With four key acquisitions in the flavours and ingredients sector completed already this year, Frutarom is making impressive strides towards its target of USD2Billion in sales by 2020.  As a global supplier to the Fruit Juice, beverages and food industries, Frutarom is one of the fastest growing producers of flavours and fine ingredients and ranks as one of the top 10 companies in its field worldwide.

Maintaining production facilities in North and South America, Europe, Asia and Africa, the company provides more than 60,000 products to over 28,000 customers spanning the globe in more than 150 countries in the food and beverages, flavour and fragrance extracts, pharmaceutical, nutraceutical, health food, functional food, food additives and cosmetics industries.

The successful implementation of Frutarom’s strategy of augmenting profitable organic growth with accretive acquisitions has led to sales growing at an average annual rate of 18% since 2000.

When first established in 1933 Frutarom was one of the earliest industrial enterprises in Israel. Its origins lie in the desire to produce flavour and fragrance ingredients based on local agricultural produce, in particular citrus products.

Here Ori Yehudai, President and CEO of Frutarom, talks to Fruit Juice Focus on some of the background to this amazing growth and why he is proud that the company still adheres to its founding principles.

Fruit Juice Focus (FJF):  Frutarom was established over 80 years ago, what were the ideals of the company upon inception and have those ideals and objectives changed since then?

Ori Yehudai, Frutarom (OY): That is a very interesting question. Frutarom was founded with the aim of combining the cultivation of aromatic plants and flowers with the extraction and distillation of flavours, fine ingredients and essential oils in order to extract natural raw materials primarily for taste but also for health applications.

The company’s foundation was promoted by Professor Haim Weizman, the first President of the State of Israel and a well-known chemist.

I love the idea that what we are doing today is very much what the company was doing back then in the early days. Mostly using mother-nature in order to produce and extract natural ingredients out of the earth. Nowadays we are not necessarily the growers but operate very much as a collective of growers all around the world whose aim is to get the right ingredients and natural raw materials which we need in order to produce the products for our customers. Today 75% of these products are natural, and the proportion of natural products has continued to grow very rapidly over the last few years.  As part of our strategy we put a great deal of importance in maintaining a strong internal research and development department that collaborates with universities and start-ups and many of the acquisitions we have made are to strengthen our position as one of the leading players in the natural products, natural ingredients, natural extraction, natural essential oils marketplace. One of our central aims is always where possible to replace synthetic ingredients with natural ingredients (such as natural colours, natural anti-oxidants to replace artificial preservatives) that we have produced. So if you go back through our history there is a continuation that we are proud of.

FJF: Replacing the synthetics with the naturals – good for your green credentials and a great selling point?

OY: That’s very true and that’s part of the strategy. Around 10 years ago when we were looking at what is the differentiation between Frutarom and its competitors, one of the most important ideas was to focus on natural products and on solutions that will replace synthetic ingredients and will allow millions of consumers the options of selecting products with more natural ingredients and less synthetic ingredients. With the trends in juices to move towards healthier and sugar free products this has proved to be a sound strategy.

FJF: Frutarom has made over 20 acquisitions in the past two years in line with the company’s growth objectives for 2020. Operationally this must be a huge undertaking to manage. How has the company been structured to ensure the successful integration of all those companies involved?

OY: The second leg of our growth strategy has been to combine internal growth – which is double the rate of that in the food industry globally – and strategic acquisition. We have made 61 acquisitions in the last 20 years and indeed 23 of them in the last two years and 32 in the last five years. As you say this is a huge rate of expansion and acquisition by any company’s standards.  Frutarom today as a global company has very strong management teams in all the relevant regions and managers that are very experienced at managing product lines. We don’t necessarily do many acquisitions in the same territory or the same product lines which means there are different managers that are managing the integration processes of the acquisitions that we are acquiring. They come from the region and from the business that they were involved with as far as each specific acquisition is concerned.

In today’s world we continue to see a consolidation process that has been going on globally for maybe 60 years. Consolidation between the big boys is already done but there are still about 800 small flavours companies in the world and around 400 in the area of natural ingredients so we have a very strong pipeline for additional acquisition. This will allow us to double in size every four years – which we have been able to do in the last 30 years that I have been in the business – and jumping to the target of USD2billion before the year 2020. This rate of growth calls for continuation of organic growth and acquisition of revenues of around USD150million a year. If you look at the last three years we have been growing internally above average market growth rate and  there has been approx. USD220 million in revenue acquisitions per year so at the moment our 2020 target doesn’t look like such a challenging target as it did.

