It's Feast or Famine for Food Additives Players

17 June 2002 00:00  [Source: ICB Americas]

Although seeing positive growth for 2002, the food additives market is facing increased competitive pressures as the food industry consolidates and larger, more global players impose greater pricing pressures. Commodity products are seeing tighter margins and face competition from lower cost products in offshore markets such as China. On the plus side, there is growing demand for higher premium additive products for specific applications that offer food additives producers an opportunity for value-added products.

"At the corporate level, the leading additive suppliers are facing challenges of their own," says Susan Davies, analyst of Leatherhead Food International, a UK-headquartered, independent food research institute that provides research and analysis to the global food and drinks industry. "Increased purchasing power of major multinational food groups are placing price pressure on additive companies and eroding margins. Food groups are showing greater interest in specialty and premium ingredients tailored for specific applications, and there is strong competition from cheaper products manufactured in China," observes Ms. Davies. These dynamics, according to the analyst, are driving the industry trends of increased consolidation, greater offerings in specialized products, more comprehensive product ranges and greater investment in China and other Asian markets through both joint ventures and direct acquisitions.

The food additive market is estimated at $20 billion, according to Leatherhead Food International. The largest market segment within food additives is flavors at 30 percent followed by hydrocolloids at 17 percent. Acidulants are next at 13 percent followed by flavor enhancers at 12 percent, sweeteners at 6 percent, colors at 5 percent, emulsifiers at 5 percent, vitamins and minerals at 5 percent, enzymes at 4 percent, chemical preservatives at 2 percent and antioxidants at 1 percent. Annual growth is projected at 2 to 3 percent over the next five years with the market expected to reach $22 billion in 2005.

Despite the forecast for positive volume growth in the food additives sector, weak pricing is likely to create margin pressures. "Volume growth is likely to outpace market value in sectors that are affected by price cuts as cheaper Asian products enter the international market. An example of this is the acidulants category, where forecast volumes show growth of 3 to 4 percent, compared with only 1 to 2 percent by value," says Leatherhead Food International's Ms. Davies.

Fueling volume growth will be consumer demand for convenience, which in turn translates into greater consumption of highly processed foods, according to Ms. Davies. In terms of sales, this demand trend will be felt more in less developed markets such as Asia, Latin America and Eastern Europe than in the more developed processed food markets of the US, Western Europe and Japan. For these more developed Western markets, Ms. Davies says innovation will drive growth. Relative to Western demand trends, this includes expanded use of natural and organic ingredients, healthy and functional ingredients, product shelf-life extenders and quality enhancers of mainstream foods.

"The strongest growth sectors will include vitamins and minerals, flavor enhancers and fat replacers," says Ms. Davies. The Leatherhead analyst believes there is increasing demand for natural varieties of flavors and colors at the expense of synthetics. For example, even with the growing segment of antioxidants ingredients (representing about a $20 million market), Ms. Davies believes demand for natural over synthetic antioxidants is developing. The analyst also believes that Western countries' emphasis on health, the use of fortification ingredients such as calcium, the use of hydrocolloids as fat substitutes and artificial sweeteners will continue to grow.

Contrary to the use of "natural" food additives, Ms. Davies believes consumer demand, particularly in Latin America, Asia, and Eastern Europe will continue to rise for foods with higher shelf lives, which in turn will cause demand increases in chemical preservatives. The chemical preservatives segment still accounts for only roughly 2 percent or $40 million of the food additive market. The analyst also sees greater global demand for ethnic foods flavorings, particularly as ingredients in pre-made meals and processed snacks.

The food additives market is highly fragmented and diverse, and Leatherhead categorizes firms into three main categories: agribusiness/commodity players, chemicals players, referring to larger chemical companies with food/flavors holdings, and specialty additives companies, which include the major flavors and fragrances (F&F) houses.

Agricultural/

Commodity Players

For the large agribusiness/commodity players, recent earnings show improvement into certain key areas, such as soybean crushing activities and corn refining as some of these companies also diversify portfolios into value-added ingredients.

Key players are the large agribusiness concerns, such as Archer Daniels Midland (ADM), Corn Products International, Cargill and the Dutch cooperative Avebe.

