February Treatt trends Designed to satisfy the high demand for new applications we reveal our new applications laboratory at our UK facility

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1 market intelligence February 2015 sweet orange oil The United States consumption of orange juice per capita has fallen almost 30% in just a decade, and the number of trees in Florida is down almost 40% over the past 15 years nutmeg oil The price of Indonesian origin has softened over the last year, most notably in the last month Treatt trends Designed to satisfy the high demand for new applications we reveal our new applications laboratory at our UK facility

2 in this issue 4 - citrus oils 8 - essential oils 10 - vegetable oils 11 - organic citrus oils 12 - aroma chemicals 14 - specialty chemicals 16 - Earthoil 18 - Treatt trends 2

3 welcome Many economies continue their recovery at a pace which is surprising countless analysts. Whilst it is typically the volatility associated with many of our ingredients and their feedstocks that captures the attention of buyers and sellers, it is the global economic upturn and its impact on exchange rates that is having a more profound influence than usual. Institutional investors may find a safe haven in the US dollar. Unfortunately, for those of us in an industry underpinned by the dollar, its strength is changing the perceptions of origins and offers by the day. The effects of this are further exaggerated when many key raw material prices remain higher than historical averages. Just one more factor in the constantly evolving flavours and fragrances industry.

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5 sweet orange Orange oil has firmed significantly in the last couple of months and supply has become quite constricted. The ongoing drought has now been deemed by Brazil s Environment Secretary as the worst water crisis in Brazil s history, and certainly there are numerous other officials who concur. The combination of drought, poor juice and oil yields, the lowest aldehyde levels recorded consistently from any one Brazilian crop and a further reduced crop in Florida have made for extraordinarily difficult circumstances. Recent news reaching mainstream buyers that the 2015 Brazilian crop is also expected to be poor has now pushed orange prices higher than they ve been since the autumn of 2011, the year orange chaos really first began. The 2015 Brazilian crop, in terms of box numbers, is unknown at this time, but we do know that it will be a late crop with multiple blooms which is likely to continue to put pressure on supply and prices. Multiple blooms are problematic as it means much smaller quantities of fruit available at any one time and processing will last for a longer period of time as fruit maturity is stretched out. Besides a crop such as this being more costly to the processors in terms of efficiencies and logistics, the unwelcome result is lower quantities of oil available than usual in any given month. Florida is processing but yields for both d-limonene recovery and orange oil are down. Although it is relatively normal for this time of year, with the market so unsteady this is just another factor that is adding to an already trying situation. The United States consumption of orange juice per capita has fallen almost 30% in just a decade, and the number of trees in Florida is down almost 40% over the past 15 years. Of course, greening (the Huanglongbing disease we have so frequently referred to in our market reports), continues to plague the industry, forcing growers to now spend almost three times per acre on grove care than they did before the disease spread across the state. It feels somewhat gloomy at the moment, but we are hoping that the Valencia crop will produce some better fruit, oil yields and aldehyde levels whilst keeping in mind that we still have at least another month of possible freeze weather to stave off. We will see processing of Valencias begin in the next six to eight weeks. orange terpenes and d-limonene Following orange oil, the orange terpene and d-limonene market has also firmed. There seems to be a general lack of supply worldwide, whilst demand remains high, causing the price to jump at least 30% in just under three months. However, this market can be very fickle as many buyers and end users have substitutions they will quickly reformulate to when orange simply becomes too expensive, which can then cause a quick drop in both demand and subsequently price. We urge you stay close to your Treatt sales representative for the latest on these quickly moving markets. lemon Lemon oil continues to drift downwards off the highs of last year, but slowly. Prices of fresh lemons in Europe remain high which makes it expensive for both Italian and Spanish processors to buy fruit for production. New crop California lemon oil prices remain extremely high with limited availability as demand is strong with only a moderate crop. Argentinian production is still some four months away so, although we still believe the cost of lemon will come back to more normal levels, it appears those levels are still many months out. Globally, there are now improved supplies of other lemon products including

