Frutarom’s Aggressive Strategy; Belmay Focuses on Fragrance

Just last week, Frutarom announced the acquisition of Belmay's flavor business. Here, P&Fnow talks to Ori Yehudai (Frutarom CEO) and Hee Jeong Son (Belmay VP of marketing) to gain insight into each company's respective plans for the future.

More Acquisitions Ahead for Frutarom

“I assume that maybe we can make even more than two acquisitions in 2007,” says Frutarom (Haifa, Israel) president and CEO Ori Yehudai. “I assume that we will, through the coming year, be able to execute a bigger acquisition compared to those we’ve done before.”

Following a year in which the company’s sales leaped 17.8% to $287.2 million, Frutarom is looking to combine internal growth with expansion via acquisitions. Following the 2006 purchases of Germany’s GewurzMuhle Nesse and Actaris Health, the company recently paid $17.1 million for Belmay Inc.’s flavor business, which provided enhanced entrée into Singapore, Denmark and Norway, among other locales. “The combination of Frutarom and Belmay creates the strongest flavor player in the UK market,” says Yehudai. In addition, he says, Belmay’s strong R&D and strong emphasis in the beverage market—particularly soft drinks and alcoholic beverages—melds well with Frutarom’s existing expertise in citrus products.

Health + taste: “Frutarom’s vision is to be the preferred partner for tasty and healthy success,” says Yehudai. As the food industry demands more healthy, natural and organic products, Frutarom is taking advantage of the functional food and dietary supplements expertise of its Actaris purchase. Of course, the goal is to meet these health and wellness demands without compromising on flavor. “The Nesse acquisition …enhanced our position in savory products, with a strong position in the fish and meats arena, and some very interesting organic lines,” says Yehudai. All combined, Frutarom has greatly enhanced its portfolio of flavor and health ingredients.

Facing a future of consolidation: Yehudai, like many of his peers in the industry, foresees further consolidation, leading to a landscape populated by just a couple giant F&F institutions and more numerous mid-sized companies such as Frutarom. “Frutarom will be able to take a roll as one of the top five or six flavor companies in the world,” he adds.

“I believe that if you look at the market of flavors, excluding fragrances,” says Yehudai, “we’re number eight in the world. And I think that the goal to double our sales from around $300 million to $600 million through the combination of internal growth and acquisitions will help us to improve our position.”

Belmay Refocuses on Fragrance

“These are perfumers who really want to make great smelling fragrances,” says Belmay Inc.’s (Yonkers, NY) vice president of marketing Hee Jeong Son. “They are not pressured by the board to make ‘x’ amount of margin on a monthly or quarterly basis.”

With the sale of the company’s flavor business to Frutarom for $17.1 million, all of Belmay’s energy and resources are now being invested into the fragrance business. As Son explains, “Belmay’s been around for 72 years, since 1935, but our flavors division is only 20 years old. Because of this, flavors have never really been our core competency… So, he [Ted Kesten, CEO] decided it was the right time to sell, and since it’s a private business, put the cash into fragrance and grow that further.”

Back to basics: A part of Belmay’s plan to refocus and reinvigorate the fragrance business is to invest in the basics, such as the computer systems and employees. “We are trying to really update our computers and automations, in order to allow our global perfumers and evaluators to become faster and more efficient through these systems,” says Son. “This will free up time for them [perfumers] to focus on more experimental projects and become more creative. Also, Ted promised that he is going to invest in human resources. This isn’t just in more people but in people with more experience.”

In addition, Belmay continues to focus on its proprietary technology—the key to its success when going head-to-head with major fragrance players such as IFF or Firmenich. The company has put money into Hong Kong University to investigate nanotechnology and works with scientists at Columbia University to help figure out the next big thing in fragrance technology. 

Future strategies: So, with this new solid foundation, what is in store for Belmay’s future? As a privately-held company, Belmay has the luxury of focusing on long-term strategy and not necessarily worrying about the quarter’s profits. Acquisitions are looked at as a means to grow the company long term. The acquisition of the Independent Fragrance Co. in 2003 gave Belmay a presence in Asia, where they now have a manufacturing facility and offices. When it comes down to it, “our strategy has been very simple,” explains Son. “We really pay attention to our legacy business—that’s the business that we currently have…and we aim to grow above average organically.”

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