Four Industry Experts on Mergers & Acquisitions

Courtesy of Perfumer & Flavorist magazine.

With the recent mergers of Firmenich and Danisco Flavors, Givaudan and Quest, and Frutarom’s ongoing shopping spree, consolidation is on everyone’s minds. Raymond Hughes, president, ingredients, flavors division at A.M. Todd, sees something larger at work.

“Ongoing consolidation of consumer packaged goods companies will limit product opportunities,” he says, “and continue downward price pressure. Reduced opportunities will force flavor and fragrance industry consolidation to achieve desired growth in sales and profits.”

Yet consolidation may not fulfill its promise, says Robertet CEO Philippe Maubert: “Consolidation does not necessarily translate into organic growth. Because products in the flavor and fragrance industry are customized to work in a specific application—with the result a consumer product that is different than all other products in the market—the true key growth is to continuously deliver the most creative and cost-effective products. There is no evidence that merged companies with increased business complexities a can deliver this more effectively than they could before a merger."

In addition, notes Maubert, increased consolidation reduces competition, giving customers fewer choices in an industry defined by creativity.

drom’s president Ferdinand Storp concurs. “You shouldn’t be big just to be big,” he says. “… [M]arket share isn’t a healthy way to look at this.” Storp feels that creativity must be the driver of moves within the industry, pointing to the example of Daimler Chrysler in which the company’s growth paralleled decreasing quality. “This demonstrates that you can’t be everything to everyone,” Storp says, “and there will become a need to seek out specialists who can be counted on to do the job right.”

For companies to succeed, T. Hasegawa president and CEO Tokujiro Hasegawa says that, as the industry increasingly divides into global giants and smaller niche entities, “only the strongest will turn out to be the winners.


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