Frutarom buys up Brazilian sweet flavour house

By Jane Byrne

- Last updated on GMT

Related tags Raw material prices Flavor

Israel-based supplier Frutarom has acquired Brazilian flavour house Mylner for $15.7m (€11.84m), underlining its strategy of plugging any gaps in its flavour portfolio or market base.

The takeover represents the company’s third since the beginning of 2012.

Mylner develops, manufactures and markets flavor focused mainly on sweet flavours for beverages and baked goods, and natural flavor products with a focus on the malt business.

Speaking to Food this morning, Frutarom’s president and CEO, Ori Yehudai, said that the company’s Brazilian presence, prior to this acquisition, was in the area of ingredients only and, as such, Frutarom has not been able to leverage the considerable growth in demand for flavours within that market.

“All our recent acquisitions have strengthened our positions in key areas, with our move on flavour company Etol in Slovenia in January this year aimed at boosting Frutarom’s presence in markets such as Slovakia, Croatia and Slovenia where we are not so strong.”

The CEO added that the deal with UK company, Savoury Flavours, signed a few weeks ago, gives Frutarom access to the savoury segment within that market, which, added Yehudai, has massive growth potential.

Consumer demand

Frutarom reports that Mylner’s sales turnover increased by 43% over the last 4 years and that the sweet flavour specialist saw a revenue hike from US$ 6.8m in 2007 to US$11.4m in 2011. “Over the last year, Mylner’s sales turnover grew by 8%,”​ added the Israeli company.

“We believe that the sales in the emerging markets in which Mylner acts will continue to grow at high rates over the next few years as a result of the shift to processed foods and beverages and from changes in consumer demands in this region,”​ said the Israeli flavour producer.

Market penetration

Asked why the company sought to access the Brazilian market through the acquisition front, Yehudai points out that it is down to a question of timing. “If you want to penetrate a new market through other means, it is feasible, but can take years. Purchasing a long established player like Mylner gives us immediate access to domestic food manufacturers and allows us to growth market share rapidly,”​ added the CEO.

Yehudai explained that Mylner has extensive expertise in flavour technology and can adapt some of Frutarom’s existing flavour portfolio for use in the Brazilian market.

The CEO said further acquisitions within both Brazil and Mexico are planned.

Asian growth

Accessing the China savoury flavours market is a slightly more onerous challenge though and growth through acquisitions can prove difficult considering the number of regulatory hurdles in place there.

The CEO said that Frutarom is looking to build a savoury flavours production facility near Shanghai to accelerate growth in that market, with construction to start mid-2012 but completion would not be expected for at least 18 months following the initial turf-turning.

“It took us a few years to acquire the land, which we finally secured at the back end of 2011,”​ said Yehudai.

Commodity costs

Asked about ongoing volatility in raw material prices, the CEO said that Frutarom will continue to adapt its selling prices to offset recent record hikes in some commodities and will aim to be as “competitive as possible”​ to manage further volatility while not hurting its margins.

“We expect to see some relief in certain raw material prices in 2012,”​ added Yehudai.

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