Sweet taste of flavors M&A

Source: CMR

2007/06/10

MERGERS AND acquisitions have peppered the global flavor landscape over the past six months. Following Givaudan's $2.3bn acquisition of Quest early this year, Frutarom, Firmenich, Symrise and Synergy Flavors have also moved to expand their market shares.

Firmenich's pending $609m acquisition of Danisco Flavors will add 2-3% to the company's global market share, according to Danisco CEO Tom Knutzen.

"A major consolidation has taken place within the flavors and fragrance industry. The top four players already cover more than 50% of the market," says Knutzen. "With revenue in flavors at Danish Kroner (DKr)1.5bn ($272m), Danisco's market position in this arena is limited compared with the largest players," he adds.

The global flavor market last year was estimated at $6.37bn, according to IAL Consultants. Givaudan (including the Quest business) held 31% of the market International Flavors & Fragrances (14%) Symrise (11%) Firmenich (9%) and the rest with 35%.

Symrise acquired British natural flavorings manufacturer Steng in March. Steng had sales of €5.4m ($7.3m) last year.

"Acquisitions will likely play a material role for Symrise if the company plans to become the top two global flavor supplier by 2009," reports Citigroup Research analyst Sophie Jourdier. "The target is ambitious but not unrealistic if it can find the right acquisition targets and deliver the synergies from them," she adds.

In 2006, Symrise bought France-based Aromatics Holding, which gives Symrise a stronger position in vanilla and Kaden Biochemicals, which develops active ingredients for functional food and nutraceuticals. Symrise bought Flavours Direct in 2005, which expanded its market position in the UK.

Playing catch-up

Israel-based Frutarom went on a shopping spree this year with three new flavors acquisitions.

Last week, Frutarom bought Israeli company Raychan Food Industries for $2.28m. Raychan had 2006 sales of $5.5m.

"Raychan's activity is highly synergistic with Frutarom's activity in Israel and that of the Nesse Company, which was acquired in early 2006," says Ori Yehudai, Frutarom's president and CEO. "The company will broaden Frutarom's product offering in the fields of savory and functional products."

Frutarom also acquired British companies Belmay for $17.1m in March and Jupiter Flavours for $2.8m in April. The acquisitions will strengthen the Frutarom's leading position in the British market, says Yehudai.

"Frutarom will continue to implement its rapid growth strategy and is continuously seeking additional strategic acquisitions of companies and activities in its field," he adds.

Belmay, with subsidiaries in Singapore, Norway and Denmark, had sales of $15.1m last year while Jupiter had $2m.

Frutarom's sales last year were $287.2m, an increase of 18% compared in 2005. Frutarom's share in the global flavors and fragrance market was estimated around 1.6% by consulting firm Leffingwell & Associates.

Wauconda, Ill.-based Synergy Flavors, a member of Irish food ingredients group Carbery, acquired vanilla producer Vanlab Corp. of Rochester, NY, in January. The deal will strengthen Synergy's overall product mix across sweet and savory flavors, says Roderick Sowders, president and CEO.

In March, Synergy also acquired American Flavors and Fragrance do Brasil (AFF) based in Sao Roque near Sao Paulo.

"Brazil is the number-one consumer of distilled beverages in the world the third-largest consumer of soft drinks in the Western Hemisphere the largest market for bakery and confections in Latin America and the second-largest global manufacturer of candies," says Sowders. "With our business strengths and focus within all of those industries, the location consideration was natural."

The market for flavors in South America was valued last year at $369.5m and North America at $1.96bn, says IAL.

Joint ventures and facility additions also marked this year's global flavor landscape.

DSM opened its new €10m Chinese process flavor facility in March. In May, Symrise started its new €1.8m extraction and distillation pilot plant in Nordlingen, Germany, for the production of natural flavorings.

Givaudan entered an exclusive R&D partnership with Redpoint Bio. The collaboration will discover and develop novel sweetness, savory enhancers and bitter blocker compounds.

Recent collaboration deals with Senomyx, a California-based flavor technology company, include Solae, Ajinomoto, Cardbury Schweppes, Campbell Soup, Coca-Cola, Kraft Foods and Nestle SA.