FJF: Apart from natural ingredients and small flavours are there any other markets you are looking to get into or are Frutarom sticking to their core markets? 

OY: Frutarom is not a single solutions company like some of our large competitors. We are not looking to move away from our core markets. We see ourselves more as a provider of combinations of taste and health solutions for sectors we work with such as the fruit juice and food industry.  For instance, we would develop savoury solutions for regular meals that includes not only the flavour but also the natural antioxidant, the natural colour and the functionality that the customer requires as an ingredient. Another example would be creating a solution relating to a beverage paste. Fine ingredients is around 20% of total sales of Frutarom, which relates to 700 different raw materials that we are producing, most of them are natural products  that are based on flavours or health ingredients for natural colour or antioxidants.

We are structured in such a way that under one roof in any one territory we can make the right solutions that our customers need.  You have to bear in mind that the majority of our business is with smaller and mid-size customers who in the last two years are growing faster than some of the bigger companies. These customers need the full solutions options much more than the big companies. They are typically niche and require solutions that Frutarom provides in the natural products sector that other larger competitors will not be able to produce because of the technology involved or because of their limited product portfolios.

FJF: Has the expansion of the Frutarom research and development capabilities seen a marked increase in innovative new products being developed for your customers in the fruit juice industry? And can you tell us more about these developments? 

OY: It’s not so much new types of products – it’s more about new solutions that consumers want to see with less sugar, less calories, the natural solutions back in the fruit juice drinks, to ensure good taste and to improve on what we have got to make it more acceptable to consumers based on what they want.

For example, in the citrus industry natural sweeteners with zero calories and the excellent taste at affordable price are now becoming a very important part of today’s world. Consumers and the industry are very interested to move towards these natural solutions but the natural products are not always affordable because prices are much much higher than the synthetic ones. Part of Frutarom’s vision, more so in the last year, is to go back into collaboration with growers and farmers and to work to improve our yields and our cost structure to enable us to provide the solutions at a price that is acceptable to our customers.

Then we would be in the position with this type of natural sweet enhancer for example to be able to offer the product at an affordable price allowing both very large beverage companies and the smaller companies to be able to use these solutions.

FJF: What future trends do you predict for the fruit juice industry?

OY: We predict more and more consolidation between the juice manufacturers. For Frutarom part of the challenge is how to partner with the fruit juice processors to be able to continue to deliver more and more natural raw materials for taste and for health purposes.

The UK Food and Drink Federation (FDF) and the UK Industry Council for research on Packaging and the Environment (INCPEN) have recently published Packaging for people, planet and profit – a sustainability checklist.

With a foreword from the UK Environment Minister Thérèse Coffey, the checklist will help companies in the fruit juice industry choose and optimise their packaging systems in order to continuously improve the sustainability of their value chain. It provides practical guidance for companies to improve resource efficiency at all stages of a packaged product’s journey while ensuring that the essential functionality of the packaging is not compromised. While including references to relevant regulation and guidance, the checklist also encourages companies to go above and beyond legal requirements.

“We have made great progress in boosting recycling rates and making more packaging recyclable, and we continue to see exciting innovation in this area. But there is still much more to be done to increase sustainability across the supply chain – from producers and into the home.” Says Thérèse Coffey. “That’s why it is so encouraging to see food and drink manufacturers, packaging companies and retailers working together on the Wrap Framework for Greater Consistency in Household Recycling, sharing a vision to make recycling at home significantly easier for the wider public.”

It will support businesses in considering packaging as part of the total product system for delivering products from point of production to point of consumption. This in turn will help strike the optimal balance between the often competing demands of designing packaging for optimum functionality, reuse and recovery considerations, and reduced transport impacts.

The checklist also represents the first deliverable under FDF’s Ambition 2025 - to minimise the impact of used packaging associated with food and drink products and to encourage innovation in packaging technology and design that contributes to overall product sustainability.

