Fourth 2017 Acquisition for Frutarom: Company Expand into Brazilian Dessert Market

26 Jun 2017 --- Frutarom are continuing their momentum of acquisitions and implementation of its rapid and profitable growth strategy. The company has announced the purchase of 80 percent of the shares of SDFLC Brasil Indústria E Comércio Ltda. (“SDFLC”), a leading Brazilian producer of taste solutions for ice creams and desserts, in exchange for $33 million (BRL 110 million).

The purchase agreement includes an option for the purchase of the balance of shares beginning about two and a half years after the date of completion of the transaction at a price based on SDFLC’s business performance during this period. The transaction was completed upon signing and financed through bank debt.

SDFLC had sales over the 12 month period ending May 2017 of approximately $ 22 million (BRL 72 million) (approx. US) after achieving average annual growth of 17 percent over the past five years.

Founded in 2001, SDFLC provides its customers support in product R&D built on a full and high quality portfolio of solutions for ice creams and desserts based on natural ingredients and includes: diverse taste solutions, texture solutions, coatings and glazing, as well as a unique diversity of innovative functional solutions (low sugar, low fat, low calorie and non-allergenic).

SDFLC employs about 90 workers and serves around 2,250 customers in Brazil in the field of ice cream and desserts and has advanced and innovative R&D capabilities and proven abilities in developing innovative taste solutions for ice creams adapted to consumer demand and Brazilian tastes.

The activity of SDFLC is synergetic to a large degree with Frutarom's taste solutions activity, with emphasis on sweet flavors and the innovative taste solutions based on natural ingredients aimed at desserts, where Frutarom has a growing global infrastructure that has been strengthened and deepened based on the growing activity of Inventive (acquired by Frutarom in December 2015) in the Chinese and Southeast Asia market, and thanks to the diverse natural and innovative fruit-based solutions of Taura (acquired by Frutarom in May 2015).

The acquisition of SDFLC allows Frutarom continued expansion of its global activity in natural sweet taste solutions along with the expansion and deepening of its activity and market share in Brazil and Latin America by leveraging SDFLC’s specialized know-how and technology as well as Frutarom’s expansive sales and marketing platform in the region in order to expand SDFLC’s activity into additional countries as well as capitalizing on the many cross-selling opportunities for Frutarom products among SDFLC customers.

Melissa Frojmovics Marketing Coordinator, Natural Solutions at Frutarom told FoodIngredientsFirst: “In recent years, the market for premium ice cream, or gelato, classified as a frozen dessert, has been growing in an important way with a growing demand for the Italian type of product. To the point that large manufacturers like Nestlé and Unilever are launching premium brands to meet consumers craving for the high quality products.”

“SDSFLC had taken advantage of the trend with an offering of products based on technology directly transferred from Italy and has established a strong supply of imported top quality raw materials and state-of-the-art machinery. The brands Leagel, La Menut and Gelateria Italiana cover a wide range of segments and customers including fast food and casual dining chains,” explains Frojmovics.

“Frutarom in recent years has been seeking a more diversified portfolio of products for its wide range of taste solutions in which its flavor science is combined with innovative and high value added ingredients. As an example, the acquisition of Taura in 2015 and Inventive also in 2015, have boosted the synergies of product portfolios.”

Brazil’s economy is the largest in Latin America and the ninth largest in the world, with GNP estimated at $1.8 trillion and a market for food products estimated at 140 billion. The Brazilian ice cream market has grown over the past decade at an average annual rate of 7 percent with average annual consumption of approximately 1.3 million liters, which translates to 6.4 liters annual per capita consumption as opposed to 4.1 liters annual per capita consumption a decade ago and an average of 16.5 liters per capita annually in developed countries.

The acquisition of SDFLC is Frutarom’s third acquisition in the Brazilian market and its sixth in the Latin American market in the last five years.

Ori Yehudai, President and CEO of Frutarom Group, said: “The acquisition of SDFLC is the continuation of the implementation of Frutarom Group's rapid profitable growth strategy and the realization of its vision “to be the preferred partner for tasty and healthy success.” SDFLC has a leading position in Brazil’s market of sweet taste solutions for ice creams and desserts which is based on longstanding tradition and know-how and cutting-edge technology, and we intend to continue expanding its activity by means of Frutarom’s global support and the exploiting of the many cross-selling opportunities, both by offering Frutarom’s broad portfolio of solutions to SDFLC customers in Brazil and by expanding SDFLC’s activities into countries in the region where Frutarom already has a sales and marketing infrastructure in place.”

“We will continue working to expand our activity in Brazil and Latin America and other growing emerging markets where our growth engines are focused,” said Yehudai. “I am convinced that this infrastructure will support the continued rapid growth of our activity in Latin America both by means of organic growth and through additional acquisitions which we are evaluating. In recent years Frutarom has been implementing a strategy of geographic expansion in North America and in emerging markets (Asia, Africa, Central and Eastern Europe and South America) that exhibit higher rates of growth. The result of this strategy is that while Frutarom sales over the past 6 years have grown by a factor of 2.6, sales in the same period in emerging markets grew by a factor of 3.8 such that the percentage of sales in 2016 in emerging markets constituted 4 percent of total Frutarom sales compared with 27 percent in 2010.”

In conclusion, Yehudai said: “We are working on seeking out and executing additional acquisitions of companies and activities in our fields of activity, with special focus on high-growth markets and natural products in the field of taste and health, and we have a strong pipeline of potential strategic acquisitions. We will continue carrying out our rapid profitable growth strategy, which is based on profitable internal growth and strategic acquisitions, in order to achieve the targets we recently set: sales of at least $2 billion with an EBITDA margin of over 22 percent in our core activities by the year 2020.”

by Elizabeth Green

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