The memorandum of understanding also gives Frutarom an option to acquire up to 50 per cent of RAD shares over the coming three years.
RAD, established in 1996, has developed a water-soluble antioxidant range, Origanox, from the oregano plant. It markets the product to food manufacturers in central and western Europe, mainly to increase shelf-life by fighting oxidation in meat, baked and snack products.
However the ingredient has also recently been added to new applications, such as supplements in the US and topical creams designed to act as anti-inflammatory agents. The new deal with Frutarom will allow the small firm to push its benefits as a health ingredient.
The health foods sector currently makes up about 30 per cent of Frutarom's customer base but Frutarom president and CEO Ori Yehudai told NutraIngredients.com that it is planning to expand in this area.
Last year the firm took over the Swiss botanicals business Emil Flachsmann, which markets herbals including mate, green tea and red vine leaf.
said Yehudai.Rad's turnover has reached about a million dollars a year but Frutarom can grow this to around $5 million within a year's time, he added.
"A water-soluble antioxidant hasn't really existed until now. This product offers advantages both in food formulation and with increasing interest in natural additives."
Most antioxidant products are oil-based and therefore need to be emulsified before being added to many foods. Origanox can however be used in lower doses as it is directly soluble in water-based foods and therefore is a more efficient option than many rival products, explained RAD owner Oded Cohen.
"The market for natural antioxidants is currently around a couple of thousand tons per year but is growing fast. Companies are under increasing pressure to replace synthetic ingredients with natural alternatives, based on stricter labeling regulations from food authorities and consumer demand," he said.
"Our main thrust until now has been reaching novel applications for the ingredient. But the new deal will allow us to really step up our marketing, including to functional food makers."
Frutarom has production and development centres on three continents and markets its products in 85 countries worldwide.
Cohen added that the firm has not had the resources to date to carry out clinical research on Origanox. The new agreement could see further investment in research on the product's health benefits.