Riskgaming

“There are more astronauts alive than there are perfumers”: the complex supply chains of scents

Description

While the natural world is fecund with a dazzling diversity of smells, the landscape of scents in our daily lives is far less organic. A handful of tightly-held fragrance companies and an extremely small guild of perfumers carefully craft the scents that go into every product we purchase, from the scent of clean laundry in our detergents to the orchestrated beauty of scents that make up a modern perfume. Our memories are — without too much exaggeration — controlled by roughly 600 people globally.

Where do those scents come from though, and why are people increasingly concerned about understanding the ingredients that make up spectrum of smells that waft over us every day?

Returning to “Securities” for our second of two episodes on the science of smell, CEO and founder of Lux-backed Osmo Alex Wiltschko joins host Danny Crichton to talk about the extraordinarily intricate supply chains and the astonishingly pricey essences that go into making our products distinctive to our olfactory system.

We cover the dynamics of the fragrance industry, the incredible scale of land required to make scents today, how perfumers perform their craft, the endlessly complicated supply chains of these products, why we have so few alternatives to natural scents, how climate change is causing dramatic shifts in ingredient prices, and finally, a bit on the future of green chemistry.

Transcript

This is a human-generated transcript, however, it has not been verified for accuracy.

Danny Crichton:
Hello and welcome to Securities, a podcast and newsletter devoted to science, technology, finance and the human condition. I'm your host, Danny Crichton, and today we have returning guest and Lux portfolio founder and CEO of Osmo, Alex Wiltschko. Alex, welcome to the program again.

Alex Wiltschko:
Danny, it's lovely to be back.

Danny Crichton:
Yeah, it's been at least a couple of weeks. It's unbelievable it's hard to schedule. It definitely was not recorded back to back, but recently, we did an episode with you, published a few weeks ago, spoken a few minutes ago about development of AI and machine learning and smell. And today, in this part two of trying to understand digital faction and the fragrance industry, I wanted to get into the molecule and chemical side of things because all of our products today have chemicals in them, either intentionally or unintentionally, but most typically intentionally.

Our food products have smells that are added to make them smell like barbecue or mesquite or whatever the case may be. Consumer product goods, our shampoos and soaps, all of them have carefully calibrated smells to give you that cleanliness feel and everything. But that industry is not that highly regulated, but is very controlled by a couple of companies. On top of that, there's growing concern about the future of a lot of these chemicals as we learn more about them. And so, I just wanted to, in this episode, get a sense of the lay of the land of this industry because it's one that is very tightly held, mostly private, very little publicity. And my only experience with it, frankly, was in Eric Schlosser's book Fast Food Nation, which I read in I think middle school. What is the fragrance industry like today?

Alex Wiltschko:
It's a deep question because there's a lot of folks in the industry and there's a lot of folks that are contributing to different parts of it. And I think it's important to remember that the core of what all these companies are trying to do is to help make memories, to help make interesting memories, to make life a little bit more interesting, a little bit more vibrant. The life cycle really starts with the earth. There are plants that have beautiful odors, they can be grown in mass quantities and they can be harvested in mass quantities, and basically distilled like you'd make a whiskey or gin. And instead of getting a liquor back, you get an essential oil that contains a very, very concentrated essence of that flower or that wood or other plant or animal product. That can be added minute quantities with lots of other ingredients to create a particular perceptual experience, a particular smell.

And there's another starting place for ingredients, which is as rest of the chemical industry. The same kinds of companies that might make lubricant or glue, and in some cases, they can do that a lot more efficiently than it can be done with agriculture. When that happens, the fields of land that are used for growing rose or lavender could be used instead for food. So I think there's an argument to be made that ethically produced, high potency and safe ingredients that are produced synthetically as opposed to agriculturally actually can be better for the earth. I think there's a lot of details, there's a lot of nuance to that, but giving my personal opinion that there's a lot of options for how to get to beautiful memories.

And then those ingredients are taken and they arrive at factories that can mix them in particular quantities. And there's a particular kind of profession that dictates how to mix them, and that's called a perfumer. And a perfumer is a very, very interesting profession, and there are very, very few of them. There's actually more astronauts alive than there are perfumers. Of those, there's a very few number of master perfumers. Those are the profession who've reached the highest level of their craft. It's hard to say, maybe 30 or 40 in the whole world. And that group of people are the folks that make our memories. They decide what tide smells like, therefore what clean laundry smells like. They decide what a given fragrance is going to smell, therefore what your high school crush will always smell like in your memory. They make your memories.

Danny Crichton:
Right.

Alex Wiltschko:
The particular formulas that they come up with, one part of this, two parts of that, 10 parts of this other thing, often there's dozens or hundreds of ingredients in their formulas, those get mixed in factories. And these drums or buckets of this fragrance oil gets added into products. And in the case of [inaudible 00:04:19] fragrance, it's just ethanol. In the case of detergent or hand soap, it's the things that actually will do the cleaning of the product. And then they get put into a package and shipped, and you can buy them at the retail store. So that's the whole chain of that. And where the fragrance industry sits is from the ingredients part, all the way to the mixing of the fragrance and then shipping it out to be blended with other things that make a product functional. They're a B2B business. There're manufacturers.