“This guidance will help businesses choose and optimise their use of packaging in ways that will contribute to a net improvement in the use of resources across the value chain” Says Helen Munday, Director of Food Safety, Science and Sustainability and Chief Scientific Officer, Food and Drink Federation. “This improvement can be achieved whilst continuing to ensure that food safety and quality requirements are not compromised. We encourage all food and drink operators to use it.”

The checklist looks in detail at the functionality of packaging, re-use, recovery and recycling and transport including design and innovation, manufacturing, distribution, retail stacking and display and customer usability.

Jane Bickerstaffe, Director of INCPEN, sums up saying: “The checklist will help companies improve packaging for food and drink and other products, make it more consumer-friendly and make supply chains more resource-efficient. Supply chain companies are more aware of, and responsive to, environmental concerns than many businesses. This checklist will help them demonstrate that responsiveness to the public.”

To download the checklist go online to https://www.fdf.org.uk/packaging-checklist.aspx

Jacob Thundil is a London based entrepreneur born in the Indian state of Kerala “The land of coconuts”. After his father’s passing at the age of 17, he took over and ran the family business while pursuing a mechanical engineering degree and working in several blue-chip companies before founding Cocofina in 2004. 

Cocofina, the ‘Coconut Experts’ boast an innovative range of 32 coconut-based products, including their top selling coconut water, many of which are Great Taste Award winning, that are vegan and vegetarian friendly and UK Soil Association certified. Now sold throughout the UK and in 28 countries worldwide, the organic evolution of the brand from its beginnings in Kerala to recently securing investment on the popular UK BBC TV series Dragons Den is a truly inspirational journey. Fruit Juice Focus reports on the Cocofina story and the message it gives to others just starting out, or looking to develop their more established brands.

In a recent interview with the BBC, Jacob explained how taking over and running a business from such a young age forged the basis of his future success: “My dad was into cashew nut products and I took over the business and ran it while doing my engineering degree. Food I think is also a science when you’re producing it to scale and the engineering helped me in a big way to understand the specifications of the raw materials and eventually produce our pure coconut water. How do you get purity? How do you conserve the quality of the water and to add to it?” “Kerala helped me a lot”, added Jacob, “because coconut is like wine as it’s affected by taste, terrain, climate and also the species of the nut. When you’re looking at all of those factors, it helped me because I grew up with it”

An innovative approach was evident in the brands’ early life when Jacob rediscovered coconut water in 2004 on a beach in Brazil. In that same year Cocofina became the first to bottle it in its purest form and launch throughout Europe. Jacob states, ‘as a pioneering brand in the coconut space in Europe, we had the luxury of setting the bar high. I spent all of 2004 sampling across food festivals such as Taste of London in Regents Park and travelling around Asia and South America to choose the best species of coconuts suitable for the European palette. Positive feedback from customers makes all of this research all the more worthwhile’.

The journey began with a vision to create an innovative range of products that would not only appeal to health and lifestyle conscious consumers but also to those that have food intolerances. The current range boasts products such as a superior Coconut Nectar with a low GI of 38, a Coconut Amino which is a soy sauce alternative, sustainably produced Coconut Vinegars infused with Chili and Nutmeg and a range of Free-From cooking and baking products such as Coconut Flour, Sugar, Chips and Desiccated Coconut.

Premium quality, honesty and healthy are core brand values as well as sustainably producing products utilising every part of the coconut palm. Cocofina also supports the charity Action Against Hunger (ACF) by donating to help fight child hunger around the world. Ethically responsible and completely transparent, the brand is continuously evolving and achieving success.

Since receiving offers from all five Dragons from the Dragon’s Den, the long running UK BBC TV programme where entrepreneurs pitch for investment from the Dragons (five venture capitalists willing to invest their own money in exchange for equity) they are now working with two Dragons – Sarah Willingham and Nick Jenkins. Their expertise is already being imparted and they have both facilitated introductions at boardroom level with some key players.

Since pitching in the Den, Cocofina have secured listings within all 60 stores of UK premier lifestyle retailer Lakeland and the UK health products retailer Holland and Barrett have expanded their Cocofina range to 20 products. Orders have significantly increased as have the number of social media followers which are continuously rising, with awareness for the brand at an all-time high.

This exposure has also instigated a number of approaches from wealthy investors and a well-known financial institution with offers ranging from £150K to £1M tabled.