Emerging from some recent difficult times in the oilseeds market is ADM, which is positioned in commodity oilseeds, food ingredients and nutraceutical/supplements. The company's fiscal 2002 third quarter earnings improved to 17 cents a share compared to 15 cents per share in the year-ago period. ADM's oilseed and corn processing profits rose only 1.8 percent in the fiscal third quarter to $138 million. Agricultural services rose 84.5 percent to $38.1 million and the "other" category, which includes items such as soy protein increased 14.4 percent to $63.8 million.

"Overall results improved over last year due to improvements in several of ADM's business lines," says Salomon-SmithBarney analyst David Driscoll. "In its oilseed and corn processing segments, results were added by strong North American soybean crushing margins while the agricultural segment benefited from better trading volumes." In other segments, the firm was "aided by improved wheat milling results due to industry rationalization and improved soy protein results owing to lower manufacturing costs. However, the segment was negatively impacted by continued weakness in the firm's cocoa operations while gains in the oilseed and corn processing segment were partially offset by weak ethanol pricing."

In its oilseed operations, ADM benefited from strong soybean crush margins, which average 69 cents per bushel on the Chicago Board of Trade, compared to an historical 20 year average of 51 cents, according to SalomonSmithBarney. "On the demand side, we continue to believe that ADM will continue to see sustained demand for soybean-related products over the course of the calendar year as global demand for soybean oil and soybean meal continue to grow at healthy rates (6.0 percent for meal and 8.5 percent for oil in 2002)," says Mr. Driscoll. The strong demand, combined with healthy operating rates, which were estimated at 89 percent at the end of March, are laying the groundwork for better performance in its oilseed operations, according to analysts.

Although soybean performed well for ADM, canola crushing margins have been pressured by rising canola seed costs and weak selling prices, says Mr. Driscoll, adding that ADM has idled production at its Alberta, Canada canola seed processing plants. The company also announced in late May that it will discontinue operations at its Port Gibson, Miss., cottonseed oil mill facility, effective in June because of poor economic crushing activities.

ADM is also leveraging its position in commodity products, such as soybean oil and meal, to produce value-added soy protein products for use in food markets. Its products in this area include textured vegetable protein, isolated soy protein, soy protein concentrate, soy-based milk products, soy flour, soy protein concentrate and soy-derived isoflavones. In April ADM added to its commercial offerings Soy 7 pasta, a soy-based product, which the company says has twice the protein as regular pasta. The product carries the soy "healthy" heart claim allowed by the Food and Drug Administration. ADM also joined forces with Nutraceutix Inc. for controlled delivery technology for its Novasoy Daily Dose, a once-a-day supplement of steady delivery of soy isoflavones.

The company is also providing organizational support for its renewed emphasis on value-added products through a recent restructuring of its specialty ingredients business. In March, ADM Specialty Ingredients announced it was restructuring its sales and marketing organization into the market-focused areas of meats, nutrition, baking, cereal and snacks, beverages, confectionary, pharmaceuticals, personal care, industrial and food processing.

Outside of oilseeds and specialty ingredients, high fructose corn syrup (HFCS) is another important area for ADM. "In ADM's HFCS operations, the firm has benefited from the 5 to 6 percent increase in annual pricing contracts in the US established in late January," says Mr. Driscoll. "Moreover, ADM management has indicated that all of its business for the remainder of the year in contracted, insulating ADM from fluctuations in the spot price for HFCS," says the analyst.

However, the SalomonSmithBarney analyst points out that ADM's HFCS results are being negatively impacted by the company's Mexican sweetener operations because of a 20 percent tax on beverages made with HFCS, which was made effective January 1 of this year. "Although the tax was lifted on March 6, some bottlers have been slow in switching back to HFCS. ADM's HFCS plant in Mexico is a joint venture with AE Staley and accounts for only 4 percent of ADM's total HFCS capacity. "However, Mexico has a serious problem with what to do with its sugar surplus, and consequently has sought to displace HFCS or force the US to increase Mexico's duty-free sugar import quota to the US. This situation continues to evolve, so we imagine that things are far from their final chapter," says Mr. Driscoll.

