The division will be a wholly owned subsidiary of the Japanese company and will, perhaps most importantly, serve to export cheaper raw materials and products to the rest of the Takasago operations in Asia, Europe and the US.
Likewise the operation will also import and sell Takasago products from its overseas markets to be sold to the burgeoning consumer base in China. Currently both the food and cosmetic industries - the company's primary focus - are growing at a rapid rate.
With the establishment of the division, Takasago now has five companies in China. Shanghai-Takasago Union is a joint-venture company situated in Shanghai that has flavour and fragrance manufacturing capabilities, which caters to Takasago's Chinese, Japanese and multinational customers.
Focusing mainly on the food industry, Hua Li is a joint-venture situated in Xiamen and produces oolong tea extracts, while in Xiamen, Hua Ming is a joint-venture which manufactures green tea powder. In Guangzhou, Takasago has a wholly owned subsidiary which was recently established for the production of powdered flavour and related products.
Takasago's new Shanghai division will be used as a trading company to support the operations of the other Takasago companies in China. The sales target of the trading company has been set for $5 million (€3.8m) and is expected to grow to $10 million by 2010.
Company president Hiroki Take said that the establishment of the Shanghai division would help to strengthen Takasago's business in China as well as solidifying its position in both the Asia Pacific region and globally.
"This will facilitate a more efficient route of delivering goods to Takasag's customers in China," Take said. "It will also serve as the supply hub for the Takasago production centres for their Chinese raw material requirements, which will significantly contribute to the company's cost reduction programme."
In a similar move, the world's number two fragrance and flavours company, International Flavors and Fragrance, has also recently announced the expansion of its manufacturing capabilities in China. In November last year the company said that it was commencing construction of a $29 million chemical aroma production facility in the Hangzhou Economic Development Area in . The plant is expected to open at the end of 2006 and will reach full production capacity in 2008.
Currently the market for cosmetics alone is valued at €3 billion, but with GDP running at over 8 per cent annually and consumer sales following very strong growth patterns, industry analysts estimate that this figure will increase ten-fold by the year 2010.
With growth rates for the processed food industry running at similar rates, this means that manufacturers in both industries are frequently reporting that specific flavours and fragrances are becoming increasingly difficult to get hold of.