Robertet, Navigating Industry Challenge with Resilience

How does the company sustain robust growth in a challenging market environment?

Robertet is a thriving French small-cap company with a strong presence across diverse markets and geographies, exporting the majority of its products globally. In its latest earnings report, sales grew by 10%, while earnings per share (EPS) surged by 29%, showcasing resilience that sets it apart from its underlying sectors, customers, and even fellow French giant, L'Oréal.

In this article, we will delve into Robertet's business model to uncover the key drivers behind this impressive performance. Additionally, we will examine the risks, opportunities, and fair value of the company to determine whether it presents an attractive investment opportunity.

If you like this sector, here is an article about L’Oreal and another one for an overview of the entire cosmetics market.

Company overview

Robertet operates through four main divisions:

• Fragrances. 38% of total sales

• Flavors. 36% of total sales

• Raw Materials. 23% of total sales

• Health & Beauty. 3% of total sales

Among the company’s key figures, 2,400 employees and 32 industrial sites—three stand out:

1. Global leadership in natural raw materials. Robertet dominates the market in natural raw materials, excluding mint and citrus. This leadership is a major driver of the company’s growth.

2. Extensive botanical sourcing. With over 1,700 botanical extracts sourced from 60 countries, Robertet offers a diverse and comprehensive product range, tailored to the unique needs of its customers.

3. Certified supply chains. The company’s 55 certified supply chains provide both a strategic competitive advantage and solidify its position as an industry leader.

The company has a global presence, with its two largest regions, the US and Europe, showing the slowest growth. However, other regions, though currently smaller in scale, are expected to become significant growth drivers in the coming years.

The company succinctly illustrates its “from seed to scent” business model with a simple chart. Its competitive edge lies in its expertise in sourcing, extracting, and processing raw materials, combined with the ability to secure a reliable supply chain, ensuring consistency and quality for its customers.

Robertet’s competitive advantage

Robertet's competitive advantage is closely aligned with the growing trend toward natural ingredients. Three key factors drive this trend:

1. ESG initiatives. ESG efforts are encouraging the shift from synthetic to natural raw materials. As a result, existing formulations are increasingly being replaced with natural ingredients from Robertet’s Customers (major cosmetics brands especially)

2. Consumer demand. Customers are showing a clear preference for products that contain more natural ingredients, driving companies to adapt.

3. Regulatory pressures. Regulations now emphasize the importance of traceability, making certified natural supply chains highly valuable to B2B customers seeking transparency and reliability in their sourcing.

At the same time, Robertet invests heavily in R&D, allocating 8% of its sales to innovation. The company also incubates startups, launches research programs in agronomy, and pioneers green extraction methods. To strengthen its ESG-driven competitive advantage, Robertet continues to reduce its environmental impact and actively pursues certifications such as Ecovadis and Fair for Life.

The growth strategy

Robertet’s growth strategy can be outlined around four main pillars:

1. Sustainability. For Robertet, sustainability is more than a commitment, it is a core competitive advantage. Strengthening this area is crucial and is pursued through continuous innovation and robust ESG initiatives. These efforts focus on preserving natural resources, mitigating climate impact, fostering employee development, and ensuring sustainable sourcing practices, all while driving innovation to maintain long-term environmental and social value.

2. Innovation. Innovation is key to staying ahead of the competition. By advancing new extraction methods, enhancing product performance and quality, and broadening the range of offerings, Robertet can continuously evolve. Innovation also supports sustainability efforts, ensuring the company remains an industry leader in both environmental and product-driven advancements.

3. International expansion. Significant growth opportunities exist in key emerging markets. Over the next five years, Robertet has identified South America and Asia as major drivers of expansion, with these regions holding substantial potential for market penetration and increased revenue.

4. Acquisitions. Strategic acquisitions are integral to Robertet’s growth model. In 2023, the company made two key acquisitions:

   • Aroma Essential. A high-value material producer for perfumery, known for its unique expertise, prestigious clients, and robust industrial capabilities.

   • Sonarome. A leading local flavor creator and producer, specializing in regional tastes, with 30% of its business in Africa. This acquisition strengthens Robertet’s foothold in both African and international markets.

When effectively executed, these four strategic elements will enable Robertet to maintain its leadership position in the market. However, given the company’s relatively mature business model, organic growth should be around 6%, with an additional 1% growth anticipated from strategic acquisitions.

Stock metrics

You can find all the data I am using through the following link to marketscreener.com. I use this website daily, and I am confident it can be helpful to you as well. (Please note that this is an affiliate link)