I'd be willing to bet that when most people have a packaged food item or use a fragrance, they don't think about how that particular flavor or fragrance profile was created - most likely by a different company. This brings us to Swiss company Givaudan, the world's largest Flavor and Fragrance creator.
The largest company in the industry as of 2008 (others include International Flavors and Fragrances - IFF/US and Sensient Technologies - SXT/US; the latter also deals considerably with food coloring and inks, among other avenues), Givaudan creates custom produced flavors (usually sold under confidentiality agreements - there are four divisions: Beverages, Dairy, Savoury and Sweet Goods) and fragrances for both perfumes (Taylor Swift's new "Wonderstruck" perfume is an example of the company's recent work) and household products. In terms of flavors, the company's quest to create new flavor profiles and innovate is fascinating. Team members head out on "Tastetrek" adventures, going around the globe in an attempt to find new raw materials. As noted on the company's website: "TasteTrek™ is all about going in search of new tastes. They might be found in a rainforest, they might found be in a village in the middle of nowhere – but they will not be commonplace."
In terms of the "science of food", Givaudan is even working on a "bitterness blocker" that makes healthy foods like Broccoli a little less bitter. "Taste cells with particular receptors blanket the tongue. Scientists have recognized 27 receptors for different shades of bitterness, which along with salty, sweet, sour and savory (or umami), make up the human taste palate. The new-fangled bitterness blocker, known merely at this point as GIV3616, works by blocking some of the bitterness receptors." Story.
A primary issue for the company is the rising cost of raw materials (the company uses a stunning 14,000 different ingredients in their flavour and fragrance products from more than 50 countries) although the company is in a unique spot for the growing desire for many to eat healthier. The company's "TasteSolutions: Salt" offers the ability to use less salt in a product without heavily compromising taste. In terms of reduced fat products, the company provides "Tastesolutions: Mouthfeel" to provide a similar feel and aroma without as much in the way of fat and calories. The company's "PureDelivery" optimizes a product's flavor for the production-to-store trip, as the encapsulation technology helps keep flavors strong through the manufacturing process and protects from such issues as oxidation.
Healthier eating is a focus of the company, but there's a number of other avenues for the flavor business, such as the desire for more complex flavors in ready-to-drink beverages. Givaudan's expertise (or, in this case, experteas?) allows it to take the flavor profiles from any number of different teas (from the fundamental flavours of green, black, red white, flower – as well as varietals of these fundamental types such as Dragon Well (Long Jing), Oolong, Silver Needle, or Osmanthus), for its "TasteSolutions: Tea". The company is also doing similar work in coffee.
The amount of research and development that goes into a product is remarkable. For "TasteSolutions: Vanilla", the company held focus groups: "From Los Angeles to Shanghai, more than 150 of our new vanilla flavours, tastes, and concepts were chosen for consumer testing. Over the course of three years, our sensory team mapped 75 of the most popular vanilla ice creams with over 4,000 consumers from 20 different countries and identified preferences and drivers of liking."
For chicken: "Our TasteEssentials™ Chicken flavour programme is developing breakthrough natural ingredients that really capture the nuances of the taste of chicken.
From the kitchens of Moscow to the restaurants of Mexico, we at Givaudan have been on a global journey of culinary exploration to make sure that we really understand everything about chicken. We have explored the regional cuisines in China and Japan and visited traditional and modern restaurants in Europe to help us identify and create the most natural, rich and authentic flavours possible.
From chicken stocks, soups and bouillons, to grilled, fried, boiled and roasted chicken dishes, we explored the chicken flavour universe – talking with 7,300 consumers in 14 countries as well as the world's leading chefs across four continents."
On the perfume side of the company, the company has the unique offering of its legendary perfumery institute, which was opened in 1946 and claims to have trained perfumers responsible for a third of the fragrances on the market today. The company has created many award-winning fragrances, working with fashion designers, specialty retailers and other manufacturers to create memorable fragrances. The company's school ensures that it has a consistent stream of new talent. The company continues to try and innovate on the fragrance side, sourcing more than 200 natural materials for use in its perfumes, with a specialty collection of 50 for its Orpur range.
The company has discussed a detailed five-year plan, including an increased focus on developing markets and sustainable sourcing of raw materials.
The company's business is fairly reasonably balanced, with 54% of the business coming from the flavor division and 46 coming from the fragrance part of the business. Breaking it down further, beverages make up 37% of the flavor business, followed by savoury (ready-made meals, soups, sauces, meats, etc) and then Dairy and Sweet Goods provide the third and fourth spots in the flavor division. In the first 9 months of 2011, the flavor side saw 5% growth, while the fragrance section saw 4.4% growth. The company's raw materials costs, however, remain a burden: it is expected that materials will cost 15% higher in 2011 than 2010, and while the company is trying to pass off costs, that will only be able to be accomplished gradually over 2011 and 2012.
Half Year 2011 Financial Presentation
As noted with other profiles on this blog, this is not a recommendation to invest, but a profile of an interesting and unusual global company. That said, the industry is definitely one to watch: the "science of food" will be an increasingly important factor over the next decade, both for varying/evolving world consumer flavor demands and health issues (trying to use flavors and other innovations to allow for less salt, fat and other unhealthy substances to be used in food and still keep a satisfying, pleasing flavor.)
US: GVDNY (ADR shares)
Average Volume: 14,291 shares
Website:http://www.givaudan.com/
Five-Year Strategy: link
Flavor Global Trends:link
