THE NATURE OF OUR BUSINESS – STABLE GROWTH - Symrise

given current supply/demand equations, increasing scarcity or
more demanding regulatory constraints. This is true, for example,
of all turpentine derivatives and citral-based materials.
In mature markets, growth in the flavors and fragrances segment
is led by consumer trends satisfying basic needs, except for the
fine fragrances and luxury-end personal care products, which are
more susceptible to changes in consumers’ disposable income
and therefore suffered during 2008 from the business downturn
and economic uncertainty. In emerging markets, the flavors and
fragrance segment correlates more directly to GDP growth, and
sales there held up well as these economies generally continued
to grow strongly.
Performance of the Flavor and Fragrance Market
As mentioned elsewhere (see page 57), Symrise is active on the
worldwide market for flavors and fragrances with its fragrances, mint
products, and flavors. With its Life Essentials and Aroma Molecules
business units, Symrise is present on the market for cosmetic ingredients
and the market for aroma chemicals.
In a recent study, IAL Consultants (IAL) estimates the total volume
of sales generated in the worldwide F&F market in 2008 at € 10.7
billion.The fragrances submarket accounted for around € 5.3 billion
of this, and the flavors submarket for about € 5.4 billion. If the submarkets
of aroma chemicals and cosmetic substances are added
(together accounting for around € 3 billion), the F&F market of relevance
to us in 2008 had a volume of € 13- € 14 billion. From a
long-term perspective, the market is expanding by between 2% and
3% a year. In 2008, market growth was less than 2%; due to the
financial and economic crisis, we expect zero growth for 2009.
Symrise is the fourth-largest player in the F&F market with a market
share of approximately 10%. The market leader is the Swiss company
Givaudan S.A., with an estimated market share of 20%,
followed by Firmenich S.A., Switzerland, with a share of around 13%.
In third place is International Flavors & Fragrances Inc. (IFF), USA,
whose market share stands at about 12%. The top four players in
this market thus comprise more than 50% of the total, although there
are more than 500 companies active in this segment.
Investments and Acquisitions
In the fiscal year 2008 we invested worldwide € 179.2 million
(2007: € 55.8 million) in intangible and tangible assets. The significant
investment and acquisitions activity centred around the
strengthening of both the Flavors & Nutrition and Scent & Care divisions
through acquisitions in the United States.
In early March, we announced the acquisition of the flavors business
from the Danish manufacturer Chr. Hansen, which was subsequently
completed on April 25. $ 110 million (€ 72 million) was
paid for the business, which enjoyed a turnover of $70 million
(€ 51 million) in 2007.
The acquired business comprised the Seasonings, Sweet, Savory
and Dairy Flavors activities of Chr. Hansen and added production
capacity and new technologies to strengthen our North American
capabilities. In addition, our sales force was further strengthened
and we gained a customer base which was very complementary to
the existing Symrise business.
In 2008, this business contributed $ 45 million (€ 31 million) of
additional sales and is performing in line with our expectations. As
previously highlighted, the acquisition did not benefit EBITA in
2008 as a result of the costs of the business integration which
were incurred. Following the finalisation of the purchase price allocation
and the subsequent amortisation of capitalised recipes
during 2008, the acquisition reduced EBIT by € 3 million. Integration
was complete by the end of 2008 and, from the beginning of
2009 the business is expected to contribute additional margins in
line with the rest of the Group.
For the Scent & Care division, we announced in late September the
acquisition of the businesses of Intercontinental Fragrances, which
was completed on September 3, 2008, and of Manheimer Fragrances,
which was subsequently completed on November 6,
2008. The combined consideration for these businesses was
$ 92 million (€ 65 million). In 2007, Intercontinental Fragrances
enjoyed turnover of $16 million (€ 12 million), while Manheimer
Fragrances generated turnover of $ 33 million (€ 25 million).
Through these acquisitions, Symrise was immediately promoted
to the position of one of the leading fragrance suppliers for air care
products in North America, where the market is estimated to exceed
$ 300 million and represents about 10% of the entire US fragrance
market. Symrise has also gained some attractive new
customers and will leverage the expertise gained to strengthen
Symrise’s position in the global air care market. In 2009. Symrise
plans to build a global air care center in the US.
In 2008, these businesses contributed $ 7 million (€ 5 million) of
additional sales and are both performing in line with expectations.
Integration of the businesses, which involves transferring production
of the Manheimer products to other Symrise production sites,
including the Intercontinental factory in Houston, Texas, is proceeding
according to plan and should be completed in the first
66 Annual Report 2008 Symrise AG