A key competitor to ADM in HFCS is Corn Products International, which is a global producer of corn starches and sweeteners, primarily dextrose and HFCS. "After a long delay, we believe the US corn refining industry is poised for a significant recovery from overcapacity issues, which have plagued the industry since 1995," says Mr. Driscoll. He says the biggest impact for Corn Products is the improvement in US HFCS operating rates, which are likely to occur as the US and Mexico "come to grips" with the Nafta sugar trade in 2003. "It is our belief that Mexican sugar pressures will abate partially in 2003 and 2004, driven by Nafta's sugar agreement. The agreement gradually lessens US sugar duties, which should allow more Mexican sugar into the US and ease the pressure on the Mexican government coming from local sugar farmers," says Mr. Driscoll. "Moreover, as Mexican sugar prices lessen, Mexico will likely make additional concessions to HFCS producers in the US. It is this situation that will, in our opinion, act as the driving factor for rising US corn utilization rates, which should improve corn sweetener prices and margins," he says.

The corn refining industry has already begun a trend of consolidation, with the top three players in the North American HFCS holding 78 percent of capacity. The top four players control about 97 percent of industry capacity. In December 2000, Corn Products and Minnesota Corn Processors (MCP) formed CPMCP Sweeteners LLC, their joint marketing sweetener venture. Prior to the alliance, the two companies were respectively ranked fourth and fifth among North American HFCS producers in terms of capacity. Industry consolidation has continued with the acquisition of Cerestar by Cargill, which was announced in September 2001. With these deals, Cargill/Cerestar will be the market leader in the HFCS North American with a 32 percent share in terms of capacity, followed by ADM at 26 percent, Corn Products/MCP at 20 percent, AE Staley at 19 percent and Roquette at 3 percent, according to SalomonSmith-Barney estimates.

In May, MCP said it was engaged in "preliminary discussions" with ADM regarding a potential sale of MCP to ADM. MCP has engaged the investment banking firms of Morgan Lewis Githens & Ahn Inc. and ING Capital LLC as financial advisors to assist MCP in any potential transaction.

In April Cargill purchased Montedi-son's 56 percent stake in Cerestar, a producer of starches, sweeteners and derivatives. It plans to initiate a public offer for the remaining 44 percent at  33 share. The acquisition is the largest for Cargill. "The decision to acquire Cerestar is consistent with our strategy to deliver products and services that help our customers succeed and globally," says Warren Staley, chairman and CEO of Cargill. Cerestar, was one of four new companies formed from the demerger of Eridania Beghin-Say last June. In addition to Cerestar, the new entities included Beghin-Say, a European producer of sugar and derivatives; Cereol, which is centered on the oilseed market, including edible oils, proteins and lecithins; and Promivi, a provider to the animal nutrition market in the US and Europe.

Like its agribusiness rival ADM, Cargill is also beefing up its presence in soy products and other specialty ingredients. The company is bringing on line a new soy protein isolate plant, in Ohio, which is scheduled for the fall of 2002. The expansion falls under its Soy Protein Solutions business, which is a part of a larger Cargill initiative, Food System Design, which structures the company's customer-focused approach for developing and enhancing food ingredients. In March, Cargill Acidulants announced plans to manufacture a glucosamine dietary supplement at the Iowa Bio-Processing Center in Eddyville. About $10 million to $15 million will be invested in the new facility. Cargill plans to be shipping commercial volumes of the product in early 2003.

Jack Staloch, president of Cargill Acidulants, says the company's Regen-asure producer, will be the only source of glucosamine that is free from potential shellfish allergens. The product will be sold in the hydrochloride form, to provide 83 percent of the active as opposed to the sulfate form, which would contain only 50.7 percent active glucosamine.

Chemical Players

For chemical companies participating in the food additives market, a key issue is who will eventually emerge as the final suitor for Roche's vitamins and fine chemicals business. In March, Franz Humer, chairman and CEO of Roche, announced that the company was seeking strategic options for its vitamins and fine chemicals division. Mr. Humer expressed then that it was unlikely that Roche would break up the division as part of a sale, and antitrust concerns, would likely prevent the sale to one of its nearest competitors. Options include selling the business to a company that holds a similar customer base as Roche or a sale to a financial buyer, a move made by Aventis when it sold its animal nutrition business to CVC Partners. Roche could also spin off the vitamins and fine chemicals division as a separate company, a strategy pursued when Roche spun off its flavors and fragrance operation Givaudan in 2000.

Vitamins are the single largest piece of Roche's vitamins and fine chemicals division, accounting for nearly 50 percent of sales on a global basis, followed by fine chemicals at 30 percent and carotenoids at 20 percent. Roche's global vitamins and fine chemicals business posted sales of SFr3.54 billion in 2001, a 2 percent decline from 2000. Operating profit and EBITDA (cash flow) declined by SFR148 million and SFr142 million, respectively on an adjusted basis, which created operating and EBITDA margins of 9.8 percent and 16.3 percent, respectively.

