Flagging growth for flavour leader Givaudan

Contributing the biggest revenue stream to the Swiss company, the flavours unit posted sales of CHF 1.6 billion (€1 billion) sales, representing stagnant growth on a like-for-like basis in Swiss francs.

According to the Geneva-based firm, that reported group sales of CHF2.68 (€1.74 billion) in 2004, the confectionery and dairy segments posted the strongest gains for the flavours arm.

Operating profit for the flavours unit came in at CHF311 million in 2004.

Reflecting the same picture across the ingredients and additives industry, Givaudan faces the pinch of rising raw material prices, and supply chain pressures squeezing margins. Confronted by this climate, investment in innovation and higher margin products are widely believed as the key opportunities for real growth.

In 2004 Givaudan opened three new flavour development centres in the US, Singapore and Switzerland, as well as pouring funds into the growing Chinese market.

"Investments were also completed for the expansion of the flavour creation and application facilities in Cuernavaca (Mexico),"​ said the firm in statement yesterday.

China is spurring growth in Asia Pacific, a region slated to advance at about 7.3 per cent, year on year, until 2008. This compares to western Europe and the US with 3.7 and 3.3 per cent growth respectively.

Eyeing this rapidly growing market, looking to mop up some lost margin and protecting market share, in 2004 Givaudan broke ground on a new flavour creation, application and production centre in Shanghai.

Food sales in China took off in the mid 1990s rising from under 100 billion yuan (€9.2bn) in 1991 to well over 400 billion yuan (€37bn) just ten years later.

Driving the market is the increased spending power and changing eating habits of China's 1.3 billion people who are transforming the country's food sector, both domestically and in foreign trade.

Historically, flavours production has been dominated by the US, Japan and western Europe - in particular, France, the UK, Germany and Switzerland. But a recent report from Freedonia​ warns that up to 2008, these areas will lose market share to developing areas of the world, as the product range and demand expands.

In 2003, the US and western Europe had a 23 and 21 per cent share of the market respectively, compared to Asia Pacific with about 30 per cent .

Swiss firm Givaudan continues to lead the competitive global flavours industry with an estimated 13.5 per cent slice of the market in 2003, followed by US International Flavours & Fragrances that has an 11.7 per cent share. Firmenich, Symrise and ICI-owned flavours company Quest International are slated to have about 9.8, 9 and 6.1 per cent of the market respectively.