Givaudan SA

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Givaudan SA

5, Chemin de la Parfumerie
1214 Vernier
Switzerland
Telephone: (41) 22 780 9111
Fax: (41) 22 780 9150
Web site:http://www.givaudan.com

Public Company
Incorporated: 1895
Employees: 5,075 (2000)
Sales: $1.31 billion (2000 est.)
Stock Exchanges: Swiss Munich NASDAQ NM
Ticker Symbol: GIVN (Swiss); 938427 (Munich);
GVDBF (NASDAQ NM)
NAIC: 311942 Spice and Extract Manufacturing; 325199
All Other Basic Organic Chemical Manufacturing

A company whose historical roots date back to the beginnings of the modern flavor and fragrance industry in the late eighteenth century, Givaudan SA of Vernier, Switzerland is one of the leading creators of fragrances and flavors in the world with sales that reached $1.31 billion in 2000. Givaudan became a public company when it was spun off from its parent company, the pharmaceutical giant Roche in 2000. Givaudan produces flavor and fragrance compounds for a variety of products; its Cincinnati-based flavor division supplies the “taste” in food products ranging from soft drinks to soups, and its fragrance division headquartered in Switzerland provides the aroma in perfumes and personal care and household products. More than 30 percent of women’s fine perfumes, including Poison by Christian Dior, Obsession by Calvin Klein, and Opium by Yves Saint Laurent, owe their signature scents to Givaudan’s fragrance scientists. While Givaudan’s corporate headquarters are in Switzerland, it maintains factories and operating facilities in over thirty countries. A leader in technical innovation since its founding, Givaudan devotes over $98 million per year on research and development and has twice won Fragrance Foundation Awards for technological breakthroughs.

Pioneers in Perfumery

Givaudan was founded as a Zurich perfume factory in 1895 by brothers Leon and Xavier Givaudan. In 1898, after a local bakery complained that the perfume production was hurting sales—fumes from the factory made the bread smell like violets—the brothers moved operations across the Rhone to Vernier near Switzerland.

The industry of perfume-making was undergoing a major change at this time. The first synthetic fragrance, coumarin (the scent of new-mown hay), had been produced in 1868. Prior to this time all perfumes had to be distilled directly from natural ingredients. This process was expensive and time-consuming. As many as 8,000 rose or jasmine blossoms were needed to create one gram of essential oil, meaning that commercial perfumes were only available to the wealthy. During the next 20 years, many other synthetic scents, including musk, vanilla, and violet, were produced. Many fragrance houses saw the new synthetics as a threat, calling them a “corrupting influence” on the art of perfumery. The Givaudan brothers, however, saw great opportunity in synthetics. Synthetics could be produced at a much lower cost than natural essential oils. The Givaudans sought to enlarge the market for synthetic perfume chemicals by producing them inexpensively and on a much larger scale than had previously been possible. They invested their early profits in increasing their research facilities, and Givaudan became one of the pioneers in commercial production of fragrance ingredients that would become industry staples such as synthetic musks, phenyl ethyl alcohol, and ionones. Givaudan was also among the first companies that promoted the use of fragrance in cosmetics and soaps.

Givaudan’s focus on synthetic fragrance ingredients did not diminish the importance of natural perfumes in their business. The company blended natural and synthetic ingredients to widely expand its palette of scents, and it focused much of its energy on locating exotic natural scents all over the world to be duplicated in the Givaudan laboratories. This practice would remain a focus for Givaudan throughout the life of the company, and would drive later technological advances. Dr. Ernest Geurter, the company’s vice president and technical director in the years preceding World War II, himself traveled all over the world in pursuit of indigenous oils and fragrances.

International Expansion

Givaudan thrived during the years between the turn of the century and the First World War. Synthetics had become widely accepted in all fragrance markets, and manufactured perfume became available to the general public for the first time. The growth enjoyed by the company sparked its international expansion, and Givaudan opened a factory in Lyon, France in 1917. In 1924, Givaudan branched out into the United States with the opening of its plant in the Delwanna section of Clifton, New Jersey. The Delwanna/Clifton facility became Givaudan’s major manufacturer, and the years between 1924 and 1948 saw a significant increase in the company’s output. In that period, the company’s production of synthetic aromatics for fragrance and flavors grew from 2 million pounds to 20 million pounds per year.

A School for Perfumers

In 1946, to ensure qualified personnel for the future, Givaudan opened its own perfume school in Grasse in southern France, becoming the only fragrance company in the world to possess such a facility. Graduates of the Givaudan school were required to identify 2,800 synthetic odors and 140 natural ones at the end of a three- to five-year course of study. In 2001, the school was the oldest perfumery school in the world, and the company estimated that one out of three fragrances existing in the world had been created by Givaudan-trained perfumers.

