Overview
Our project this year is to produce ambrein, santalene and santalol in the yeast S.cerevisiae. Our aim is to produce high-quality fragrance fixative at a lower production cost. In terms of generate real economic effect, we created a business plan for our project----Aroma Anchor.
Firstly, we analyze our industry pain spots and the value of our projects, combined with the data we got from the Human Practice, we clarify what the industry pain spots are and what the true market size looks like.
Apart from this, we analyzed the technical advantages and opportunities of our project, and clarified which point our project should focus on. Moreover, we made a five-year business plan. Our first two years will be spent in the lab optimizing strains and iterating production capacity, and as our production capacity rises, we'll start pilot testing in the third year, and in the fourth and fifth years we'll scale up to industrial levels. We have created a financial model for our project's business plan.
Finally, we hope that our project will be truly applicable to the world in future and change the industry!
The Status-quo of frangrance industry: High Price and Soaring demand due to the limited supply chain
High price for santalol and ambrein
In order to find out the current market situation, we arranged an interview with Mr.Lorenzo, a perfumer from an American fragrance studio. He mentions that the price of natural santalol is around 12,000 USD/kg. High quality sandalwood oil extraction relies on the heartwood, which undergoes a lengthy growth cycle. As for ambrein, he says the purchase price of ambroxane is 6000 USD/kg. The chemical synthesize production is workable, but its yield cannot fulfill the market need.
Soaring demand and limited supply for fragrance fixative
According to our interview with Ms.Zhen, the operational manager of a car aroma diffuser company, she states that fragrance fixative as an ingredient can enrich the intensity and gradation of the fragrance. So the fragrance fixative plays an important role in her company's product recipe. The fragrance fixative has been widely used and there's a increasing demand for it in the perfume industry but the raw material comes from certain specific areas with limited supply. Result in an exorbitant price.
In conclusion, the pain spots of the current industry can be summarized in the following: The limited supply chain and high demand for fragrance fixative have led to the exorbitant price of fragrance fixative.
Ambergris Market
Predominantly propelled by escalating demand for perfume and pharmaceutical additives, among other applications, the Ambergris market is poised for substantial expansion in the forthcoming years. Data pertaining to the market size of Ambergris is typically not publicly accessible, and its monitoring lacks the rigor seen in more conventional commodity markets. The trade and utilization of Ambergris are encumbered by a compendium of legal and ethical constraints, emanating from its origin in sperm whales, a species safeguarded under international regulations.
Nevertheless, as per research insights, it becomes evident that notwithstanding the vicissitudes induced by the COVID-19 pandemic and the Russia-Ukraine conflict, the global Ambergris market exceeded a valuation of several million USD in the year 2022. Furthermore, buoyed by favorable feedback from key stakeholders, vendors, and industry participants, the global Ambergris market is poised for substantial growth in the ensuing years.
Simultaneously, owing to its rarity and the challenges associated with its procurement, ambergris commands a premium price in the market, rendering high-quality ambergris a luxury commodity. The most aged and prized white ambergris, for instance, commands a staggering $30 per gram, while its darker and less oxidized counterparts are typically available at around $10 per gram. Consequently, only established major brands can viably incorporate such costly additives into their products, making it an impractical option for smaller-scale brands.
However, our biosynthetic production process offers the prospect of production stabilization and a significant reduction in unit costs, all the while maintaining a high standard of quality. This breakthrough not only aids larger brands in cost reduction but also extends an opportunity for smaller brands to access and incorporate our product, thereby democratizing its usage for everyday consumers.
The Sandalwood oil market's growth is propelled by its multitude of advantages. In 2022, the Sandalwood Oil Market was valued at USD 0.1 billion. The industry is poised for significant expansion, with a projected growth from USD 0.11 billion in 2023 to above USD 0.2 billion by 2032. This growth is indicative of a Compound Annual Growth Rate (CAGR) of 6.99% during the forecast period spanning 2023 to 2032.
The segmentation of the Sandalwood Oil market, based on type, includes Natural Sandalwood Oil and Lab-created Sandalwood Oil. Notably, the natural Sandalwood oil segment dominated revenue shares in 2022. This is largely attributed to the increasing consumer preference for natural and environmentally friendly products, particularly in the realms of personal and healthcare. Additionally, in cosmetic and pharmaceutical applications, natural Sandalwood oil is more cost-effective to produce and presents fewer adverse effects when compared to its lab-created counterpart.