With evidence of a shift in consumer attitude towards coconut products over recent years, Cocofina have come through this period, grown at a fast rate year on year, expanded into new territories and markets and received significant credit from the UK organic industry for cementing themselves as a trusted and go-to brand.

Jacob states ‘I am flattered with the offers and the trust that the public have placed on us. I was not in the den for the money and very happy with the experience that the new investors have brought to the table to take our dreams to the next level’.

The next stage of brand evolution is already underway. Firstly a competition was won with SAGE to create a pop-up-shop at Piccadilly Circus tube station in London for one week where Cocofina were seen by a potential 800,000 passers-by across the seven days. Many recognised the brand from being on television and immediately associated with it and in excess of 5,000 samples were given out.

Jacob has since been invited to speak at a number of export focused events; the Santander Red Box event held at Spitalfields Market in London in September last year, that also focused on labelling, a UK Department of International Trade (DIT) Kickstart Export conference with over 400 businesses in attendance which has led to a case study, an ‘Entrepreneur Masterclass’ for students at a London school, who are taking part in the prestigious Tycoon in Schools initiative in association with the Peter Jones Enterprise Award. The Cocofina journey will also be an example case study across every business course at the school.

The Soil Association website currently features Cocofina within the ‘Meet our Licensees’ section, which spotlights the brands’ efforts in helping to shape the future of organic. Cocofina will be showcased as an organic export case study by the UK Department for Environment, Food and Rural Affairs (DEFRA) and HSBC has selected Cocofina as a chosen best brand to include in their marketing and advertising campaigns for 2017. Jacob appeared as a guest speaker at the 2016 Health Ingredients Europe event in Frankfurt which is the leading global event for food and beverage innovation.

The future is certainly brighter than ever before, as a new journey begins on the road to establishing Cocofina as a global super brand.

Since the global financial crisis, the container shipping industry has been plagued with government bail-outs, huge corporate losses, and an ever expanding fleet of mega vessels. But the 2016 collapse of South Korea’s Hanjin Shipping, seemingly triggered a new era of reform across the container shipping industry.  Nevertheless, critics reflect on a conservative, even archaic, industry which has been too slow to modernize and adapt to change, and wonder if we are really witnessing a ground zero moment when the tide is at last turning and shipping lines can begin to claw their way back to profitability after years of losses. Or have those operators who made such heavy weather of their recovery from the financial crisis of 2008 still not regained full control of the levers they will need to see them through the coming storms which undoubtedly lie ahead?

Here Peter West who is the Director of the supply chain and logistics company Maia Global, brings Fruit Juice Focus up-to-date with the latest changes in the container shipping industry, recent problems and the likely impact on the international trade of fruit juice products.

The new container shipping landscape

In addition to the shockwave of the Hanjin bankruptcy, several rounds of mergers and acquisitions have seemingly created a new order in the shipping community: Maersk Line have bought the family-owned Hamburg Süd, CMA CGM have secured the NOL Group, Hapag Lloyd have acquired UASC, to mention just a few of the recent realignments.

Even more importantly, this has prompted the introduction of three new mega alliances designed to achieve economies of scale, address the excess capacity problems and maintain more sustainable freight rates – all problems that have constantly dogged the industry. These mega alliances will now line up as follows:

•  2M (32.3%): Maersk (18.5%) & MSC (13.8%)
• Ocean Alliance (26.1%): CGM CMA (10.5%), COSCO (8.0%), Evergreen (4.8%) & OOCL (2.8%)
• The Alliance (16.4%): Hapag Lloyd (7.1%), Yang Ming (2.8%) & the Japanese carriers 1 (6.5%)

The Alphaliner Top 100 2 shows that the container shipping industry still regards itself as very fragmented, with the main carrier still only controlling 18% of the market and the top five controlling a total of 58%. However, further analysis of the cumulative capacities of above-mentioned carriers, shows they control 75% of overall capacity, with the remaining 25% handled by niche carriers on smaller trades. Using those numbers, it means that the number one carrier Maersk Line controls approximately 25% of market capacity and the whole 2M alliance commands 43%.

Despite all this seemingly positive news for the container shipping industry and ever-increasing geopolitical features such as regional trade wars, the escalating risk of terrorism, and growing legislative burdens, it remains vital that the global container shipping industry persist with its transformative initiatives.