In the first quarter of 2002, sales in Roche's vitamins and fine chemicals business declined 3 percent to SFr 862 million from SFr 888 million in the year-ago period, although the company points to positive signs from new products. Sales of new products were SFr122 million in 2001 or 3.4 percent of sales, a 125-percent gain over 2000, when new product sales accounted for only SFr64 million.

Key recent product launches for Roche nutraceuticals include zeaxanthin, a carotenoid used for eye health, which joined recent launches for lycopene and lutein. The company launched a water-soluble version of vitamin E for functional beverages in 2001 and is also evaluating green tea extracts. Roche is also targeting feed enzymes through its strategic alliance with Novozymes A/S, particularly phytase. Roche expects double-digit growth in feed enzymes, pet food and new production formulations.

Like other multinational vitamin makers, Roche is continuing it strategy of rationalizing North American vitamin operations as it centralizes production in Europe and invests in joint ventures in China.

The company is building an SFr170 million, 25,000-ton manufacturing plant for vitamin E in Sisseln, Switzerland, which will replace vitamin E manufacturing capacity in Nutley, N.J., which is scheduled to close in 2004. However, Roche will continue to manufacture vitamin C in Belvidere, N.J. A £121 million ($171 million) expansion to the vitamin C plant in Dalry, Scotland, which began construction in 1998, is scheduled to be completed this year.

Last year, Roche invested DM200 ($89 million) for two production facilities in Grenzach, Germany, for vitamin B2 and biotin. The biotin plant replaces two smaller plants in Nutley, N.J., and Village-Neuf, France. The vitamin B2 plant, which uses fermentation, replaced two former facilities in Grenzach and Fukori, Japan.

Last year, Roche invested SFr50 million for a new 1,000 ton vitamin B6 manufacturing plant in China as part of its joint venture with Shanghai New Asiatic Pharmaceuticals Ltd. Another Chinese joint venture, Roche Taishan (Shanghai) Vitamin Products Ltd. opened a new vitamin A facility in 1999, and a further joint venture in Wuxi opened a 40,000 ton citric acid facility.

Meanwhile, Roche's main rival in vitamins, BASF, is also proceeding with expansions. BASF is proceeding with a previously announced plan to invest  600 million ($540 million) to fortify its position in the vitamins market. The company is completing a  100 million expansion of vitamin E and its precursors at its Ludwigshafen site, which is scheduled to be completed this year. The expansion will raise the plant's production volume to 20,000 metric tons per year.

The expansion is coincident with BASF's move to phase out vitamin E production at its plant in Wyandotte, Mich., which was completed last year. Vitamin E oil production was transitioned to the Ludwigshafen site after the closure of the Wyandotte plant.

BASF is also constructing a vitamin B2 plant in Gunsan, Korea, with capacity of 3,000 metric tons and is building world-scale plants for vitamin C and B6. The company is also building a new production plant for the fine chemical intermediate citral in Lud-wigshafen, with annual capacity of 40,000 metric tons. The plant, which is scheduled to come on stream in 2004, replaces an existing citral plant, which has capacity of 10,000 metric tons per year. The capacity expansion will make citral the production platform for vitamin A and vitamin E, carotenoids and an expanded range of aroma chemicals. BASF holds roughly 25 percent of the global vitamins market, following is 2000 acquisition of the vitamins business of Takeda Chemical Industries.

Roche and BASF are among the leading chemical companies with positions in both food additives and ingredients in addition to other chemical activities. Other key players include ICI (Quest and National Starch), Hercules, Degussa, DSM, DuPont, Lonza, Rhodia, FMC BioPolymer and Nikken Chemical, according to Leather-head Food International.

DSM is considered a possible suitor for Roche's vitamins and fine chemicals business, although as of press time, the company had said it is not pursuing the business. However, analysts see a large acquisition in food for DSM. "Key areas of focus for acquisitions are food ingredients, biologics and engineering plastics," says Merrill Lynch analyst Owen Dwyer. "The preference is for a large, single acquisition rather than buying several small businesses," he says.

