It seems the only way to go is up in F&F expansion. We’re seeing companies driven by a desire to be vertically integrated, whether through ingredients or applications, or both.
Our feature article this issue will present the current state of M&A affairs in the F&F industry (page 26). What are the key challenges of understanding M&A dynamics, and its effects? And can smaller companies compete with the big 10 in the applications business?
Access to raw materials, capital pressures and competitiveness by the top four companies are key drivers for smaller companies to sell. The biggest trend is the acquisition of smaller companies that offer complementary production capabilities or services for larger companies. This way, the more niche and specialized companies have entrance into a regulated environment with commercial production capabilities; whereas the larger counterparts can now fine tune its production of a particular ingredient based on the smaller company’s area of expertise (think Symrise’s fine tuning of menthol when it acquired Pinova in 2015).
M&A activity is certainly not what it used to be with factors such as supply chain transparency, evolving consumer preferences, stricter regulatory requirements (including safety testing, page 50) that drive companies to look outside of its normal offerings, rather than expanding organically.
I hope you enjoy this issue. Happy learning to you.
With warmth from New York City,