Givaudan: Boring smells good

May 9, 2025 7 min read

Patrick

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

– Warren Buffett

arvy’s teaser: Invisible. Essential. Everywhere. Givaudan’s flavors and fragrances shape our daily lives — and few notice. A 257-year-old Swiss spin-off delivers dividends, stability — and compounding returns that smell like success.

F&F.

Flavor and Fragrance.

You want your food to taste good. You want to smell good.

I’d even argue these are two daily needs, deeply ingrained in all of us. There’s no day without flavor or fragrance — it’s become a necessity. From a business angle, that makes this space pretty compelling. Why? Because flavors and fragrances are consumables — once used, they’re gone. Which means customers keep coming back. They crave the taste that’s missing. Think about it: Would your go-to Starbucks latte hit the same without that vanilla flavor? Would Tom Ford’s iconic perfume “Oud Wood” have made waves without that complex, spicy-woody-floral scent profile? I don’t think so.

Enter the world’s leading manufacturer in this space, holding an estimated ~25% market share in the global F&F industry.

Its products are the invisible companions embedded in almost every corner of your daily life.

A 257-year-old Swiss company.

Givaudan.

Chart 1: Givaudan’s two business activities: Taste & Wellbeing and Fragrance & Beauty

Source: Givaudan, business activities

Spin-off from Roche

Spin-offs.

Remember this corporate action?

Last time we wrote about it, we said: “Spin-offs were ultimately able to flourish as independent companies and unfold their full potential. Given that these are not isolated cases, if a spin-off occurs, we will keep our eyes and ears open. There could be a big winner lurking around the corner.”

And guess what? Givaudan is a spin-off too.

Back in 2000, our beloved Swiss giant Roche spun it off as a separate company.

Today, Givaudan is the global leader in flavor and fragrance manufacturing, with a presence in over 80 countries. It sources more than 10,000 different ingredients from 100 nations.

Its fragrance division (chart 1) supplies personal care, home care, and laundry brands — including prestige perfumes. On the flavor side, it serves categories like beverages, savory, snacks, sweets, and dairy. The company employs nearly 10,000 people — and boasts the largest perfumery team in the industry.

And here’s the kicker: Since the split, Givaudan has outperformed Roche by a staggering 1,104% (chart 2).

Impressive, right?

Over the years, Givaudan has strengthened its position in what is now an oligopolistic industry. Together with International Flavors & Fragrances (IFF), Symrise, and DSM-Firmenich, they control over 60% of the global market.

A sticky consumer base. Dominant market share. A rock-solid track record of performance and financial delivery.

Plenty to like — as this Swiss Market Index constituent firmly anchors itself as a “Good Story.”

And that’s still not all.

Chart 2: Givaudan compared to Roche since the split, total return, dividends reinvested

Source: Koyfin

A Dividend Aristocrat in the Making

Let’s think about the business model one more time.

In the morning — yogurt, shampoo, perfume.

At work — energy drinks, snacks, food from the canteen.

In the evening — sauce, toothpaste, face cream.

Givaudan’s products are everywhere.

And that is the crucial point. The sheer diversity of the product portfolio translates into stable sales. Which means consistent growth, strong cash flows, and — most importantly — predictable, visible earnings.

Sounds like a boring company. But as we know: boring is good.

Another thought: Doesn’t this sound like the perfect candidate to pay out stable — and steadily rising — dividends?

Exactly. And that’s what Givaudan has done since it became a standalone company in 2000.

For the full year 2024, it marked 24 consecutive years of dividend increases — including through the Global Financial Crisis (chart 3). That’s a serious seal of quality.

One more year, and Givaudan earns the prestigious title of Dividend Aristocrat — awarded to companies that raise their dividend for 25 years in a row. So, we already know what to expect from management in 2025. Oh, and the dividend yield? 1.7%.

I know — nothing to write home about.

But maybe… something else.

Chart 3: Dividend per share of Givaudan, 24 consecutive yearly increases

Source: Givaudan, Annual Report 2024

Outstanding Financial Performance

Givaudan’s business is currently running like clockwork. A Swiss clockwork 😉.

It’s recently outpaced both its competitors and even its own five-year sales growth target of 4–5%. And the temporary Covid-related boom-and-bust stock price performance? Processed and behind us. That suggests we are seeing an improvement in the “Good Chart”.

Back to the normality of the Givaudan standards, I would say.

Which means solid, uneventful execution from management and strong performance across all markets — or, as their annual report modestly puts it: “outstanding financial performance.”

But here’s what really stands out: While the business has been firing on all cylinders, the stock hasn’t moved much.

That matters.

Because Givaudan — long considered richly priced — has seen its valuation come back to earth. From a stretched P/E of 38 and FCF yield of just 2.5%, we’re now at a more reasonable P/E of 30 and FCF yield of 3.7%.

Put simply: A boring, high-quality company — or as Warren Buffett might call it, “wonderful” – now at a fair valuation that can be backed by its long-term stock price trend.

In uncertain times, this Swiss darling looks like one that can quietly deliver.

I think this is more something to write home about.

Message to Mom and Dad?

Put it on the watchlist.

Chart 4: Givaudan und Roche over the last ten years