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7 terpenes, essence oil and aroma and whilst prices remain above historical norms they have also come down to more reasonable levels. We have noted some very poor quality on the market and even oil that is not from the named fruit, so we encourage our customers to be diligent in their QC efforts. distilled lime (key lime) As is usual, Peruvian lime processing has been very slow and late to start. Fruit deliveries have been sluggish and fruit prices are beginning to rise and expected to be up at least 20% from the end of last year s processing season. The positive news is that the crop in Peru is very good with healthy fruit on plentiful trees and we should see steady volumes offered by mid- March. Mexican production for the January/ February crop is reduced, as was predicted due to the unseasonable rains late in. Processors are now competing for fruit volumes that will allow them to maximise production efficiencies but this, of course, causes higher oil prices. It is a little early, but the typically larger summer crop for key lime in Mexico looks to be mediocre at best and the sentiment is that this market will remain strong, though both availability and prices are certainly better than they were this time last year. persian/tahitian lime Prices for expressed lime have fluctuated dramatically in the last 18 months. We recently saw a small dip in the prices being offered but lately they have climbed back up again. There are no large quantities of stock at origin and there are limited resellers, but still material is available, so we expect this market will stabilize, albeit at higher prices until the new crop, which should arrive in June. The crop in Mexico (Persian lime) looks to be good, but the lime in Brazil (Tahitian lime) is not looking so promising. grapefruit As we reported in November, the grapefruit market is very firm as many buyers scramble to find the quality they need. Florida s production is forecasted to be 15 million boxes this season, with only four million boxes of white. Although Florida remains by far the world s largest supplier of grapefruit oils, this is the ninth consecutive year of reduced crop size for the state, who only 15 years ago produced more than three times this number! Consumers are simply not drinking grapefruit juice and the unfortunate poor interactions between grapefruit juice and statins (cholesterol reducing drugs), which was long ago made clear to the public, certainly hasn t helped the cause. Those disappointing factors coupled with the huge losses of trees and fruit from the hurricanes in Florida a decade ago has simply driven supply and demand to extreme lows. Grapefruit juice and flavours are still heavily consumed in the Japanese markets; in fact their usage has increased over the past 3-4 years. But because supply has decreased, there has certainly been a firming effect on pricing. We expect this trend to continue, though do hope that we can hold it somewhat stable as we have learned that this product can and will be formulated out when prices rise too high. tangerine Production for Dancy tangerines is complete in Mexico, but the usual slow process of winterisation is now taking place. This market remains firm but availability is a bit healthier this year thanks to a good crop. Other tangerine varieties have also come on to the market, again with higher than average prices but will certainly assist with increased availability. Treatt have a diversified portfolio of tangerine products and welcome your inquiries. bitter orange Unlike sweet orange oil, bitter has remained relatively steady over the past few years and continues to be so. There are a few regions where bitter is grown and processed so although Brazilian origin crop has been down, other areas such as the Dominican Republic have stepped in and there seems to be decent availability. This market can swing rapidly with large losses and then surges in demand but for now it seems it has found some stability.

8 essential oils cardamom With limited availability, the price of cardamom oil has risen considerably. The general shortage of cardamom pods was caused by a number of contributing factors including an unforgiving attack by thrips. This resulted in some growers cutting down entire plantations before harvest as they were rendered worthless. Thrips are considered to 8 be the most destructive insect pests and are the greatest threat to cardamom growing regions. They lacerate the plant tissue and feed on the exuding sap causing the pods to become malformed and to lose their characteristic aroma. Volumes were further reduced by heavy rains driven by El Niño conditions which made access to plantations for harvesting extremely difficult. With the next harvest not due until October, prices are set to remain firm.

