Israel’s Frutarom is a company with a hearty appetite.
Currently the world’s sixth largest flavors and fine ingredients house, Frutarom averaged one acquisition per month in 2015 and is keeping up that pace in 2016 as it announced its biggest deal yet: the $130 million purchase of Wiberg of Austria, a major provider of savory flavor solutions.
Frutarom Group President and CEO Ori Yehudai tells ISRAEL21c that the rapid growth — 52 acquisitions over the last 20 years, 29 of them over the last five years — is not about putting Frutarom in the No. 1 global slot but “to differentiate us from competitors and bring value to our customers, shareholders and employees.”
By doubling in size every few years for the past two decades, Frutarom has earned its place in the exclusive club of large Israeli multinationals such as Check Point, Mobileye, Waze, Gett and Teva Pharmaceuticals.
The company went public in 1996, but if it were private, one could call it a “unicorn” (valued at $1 billion or more) as its current valuation is about $2.9 billion. The company’s sales rose 6.5 percent in 2015 to a record $873 million.
Yehudai, sometimes dubbed “the Warren Buffett of flavors” for his extraordinary management success, came to Frutarom 30 years ago when sales were a modest $3.5 million. This year, sales are expected to reach $1 billion. Profits, rather than investments, fuel its acquisitions.
And each new milestone is a larger stepping stone to the next.
“It has been much easier for us to grow from $150 million to $1 billion than our earlier growth from $10 million to $100 million, and it will be even easier to grow from $1 billion to $2 billion by 2020,” notes Yehudai, who calls himself an “industrial Zionist.”
“Successfully growing global companies with an Israeli base is very important to me both personally and for the citizens of Israel and for the Israeli economy,” Yehudai tells ISRAEL21c.
As of early 2016, Frutarom offers 31,000 different products to 30,000 industrial customers in 160 countries. It has 68 R&D sites, 88 sales and marketing offices and 52 production sites. The company collaborates with universities, research institutes and startups in developing new products.
“We’ve done very nice acquisitions that help us gain Frutarom customers around the world. Having a strong customer base today will allow us to grow faster than the markets we are growing in,” Yehudai says.
Meeting demand for natural ingredients
About 70% of Frutarom’s business is sweet and savory flavor solutions for beverages, dairy, meat, bakery and other processed foods. The rest consists of “fine ingredients” such as natural flavor extracts, functional food ingredients, natural pharmaceutical/nutraceutical extracts, specialty essential oils, citrus products, aromas and natural food protection and preservation.
“We identified the trend of consumers preferring natural ingredients before most of our competitors did,” Yehudai says. “We decided to focus on more natural products that would be tastier and healthier, knowing that if we could generate those ingredients in an affordable way it would be very interesting for consumers.”
For example, Incaberrix, a vitamin-, protein- and mineral-rich extract of the Inca golden superberry, was introduced in 2015 for candy and beverage makers.
Sourcing products from plants rather than chemicals is top priority. But no less important to Frutarom’s ability to thrive is a management and corporate infrastructure that can assure smooth transitions as entire companies come under its wing in many different countries from Peru to Poland to Hong Kong.
Yehudai says he devotes half his working hours to the “command unit” that vets potential acquisitions from among competitors and makers of ingredients Frutarom wants to add to its lineup.
“We start with people, because at the end of the day it’s about the right people and culture,” he explains. “We have said ‘no’ to an acquisition if there isn’t a strong management or working culture. Then we look at geography, customer penetration and technology to see if there is real value to be created by the acquisition.”
Frutarom’s 52nd acquisition, announced in January after the Wiburg purchase, was New Jersey-based Grow, a producer of vitamins and dietary supplements, for $20 million.
In Israel, Frutarom has corporate offices in Herzliya and its main production site in Haifa Bay, where Frutarom was founded in 1933. A savory solutions plant in Acre (Akko) makes seasonings and spices for snacks and meat products, while a facility in the Israeli desert grows algae and other natural fine ingredients for leading cosmetics companies including Estee Lauder and Clinique.
Outside of Israel, Frutarom’s newest facility is a plant in China with massive production capacity in both the sweet and savory flavors fields, “which will provide a response for the growing markets of Southeast Asia. The acquisition of Wiberg, among the world’s leading brands and whose name has become synonymous with innovation and quality, transforms Frutarom into a global market leader for savory solutions,” Yehudai said at the time of the acquisition in January.
“Profitable internal growth and strategic acquisitions have created value and made Frutarom one of the most fascinating companies in the world,” says Yehudai.