Israel is renowned for its technology. The Start-Up Nation’s fruitfulness in bio-tech, navigation, engineering, agriculture and other areas continues enriching the world. Not surprisingly, the hi-tech industry is the leading sector of Israel’s economy and is frequently associated with the country itself.
A traditional Israeli start-up would focus predominantly on innovation without venturing much into the areas associated with manufacturing, developing logistics, acquisitions of other enterprises etc. Nonetheless, they are the reason for hordes of global companies making their way to Israel and constantly on the look out to acquire Israeli start-up companies at various growth stages.
However, hi-tech is not the only area impacted by Israeli innovation and entrepreneurship. Earlier last month, the focus of global business news and analysts was directed to an industry which is considered a little less “exciting” for conventional investors at large, and specifically for those seeking to invest in Israel.
Frutarom, the Israeli flagship company operating in the low-tech business of food fragrance and flavour manufacturing, was purchased by International Flavours & Fragrances (IFF), the second largest producer in the world of its kind.
Frutarom is not a hi-tech start-up company with a small employee base and a unique technology potentially valued by international conglomerates at hundreds of millions of dollars. Rather, it’s a company with a history and its beginnings were far from lucrative hi-tech as we know it. Founded in 1933 in the Haifa bay area, it remained a relatively small operation until it appointed Ori Yehudai as its CEO. In many ways, his approach to business was like the one of a start-up founder. He took an enterprise with revenues of $80 million in the year 2000 and developed it into one of the industry leaders, with last year’s sales reaching $1.4 billion.
As any good Israeli entrepreneur, Yehudai identified an emerging market trend – an increasing preference for natural ingredients among global consumers. The CEO’s understanding of the technological advantage in this sector led to the company’s further investment in research and development. The fact that 15% of its workforce is focused on R&D shows that Frutarom is determined to continue innovating to keep ahead of its competitors. Last year’s purchase of the Israeli company that develops nutritional ingredients and medical foods using the latest technologies, has once again underscored Frutarom’s strategy in tapping into the health food trend. Currently, three quarters of Frutarom’s output falls into the natural food category.
Today, Frutarom is a large enterprise with 5,000 employees, 93 R&D labs, 74 production sites, 70,000 products, customers from over 150 countries and sales offices all over the world. It currently stands as the sixth largest company in its sector. Clearly, IFFs move to takeover this Israeli flagship firm is indicative of its intention not only to gain its cutting-edge technology, but to further consolidate its own leading position in the world.
Frutarom’s example is further evidence that highlights Israel’s capability to deliver both highly advanced technology and develop successful production companies that can compete on the global stage. Despite its humble beginnings, fierce competition and other challenges associated with the food the industry, the Israeli-based firm has demonstrated that it is possible to become a prominent player in sectors besides hi-tech. Frutarom’s success story serves as another proof of the Israeli genius for innovation and advancement.
Frutarom, The Marker, Calcalist, Bloomberg, Financial Times, Wikipedia
This article originally appeared on Wise Money Israel, June 27, 2018, and reposted with permission.