Danny Crichton:
I find this interesting. Last year on the podcast, we had a couple guests, two CEOs of large trading house companies in the commodity space, and specifically food commodities. We were talking a lot about the supply chain crisis going around the world in 2022. And in that case, you're just trying to get grain to market. And we were talking about the scale that that requires. You've got to have mills and it has to be lined up with the rail, it has to be lined up with ships. And so, even if most of the stuff is working, you're blocked by the fact that if it ultimately has to get onto a craft that's not there, it's not going to get to market.

But in this world, you are dealing with, I think, a very different type of problem, which is you're trying to make a soap, it has 20 different smells that go into that. A couple of those are agricultural, so they're coming from flowers or you're trying to get the smell of rose or something that goes into your hand sanitizer, whatever the case may be. And so, you have to agglomerate multiple different pieces from around the world all at the same time. So there seems to me to be much more dependency on reliability than even something like food production.

Alex Wiltschko:
You're completely right. There's a couple caveats, but in general, you're completely right. The supply chain for fragrance is incredibly complex. And so, that's why, at least I think, the fragrance houses are a set of firms that have really clear, delineated responsibilities because managing the supply chain for fragrances is ridiculously hard because the diversity of sources that things come from is huge. And also, the scale at which some of these ingredients need to be harvested is also huge. I mean, to get one kilogram of rose oil, you need ... Let me just look this up. Let me make sure I got it right. You need four tons of roses.

Danny Crichton:
Oh, wow.

Alex Wiltschko:
That's just the petals. Just the petals. That's 1.6 million rose blossoms.

Danny Crichton:
Yeah, the petals aren't very heavy, if I remember from the last time I had roses 15 years ago.

Alex Wiltschko:
No. Imagine four tons of just the petals. What a way to get crushed by the wave that falls on top of you. There's worse ways to go, but the scale of that and all of the other plant material that's thrown out and the use of that land that could be reapportioned to something else, it makes you think. Back to the supply chain issue, that's just one ingredient. By the way, one kilogram of rose oil, $20,000. It can be higher, it can be lower, but these are really, really precious materials. And they smell beautiful, by the way. Real rose oil from Bulgaria or Morocco is just intoxicating. It's amazing, but you wonder whether or not you can do that in a more environmentally efficient way.

Danny Crichton:
Let me ask you a very basic question. A lot of these ingredients coming from agricultural fields or natural sources, sandalwood, rose, et cetera, why not just make these in a factory? Why can't they just be automatically artificially created?

Alex Wiltschko:
Some of them can be, and we've got really, really nice replacements for some smells. And in fact, for some of these smells, you just straight up can't get them any other way. A great example is lily of the valley. It grows wild, like one at a time, or in small patches. But not only can you not really plant it in bulk, like you need to do for roses, but you can't steam distill it. The flower is just too delicate. It does not yield its essence to these kinds of extraction technologies.

But perfumers can take their nose, they can smell the flower, and they can collaborate with chemists who can come up with interesting molecules that are just a puzzle piece of the total scent. And perfumers can put these puzzle pieces together to come up with a great replica of what this flower smells like that ordinarily would never be accessible because they don't smell all the time. You have to go in specific seasons, sometimes specific times of the day. Some flowers only emit scent at twilight or in the morning.

Danny Crichton:
Oh, wow.

Alex Wiltschko:
And to have those scents and be able to replicate them, you've got to have this collaboration of art and science. Now, this is time-consuming and we've not been able to replicate even more than a tiny sliver of the total number of smells that are out there in flowers. We've got lavender, we've got rose, we've got lily of the valley. We've got a bunch of flowers that we can use en masse. We have synthetic replicas of these smells, maybe dozens or hundreds of these are available to us, but there's potentially millions of flowers with unique scents that are out there.

I remember walking through the Jardin des Plantes in Paris, and I passed a really tall sunflower, and I just was hit with the smell of Tootsie Rolls. And I was like, "Who's eating Tootsie rolls?" And I walked around this garden trying to figure out where the freaking Tootsie rolls were because it was so strong. And then I ended up tracing it to this sunflower that was ... I'm tall ... it was taller than me. It was like seven feet tall, and I put my nose right in the middle of the sunflower, and there it was. It was the Tootsie roll. The flower smelled like a Tootsie roll. So the smells that nature can produce are incredibly varied and they can be incredibly powerful. And we have almost none of them in our palette. We have captured, we've replicated, we've taken scent pictures of almost none of them. We have so much work to do.

Danny Crichton:
And obviously, climate change is underway, huge concerns around that. We've talked about the sixth extinction where, thanks to anthropocentric climate change, many, many species in the biome, everything from insects to vertebrates and everything in between are going extinct. Is that also affecting the scent world as well, all these different smells and the ingredients that are making them up?

