Givaudan closures designed to streamline flavour business

The Swiss-based firm has decided to close its US production sites in New Milford, Connecticut and in Oconomowoc, Wisconsin. The activities of these two sites will be transferred to Cincinnati, Ohio and Devon, Kentucky, where Givaudan believes it has the necessary capacities to serve its customers.

Completion of the closure and consolidation initiatives is expected by mid 2007. Givaudan says it will incur one-time costs of CHF 22 million, of which CHF 16 million from asset impairment impact the 2005 results.

In relation to these transfers it was also decided to discontinue businesses with commodity type savoury base notes. With these products Givaudan has realised in 2005 a turnover of around CHF 45 million. The company says that the phasing out will last until 2007.

As a result, Givaudan is firmly focussing its business on creating high-value fragrance and flavour compounds in order to sustain its solid margins.

The market for flavours has, historically, been dominated by suppliers from the US, Japan and Western Europe - in particular, France, the UK, Germany and Switzerland. However these traditional flavour production areas could begin to lose market share to developing areas of the world as the product range and demand expands.

According to a recent report from Freedonia, China leads the way in 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.

Streamlining business operations and concentrating on high-margin products is one way that European firms can retain their position.

Globally, the flavours and fragrances industry is estimated at about €14.8 billion, of which the top five players account for 40 per cent of the market. Swiss firm Givaudan continues to lead the industry with an estimated 13.5 per cent slice of the market in 2003, followed by US International Flavours & Fragrances with an 11.7 per cent share.

Givaudan owns operations in 40 countries worldwide, and recorded sales of CHF 2.68 billion (€1.73bn) in 2004.