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HDFC Securities Retail Research Report
SH Kelkar and Company Ltd. is one of the largest domestic players with around 10-12% market share in flavour and fragrance market and with ~20% market share in the domestic fragrances market.
The company along with Givaudan and Firmenich control more than 60% of the market. The fragrance market is highly consolidated with the top-five players controlling 60-70% of the total market.
Flavour and fragrance constitutes key components of a variety of consumer products and hence are critical raw material for fast moving consumer good companies.
It is a key ingredient behind developing different variants of consumer products and suppliers of particular ingredients are usually not changed during the lifecycle of the product.
On account of the significance of this raw material, consumer companies largely deal with only established suppliers and this acts as a barrier for new entrants to break in. The sticky nature of the business thus acts as a moat for SH Kelkar.
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