9 coriander Despite the increased planting and the good crop in in Eastern Europe, the price of seeds remained high, with almost the entire crop being exported for the spice market. Due to a shortage caused by crop failure in India last season seed prices peaked at over US$2000/mt but have slowly fallen to around US$1300/mt with the looming Indian crop, which is expected to yield bumper volumes during February/ March. Some traders in Russia held on to small parcels of seed in the hope that prices would increase further. They have since sold it on to oil producers who have been able to pay the higher price given the strong demand for oil and the extreme prices users are prepared to pay. There is limited oil available in the market and with new season production still 8 months away prices will stay high. nutmeg The price of Indonesian origin has softened over the last year, most notably in the last month. The main reasons for this are the exchange rate (strong US dollar vs a weakening rupiah) and excess stock versus low demand in both the spice and oil markets. Oil is plentiful because, after a major shortage due to diseased nutmeg trees in Sumatra around 5 years ago, new trees were planted which are now bearing fruit; young fruit being ideal for the processing of oil. As the spice market is also quiet, Sulawesi nutmeg (which is normally sold exclusively for spice) is also being processed and is adding to the stock of oil. Prices are anticiped to remain soft. ginger The recent Chinese crop has done little to alleviate the tight market conditions. With most of the root being consumed as spice, oil is scarce and prices remain persistently high. It seems that these conditions will prevail until the second harvest in April/May. The market has gently firmed over the last year but not drastically, so little is being reported. The current price for dried roots is RMB 3.00/500gms - which is the same as it was in May last year. August when the bulbs should be ready for oil production. These need to mature for a couple of months before being used as raw material that is too fresh contains too much moisture to achieve desired yields. cassia It seems that availability of Chinese oil is plentiful due to low demand and increasing volumes of Vietnamese oil reaching the market. Oil of Vietnamese origin is slightly different in quality and therefore restricted to the production of natural benzaldehyde. Prices have dropped between 5% and 10% since October but it is difficult to say what will happen with pricing likely to be critical to the pending spring crop volumes. citral Availability is not an issue with many suppliers at origin making unsolicited offers in the hope of moving stock before the Chinese New Year. This is when extra cash flow to pay annual bonuses to their staff members is a priority. anethol and aniseed Although it is supposed to be the season for oil production, the market remains quiet due to the competition from synthetic anethol as well as anethol from other sources such as Indian basil. This has not affected the price as the labour costs in China remain high and farmers are loathe to process too much oil while the market remains uncertain. garlic The garlic oil saga continues and what little oil there was in China is almost exhausted. The new crop should be harvested around June but the price is expected to continue to rise until

10 vegetable oils grapeseed The abundant grape harvest has come early this year in Africa and Earthoil is contracting seed with their established partners. As the wineries will only separate, clean and dry the seed to order do let us know your requirements. We can supply coldpressed grapeseed oil organic and conventional, crude or deodorised. pomegranate The pomegranate harvesting season is over and the seeds have been separated and dried. In fact the first lot of seeds has already been pressed in our factory in Kenya and the precious oil is on its way to Earthoil UK. We can supply organic or conventional oil. macadamia The worldwide shortage of organic macadamia oil is set to continue through December - February is the down season in Kenya and Earthoil will only start pressing macadamia oil again in March. With many clients having to switch to conventional cold-pressed oil be sure to let us know your requirements. 10

11 organic citrus oils With the new winter season in full swing in Europe, the Treatt/Earthoil team have just returned from a field trip researching the market in Sicily and Southern Italy. lemon Grown from Palermo to Messina and down to Catania, varieties are Femminello and Monachello and processors are now starting to build stocks following a relatively calm winter. Although it did snow on New Year s Eve for only the second time in 30 years, this adverse weather did not affect the fruit, as it was so short lived. The orchards are looking healthy, as is the fruit. After the volatility of it is expected that lemon oil from the new harvest will ease the market for both conventional and organic oil. Lemons for processing-note the variety of sizes and shapes bergamot Production, which normally begins in mid-december, was a few weeks late this year due to the milder weather which delayed the ripening of the fruit. Furthermore, lack of rain coupled with the lower yields has caused the volume of oil produced to decrease by some 25% and prices have increased accordingly. Immature lemons Organic Bergamots

