Symrise 2025 strategy: Targeting health and naturalness, strategic acquisitions planned
21 Jan 2019 --- Symrise is looking to increase sales to between €5.5 billion (US$6.25 billion) and €6 billion (US$6.8 billion) as part of its 2025 strategy which will also see the company identifying and entering growth opportunities in the areas of naturalness and health. The company also plans targeted investments in additional organic growth and through strategic acquisitions and remains committed to generating more than half of its sales in emerging markets.
The company’s sharpened focus on health and naturalness taps into the growing trend of today’s mindful consumers who are seeking exciting sensory experiences that preserve their health and well-being. It also comes as naturalness in flavors is expected to lead the way in 2019, although classic flavors are still anticipated to be in high demand across all categories.
There will also be more scope for flavor development now that “adventurous” consumers – tipped as the top trend for 2019 by Innova Market Insights – are eager to seek out new experiences this year.
Symrise announced its long-term targets, aiming to further expand its business over the next six years, during a recent Investors' Day in South Carolina, US. Alongside planning to expand its portfolio, the company says it is sharpening the product mix and will be focusing on high-margin applications.
The flavor and fragrance producer says its €5.5 to €6 billion sales target is supposed to be achieved with an average annual organic sales growth (CAGR) of 5 percent to 7 percent and strategic acquisitions.
During that period, profitability is planned to be further increased at a high level. From 2020 onward, Symrise says that it intends to generate an EBITDA margin within the target corridor of 20 percent to 23 percent. At the same time, the company says it will remain “fully committed to its proven strategy.” As in the past, the company will seek to closely focus on customer and consumer needs and converting market trends into concrete business opportunities at the earliest possible stage.
In April 2014, Symrise announced the acquisition of Diana Group one of the leading manufacturers of natural flavors at the time. The transaction closed in July 2014 and was valued at around €1.3 billion. This move could be interpreted as prompting other flavor suppliers to significantly move into the natural ingredients space too, including Givaudan and International Flavors & Fragrances (IFF).
There has been a real shake-up in the flavors space in recent years. One of the most notable moves was when IFF began a new chapter with the combination of Frutarom. In what many thought to be one of the most important ingredient industry business deals of 2018, IFF agreed to acquire the Israeli flavors and ingredients company in a transaction valued at approximately US$7.1 billion in early May.
By combining with Frutarom, IFF said at the time of the acquisition that it was seeking to accelerate its Vision 2020 strategy to create a global leader in natural taste, scent and nutrition, as 75 percent of Frutarom’s sales portfolio are natural. The move came just a few weeks after leading flavors and fragrances company Givaudan also announced an agreement to acquire 40.6 percent of the shares of Naturex, the global leader in specialty plant-based natural ingredients. Givaudan completed the acquisition of 40.5 percent stake in Naturex in June 2018.
It is not yet clear if Symrise’s planned acquisitions would be bolt-ons or on a larger scale but the clear announcement to include further strategic acquisitions does signal the company’s intent to strengthen and expand in a very competitive climate.
FoodIngredientsFirst has reached out to Symrise for more details of its plans.
Existing strengths such as the comprehensive product portfolio should be used and expanded in a targeted manner, notes Symrise, and the company also plans to focus on innovative and high-margin applications and on digital business processes that will contribute to the growth strategy.
“We look back on the development of Symrise with pride. We have achieved dynamic growth and doubled our sales from 2008 to 2017 to €3 billion (US$3.4 billion). For 2025, we have set the target to increase sales to €5.5 billion to €6 billion. Our strategy, with its three pillars growth, efficiency and portfolio, has proven its worth. It is the foundation for our long-term, profitable growth,” says Dr. Heinz-Jürgen Bertram, CEO of Symrise AG.
“We will make even more systematic use of our strengths and enter adjacent growth areas, concentrating on the expansion of our global presence and our portfolio in high-margin business areas. We will also consistently expand our product mix, in particular with natural and health-related applications.”
Olaf Klinger, CFO of Symrise AG, adds: “With our targeted investments in future growth and our reinforced focus on cash flow, we will create a solid basis for the Symrise stock to remain an attractive investment for our shareholders. We will further keep an eye on our healthy capital base.”
Symrise notes that is has built its updated, long-term plan on a strong foundation. With targeted investments, the company intends to expand in high-growth business areas and to broaden its own natural raw material base. Symrise plans to further develop especially high-demand application areas such as menthol, cosmetic ingredients, food and pet food at an accelerated pace.
Last year, Symrise completed its current capacity expansions and was involved in a number of investments, developments and acquisitions.
Amid discussion about the safety of “grill flavorings” due in part to their production process, Symrise jumped into this space with a new solution which the Germany-headquartered flavor supplier presented as “Flavor Type Grill” as opposed to “Grill Flavors,” which can be labeled as “natural flavorings.”
Just last month, Symrise announced the development of tea and coffee flavors for dairy applications. The collection of specialty flavors is designed to deliver the popular tastes of coffee and tea to dairy products, including milkshakes, yogurts and ice cream and is based on the flavor trend from the company’s proprietary consumer insights study.
In November 2018, Symrise opened a site for high-quality natural food ingredients in Georgia, US. The group invested €50 million (US$56.8 million) in the facility, which follows high technological and sustainable standards. The company says that this step reinforces the pioneering role it has in the US market and emphasizes its aspiration to further expand within growth regions.
Symrise already has a broad portfolio, expanding its strategic footprint beyond the conventional Fragrance and Flavor Business at an early stage. Today, Symrise generates one-third of its sales through non-traditional applications, such as pet food, baby food, probiotics, active cosmetic ingredients and functional, health-supporting ingredients. By 2025, it aims to further increase that share. Natural product solutions for body care and foods are also playing an increasingly important role, as consumers attach greater importance to conscious nutrition choices.
Commercialization of innovations and focus on digitization
Symrise will further intensify its closely linked cooperation with its customers in the years ahead. Therefore, the company is fully committed to the increasing transition from a product developer and manufacturer to a comprehensive solution provider. Through digitized and networked processes, customer needs can be precisely identified and served across the entire supply chain, Symrise notes.
Long-term targets for 2025
Most of the major investment projects will be completed by 2022, says the company, which also aims to lower CAPEX to the range of 4 percent to 5 percent by 2025. Symrise will also continue to create sustainable value for its investors and retain a dividend policy with a pay-out ratio of 30 percent to 50 percent. In all aspects of its business activities, Symrise will remain committed to its sustainability targets and will, therefore, strive to reduce its ecological footprint by 50 percent.
By Gaynor Selby