Recent changes to carrier services in Europe and the effects on juice producers and customers

From March to May this year the carriers have been implementing the changes to services and rotation as the new alliances come into force, with shipments from Europe being heavily impacted as a result. Space then became an issue for the hub ports as the backlog built up. For example, we have seen containers of juice that have sat at the hub ports for more than 35 days – which is unheard of. In my whole experience of the industry I have not seen containers purposely miss more than two.

The problem hasn’t stopped there. When the containers finally get shipped and arrive at their destinations they have been unrefrigerated for more than five in transit in direct sunlight which raises the issue of potential spoilage of the juice and the compensation and insurance issues. You then have the situation where there has been a shortage for those past five weeks because there is no supply coming in which in turn means that the customers have had to scramble to get other supplies from elsewhere. When the containers finally arrive they inevitably end up with far too much stock.

The outlook for customers in the fruit juice trade

Life is no easier for customers in such an uncertain environment where service contract priorities seem to dictate that choosing a carrier who will still be trading in a years’ time is arguably more important than sourcing the lowest freight rates.

However, seemingly unnerved by the market volatility, exporters and importers are increasingly adopting short-term pricing strategies, effectively gambling on container spot rates in the hope that the market may soon revert to back its downward trend. So, when recommended to lock in rates and commitments for 2017, a customer will invariably ask: ‘But what if rates go down?’ This is the wrong perspective in the current climate because, whilst occasional falls can never be ruled out, the real risk is that substantial increases are much more likely.

The general effect of industry restructuring has been to limit carrier options and services. So with the newly consolidated carriers now inclined to be much more cautious and inflexible, freight forwarders are trying to fill the void by leveraging their global relationships to make life somewhat easier for customers.

All these factors influence market behaviours and can be illustrated by referencing some of these effects on two major trade juice trade lanes:

China to US

The transpacific trade lane from China, carries around 67% of all imported Apple Juice Concentrate to the USA 3. In a sector where packaging and logistics can make up as much as 35% of the delivered cost, managing these spikes will be key to maintaining profitability.

Rate volatility on this trade lane can be demonstrated by looking at the price movements over the past 5 years for dry containers from China bound for the USEC. Average prices in 2012 were USD2500/20’, bottomed at USD550/20’ in 2016, rose sharply to above USD2500/20’ in the wake of the Hanjin failure, and are now hovering around USD1900/20’.

The apple juice producing season clashes with the retail peak seasons moving on this trade lane. So with the transpacific peak season approaching, it is expected that shipping rates will continue an upward trend over the next two quarters.

Brazil to Europe

The South American trade lanes have always been the traditional preserve of major carriers such as Maersk Line and Hamburg Süd. JOC.com estimated in a recent study that if Maersk is successful in acquiring all of Hamburg Süd’s assets, the new conglomerate could control as much as 80% of the market on some major trade lanes from South America 4.

Rate movements on the Santos to Rotterdam trade lane for refrigerated containers dropped from USD3200/40’ in 2012, bottomed at USD1450/40’ in 2016 and since then, have been recovering slowly having now reached around USD1900/40’. Now the Southern hemisphere growing season is well underway, and with the Brazilian orange juice production season  starting this May in Sao Paulo state, we expect rates on these lanes to continue an upward trajectory for at least the next 6-12 months.

Future implications

With industry consolidation well underway, plus a raft of changes in carrier services, the expectation is that carriers are set to remain in the driver’s seat for the foreseeable future. Viewed objectively, available capacity has not reduced but has instead increased, even though the locus of control is now very much in the hands of a few. As these carriers push to increase rates, keep their vessels full and meet new rotations, it seems very likely that the second half of 2017 will precipitate a significant increase in rates – a bloodbath which may once again test the industry’s resilience. Expect many exporters and importers to adopt tactics such as desperate, ad hoc pricing strategies and increasing safety stocks in response to price instability and uncertainty surrounding service performance.

But over the next 2-3 years, rates will again stablise and return to levels at or below the current market. Major trade lanes will be serviced by larger and more economical vessels, bunkering costs are likely to remain at or around their present low levels, and the overall service costs will correspondingly decrease. The recent expansion of the Panama Canal has at last opened this ocean corridor allowing larger vessels from Asia to gain greater access to the US East Coast, which should lead to a long-term reduction in the East vs. West Coast rate differential. And the world will return to normal, if such a term exists anymore.