12 aroma chemicals Jan 02 Feb 02 Mar 02 Apr 02 May 02 Jun 02 Jul 02 Aug 02 Sep 02 Oct 02 Nov 02 Dec 02 Jan Chart shows Brent Crude oil prices (USD)

13 Crude oil prices fell sharply in the fourth quarter of as robust global production exceeded demand. After reaching monthly peaks of $112 per barrel (bbl) and $105/bbl in June, crude oil benchmarks Brent and West Texas Intermediate (WTI) fell to $62/bbl and $59/bbl in December, respectively. We should see pricing fall not only for vanillin, ethyl vanillin, coumarin, phenyl ethyl alcohol and diphenyl oxide, all of which are derived from petrochemicals, but others too due to the reduction of energy costs used in manufacture and shipping. gum turpentine Gum turpentine pricing has also come down so items like terpineol, terpinyl acetate, iso bornyl acetate should also reduce in price. ethyl maltol and maltol The biggest production facility for ethyl maltol and maltol has stopped production this winter. The factory is located in northern China where temperatures are below -10deg C and the raw materials are freezing and need to be melted before use. However, the yield in winter is also very low so the factory has decided to stop running temporarily. This situation is expected to last until April/May. fatty acids The following products are naturally derived and most come from Malaysia, making the product very susceptible to changes in the weather which is relatively unpredictable. This time last year there were monsoons that threatened crops and towards the end of last year a hurricane near Indonesia damaged plantations. Many products are from palm kernel oil although coconut oil is a very good substitute but tends to be more expensive. Damage to coconut crops in one part of the world can sometimes lead to increases in palm kernel derived products as people start switching and demand grows. octanoic acid/ decanoic acid Global demand remains high and supply short, keeping prices up. Material is available but with extended lead-times and on occasions on allocation. We believe the situation is expected to remain the same for alcohol C-8 and C-10 After significant cost increases in the market seems to have stabilised although supply remains insufficient. Inventories are low and any non-forecasted demands would constrict the market further, which in turn would extend already long leadtimes. For Alcohol C-12 in the short term we do not foresee any supply issues and prices may even soften. raspberry ketone Material is somewhat limited. The main reason for this is due to ongoing pollution issues; as a result the number of manufacturers has reduced. We believe that only one significant Chinese factory remains. This factory has improved the quality of materials by using a new process, but there are still teething problems which continue to delay output. Demand is building due to this bottle neck which only makes the situation worse.

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15 With recent price fluctuations and uncertainty in the market for key citrus items, flavourists are looking at top notes to get more cost-effective citrus formulations. At Treatt we have been working with our manufacturing partner, Endeavour Speciality Chemicals, to develop materials for enhancing citrus blends and imparting a unique character when developing profiles such as yuzu and chinotto. These materials include: 2,3-epoxyoctanal Fema 4657 Cas Nature identical in oats and black tea. Fresh, zesty, sherbert, citrus, floral green odour. 8-methylnonanal Cas Fruity, berry-like, plastic, apple, green, woody, citrus. 4-mercapto -4-methyl-pentan -2-one Fema 3997 Cas Nature identical in Yuzu and grapefruit. Tropical, fruity, catty, meaty odour. 2,3-epoxydecanal Fema 4659 Cas Green, unripe citrus peel, fatty, cucumber, plastic, waxy, tropical, fruity odour. tetradecanal Fema 2763 Cas Nature identical in citrus. Fatty, waxy, dairy, creamy, coconut, pear, fruity. 12- methyltridecanal 10% Fema 4005 Cas Nature identical in meats. Fatty, tallow, waxy, citrus odour and taste.

