An oriental taste of Israel

Chinese consumers to get a taste of Israeli-flavored food tech

Frutarom’s big moves in China include acquisition of Hong Kong’s Inventive, establishment of new R&D center

A Frutarom R&D lab in Germany (Courtesy)
A Frutarom R&D lab in Germany (Courtesy)

Israel’s next billion-dollar company finished off the 12 months of 2015 with its 12th acquisition in a single year.

Now joining the Frutarom family will be hundreds of millions of Chinese consumers, who use products made by Inventive, a Hong Kong-based flavorings manufacturer, which has a broad customer base among top global food and beverage makers in China.

Products using its flavorings are sold in China, Southeast Asia, the Middle East and South America.

Frutarom paid $17 million, including the assumption of the acquired company’s debt, for full ownership of its new acquisition.

Along with the acquisition, Frutarom is set to open, in the coming weeks, its new Shanghai-based R&D center.

According to Ori Yehudai, Frutarom CEO, “The state-of-the-art laboratories for development and applications will provide us, for the first time, with the ability to develop and produce savory flavoring solutions locally in China. We are convinced that our new plant will contribute towards taking a leap forward in our activities in China and Southeast Asia.

“We intend to work towards attaining maximum optimization in the operations of the two plants — Inventive and Frutarom — and provide Inventive customers the best of Frutarom’s capabilities and its wide-ranging product portfolio,” he added.

Inventive was founded in 1998 and manufactures flavors with fruit components, chocolate, grains and nuts for many food products, particularly dairy products, ice creams, pastries and beverages. In the 12 months ending October 2015, sales for Inventive reached $13.7 million. Inventive has manufacturing, research and development, and marketing facilities in Zhàoqìng in southern China, as well as an R&D and sales center in Shanghai and sales and marketing offices in Hong Kong.

With this year’s acquisitions, Frutarom has set a record for corporate acquisitions in the 21st century (surpassing the one set by Massachusetts-based Alere Global, which bought 10 companies in 2007). Frutarom now has a presence on every continent (except for Antarctica — so far), and is the seventh-largest flavoring and ingredient company in the world.

Frutarom, established in 1933, offers a total of some 31,000 products, which are sold to more than 15,500 customers in 145 countries around the world, including Algeria, Kuwait and the United Arab Emirates, via its Flachsmann A/S subsidiary. Now part of an international holding group, ICC Industries, the company is still headquartered in Haifa.

The buyout spree is not making a dent in the company’s bottom line, either. On its way to selling a billion dollars’ worth of products this year — by the end of September, sales reached a company record of $647.2 million, mostly in the US — Frutarom also remains one of Israel’s most profitable companies.

By the end of Q3 2015, Frutarom earnings per share (adjusted for currency differences from the company’s some 150 units around the world) were up 35% in the first nine months of 2015, with third-quarter growth alone 48.5% over Q3 2014.

Lest one think that producing flavors and fragrances is an “old tech” industry, Frutarom operates no fewer than 41 state-of-the-art R&D firms around the world, where top scientists in the chemical and flavoring industry come up with new ways to impart the tastes that, marketers have determined, customers crave. Along with the R&D labs, Frutarom operates over 80 sales and marketing offices throughout the world, along with 34 production facilities in Europe, North America, Israel and Asia. Overall, the company has some 3,300 employees.

The company’s new R&D center in China, in addition to the acquisition of Inventive, will help cement Frutarom’s presence in one of the world’s biggest food-manufacturing centers, Yehudai believes. Processed-food consumption in China is projected to surpass that of the US in 2015 — although currently the average Chinese consumer consumes approximately one-quarter of the processed food eaten by the average American consumer.

“The acquisition of Inventive is the continuation of Frutarom Group’s implementation of its rapid growth strategy and the realization of its vision to be the preferred partner for tasty and healthy success. We have made it a main goal to expand our activity in the emerging markets of China and Southeast Asia with their high rates of growth, both through internal growth and by means of acquisition,” said Yehudai.

“The acquisition of Inventive, one of China’s leading local companies in flavors and flavor inclusions, is another important step towards attaining this goal,” added the CEO.

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