Food color bugs ‘kosher’ enough for Israel’s Frutarom
One of the biggest food coloring and flavor companies in the world is buying a huge maker of red insect-based coloring
Already one of the biggest companies in the huge flavorings and fragrances industry, Israel’s Frutarom got bigger last week. It acquired the flavors and natural food colors division of Peru’s Montana Foods for in a $35 million deal. But there’s a bug in the works.
Frutarom will pay the Peruvian company $28.5 million in cash for the Montana assets, and it will assume a Montana debt of $6.5 million. In addition, Montana will throw in its Chile operations “for no further consideration.”
Interestingly for an Israeli company — many of Frutarom’s products actually have rabbinical “kosher” supervision — its new acquisition specializes in natural flavors and colors, and it’s one of the world’s biggest producer of cochineal carmine, a red flavoring made from the crushed carcasses of the female Dactylopius coccus, and used in foods, beverages, and cosmetics. In a word, bugs.
Sourced from insects, carmine is not kosher. Insects are on the kosher “no” list. Many of Frutarom’s products are kosher, including all those made in its Haifa facility, and the bug-infested red coloring won’t be used there. While more “natural” than the more popular coal-based red dye #40 as a food color, carmine, for obvious reasons, turns off not only kosher-keepers, but many others as well. Frutarom has non-bug (and kosher) sources of red color – manufacturing tomato-based lycopene and paprika-based capsanthin, which both have the advantage of being high in anti-oxidants, for use in its rabbinically approved products.
With the deal, Frutarom gets an R&D center, its 45th, and a sales and marketing force covering Peru and Chile. Already a major presence in North America and Europe, the company is hoping to expand its footprint in South America. Montana is Frutarom’s sixth acquisition in emerging markets since 2012, and those acquisitions have been paying off handsomely. Revenues from emerging markets rose from 25% of the company total in 2012 to 43% in the first half of this year.
Established in 1933, Frutarom is a giant, creating, developing, manufacturing and marketing a wide variety of flavors and ingredients. The company offers a total of some 31,000 products, which are sold to more than 15,500 customers in 120 countries around the world, and it has some 2,700 employees. Now part of an international holding group, ICC Industries, the company has acquired 37 businesses since 1990. Still headquartered in Haifa, the company made a profit $63.6 million on revenues of $684 million in 2013.
“The acquisition of Montana Food is the continuation of the implementation of Frutarom Group’s rapid growth strategy,” said Ori Yehudai, President and CEO of Frutarom Group, “and towards realizing its vision ‘to be the preferred partner for tasty and healthy success.’ This is an important and significant strategic acquisition which establishes Frutarom as one the world’s top flavor companies. We view the Montana Food acquisition, with its substantial activity in Peru and Chile, where Frutarom hasn’t been active until now in the field of flavors, as another strategic step that expands our activities in the emerging markets altogether and the growing markets of South America in particular. The acquisition strengthens our presence and market share in markets with high growth potential which Frutarom has identified as attractive markets for its continued development,” he said.
“Montana Food is our second acquisition this year, and we are working toward identifying and executing additional strategic acquisitions of companies and activities within our field of operations, with particular emphasis on markets showing high growth rates. We will continue implementing our rapid growth strategy based on combining profitable organic growth with strategic acquisitions,” he added.
