As IFF and DuPont’s Nutrition & Biosciences Division gear up to merge into a formidable $45 billion entity focused on food ingredients, fragrances, and pharmaceuticals, effective coordination is essential. Although the merger is anticipated to finalize in about a year, it’s logical that the groundwork for business strategies and corporate frameworks for the new entity is being laid out now. This structure aims to capitalize on the strengths and capabilities of both companies, which are leaders in various categories.
IFF recently reported its earnings while simultaneously unveiling the new mission, vision, and organizational structure of the forthcoming combined company. During a call with analysts, CEO Fibig highlighted that both firms boast top-tier products in their respective divisions and are committed to research and development, showcasing steadfast innovation. The combined R&D investment stands at approximately $550 million, with both companies holding over 9,000 patents. “From day one, we will deliver unparalleled innovation and cutting-edge insights to anticipate the needs of tomorrow’s consumers,” Fibig stated. “We are more than just a vendor or supplier. While we provide the necessary ingredients, components, and solutions, we are also united in tackling the challenges of today and tomorrow.”
Both companies have demonstrated strong performance early in the year, despite the disruptions caused by the coronavirus pandemic on supply chains and manufacturing processes. In the first quarter of 2020, IFF reported sales of $1.3 billion, achieving 5% growth in its Scent division and 3% growth in Taste. DuPont, which announced its earnings on May 5, also had a positive quarter in its Nutrition & Biosciences Division, with sales reaching $1.5 billion—an increase of 1% compared to the previous year. Probiotics ingredients experienced their best quarter ever, as consumers globally sought functional foods that enhance immune health. Demand for protein solutions also rose due to increased consumer interest in packaged goods and plant-based meat.
For this new combined entity to truly establish itself as a powerhouse, the merger requires approval from shareholders and regulators in the regions where it operates. The announcement of the business purpose and vision confirmed that the companies obtained antitrust clearance from the U.S. in March, with a shareholder vote planned for September.
IFF is recognized for its strategy of growth through acquisitions. In 2018, it acquired Frutarom Industries for $7.1 billion, expanding its portfolio in natural colors, enzymes, antioxidants, and health ingredients. This acquisition has notably driven growth in its Taste division, with Frutarom alone achieving a 4% growth compared to the same period last year if considered as an independent entity.
While IFF’s impending merger with DuPont represents the largest deal on the horizon, other ingredient companies are also pursuing acquisitions to enhance their capabilities. Ingredion is making a significant entry into the stevia market by acquiring a controlling interest in Pure Circle, the global leader in sugar alternative ingredients and R&D. Additionally, in 2018, Geneva-based Givaudan expanded its presence in the plant-based ingredient sector by investing in the French company Naturex. The merger of IFF and DuPont’s Nutrition & Biosciences division will create a giant in the industry, yet there will still be opportunities for other players in the ingredient market. With the constant emergence of new ingredients and consumer needs, smaller companies specializing in solutions like calcium citrate malate (CCM) will have the chance to carve out their niche or become attractive acquisition targets themselves.