Frutarom aims to ride natural trend

A 28-year-old foodie from the Bronx is a New Jersey company’s weapon in its bid to take over the world’s flavour market.

With pierced ears and a stylized black Yankees cap cocked to one side of his head, Philip Caputo has a mission to spot trendy ingredients, like a Korean chili paste called gochujang, and turn them into flavours that Hagelin Flavor Technologies can sell to industrial food companies.

Hagelin’s Israeli parent, Frutarom Industries Ltd., is figuring that it takes a millennial to capture millennials. CEO Ori Yehudai, who has nearly doubled revenue since 2010 through acquisitions, has watched the under-30, healthconscious generation pressure U.S. food chains from Pizza Hut to Subway Restaurants to quit using artificial flavours. He’s betting millennials’ embrace of the natural will eventually become global.

“The trend of natural food and natural ingredients in food is a trend that’s here to stay,” Yehudai said by phone. “In emerging markets, it’s absolutely not at the same level as it is Europe or the U.S., but I think we’ll get there.”

Shares of Haifa, Israelbased Frutarom had climbed 24 per cent this year as of Sunday, outperforming larger rivals like International Flavors & Fragrances Inc. and Givaudan SA and posting the second-best performance on the TA-25 stock index.

Part of that rally has been fuelled by Frutarom’s shopping spree. It has bought 21 companies since 2010, including at least six this year in places like India and Australia, according to data compiled by Bloomberg. It acquired Branchburg, N.J.-based Hagelin in 2013, and also has U.S. units in Ohio and California.

Much of Yehudai’s acquisition strategy is focused on expanding Frutarom’s reach in emerging markets, where people are starting to eat processed foods like candy, yogurt and baked goods at a faster rate than in the U.S. and Europe.

But he’s also snapping up companies that will help cater to the food industry’s demand for “natural” ingredients. He bought companies in Spain and Slovenia recently that produce natural colours, and he’s investing in natural antioxidants that can make food last longer on shelves without the use of chemical preservatives.

In Europe, the industry shift toward natural ingredients was spurred by regulators banning certain food additives, while consumer tastes are driving change in the U.S., said Erik Olson, director of the health program at the Natural Resources Defense Council in Washington. Olson said he’s lobbying the U.S. government to ban eight synthetic flavourings he said are known to cause cancer in lab animals.

Frutarom had US$820 million in sales last year, compared with US$451 million in 2010. Revenue is forecast to grow about six per cent in 2015, according to the average estimate of three analysts surveyed by Bloomberg. Yehudai’s goal is to reach US$1.5 billion by 2020.

Shares of Frutarom, International Flavors & Fragrances, and Givaudan all touched record highs in the past six months.