Alex Wiltschko:
Absolutely. Plants are plants, and the amount of arable land and the state of that arable land, it's true for no matter what you're growing, whether it's row crops or whether it's a production of fragrance. The other issue I'll highlight is one of human rights and one of proper treatment of people. A lot of these crops, fragrance crops, I should say, are harvested in areas of the world without stellar human rights records. And the capture of some of these crops and the supply chain intersects with parts of our society that really aren't so palatable.

Madagascar's vanilla supply is a great example of this. It's a sad story. You can go Google it and read about it. I won't go into detail here, but where we get natural vanilla from, it's not a clean story. It's not a good story. And so, I think it's incumbent upon us to be aware of where our smells and our flavors are coming from and do our best to access and to create these smells in a way that's ethical and that's sustainable. And the problem here in the public narrative is there's so many different smells. There's so many different stories that are interlocking. It almost boggles the mind. It overwhelmed the mind, certainly to comprehend all of the different places that these things come from. And it's just impossible to keep it in your head.

But the underlying theme is this, which is we can do better, that we aren't doing as well as we should be and we do have to systematically take a look at where we get our ingredients from and to make sure that each of those ingredients are not only beautiful and potent and powerful and affordable, but are ethical and biodegradable and safe, and all these things have to be true. And it's really, really, really hard to do all that, and that's why we need computers. We need the assistance of artificial intelligence to help us do better and to do it faster. That's my take.

Danny Crichton:
Well, and I think of this as a very opaque industry. We have ingredients on most of our food. We can see what's in there, although that's not perfect. But when it comes to fragrances, there's not a list of here are the 20 different ingredients that went and evolve to create the smell in a other particular drink or a particular consumer product good. There's very little to no disclosure of where these sources are because it gets melded in that natural flavor or one of these terms that encompasses all of it without giving any detail.

Alex Wiltschko:
Yeah. The labeling laws can be confusing. Artificial flavor is different than natural flavor, is different than ... There's a whole bunch of different little rules for flavor. That's actually a different world. Osmo is pretty fragrance focused today. I think flavor's an interesting area to consider, but we're very, very focused on fragrance. But the labeling for fragrance isn't any better. You turn your perfume bottle over or your shampoo bottle over, just says fragrance. What's in that? It turns out that it's more than just the number of letters in the word fragrance. There can be hundreds of molecules used at differing levels.

And there is a set of ingredients that if you have that ingredient in that fragrance above a certain threshold, you've got to label it. It's about 20 ingredients today. It's going to go to 80 pretty soon. That's good. That's a good thing. You should know what is in the product that you are about to put on your skin, in your hair, maybe even eat it, drink it in the case of food and beverage. You have that right, but right now, that's not how most products are labeled. So I think that there's change coming. I think, in general, there's a cry for transparency. That's a buzzword in the industry for sure, is what the heck is in this stuff? People want to know. They want their products and the labels of the products to be transparent. And I think that that's something good to aim for.

Danny Crichton:
Before we end the show, I have one other topic, which is around green chemistry. Obviously, there's been additional concern around organics and making sure that the chemistry is safe, and particularly when you're looking at chemical processes, the inputs, the outputs can both be safe, but you can actually create a lot of toxic waste along the process. And so, there has been this renewed focus around what some people have dubbed green chemistry, of having chemical processes and systems that, from start to end throughout the entire process, are green or safe, or the nice story in your phrase, at every single step of the way. Does green chemistry input into a lot of the stuff that you're thinking about around Osmo and fragrance?

Alex Wiltschko:
It's certainly something that we think about. The main target for what Osmo is working on is what should the molecule itself be, and then there's a lot of other decisions that we have to make for how do we get to that molecule and what are the starting products of that molecule to make it? And then of course, something else we think about is, "Well, what does that molecule become once it's washed down the drain? Does it safely break into pieces that can be recycled into the environment?" So the whole fate of the molecule is important, which makes this a complicated problem; again, why you need artificial intelligence to help you consider how to actually go about building these molecules.

There's a lot of different ways of synthesizing a molecule, of building it up, and green chemistry has a ton of promise. And there's some companies that I really admire in this space. There's one in our hometown of Boston called Ginkgo Bioworks that builds microorganisms basically to specification that will make the molecules you want them to. I think this is an incredibly promising area of technology, and we're just at the starting line of what's possible. How cool would that be? I mean, the idea of designing a genome of a microorganism that takes in starting products, like sugar or other waste products, and breaks them down and transforms them step by step into exactly what it is that you want and then cleans up the rest, that's the future. That's the future I want to live in.

Lots of folks are really hard at work at making that happen. And when that starts to work and, in some areas it really, really, really does work, but not uniformly. That's an area where Osmo is really keen to partner. We really like to stay aware of those companies, of what's possible, and we think that that's going to be an important technology for what we do going forward.

Danny Crichton:
Well, I certainly look forward to living both in a future that is both safe and smells amazing and beautiful and dynamic. But Alex and Osmo, thank you so much for joining us.

Alex Wiltschko:
Well, thank you for having me, Danny. It's been an amazing conversation. Thank you so much.

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