What do you do when life doesn’t give you lemons?
The old saying goes when life gives you lemons make lemonade. But Swiss flavor and scent market leader Givaudan has the opposite problem: as a shortage of lemons threatens Europe, the company is staring down increases in raw material costs over the coming year. Citrus is popular in everything from kitchen cleaners to cough sweets – but a fire at a BASF SE aroma-chemicals is causing a supply crunch in the zesty ingredient.
Givaudan’s share price has moved +16% in the last 12 months
SOURCE: Yahoo Finance
Givaudan is a powerhouse in the scents industry, and CEO Gilles Andrier recently told reporters that there was a “pretty significant shortage” of “citral derivatives”. The company is responding by scrambling to source alternative ingredients, and working with customers to ration out their uses of the product.
If the lemon shortage is only a little problem for Givaudan, it will be hellish for smaller competitors. The company reported a rise in sales in 2017 of 8.3% (4.9% on a like-for-like basis) against the previous year. It’s consolidating its hold on the industry, and has laid out ambitious plans for the next few years.
Andrier said that the company was “well-positioned to weather the supply-chain shortages,” hitting European scent and flavor companies." He expects BASF to see supplies return to usual levels in May or June, and is minimizing the impact on clients, saying: “otherwise, for sure they would not accept that.”
Dominion holds Givaudan in its Global Trends Managed Fund.
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