Background and Challenge

The client, a North American producer of flavor and fragrance ingredients, is experiencing strategic threats to its core business from production in emerging markets. The client has historically been cost-advantaged relative to producers who utilize alternative feedstock.  Most of the client’s feedstock is produced in North America, and the market has been relatively “closed”, with the shipping of feedstock from one region to another typically not cost-effective. Most of the production of alternative feedstock is in emerging markets, and producers have typically not been able to meet quality needs of customers.

However, the alternative feedstock prices in emerging markets have seen substantial volatility, and with high prices, emerging market producers look to compete for North American feedstock.  Additionally, emerging market producers are improving along the quality dimension and are becoming increasingly competitive.  Customers are showing greater willingness to switch to emerging market suppliers. As a result, the client asked for L.E.K. Consulting’s assistance in understanding the evolving landscape and the client’s likely future position.

Approach and Recommendations

We developed future outlook scenarios for emerging markets feedstock, including evolution of demand and underlying drivers (e.g., pricing, production costs). We also developed a view of the historical and forecast evolution of customers’ behavior and decision making (and potential future reaction to scenarios).

As part of one scenario, we evaluated whether the emerging market producers were going to source from North American feedstock suppliers, thereby jeopardizing the supply volumes to our client.


The client gained an understanding of the likely evolution of feedstock development over the next several years, the competitive position of emerging market producers, and an effective strategy to handle this emerging threat.

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