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Expanding Israeli firm buys IFF's natural fruit flavours

18-Aug-2004

Ambitious Israeli flavours firm Frutarom has bought the European natural fruit preparations business from the world's number two flavours player just months after completing on the Swiss botanical extracts firm Emil Flachsmann.

In this latest bolt-on acquisition the Tel Aviv-based maker of flavours for food and functional food industries paid €30 million for the European fruits preparations operations - with $90 million in sales - of US firm International Flavors & Fragrances (IFF).

Buying into IFF's fruit and vegetable extract business gives Frutarom a firm foothold in the growing natural ingredients market.

"The IFF unit purchase perfectly complements are existing activities in flavours and botanical extracts, making us a 'one-stop shop' and providing full solutions for our customers," Ori Yehudai, CEO of Frutarom Industries explained to FoodNavigator.com.

Growth in the fruit and vegetable extracts market has risen in parallel to the burgeoning functional food trend, itself driven by the consumer's desire to improve health and prevent disease through food and beverage consumption.

The €819.9m European and US fruit and vegetable extracts and powders market is on course to grow 4.5 per cent annually, reaching €1.07bn by 2009, estimate market analysts Frost & Sullivan. These growth figures have a particularly strong appeal for the Israeli firm that has near-term ambitions to achieve sales revenues around the $300 million mark, earning it a place as one of the top ten global flavour firms, an overarching aim of the ambitious Israeli company.

But Frutarom will have to battle for a position with Danish ingredients company Danisco and French flavour and fragrance house Mane that both had estimated sales in the region of $300m in 2003 and currently hold the nine and tenth position in a market dominated by €1.78 billion Swiss firm Givaudan. IFF takes the second position with €1.54 billion in estimated sales.

Under the recent acquisition Frutarom will acquire the fruit preparations business - renamed 'fruit systems unit' by the new owner - of IFF's European operations that develop and produce fruit compounds and other natural ingredients used as natural flavour materials in a wide range of food products, including dairy and bakery applications.

The Israeli company said the deal includes activities at plants in Emmerich, Germany and Reinach, Switzerland, as well as related inventory and intellectual property. In 2003 the German and Swiss activities contributed 70 per cent of the $90m sales from IFF's European fruit preparation business.

Yehudai said the deal would not threaten the 160 employees already working for the business, "in fact to the contrary, because we want to strengthen the business in Switzerland and Germany." The CEO added that Frutarom already has a strong sales force in this region, mainly due to the Flachsmann purchase, which they will build on.

France has also been identified as a key region in Frutarom's strategy that focuses on rapid growth in core business together with strategic acquisitions. In fact, IFF is currently in talks with the employees work council in Dijon, France regarding Frutarom's proposed bid to acquire IFF's fruit preparations business in France.

"We believe that IFF's talks with the French workers are going in the right direction and hopefully we should expect an agreement sometime in the fourth quarter," said Yehudai.

"We also want to strengthen our position in the US," he added. And looking ahead the CEO said there are more acquisitions for the public-traded Frutarom in the pipeline, but none are planned for 2004.

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