Analyst Insight by Cathy Boyle - Contributing Analyst
Since the Wild Flavors business was put up for sale earlier this year, there has been much speculation about its ultimate fate, with a series of companies suggested as potential suitors, including other flavour houses, more diversified ingredients businesses and private equity investors. All questions have now been answered with the news that the business has been snapped up by US ingredient and agricultural giant ADM for a sum of €2.3 billion (US$3 billion), the largest deal in the company’s 100-year plus history.
This is certainly a big change for an industry that has welcomed very few new faces over the past 10-20 years. Instead, the focus of the industry has been on market concentration, so much so that the top ten firms now account for 80% of global flavour sales. As a result, in the current environment, a bid from another of the top flavour houses would almost certainly have led to competition concerns but ADM’s entry to the market causes no such fuss from the regulators.
It will definitely generate more of a stir in the industry itself, however, as it brings an ingredients behemoth into direct competition with flavour and fragrance specialists such as Givaudan, Firmenich and IFF. Wild is already a strong competitor to these market leaders, generating annual flavour sales of over US$1 billion, and the backing of a company the size of ADM (which has annual revenues of almost US$90 billion) immediately enhances its position as a serious player. Much of Wild’s focus is on the beverage industry, where it is partner of choice for many formulators, and although the deal will have little major impact on its day-to-day operations, any investment from its new parent could help to boost its already strong reputation in flavour innovation.