Frutarom targets emerging new flavour markets
strategy through its expansion into Latin America.
The company recently established a subsidiary in Mexico in order to coordinate and manage its activities and sales in the region.
Frutarom, which already has a subsidiary and sales office in Brazil in order to coordinate sales in South America, is looking to exploit emerging new flavour markets and Mexico is one of the world's largest.
"As part of Frutarom's strategy, we are working to broaden and expand our business in additional countries and emerging markets, where growth rates are significantly higher than the average rate for Europe and the United States," said Ori Yehudai, Frutarom's president and chief executive officer.
"We believe that establishing our subsidiary in Mexico will greatly strengthen our presence in Central and South America, and also enable us to develop our flavours business and strengthen our ingredients presence through offering our customer base in Central America the wide range of solutions that our customers in Europe and the United States enjoy.
"Additionally, we see great significance in shifting our activity from agents, as this enables us to make direct contact with our customers. This will contribute substantially to our continued growth in this important developing area."
Indeed, up until now, Frutarom has focused specifically on sales of ingredients to the Central American market. The establishment of Frutarom Mexico should therefore enable the company to develop the flavours market as well as further expand its ingredient activities.
The company also believes it has built a solid financial base from which to expand. Frutarom reported sales growth in Q2 2006 to US$72.3m, and although profits were impacted by price drops in natural raw materials and energy price hikes, the company clearly remains intent on expansion.
Sales for the quarter ended June 30 2006 were up 7.4 per cent from last year's Q2, but operating profit fell from $11.6m to 9.7m. Together with growth for the flavours division and cross selling between the company's divisions, the increase in sales was attributed an $8.9m contribution by newly acquired flavours and functional ingredients firm Nesse.
Yehudai also said that the company has experienced good growth in the functional foods arena, with healthy ingredients showing high double-digit growth for the quarter.
Frutarom's 2005 sales totalled $243.8 million (a 24 per cent increase from 2004), and its net profit totalled $28 million (a 50 per cent increase from 2004).
The expansion into Latin America is therefore very much part of an overall growth strategy that seeks to capitalise on strong growth. The company aims to combine organic growth in core activities with strategic acquisitions of activities and knowhow in the company's main fields of expansion into strategic geographic targets.
