Vying for the top spot: IFF’s takeover of Frutarom shakes up flavors industry

636614533716696689clean herbs.jpg

09 May 2018 --- As the dust settles on the International Flavors & Fragrances (IFF) and Frutarom US$7.1bn deal, all eyes are on the flavors and fragrances industry as the takeover is expected to shake up the sector when the company goes up against current market leader Givaudan.

Consolidation within the flavors and fragrance industry has been on the cards since Swiss giant Givaudan agreed to acquire 40.6 percent of the shares of Naturex, the global leader in specialty plant-based natural ingredients in March.

There have also been previous reports in Israeli media that Frutarom had attracted takeover interest.

And IFF’s takeover of Israeli-based Frutarom demonstrates how consumer preferences for smaller brands featuring natural products that tap into health and wellness trends are driving the flavor and fragrance market. The two companies are projected to have combined revenue of $5.3 billion in 2018.

IFF’s takeover will also be the second largest of an Israeli company after Intel’s US$15 billion acquisition of Mobileye.

Frutarom's 20,000 products are sold to more than 10,000 customers, in 120 countries around the world and The Frutarom Group has 1,900 employees worldwide, with manufacturing facilities located in Europe, North America, Israel and Asia.

But it is the rapid growth of the company that has attracted such attention as well as its attractive product portfolio, including broad expertise in naturals.

Frutarom has been gaining serious momentum over the last couple of years as the company completed a series of acquisitions that mark significant growth for the flavors and fragrances specialists.

Last December, Frutarom Industries signed an agreement for the purchase of 51 percent of the shares of the Brazilian company Bremil Indústria Ltda, the top producer of savory solutions in Brazil, at a company value of approximately US$73 million. This was the twelfth acquisition for Frutarom in 2017 and came just one day signed a deal to acquire Polish flavors & fragrances company Pollena-Aroma.

Once the deal is completed, IFF’s shares will be listed for trading in New York as well as trading on the Tel Aviv Stock Exchange. Expectations are for the transaction to close in six to nine months.

According to IFF’s “compelling strategic rationale,” the takeover will establish an industry leader in natural taste, scent and nutrition, as 75 percent of Frutarom’s sales are natural. The company says the deals also creates a differentiated portfolio and enhances capabilities.

In addition to IFF’s and Frutarom’s highly complementary flavor capabilities, Frutarom’s portfolio creates opportunities to expand into attractive and fast-growing categories, such as natural colors, enzymes, antioxidants and health ingredients.

The combined company’s customers will have access to a comprehensive portfolio with more integrated solutions and Frutarom significantly enhances IFF’s exposure to the fast-growing small- and mid-sized customers, including private label. Approximately 70 percent of Frutarom’s sales are to these two customer groups, says IFF.

FoodIngredientsFirst has reached out to both IFF and Frutarom for further details on the takeover.

IFF reports first quarter 2018 results
IFF has also reported results and strategic achievements for the first quarter ended March 31, 2018.

Reported net sales for the first quarter totaled US$931 million, an increase of 12 percent from US$828 million in 2017. Excluding the impact of foreign exchange, currency neutral sales increased 7 percent over the prior year.

Reported operating profit for the first quarter was US$175 million versus US$130 million reported in 2017, an increase of 34 percent. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted operating profit grew 12 percent, principally driven by volume growth, the benefits associated with cost and productivity initiatives and favorable sales mix.

Reported earnings per share (EPS) for the first quarter was US$1.63 per diluted share versus US$1.45 per diluted share reported in 2017. Excluding the impact of foreign exchange and those items that affect comparability, currency neutral adjusted EPS improved 12 percent.

“We have started the year very well, with robust growth across all of our key financial metrics,” said IFF Chairman and CEO Andreas Fibig. “Top-line trends remained strong in both businesses, with new wins, volume and pricing all contributing to growth. Our focus to drive differentiation, balance our customer base, maximize our portfolio and generate a return is yielding strong results.”

“Growth with local and regional customers was strong, growing four times faster than our global customers. Cosmetic Active Ingredients, sweetness and savory modulation, and POWDERPURE, on a standalone basis, also all grew double-digits.”

“Cost and productivity initiatives continued to play an integral role in our ability to invest in the business while delivering robust profit growth. Through the combination of these initiatives, as well as our strong sales growth, we delivered double-digit operating profit and EPS growth.”

Fibig added how the company is off to a strong start to the year and is confident in achieving financial objectives for 2018.

“And while it’s still early in the year, we believe we will be closer to the upper end of our previously communicated sales and operating profit guidance range,” he said.

To contact our editorial team please email us at editorial@cnsmedia.com

Related Articles

Food Ingredients News

Plant-based protein growth: Hydrosol’s new stabilizing systems for dairy alternatives

24 Sep 2018 --- Hydrosol is tapping in the growing demand for plant-based proteins with its new stabilizing and texturing systems for a wide spectrum of dairy alternatives that give them properties very close to products made from cow’s milk. These include cultured desserts that contain no milk components, soy or gluten.

Food Ingredients News

Biofuel collaboration: Mascoma and NextFerm Technologies enter partnership on yeast-based innovation

24 Sep 2018 --- Mascoma LLC, a subsidiary of Canadian business Lallemand Inc., and NextFerm Technologies have signed a new commercial joint development agreement that will expand their collaboration into the biofuels category. NextFerm is an Israeli biotech start-up that is developing and producing high-end, science-based, fermentation-derived ingredients for the global food and feed industries.

Food Ingredients News

Layn rolls out new sweetener platforms in Mexico

21 Sep 2018 --- Layn Corp. is rolling out its advanced sweetener and flavor systems in Mexico at the FoodTech Summit & Expo taking place in Mexico City September 26-27. The company is introducing its Lovia sweetener platform and showcasing Monk Fruit by Layn.

Food Ingredients News

Stevia leaf marketing intensifies amid North and Latin American NPD boom

21 Sep 2018 --- Stevia application continues to grow in food and beverages when assessing CAGR between 2013 and 2017. According to new Innova Market Insights data presented in a webinar yesterday, the rise in applications in North America at 17 percent, Australasia on 21 percent and especially Latin America on 37 percent has been spectacular. As consumer awareness around the sweetener grows, new product data points to a rise in marketing in American markets where “sweetened with stevia” is mentioned more frequently on the front of packaged goods.

Food Ingredients News

Weekly Roundup: Nestlé sells Gerber Life Insurance, Givaudan completes Naturex acquisition

21 Sep 2018 --- In business news this week, Nestlé announced plans to sell Gerber Life Insurance Company, to Western & Southern Financial Group for US$1.55 billion in cash. Bösch Boden Spies launched a sustainability initiative and Givaudan completed the acquisition of Naturex, following the implementation of the squeeze-out procedure and the delisting of Naturex shares from the Euronext Paris stock exchange. Firmenich appointed Emmanuel Butstraen as president of its Flavors Business Unit and member of the company’s executive committee and Tyson Foods’ CEO Tom Hayes is stepping down.

More Articles