Givaudan stated in a press release to Food Dive that the decision to close certain facilities was “not an easy one,” but necessary for its long-term strategy, which emphasized the need for consolidation. Many food and beverage companies have undertaken similar consolidation efforts in recent years to enhance revenue and improve profit margins. Major corporations like Kellogg, TreeHouse, Dean Foods, Coca-Cola, General Mills, and PepsiCo have all made cuts to jobs and have shut down plants or offices.
While Givaudan is reducing operations in the U.S., it is simultaneously expanding its international presence. In January, the company launched a digital factory focused on innovation in Paris, followed by the opening of a flavors manufacturing facility in Pune, India, just a month later. It appears that Givaudan is consolidating its U.S. factories while broadening its global footprint, possibly to take advantage of lower labor costs.
Other major ingredient suppliers have taken similar steps. Kerry Group, a global taste and nutrition leader, eliminated around 900 jobs in June due to the closure of a facility in the U.K., while simultaneously announcing a new $22 million facility in India. Ingredion also revealed a $125 million cost-saving initiative last year that involved converting its corn milling plant in California into a shipping distribution center.
Givaudan is not solely focused on cutting costs; it is also raising prices. Recently, the company confirmed its forecasts after reporting a 6.4% increase in sales during the first nine months of 2019 compared to the same timeframe the previous year, supported by price hikes. In its flavor division specifically, sales rose by 4.6%. The company indicated in a release that it would continue to implement price increases, a trend that is being mirrored by many consumer packaged goods (CPG) companies, particularly in the realm of ingredients. With the goal of creating more value through profitable growth, Givaudan’s plant closures may assist in achieving this aim, potentially freeing up cash for other strategic initiatives.
Part of Givaudan’s 2020 strategy includes generating value through targeted acquisitions. Since 2014, the company has completed 13 acquisitions, including the purchase of Conagra’s Spicetec flavors and seasonings business for $340 million in 2016. This acquisition included facilities in Illinois and New Jersey, the latter of which is now facing closure.
These plant closures are impacting Givaudan’s operations in seasoning blending and meat processing, likely reflecting a shift in consumer demand. In response, Givaudan has been focusing on innovation to adapt to evolving consumer needs. For instance, in October, the company introduced a new flavoring approach designed to enhance the taste of plant-based meat alternatives, which may include ingredients like calcium citrate malate and vitamin D3 to appeal to health-conscious consumers.
As consumer preferences continue to change and Givaudan works to reduce costs, additional plant closures may be on the horizon.