As DSM plots it next move, the company will proceed with a plan to split its fine chemicals activities into two businesses, DSM Pharmaceutical Products, which will include its custom manufacturing activities, and DSM Fine Chemicals, which will include specialty chemicals for the food and agrochemicals markets. DSM Fine Chemicals will include business Holland Sweetener Company, DSM Specialty Products and DSM Minera. The split is scheduled to take place July 1. On a smaller scale, DSM is building a new $12 million applications development laboratory for DSM Food Specialties and DSM Bakery Ingredients in Delft, the Netherlands, which is scheduled to be completed in the third quarter of 2003.

Another major chemical company involved in the food market is DuPont. DuPont Agriculture and Nutrition is one of five growth platforms around which the company has reorganized. It accounted for roughly $4.3 billion in 2001 sales and includes Pioneer Hi-Bred International, crop protection products, Protein Tech-nologies International and Qualicon.

For the first quarter, sales in DuPont's agricultural and nutrition business's increased 4 percent on higher sales value. The business segment's after-tax operating income (ATOI) increased $68 million to $323 million in the first quarter of 2002 on improving results for Pioneer Hi-Bred International, crop protection, agricultural and nutrition, and a roughly $25 million after-tax benefit from a goodwill accounting charge.

"Pioneer results benefited from the estimated 4 percent increase in US corn plantings, improved soy availability compared with last year's production problems, and increased biotech acreage, offset by royalty payments to Monsanto," says Merrill Lynch analyst Donald Carson. "While we believe the first quarter earnings improvement was fundamental rather than a weather-related shift from the second quarter, we expect ATOI to decline seasonally to $265 million in the second quarter, for a 55 percent/45 percent first quarter/second quarter split in first half ATOI. We expect ATOI for the first half North American planting season to increase about $133 million year-over-year or 30 percent, including the $50 million goodwill benefit."

As for other companies, soy is an important part of DuPont's growth strategy. Last month, DuPont Protein Technologies Inc. (PTI) announced a $20 million investment as part of joint venture agreement with Henan Luohe Shineway Industry Group Company Ltd. and a cooperative agreement with the Zhengzhou government to build a new soy protein manufacturing facility in Luohe. The Zhengzhou agreement also includes the existing assets of a state-owned site, formerly Zhengzhou Oil Chemical Group Company.

"We have a strong commitment to the growth of our business in China, particularly in our aggressive growth areas as food ingredients," says DuPont's chairman and CEO Chad Holliday, who estimates annual growth of the soy protein market in China at 10 percent. Last year DuPont acquired a soy protein facility in Yun Meng County in China.

Specialty

Additives Players

The flavors and fragrance (F&F) companies, industrial enzyme players and companies with a major and focused portfolio in food additives and ingredients comprise (see related sidebar, pg. 9) the final group of food additives players-the specialty additive players.

Following the acquisition of the Bush Boake Allen (BBA) by International Flavors and Fragrances (IFF) in 2000, IFF became the number one F&F company, with an estimated 16.2 percent of the market, based on combined 1999 sales, according to JPMorgan. Givaudan is next at 11.7 percent, followed by ICI's Quest at 9.1 percent, Firmenich at 8.9 percent, Takasago at 7.9 percent, Haarmann & Reimer at 6.5 percent, T. Hasegawa at 3.4 percent, Sensient Flavors at 3.1 percent and Dragoco at 2.7 percent.

Flavors account for roughly 49 percent of the $12 global flavors and fragrance market, according to JP Morgan. The $5.9 billion global flavors market is divided into beverages with 31 percent share, followed by savory at 23 percent, dairy at 14 percent and other at 32 percent.

Although financial returns in the F&F industry have historically been very strong, growth from 1995 to 2000 fell off, including for flavors. Overall growth in flavors from 1990 to 1995 was 8 percent, but consolidation among the major food companies, increased customer purchasing power and pricing pressure has made conditions more difficult for certain players.

