When French botanicals producer Naturex told the world about its merger with the ingredients arm of Spain's Natraceutical Group last month, much was made of the fact the deal would create an industry player of newly-acquired scale.
"The resulting company will become the world's leading independent natural ingredients company," declared the press release. Echoing these words, CEO Jacques Dikansky stated: "This represents a unique opportunity for Naturex to become the number one speciality ingredients company worldwide."
But this is not just a case of claiming bragging rights for being the biggest on the block; in fact the focus on the scale of the new entity reveals the rationale which drove the deal.
As Dikansky explained in an interview with Functional Ingredients a few weeks on from the merger, it is a fact of life in modern business that buyers of functional ingredients want their suppliers to be bigger.
"This deal means one company now offers a wider range of products, and that's what customers are looking for more and more," says Dikansky. "Our customers are all reducing their supplier base because each supplier costs money. In terms of purchasing they have to meet with people from each supplier; they need to audit each supplier for quality assurance; they have to update their files on each supplier. When you have one supplier offering a larger range of products, you meet one set of guys, you audit one supplier, you update one file. It just saves time and money. So when a supplier becomes bigger and offers more products, it is a plus for the customer."
The Naturex-Natraceutical merger certainly ticks all the right boxes in terms of product synergies, with each company boasting different strengths. Naturex, for instance, is famous for its huge 300-strong range of active botanicals. Natraceutical, on the other hand, is strong in natural colours and non-botanical natural functional ingredients, such as beta-glucan and soluble fibres. Meanwhile, Naturex has traditionally specialised in the supplements industry, while Natraceutical has greater experience of the food industry.
In addition there are the geographical considerations. "Our customers also expect their suppliers to be as global as possible," says Dikansky. "They want their suppliers to be able to deliver the same product at the same price at the same quality and with the same service whether in North America, South America, Europe or Asia."
Another boxed ticked by the deal, then. "Naturex is very strong in North America, where we do about 60% of our sales," adds Dikansky. "But Natraceutical only does 15% of its sales there. It is much stronger in Europe. Together we will be more global."
Now is a good time to be in the natural ingredients business, says Dikansky, as demonstrated by the fact that Naturex has ridden the worldwide recession with little difficulty. "Demand is growing for natural ingredients despite the economic situation," he says. "Despite the recession Naturex has continued to grow organically just because demand for natural products has continued to grow. In 2008, our sales grew 10% organically without acquisitions. This year organic growth will be between five and ten percent, which is quite good in this environment.
"Consumers worldwide, in the US, Europe, Asia, even if they have economic problems they want to buy products made withnatural ingredients, even if they cost a little more. The trend towards natural products is stronger than the economic situation. It's a society thing. People want natural products like they want green products. It's all part of the same trend. It's cultural."
Fulldetails of the terms of the Naturex-Natraceutical deal can be found in the original press release. Click here to view.