Givaudan confident despite flat flavour sales

Growth for the Swiss flavour giant was impacted by the firm's ongoing initiative to eliminate lower value-added ingredients both in fragrances and flavours.

Total group sales for 2005 reached CHF 2,778 million, reflecting an increase of 2.5 per cent in local currencies and a 3.6 per cent in Swiss Francs.

Excluding the ongoing streamlining initiative, Givaudan says that sales would have grown by 3.5 per cent in local currencies, in line with Givaudan's objective to grow faster than the market.

Givaudan's flavours sector however performed less well. Overall sales grew 1.3 per cent in local currencies and 2.5 per cent in Swiss Francs, though sales in the mature markets of North America and Western Europe remained flat.

The company says that flavour division sales, in addition to the streamlining effect, were also impacted by lower prices for natural vanilla.

Nonetheless, sectoral operating profit increased from CHF 310 million to CHF 352 million, resulting in a margin increase from 19.3 per cent to 21.4 per cent. Givaudan says that this is a direct result of the successfully implemented margin improvement initiatives, the product portfolio rationalisation and the production consolidation activities in Europe.

At the end of 2005, Givaudan successfully completed the transfer of the liquid and dry flavour production from Barneveld (Netherlands) to Dortmund (Germany) and Zurich (Switzerland). The French market commercial team was moved from Tremblay (France) to the newly refurbished facilities in Argenteuil (France).

In August 2005, the final phase of the Savoury Development Centre in Kemptthal (Switzerland) was completed with the inauguration of a fully dedicated pilot plant, capable of handling a wide range of food manufacturing processes. The firm says that this will allow the development of flavours together with customers in a realistic setting.

As a consequence of the on-going streamlining of savoury base notes and the consolidation of production sites, Givaudan announced on 10 January 2006 the closure of its New Milford (Connecticut) and Oconomowoc (Wisconsin) sites. These activities will be transferred to Cincinnati (Ohio) and Devon (Kentucky) with a targeted completion by June 2007.

The expansion of the production facilities in Fukuroi, Japan, was completed in 2005 and now provides the necessary manufacturing capacity to serve the ever-increasing business being generated in this important market. The construction of a fully dedicated flavour creation, application and production centre in Shanghai is progressing well and is scheduled to become operational in summer 2006.

Such restructuring is designed to strengthen the Swiss firm's position in the market. 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.

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. Firmenich, equity-owned 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.

As a result, Givaudan is confident of its ability to sustain its leading market position and to deliver a strong performance in 2006.