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Givaudan And IFF Plan To Revamp

Moves may be coincidental rather than emblematic of a struggling industry

by Alexander H. Tullo
January 16, 2006 | APPEARED IN VOLUME 84, ISSUE 3

Credit: Givaudan Photo
Credit: Givaudan Photo

Apparently the new year's resolution at the world's two largest flavor and fragrance companies, Givaudan and International Flavors & Fragrances (IFF), is to trim the fat.

Both firms have started 2006 with plans to streamline operations, mostly in manufacturing.

IFF is cutting 300 positions, or 6% of its workforce, in manufacturing, sales, research, and administration. The company says it will take pretax restructuring charges of between $25 million and $30 million in its fourth-quarter 2005 and first-half 2006 earnings, almost solely in employee separation costs.

"These actions are a necessary part of our ongoing efforts to maintain and improve IFF's profitability in the economic environment in which we operate," CEO Richard A. Goldstein says.

Givaudan, by mid-2007, plans to close plants in New Milford, Conn., and Oconomowoc, Wis., and transfer production from these sites to facilities in Cincinnati, and in Devon, Ky. The company will take about $17 million in charges.

The Oconomowoc plant produces dairy and cheese flavors. The New Milford plant makes savory flavors, including hydrolyzed plant proteins (HPPs).

In addition to the plant closures, Givaudan says it is exiting commodity-type savory base-note flavors such as HPPs and yeast extracts. These businesses generate about $35 million in sales annually. Givaudan is keeping noncommodity savory products.

Despite the restructurings, the flavors business is not struggling, according to John Leffingwell of the flavor and fragrance consulting firm Leffingwell & Associates. Instead, fortunes in the industry are company-specific. IFF's results have been anemic for a couple of years, he says, whereas Givaudan is integrating its 2002 acquisition of Nestle's Fis (Food Ingredients Specialties) unit. "When they acquired the Fis savory business, they acquired a lot of assets," Leffingwell says.



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