KEY INTERVIEW: 49 Acquisitions and Counting: Frutarom Plans to Expand Further

18 Nov 2015 --- Israeli flavors and fragrance company Frutarom announced its 11th acquisition this year on Monday. The acquisition, that of Polish savory flavors company AMCO, was the company’s 49th strategic move to become a leading global flavors, fragrance and fine ingredients company. At just under $21m it was a mid-range investment, but as president Ori Yehudai told FoodIngredientsFirst, there will be more, and they are likely to increase in value in the near future.

“I recognised early on that to be a truly global company, we needed grow, so I implemented fast internal growth and started the acquisitions process. We have a good customer base now and great technology. As well as a global strategy, we are eager to promote a total taste solution in sweet, savory, fruit and vegetables as well as others,” he explains.

“The main target of most industry players currently is to replace synthetic ingredients with natural, healthy ingredients. With some 70% of our business coming from ingredients solutions we are in a good position to provide natural solutions to customers in the food, pharmaceutical and nutraceutical industries.”

Of course it isn’t enough to just replace a synthetic ingredient with a natural healthy ingredient. It also has to taste good and be financially viable. Frutarom’s aim has been to snap up companies that supply good quality, natural products with a good taste profile and one that can supply these ingredients at a reasonable cost. One recent acquisition that ticked those boxes was that of New Zealand company Taura Natural Ingredients ($70m), a company that has its own fruit concentration technology, so customers can add fruit flavour as an alternative to sugar, and natural fruit pulp as a binding agent, for example. This allows the final product to maintain its sweet flavour, but also to be natural and healthy.

“The trend for natural ingredients is being led by the consumer in the main,” says Yehudai. “It is consumers who are pushing supermarket chains and in turn, big food processors have been forced to change their formulations.”

He continued: “In the last 2-3 years, one food processor after another has made a commitment to exclude synthetic flavors and colors from its portfolio. This fits well with Frutarom’s strategy to supply natural solutions that don’t compromise on taste. In many cases there is a cost impact but we need to find a way that food processors can absorb this cost and not pass it on to consumers. Sometimes this is a case of replacing a very small ingredient that may be <1% of the final formulation; it should be possible to absorb this cost in other areas.”

As these taste solutions with a healthy angle become more popular, so does the amount of food processors looking for a healthy alternative that is also natural. The need to reduce salt and sugar in processed foods but not replace them with synthetic alternatives is paramount to Frutarom’s strategy. “This is where a company like Taura comes into its own,” says Yehudai.

With so many acquisitions in so many parts of the world, there is now enough coverage to call the company truly global. However, there has not been much evidence of Frutarom combining its ever-growing resources to streamline operations.

“This is a good point,” observes Yehudai. “But we are now capable of operating a 24 hour-a-day operation as we have a presence in most countries. We have the capability to combine many operations now to become more efficient. This can be seen in the US, where we recently closed two factories, and in our botanicals businesses in Spain and Slovenia we see a lot of synergies. We are always looking for ways to save and are currently working on a $12m savings program by combining operations. However, being local and close to our customers is very important.”

“Ultimately, numbers are not so important. They are the result of what we do and growing Frutarom is based on a clear vision to be the preferred partner for healthy solutions globally in terms of both taste and health represents the clear strategy.”

The future will mean more acquisitions for Frutarom. “We have so far focussed on small-medium sized acquisitions,” says Yehudai. “But I see these growing in value over time and suspect that we will embark upon a few $100m + in the near future. It’s about finding the technological vehicles that allow us to create innovations so that we can come to the global food industry with solutions.”

By Kelly Worgan