco with a natural herbal flavor; with its light, delicate, sweet-tasting and extremely mild tobacco aroma enhanced by a natural flow and adequate eruption of aroma. Furongwang is a representative of the middle aromatic type between the delicately aromatic type and the strongly aromatic type, but it is generally on the delicately aromatic side. Furongwang generates a perfect original flavor of tobacco, creates a clean, delicate and smooth mouth feel, gives off a fine tobacco smoke and has a coordinated and mild aftertaste.
Besides, there are also the natural herbal flavor type in the Jinsheng brand family, the original tobacco aroma type in the Double Happiness brand family and the delicately sweet and aromatic type in the developing Yunyan brand family.
Three major rivalsPresently, there are three major rival players in the domestic cigarette fragrance and flavor market.
Huabao International is the biggest company specializing in the production of fragrance and flavor, taking 43% of the market shares alone. Today, Huabao International is the leading supplier of cigarette fragrance and flavor to the best-selling cigarette brands in China. Huabao International has established production bases in Shanghai, Yunnan, Guangdong, Jiangsu, Shandong and other regions, and has also established research and development centers in Shanghai, Yunnan and Guangdong in China, as well as in Germany.
Besides Huabao International, there are also a number of small, specialized producers that have taken a share of the market, such as Shanghai Apple Fragrance and Flavor Co., Ltd. But they are all relatively small businesses.
In reality, apart from specialized fragrance and flavor producers, tobacco manufacturing enterprises with strong funding capacity have independently conducted research and development of cigarette fragrance and flavor with their own characteristics with a degree of success. The two most successful ones are CTHIC and China Tobacco Jiangxi Industrial Corporation (CTJIC) in east China’s Jiangxi province.
The Yellow Crane Tower – a high-grade cigarette brand of CTHIC that has risen over recent years – is a representative of the delicately aromatic type, with its aroma stemming from fragrance and flavor independently developed by the corporation itself. The technicians at the YCT Science and Technology Park have succeeded in independently creating the ultra-purifying extraction technology of "fivefold extraction" and "fourfold separation", by which they extract effectual active constituents of more than 300 types of monomer fragrance from natural herbs that coordinate effectively with tobacco aroma, for use in YCT brand cigarettes.
CTJIC has independently developed a special fragrance, named Jinsheng Fragrance, for producing its Jinsheng brand cigarettes. Through continued exploration and development over the past 15 years, Jinsheng Fragrance has become a representative fragrance of the natural herbal aroma type. In producing Jinsheng brand cigarettes, CTJIC adds Jinsheng Fragrance, which is actually an essence extracted from herbs that can produce a pharmacological action. Cigarettes treated with Jinsheng Fragrance give off an obvious sweet smell of natural herbs, and the smoke is natural, comfortable, moistening and potentially less harmful. Jinsheng Fragrance is now in its third generation of development.. CTJIC has invested RMB46 million (US$6.6 million) in the Jinsheng Fragrance Extraction and Purification Center at the Jinsheng Industrial Science-Technology Park. Construction of the center was completed on May 19, 2009, So far, the center is the only fragrance production facility of China’s tobacco industry that extracts essences from traditional Chinese medicinal herbs. It is expected to become a research center and experimental base for the tobacco industry with a mission to develop technologies for reducing the content of harmful substances in cigarettes through the use of natural herbs.
Some securities traders have reported that the market capitalization of the domestic cigarette fragrance and flavor industry has grown by more than 9% over the past three years. Xiong Guoxi believes that the tobacco industry of China has to spend over RMB3 billion importing cigarette fragrance and flavor annually, a fact that has not been lost on transnational fragrance and flavor giants.
In particular, Mane of France has penetrated the cigarette fragrance and flavor market the furthest. Mane has been ranked among the Top Ten suppliers of cigarette fragrance and flavor for the domestic tobacco industry. Mane has established research and development centers in Shanghai and Beijing, and operates a factory in Tianjin. In 2007, Mane established another factory in Shanghai.
Hertz & Selck of Germany, which specializes in the production of cigarette fragrance and flavor, has also begun to strengthen efforts to develop domestic markets. In 2006, Hertz & Selck sold about 3,000 tons of products in China. Some Chinese tobacco manufacturers are now its regular customers.
TechnologyPresently, there are quite a few major types of cigarette products available in China, together with the rise of several new types of cigarette products, such as the strongly and purely aromatic Dihao brand, the pure and aromatic Golden Yellow Leaf brand, the milky fragrant type of Golden Bridge brand and the continuously fragrant Lanzhou brand. All these products rely heavily on the supply of corresponding fragrance and flavor to reach the ideal sensation, and this cannot be realized without the support of scientific-technological research.
Some fragrance and flavor producers with foresight, including Huabao and Apple, have established their own research and development centers or have developed cooperative relationships with big research and development institutions as well as universities in China or other countries to jointly develop research and development bases, to strengthen and promote scientific-technological research and development.
However, to some extent, there is a lack of mechanisms for sharing achievements in scientific-technological research in China, which in turn negatively impacts research progress. It was reported that CTHIC has invested nearly RMB20 million over the past five years developing a package of technologies for extracting, separating and purifying fragrance and flavor using unique medicinal herbs grown in China using ultrasound, microwave and supercritical carbon dioxide extraction, cold pressing, and so on. CTHIC owns the exclusive intellectual property rights to these technologies.
"We have reached breakthroughs in solving hard technological problems while other enterprises of the tobacco industries of China or other countries are still busy finding solutions to them." Said Dr. Xiong Guoxi, speaking to Chinese news media. "In consideration of factors of market competition and incompleteness of the system of legal protection of intellectual property rights in China, we presently do not dare to disclose the breakthroughs we have made. For the time being, the unique technologies we have developed are still used by our cigarette factories only. Each year, we can save up to over RMB10 billion in technological imports alone. Moreover, we are trying to extend this expertise to the food and chemical industry fields, manufacturing products for daily use, in terms of scientific-technological research and development."
In order to ensure that relevant intellectual property rights are protected, Xiong Guoxi added that: "It is advisable to strengthen exchange mechanisms in the research and development of new technologies for producing cigarette fragrance and flavor. Only by doing so can the industry succeed in preventing overlapping research and development and in promoting more breakthroughs in technology research and development. The relevant enterprises also need to increase investment in the innovation of technologies for producing cigarette fragrance and flavor, in order to swiftly develop their own advantages, and gain greater room for their future development."