Based on region, the North American market for Sandalwood Oil is capturing a dominant share of 45.80%. Notably, the Canadian Sandalwood Oil market exhibited the fastest growth within the North American region, which can be attributed to the burgeoning acceptance of natural products and heightened awareness of the importance of leading a healthy lifestyle.
By means of extensive interviews and comprehensive research, we have acquired a profound understanding of the prevailing market perspectives and applications of pure Sandalwood oil, as well as the challenges faced in each segment. For instance, the aromatherapy sector exhibits a preference for natural, botanically sourced Sandalwood oil. In contrast, the automotive aromatherapy and fragrance industry emphasizes the need for a consistent and substantial supply of Sandalwood oil. In this context, we are enthusiastic about our existing product offerings, which align harmoniously with the demands of our primary customer base.
Strength and weakness
According to our HP with the traditional fragrance companies, there are several strengths for our project. In the interview with Ms. Zhen which mentioned before, if we can reduce the cost of production, it will be a great advantage for us in the market. The biosynthetic santalol can get rid of the problems of unsustainability due to the rare raw materials. Animal-derived raw materials are often prone to health risk caused by the poor extraction process, and carry the smell of blood, however, the biosynthetic ambrein contains no problem brought by the poor quality control of natural extracts.
However, In the first few years, our output may not reach a high quantity due to the R&D investment, which will become our short-term weakness. According to the HP with traditional fragrance company, the aromatherapy industry may not be our target industry. They state that the natural essential oils are usually considered to has a more comprehensive effect.That will also be our weakness because our production is a synthetic methodology.
Opportunities and threats
Due to the current situation of high price and low quantity, our synthetic fragrance will be benefited hugely from such opportunities becase the yeast fermentation cuts the production cost significantly while guarantees a higher quantity. The production process is stable and sustainable in the controlled fermentation tanks with regulated conditions. That means the production yield will be standardized and industralized with manageable cost.
Moreover, consumers nowadays are inclined to look for everyday products that are more sustainable and environmentally friendly. Take natural ambergris and sandalwood essential oils as an example, ambergris can bring harm to endangered species sperm whales; high-quality sandalwood essential oils need to cut down sandalwood that has been growing for more than 20 years, and extract it from its heartwood, which requires a lot of water resources to be used for irrigation. Our products require far less water to produce than natural growth with shorter time, making them more sustainable.
Nevertheless, according to the interview with both Ms.Zhen and Mr.Lorenzo, we found out that in order to promote our products, we need to educate our consumers with the aim of dispelling their safety concern about genetically modified production of santalol and ambrein. The educational cost will be an extra expense during its marketing effort, which could be defined as our threat.
Five-year business plan
In the first year of our plan, we will continue using shake flask fermentation as our primary method for production. The fermentation scale will range from 10ml to 10L. During this time, our main objective will be to optimize the strains we are working with, improving their productivity and efficiency. We will conduct extensive research and experimentation to identify the most promising strains for our product.
Moving into the second year, we will scale up our fermentation capacity to meet the growing demand. We will transition from shake flask fermentation to larger fermentation tanks. The fermentation scale will range from 10L to 500L. This increase in capacity will allow us to produce larger quantities of our product and cater to a broader customer base.
By the third year, we aim to achieve quasi-industrial level production. The fermentation scale will be further expanded, ranging from 500L to 2 tons. This substantial increase in fermentation capacity will enable us to produce on a larger scale and meet the needs of our customers more efficiently. Additionally, we will conduct customer trials during this year to gather feedback and make any necessary adjustments to our product.
In the fourth and fifth years, our focus will be on achieving industrial-level production. We will gradually increase our production capacity step by step to meet the growing demand. In the fourth year, we plan to reach an annual output of approximately 200 tons using 2-ton fermentation tanks. This significant increase in output will require efficient scaling of our processes and careful management of resources.
By the fifth year, we aim to have a 100-ton fermenter in place, allowing us to further expand our production capabilities. This will position us as a major player in the market, meeting the demands of a wide customer base and establishing ourselves as a reliable supplier.