IFF says it expects sales to be flat in both local currency and dollar terms for the second quarter of 2002, following a 6 percent decline in its flavors operations in the first quarter. To further realize cost savings from its acquisition of BBA, the company plans significant headcount reductions and plant closings in the second quarter. IFF eliminated more than 700 positions or 11 percent of its combined workforce of 6,600 employees as of the end of the first quarter of 2002, reducing its combined workforce to 5,900, estimates JPMorgan. "We expect that number to decrease by approximately 250 positions as more operating plants are up for consolidation in 2003," says JPMorgan analyst Jeffrey Zekaukas. The reductions in workforce and plants come both from flavors and fragrances operations. "We believe there remains additional room for expense reduction efforts as operations are downsized in Chicago and two sites in the UK, Witham and Long Melford," says Mr. Zekaukas. He cites as previous notable consolidation as BBA's headquarter in New Jersey, BBA's China facility, BBA, fragrance compounding operations in New Jersey, IFF's manufacturing facility in Australia and operations in Hong Kong, Montreal, Brazil, Jamaica, Columbia, South Africa, the UK and Argentina.

Unlike IFF, Givaudan saw strong growth in flavors in the first quarter of 2002. "Flavors delivered 8 percent growth in the first quarter, winning market share from small/mid players. Beverage and confectionary delivered double-digit growth," says Merrill Lynch analyst James Knight. "All regions were strong apart from Argentina," adds the analyst. Givaudan reported first quarter sales of SFr635 million, up 3 percent in local currencies, year-over-year, and up 18 percent sequentially over the fourth quarter 2001.

Last month Givaudan closed on its acquisition of Nestl''s Food Ingredients Specialties (FIS) for SFr750 million. FIS, with sales of just over SFr400 million, concentrates on savory flavor and culinary intermediates, with an estimated 14 percent in global market share, making it the leader in this segment. "Givaudan had limited overall exposure here, but is stronger in flavor 'top notes,'" says Mr. Knight. Savory products are used in the food services area. "It [savory products] offers higher market growth (3 to 4 percent), and has therefore been a focus expansion area for Givaudan," says Mr. Knight.

One potential risk to the deal is that Nestl' retains a 5 to 10 percent interest in FIS, possibly making it harder for Givaudan to win business from Nestl''s competitors in the future. "We view this as a small risk," says Merrill Lynch's Mr. Knight. "For example, even when part of Nestl', 80 percent of FIS's sales were to external customers, including competitors."

When part of Nestl', estimated margins for FIS were around 12 percent at the EBIT level, and 18 percent at EBITDA level. Givaudan expects cost savings of up to 6 percent of sales or SFr25 million. This would be bring FIS's margins up to Givaudan's current flavor EBIT margin of 18 to 19 percent, estimates Merrill Lynch. Most of the savings are expected to come from redundancies. Givaudan plans to consolidate all the present operational activities in FIS in Chatel-St. Denis, Switzerland, into other existing locations in Switzerland, namely Vernier, Dubendorf and Kemptthal. The company hopes to complete this process by year-end.

Meanwhile, the other F&F houses are proceeding with some changes as well. As of press time, Bayer's Haar-mann & Reimer was still on the block as part of Bayer's plans to divest its F&F operations in its reorganization into four business areas-health care, polymers, chemicals and crop science. The privately held Swiss F&F house Firmenich will see its current CEO Pierre-Yves retire July 1, 2002, and Patrick Firmenich taking over the position. ICI's Quest announced earlier this year its plans to double sales to new customers by 2005, which would translate into annual growth of 5 percent. The company says it has seen compounded annual growth of 14 percent over the last three years, which included $65 million in sales to new customers in 2001. Flavors accounted for 64 percent of Quest's sales in 2001 and food ingredients 36 percent. The company recently launched a new sports beverage Hyprol.

In May, Danisco acquired the Belgian flavor house Perlarom SA. Danisco says the acquisition moves the company from the number 10 position in European flavors to number six. Perlarom had net sales of DKK350 million ($47 million). Danisco's flavor sales will amount to  240 million following the acquisition. Earlier in the year, Danisco sold its condiments business to Bahncke A/S, as part of Danisco's strategy to focus on the development, production and sales of food ingredients, sweeteners and sugar. The company also launched a new enzyme, hexose oxidase (HOX) for the food market. Danisco says it expects to see sales of HOX enzymes of  7 million to  14 million. The company says the enzyme allows for bakeries to stop using bromate and ascorbic acid as bread-improving agents.

Also in May, Sensient Technologies Corp. acquired the flavors and essential oil operations of Bremen, Germany-headquartered C. Melcher, which posted revenues of $14 million last year. The company supplies flavors for coffees and teas, essential oils, aroma chemicals and other formulations for flavors, cosmetic and fragrance applications. The company maintains facilities in the US, Germany and China.

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