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17 FA FA Life has existed on Earth for 3.6 billion years. 200,000 years ago, humans started shaping the world around them, felling trees, developing agricultural land & extracting the planet s resources. Now, in the 21st century, rising demand for consumer goods, food and energy, coupled with a rising population can only accelerate the strain on resources. Issues such as climate change, leading to rising temperatures, strain on agricultural land, together with the depletion of natural resources, such as minerals and fossil fuels are the subject of mainstream concern. So, why does sustainability matter to personal care manufacturers? Consumers and corporations alike are more aware of the need for ecofriendly products and manufacturing processes in order to create a greener world. Global commitments to sustainability have been made through high profile responses from brand owners and regulatory bodies to encourage the production of environmentally friendly products. Personal care brands are continuously under regulatory scrutiny due to their products very nature of being applied to the skin. The cosmetics industry is therefore investing in a raft of Corporate Social Responsibility (CSR) and sustainability initiatives in a drive to provide greener options. While ethical, natural and sustainable all vary from a regulatory perspective, there is an intrinsic link in the eyes of consumers. Manufacturers must take all of these aspects into consideration when developing new products. P L A N T A T I O N S A sustainable process is not always an easy process, but the value added can dwarf any obstacles encountered. Alongside the sustainability trend, there is also heightened demand for new ingredients from across the world with demonstrable provenance and performance. To marry the trends, sustainable and ethical sourcing is important and this means that new opportunities are opening up for rural populations from across the globe - with a fair deal for all involved. Our pioneering personal care division - Earthoil - works to keep personal care manufacturers ahead of the trends. Three sustainable ingredients to look out for in 2015 are argan oil, moringa oil and ylang ylang oil. Producers must also establish whether the product is already certified to a recognised sustainability standard. Organic certification, for example, can provide proof of whether environmental practices are sustainably sound and organically stable. The concept of sustainability is still fairly new to the cosmetics and personal care industry but a growing number of personal care formulators create products that are both ethical and green in origin. It is about supporting communities to provide safer working environments while producing ingredients that are F R A G R A N C E F A M I LY F R A G R A N C E F A M I LY F R A G R A N C E F A M I LY Hop Oil Ginger Oil Fennel Oil Clove Bud Oil Cinnamon Leaf Oil Cinnamon Bark Oil Cassia Oil Cardamom Oil Black pepper Oil Wintergreen Oil Thyme Oil Tea Tree Hydrosol Tea Tree Oil Tagetes Oil Sweet Marjoram Oil Spearmint Oil F R A G R A N C E F A M I LY Siberian Fir Oil Sage Oil less harmful to both personal and global welfare. In short, sustainability and recyclability remain industry defining issues for packagers and their customers. Furthermore, companies now seek to decrease energy consumption to enjoy improved profitability and manufacture products that meet their customers expectations in both cost and performance. Earthoil is dedicated to projects which benefit the lives of other people. You too can be involved in our projects. If you would like more information, please contact sales@earthoil.com or visit: Miquel Boix Tomas Special Projects Director, Earthoil Earthoil Fragrance Wheel Earthoil s fragrance wheel is a new take on an old idea and demonstrates the relationships between the fragrance families. It also shows whether Earthoil can supply oils as organic or fair trade. Contact us at fragrancewheel@earthoil.com for a poster or desktop version Mace Oil Lemongrass Oil Nutmeg Oil Star Anise Oil Lemon Ginger Sesquiterpenes Rosemary Oil (all types) Ravintsara Oil Ravensara Oil Pine Needle Oil F R A G R A N C E F A M I LY Anethole ORGAN I C ORGAN I C SECONDARY FRAGRANCE FAMILY ORGAN I C Balsam Copaiba Anethole Natural 21/22 FA IR TRADE Cedarwood Oil IR TRADE ORGAN I C F R A G R A N C E F A M I LY Peppermint Oil (cornmint) Peppermint Oil Parsley Herb Oil FA Menthol Crystals Patchouli Oil Sandalwood Oil IR TRADE Vetiver Oil ORGAN I C SECONDARY FRAGRANCE FAMILY SECONDARY FRAGRANCE FAMILY SECONDARY FRAGRANCE FAMILY Bergamot Oil ORGANI C IR TRADE IR TRADE F R A G R A N C E F A M I LY ORGAN I C FA IR TRADE FA Lavender Oil Citronella Oil Lavandin Oil (all types) Juniper Oil German Chamomile Oil Frankincense Oil Eucalyptus Oil (all types) Clementine Oil ORGAN I C Clary Sage Oil ORG AN I C Grapefruit Oil Grapefruit Terpenes L C Basil Methyl Chavicol Oil Caraway Oil F R A G R A N C E F A M I LY Lemon Oil Basil Linalool Oil Lime Oil F R A G R A N C E FA M I LY Litsea Oil F R A G R A N C E F A M I LY Mandarin Oil Orange Oil Orange Essence Oil Orange Oil Blood Orange Oil Juicy Cabreuva Oil Sinensal 20% Nat Ex Orange Geraniol Natural Ex Citronella Ylang Ylang Oil Buchu Oil Geraniol Ex Palmarosa 90% F R A G R A N C E FA M I LY F R A G R A N C E F A M I LY Geranium Oil Germacrene D Natural Helichrysum Oil Ho Wood Oil Jasmine Absolute Neroli Oil Niaouli Oil Palmarosa Oil Roman Chamomile Oil Rose Alcohol Rose Water Rose Oil Petitgrain Oil P L A N T A T I O N S first impressions Fragrance is the first impression your customer has of your formulation. You need to make a good initial sensory impact so whatever fragrance challenge the formulator has been given, Earthoil will have a solution. From Siberia to South Africa and from India to Italy, Earthoil sources pure and natural essential oils from around the world for formulators to incorporate into personal care products. Whether you choose a natural isolate (indented on the wheel), an organic grade or one of our increasing number of Fair For Life fair trade ingredients, you can be assured of provenance and performance; quality assured. Enjoy! key fragrance family citrus floral fruity herbaceous spicy woody secondary fragrance family citrus floral fruity herbal balsamic minty green herbaceous spicy woody organic fair trade personal care from people who care...

