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Frutarom Deepens Reach into Emerging Markets Through Latest Acquisition

February 14, 2017

Israel’s Frutarom, one of the world’s ten biggest flavor and specialty ingredient companies, continues to expand its portfolio while also deepening its reach into emerging markets with the announced acquisition of South Africa-based Unique Flavors Ltd. for a total consideration of ZAR90 million (US$6.7 million).

Founded in 2001, Unique’s business focuses on the development, production, and marketing of savory flavors and on sweet taste solutions. Since its launch, Unique has grown rapidly to include an R&D, production, and marketing facility in Pretoria near Frutarom’s new South African site, and has built an extensive customer base across South African and the sub-Saharan region including Ghana, Malawi, Zimbabwe, and Mozambique.

With two main core activities – flavors and specialty fine ingredients- Frutarom has production and development centers in 23 countries across six continents. The company markets and sells over 52,000 products to more than 29,000 customers in the food and beverage, flavor, fragrance, pharmaceutical, and cosmetic industries in over 150 countries.

This deal marks Frutarom’s second acquisition in Africa following the company’s acquisition of flavor company JannDeRee in 2013 and reflects the company’s ongoing focus on the region as part of its strategic growth plan. As Frutarom works toward achieving its goal of reaching sales of $2 billion by 2020, the company has expanded its activity on the African continent through investments in R&D and the inauguration of a state-of-the-art production plant and R&D facility in Johannesburg, and expanding its marketing infrastructure and capabilities while capitalizing on the synergies made available through its expanded presence in the region.

“The acquisition will contribute towards significantly strengthening our positioning in the rapidly growing regions of Africa, expanding the supply of our products to African countries and reinforcing our management and our R&D, production, sales, and marketing capabilities,” said Ori Yehudai, president and CEO of Frutarom.

“We intend to combine Unique’s R&D and sales and marketing platform in Africa with Frutarom’s global R&D and sales and marketing platform in order to realize and leverage the abundant cross-selling opportunities between their activities. We also intend to capitalize on the synergies and savings made available by combining Unique’s activity with Frutarom’s existing activity in South Africa.”

Flavor Craze

Driven by an improvement in global standards of living, and the shifts in consumer demands and tastes that this improvement brings, the global market for flavorings and specialty ingredients has been growing. Noting this trend, Frutarom began expanding its presence in the space in 2006 with the acquisition of the savory flavors business of Nesse Group. Since that time, Frutarom has grown to become a leader in the flavors industry through a string of multiple strategic acquisitions between 2006 and today.

Other notable flavor and ingredient acquisitions by the company include Polish savory flavor developer, producer, and marketer, AMCO for $20.7 million in November 2015; the acquisition of New Zealand-based fruit ingredients company, Taura Natural Ingredients Holdings Ltd. for $70 million in June 2015; the acquisition of a 50 percent stake in algae-based biotech startup Algalo for $2.56 million in January 2016; and the acquisition of New Jersey-based natural ingredient producer, Grow Co. for $20 million in January 2016.

Frutarom is not alone in its run to gain market share in the lucrative global flavors business. The global flavors segment has seen its fair share of consolidation and dynamic activity within the past few years as global players position themselves to expand up the supply chain in order to gain a foothold in higher margin businesses.

Most notably, Archer Daniels Midland (ADM) made news in 2014 with the announcement that it agreed to acquire Wild Flavors for $3.1 billion from private equity firm, Kohlberg Kravis Roberts, and Dr. Hans-Peter Wild. ADM also acquired Eaten Foods – a natural and organic flavor company in 2015 and went on to expand its flavors portfolio with the addition of natural extract, emulsion, and compound producer, Amazon Flavors in 2016.

Rival, International Flavors & Fragrances Inc., the third largest flavor company in the world behind Givaudan and Firmenich also made a move last year to gain market share, announcing its agreement to acquire Philadelphia-based flavor company, David Michael & Co., for an undisclosed amount.

Additionally, in February of last year, Monster Beverage Corporation announced that it agreed to acquire its long-term flavor supplier, American Fruits & Flavors (AFF), for $690 million – giving Monster the benefit of having an in-house flavor department which will result in reduced development and production costs and higher flexibility in regard to innovation.

 

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com

 

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