Morningstar | With Sensient's Restructuring Efforts Complete, Margin Expansion Will Prove More Challenging
Sensient Technologies manufactures colors, flavors, and fragrances for a broad range of consumer products. In flavors and fragrances, the four largest players control roughly 60% of the total market, with Sensient controlling only about 5% globally. The company is one of the largest global producers of both natural and synthetic colors. Although Sensient serves both large and small customers, it primarily targets middle-market customers rather than large consumer packaged goods customers. The company’s most valuable business relationships involve the manufacture of customized formulations from proprietary technologies that allow Sensient to be a sole supplier.Revenue growth tends to be primarily volume-driven, as Sensient typically adjusts prices based on changes in raw material costs. Bids for new business are typically committed at a fixed price, which bidders will backward-engineer to generate an acceptable profit margin. The company’s business model offers only modest operating leverage. Instead, Sensient aims to deliver margin expansion by gradually improving its product mix, moving toward comprehensive flavor systems and away from more commoditylike ingredients.Sensient operates via three reporting segments. The flavors and fragrances group is the largest in terms of revenue and profits. Its product lines impart a desired taste, texture, or aroma based on customer specifications. Within this segment, the food industries business markets savory, beverage, and sweet flavors, while the nonfood industries business caters to personal and home care products. The company also manufactures flavor enhancers and taste modifiers that mask or modify unwanted attributes. The company’s color group produces natural and synthetic color systems for a variety of end markets, including food, beverage, cosmetics, pharmaceutical, and industrial applications. The Asia-Pacific group markets the company’s colors, flavors, and fragrance products in the Pacific Rim.Sensient Technologies is a manufacturer and marketer of colors, flavors and fragrances. The company's three reportable segments are: Flavors & Fragrances Group, which develops, manufactures, and supplies flavor and fragrance systems for the food, beverage, personal care, and household-products industries; Color Group, which provides natural and synthetic color systems for use in foods, beverages, pharmaceuticals, and nutraceuticals, colors and other ingredients for cosmetics; and Asia Pacific Group, which provides a range of products from its Flavors & Fragrances Group and Color Group, as well as products developed by regional technical teams to appeal to local preferences.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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