Cost Financial Model
Condition 1: Factory Allocation
We will have a factory covering an area of 3000 square meters, if we materialize our production from 500L to 2t in the third year. It will be divided into a storage area of 200 square meters, a dosing area of 300 square meters, a preparation area of 100 square meters, a fermentation area of 1,000 square meters, a separation and purification area of 300 square meters, an effluent treatment area of 500 square meters and also a packaging and transportation area of 500 square meters.
The fermentation uses 2 tons of fermentation tanks, each covering an area of 30 square meters and a total of 33 fermentation tanks. The fermentation volume is estimated to be 1500L. Fermentation takes place 4 times a month.
Medium Cost: The cost of our medium consists of yeast extract at a price of 26CNY/kg, tryptone at 12CNY/kg, and glucose at 1.25CNY/kg as raw materials. The amount of yeast extract was 10g per 1L medium and the amount of tryptone and glucose was 20g per 1L medium. Thus our medium cost per 1L consisted of 0.26CNY of yeast extract, 0.24CNY of tryptone, and 0.025CNY of glucose, for a total of 0.525CNY per liter of medium.
Ambrein Extract Liquor Cost: Our ambrein requires the use of n-hexane at a unit price of 6CNY/kg as an extractant, and the amount of n-hexane is 12% of the medium. This means that one liter of medium requires the use of 120 ml of n-hexane. The density of n-hexane is 0.659g/ml, multiplied by the amount of 120ml gives us that we need 79g of hexane. After unit conversion, the cost per gram of hexane is 0.006CNY. 0.006CNY/g * 79g = 0.474CNY, which is the cost of n-hexane per liter of medium.
Santalol Extract Liquor Cost: Our santalol requires the use of dodecane, which has a unit price of 13CNY/kg as an extractant, and the amount of dodecane is 10% of the medium. This means that 100 ml of dodecane needs to be used for one liter of medium. The density of dodecane is 0.753g/ml, which multiplied by the amount of 100ml gives us that we need 75.3g of dodecane. After unit conversion, the cost per gram of dodecane is 0.013CNY. 0.013CNY/g *75.3g = 0.979CNY cost of dodecane per liter of medium.
Meanwhile, the fermentation yield of ambergris was expressed by Ya and that of santalol by Ys.
When all capacity is used for the full production of Santalol, The total cost per month for 619602.6CNY, which is about 84.7 thousand USD.
It is known that Ya and Ys represent the fermentation yield of ambergris and santalol, respectively. So we can get the final result by means of expression.
Because the Ya is unknown, while Ys equals 0.65g/L. We just calculate the Santalol profit financial model.
Condition 1: Ys = 0.65g/L
Condition 2: Back to our interview with Mr.Lorenzo, the market price of Santalol is 12,000 USD/kg, which is about 87807.6 CNY/kg
Financing Plan
By interviewing Ms. Zhen, she shows great interest on our fragrance fixative because the santatol and ambergris are too expensive to be used for them before. She says her company has been looking for more varities of fragrance with affordable price to attract the customers.
She states that her company would like to make the seed investment on our R & D if we can give them a timeline to promise the production capacity. At the same time she suggests us to reach out some daily necessities companies like hair shampoos, soaps and body washes, candles to raise the money by providing them some trial samples when the production stage is on the first and second year. Here is our financing plan.
Based on the five-year plan, we have successfully drawn Ms.Zhen's interest to make a seed investment on our project on behalf of her company Shenzhen Feitian Car Telecommunication Co.,Ltd. We are working on a detailed prodcuts introduction with developmemnt plan for her company. The seed investment will be around USD 20,000, which will help us produce the first batch of samples by the end of 2023.
In the initial 1-2 years, by sending pilots to the daily necesissties companies in South China by the networking of Ms. Zhen, particularly P&G, our objective have USD 100,000-200,000 finacing to facilitate research and development and to establish a foothold in the market.
Over the subsequent three to four years, we aspire to secure an investment of USD 1-3 million to reach to the large-scale production. This funding will be allocated towards expanding our production capacity, establishing manufacturing facilities, ensuring a stable large-scale production infrastructure, and fulfilling incoming.
Our Vision
Ultimately, we want to achieve an annual production capacity of 100 tons, and accounting for 35% of the flavors and fragrances market share. In the end, we hope that all consumers will benefit from our project and have access to affordable and sustainable biofragrance fixatives!