The Roche Acquisition

The company continued to grow throughout the 1940s, 50s, and into the early 60s, opening factories in Whyteleaf, England, Sao Paolo, Brasil, and Sant Celoni, Spain. In 1963, Givaudan was acquired by Roche, a Swiss pharmaceutical company best known for the drugs Valium and Librium. The Givaudan acquisition was part of Roche’s expansion into new markets such as chemical, perfume, and diagnostic instruments. The following year, Roche continued its expansion into the perfume market by acquiring Roure, a French perfume concern famous for developing the first “designer” fragrance (”Shocking” for Elsa Schiaparelli).

As a subsidiary of Roche, Givaudan continued to grow, opening facilities and acquiring concerns throughout the world, including the chemical company ICMESA (Industrie Chimiche Meda Societa Azionaria) in Seveso, Italy near Milan in 1969. In the mid-seventies, Givaudan developed its Headspace technology, which allowed perfumers to capture living smells in the laboratory without touching the source of the scent. Headspace technology would become an industry standard for over twenty years, with all major fragrance houses developing their own versions.

Disaster in Seveso

Seven years after becoming a subsidiary of Givaudan, the ICMESA Seveso factory was the site of an infamous environmental accident that would plague the company for years to come. On July 10, 1976, an explosion in the factory released a cloud of hazardous gases into the air. The cloud contained dioxin, a highly toxic chemical known to cause cancer, birth defects, and extensive kidney, liver, and lung damage. One thousand acres surrounding the factory were contaminated. Damages totaled over $78 million; hundreds of people were evacuated and thousands of animals died from eating exposed food. The Roche company history reports that “From the beginning Roche and Givaudan [made] every effort to redress the damage done,” but later reports faulted both the company and government officials for delaying action. According to Business Week in October of 1976, while the company cordoned off part of the factory immediately after the disaster, no announcement regarding the danger was made for a full week. Full scale evacuation of the affected population did not begin until two weeks following the accident. Investigations and court proceedings would continue for over 18 years following the disaster, and Roche, Givaudan, and ICMESA would end up paying over 19 billion lira in damages in court-ordered judgments and out-of-court settlements. The disaster sparked fears about dioxin at Givaudan’s New Jersey plant, but an inspection conducted by the Environmental Protection Agency in 1983 found no traces of the toxin at the factory or in the surrounding community.

Givaudan in the Nineties

The early 1990s saw Givaudan joining forces with some of the world’s oldest fragrance and flavor houses. In 1990, Givaudan merged with Fritzche, Dodge & Olcott, a perfume house established in 1796. In 1991, Roche combined its subsidiary Roure (established in 1820) with Givaudan, forming Givaudan Roure. The company would bear this name throughout the decade.

Company Perspectives:

At Givaudan, we believe that undisputed leadership in flavours and fragrances depends on creating what we call “sensory advantage” for our customers. Creating sensory advantage depends on our ability to bring together nature, creativity, science, technology, and business. To do this, our company has defined three core values:

Customer Focus —Our commitment to customer service comes first and foremost. We continually strive to leverage our global capabilities, bringing superior benefits to all of our customers.

Sense of Urgency —To be the undisputed leader means we constantly challenge ourselves, creating and nurturing a performance-driven company culture that also embraces openness and creativity.

Ambitious Innovation —Innovation means more than investing heavily in research and development to come up with new molecules and ingredients; it also means envisioning bold new concepts in manufacturing, marketing, delivery and more. In short, it means innovating throughout every aspect of our industry and exploiting those innovations for the benefit of all our customers worldwide.

The 1990s were a decade of tremendous technical innovation for Givaudan Roure. In 1994, in an effort to keep up with the growing flavor demand, the company opened a new flavor manufacturing facility in Hanover, New Jersey. At its opening, the facility was heralded as the most technically advanced in the industry. The plant was fully-automated and featured a custombuilt compounding facility run by a “paperless” environment. In the past, formulators would read orders from a batch printout, then manually retrieve the raw materials needed to fill the order. With the new compounding system, operators could simply input the materials and amounts, and the machine would fill the order automatically. In 1995, Givaudan Roure introduced a new sunscreen agent, Parsol 1789, the first organic material to provide protection against both short and long UVA rays.