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19 The shape of the food and beverage industry is forever changing and trends are the driving force for this growth. To support the spirit of innovation that embodies our business Treatt commissioned RTS to investigate and analyse the future flavour trends for the industry, encompassing the wise and diverse expectations consumers now possess. RTS collated this custom analysis by not only surveying emerging trends and the vast array of products already available but also by identifying far-reaching trends which will define the flavour market and food industry for years to come. The resulting analysis is fascinating, and is forming the basis for some very interesting meetings with customers. If this is something you would be interested in discussing further then please do contact us. Alongside this external research and in support of its findings we are excited to reveal a new Applications Lab at our UK facility. In this interview with Karen Cocksedge - Applications Manager at Treatt we investigate what the new lab has to offer and most importantly what it means for our customers going forward. What was the main reason for creating this new Applications lab? The main driver for this is increase in demand for new applications, which has meant we have exceeded our existing capacity. We want to be able to expand the department to ensure we meet the needs of the customer. We have also identified a need to brew beer onsite which will enable us to recreate specific beer types and offer flavour solutions to our customers in beer application. How will our customers benefit from this? The benefits to the customer are huge, firstly having a purpose built lab offers the exciting opportunity to invite customers to Treatt and work with them much more closely than we previously were able to facilitate. The aim is to then be able to work with our customers on specific project briefs in real time, formulating blends, conducting taste trials, hold project meetings etc. all in one location. How will the lab be used exactly? The lab will be used to cover all aspects of beverage application work, whether it s in beer, spirits, soft drinks etc. We will use it to brew beer onsite using a dedicated brewing room. We can conduct formal taste panels using a dedicated sensory room to ensure reproducibility. It will also be used as a meeting area to introduce the sales team to new products. What will you create in the lab? The main creations from the lab will be demo drinks, which the sales team can use as an additional tool to present our beverage flavours to new and existing customers. For example, we will be preparing demo drinks to promote our new flavour concepts which reflect the trend data outlined in the RTS reports.

20 For more information on all our products and services please visit our website.