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Mergers & Acquisitions

Firmenich, BASF buy natural flavor and fragrance firms

To meet rising demand, firms absorb smaller rivals, try biotech

by Melody M. Bomgardner
September 30, 2019

This photo shows vanilla and oranges among a bottle of flavor essences.
Credit: BASF
BASF can now offer its customers vanilla and citrus flavors made via fermentation.

Consumer demand for natural ingredients is spurring deals in the flavor and fragrance industry. The big ingredient supplier Firmenich has agreed to purchase a 17% stake in Robertet, a French natural ingredients company. Separately, the chemical maker BASF has acquired Isobionics, a biotech firm focused on aroma chemicals, and is partnering with the biotech firm Conagen to offer natural vanillin.

Firmenich bought its shares in Robertet from the private equity firm First Eagle Investment Management. Control of Robertet remains in the hands of the founding Maubert family. But Firmenich said it is interested in buying a larger—or even a controlling—stake in the company.

Firms like Firmenich that sell raw materials to the food and cosmetics industries are increasingly being asked to supply natural ingredients. Firmenich’s deal for part of Robertet is only its latest move to capture more of the naturals market. Last year, the Swiss firm bought New Jersey–based Natural Flavors, an organic food ingredients supplier.

Meanwhile, demand for synthetic ingredients has plummeted in recent years as marketers at many brand firms “no longer want to use artificial flavors at all,” says John Leffingwell of the flavor and fragrance consulting firm Leffingwell & Associates.

BASF is already a leading supplier of synthetic aroma ingredients, and its acquisition of Isobionics heralds its entrance into the natural flavor and fragrance market. Isobionics brings fermentation-based production of the grapefruit essence nootkatone and the orange flavor valencene. BASF’s deal with Conagen, meanwhile, brings fermentation-derived vanillin, the main flavor and scent component of vanilla.

By turning to biotechnology, BASF can address a gap in the market between scarce and costly plant-derived flavors and fragrances and cheaper but unpopular synthetic versions, says Kantha Shelke, principal at the food science and research firm Corvus Blue. But food companies are more likely to use the biotech versions in new products than in existing flagship brands “because consumer noses know the difference and will call them out,” she says.

Last year, Firmenich signaled its own interest in biotech ingredients with its acquisition of Senomyx. Prior to the deal, Senomyx said it was working on a fermentation method to make a high-intensity sweetener called siratose, which is more commonly extracted from monk fruit grown in China.



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