Givaudan Roure developed its revolutionary technology Scent Trek in 1996, earning the Fragrance Foundation’s first Fifi Innovation Technology of the Year Award. Scent Trek expanded the capabilities of the older Headspace technology by allowing perfume scientists to gather scents from plants and flowers outside the laboratory. The new technology was a boon for perfumers and ecologists alike. A much wider variety of scents was now available, as scientists could now extract scent from plants that could not be grown in a laboratory. Scent Trek extracted the essence of a plant without killing it, allowing for the capture of endangered rainforest scents. Scent Trek could also reproduce non-plant-based scents and undetected compounds of scents, called “notes,” to add complexity to perfumes. For example, when Givaudan created the Michael Jordan cologne Bijan, it used Scent Trek to sample notes from Jordan’s favorite golf course, a leather baseball glove, and a Costa Rican beach.

1997 saw Givaudan Roure further expanding its flavor market with its merger with the US flavor company Tastemaster. Givaudan Roure acquired Tastemaster for $1.1 billion, and moved its flavor operations to Tastemaster’s headquarters in Cincinnati. The merger gave the company 14.4 percent of the United States flavor market, and Givaudan Roure became the global leader in the flavors market. The acquisition was the first in a series of reorganization steps the company took that year, which included the closing of the manufacturing plant in Clifton, New Jersey operated by the company for nearly 50 years.

Independence

In December 1999, Roche announced its intention to spin off its flavors and fragrance interests and focus on its pharmaceutical business. The subsidiary Givaudan Roure became Givaudan SA and began trading on the Zurich Stock Exchange on June 8, 2000. The spin off left the basic structure of the Givaudan intact, and the company continued the rapid growth and development it had enjoyed as a Roche subsidiary. In August 2000, Givaudan opened a new factory in Bangalore, India, which doubled the company’s existing production capabilities, and in November of that year, the company opened a new Sensory and Technology Centre in Shanghai.

In keeping with its tradition of exploring new technologies, in December 2000 Givaudan acquired a minority stake in the United States company DigiScents—which developed the use of scents on the Internet and in computer games—becoming its exclusive perfume supplier. In 2001, Givaudan earned a second Fifi award for technological innovation—this time for the Virtual Aroma Synthesizer, which allows for scent composition and modification via computer. In the past, a perfumer would compose a formula for a scent based on a customer’s description, submit it to the laboratory to have a sample made, then deliver the sample to the customer at a later time. Any adjustments to the scent had to undergo the same time-consuming process, and since scent is difficult to translate into language, a perfume often had to undergo many adjustments before the customer was satisfied. The VAS allowed the perfumer and customer to sit down together to compose and manipulate scents in real time.

At Givaudan’s annual shareholder’s meeting in May 2001, the company’s chairman, Dr. Henri B. Meier expressed optimism about Givaudan’s continued growth as a business and as a technological pioneer. He spoke about the direction of Givaudan’s technology development efforts: research in microbiology, and attempts to understand how the human sense organs break down flavors and scents and deliver them to the brain. While the company’s overriding goal was to be the undisputed world leader in the fragrance and flavors market, Dr. Meier noted that future acquisitions must bring added value to the company. He cautioned shareholders, “size at the expense of profit is not our ambition.”

Principal Divisions

Givaudan Fragrances Corp.; Givaudan Flavors Corp.

Principal Operating Units

Givaudan do Brasila Ltda. (Brazil); Shanghai Givaudan Ltd. (China); Givaudan France SA; Givaudan Singapore Pte. Ltd.; Givaudan Däbendorf Ltd. (Switzerland); Givaudan Flavors Corp. (USA); Givaudan Fragrances Corp. (USA).

Key Dates:

1895:: Company founded by Leon and Xavier Givaudan in Zärich, Switzerland.
1898:: Company builds chemical factory in Vernier, Geneva.
1917:: Factory in Lyon, France, is built.
1924:: Facility opens in Clifton, NJ.
1946:: Givaudan opens its own perfume school.
1950:: Company opens factories in UK and Brazil.
1960:: Company opens factory in Spain.
1963:: Pharmaceutical company Roche acquires Givaudan.
1964:: Roche acquires Roure.
1976:: Accident at Icmesa (a subsidiary of Givaudan) plant in Seveso, Italy, contaminates surrounding areas with dioxin and other chemicals.
1989:: Givaudan acquires Reidel-Arom.
1990:: Givaudan acquires Fritzche, Dodge & Olcott.
1991:: Company is merged with Roure, forming Givaudan Roure.
1995:: Shanghai Givaudan Roure Ltd. founded in Shanghai.
1997:: Company acquires Tastemaker. 2000: Roche spins-off Givaudan Roure as Givaudan SA, company listed on Swiss Stock exchange.