CATEGORY

Backward Integration

Flavor companies have started making significant investments in backward integrating to ensure steady supply of key raw materia crops

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    Company
    ACCENTURE PUBLIC LIMITED COMPANY
    Location
    Jackson, Mississipi
    Duns number
    3862211

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    90
    Social
    42
    Governance
    67
    6 Domains Performance (/100)
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    58
    Human rights
    55
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    54
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    Industry Comparison
    accenture.com
    Industry average
    Adverse Media Appearances
    Environmental Issues
    0
    Workforce Health Safety Issues
    0
    Product Service Issues
    9
    Human Rights Issues
    0
    Production Supply Chain Issues
    3
    Environmental Non Compliance Flags
    12
    Corruption Issues
    0
    Regulatory Non Compliance Flags
    5
    Fraud Issues
    2
    Labor Health Safety Flags
    6
    Regulatory Issues
    3
    Workforce Disputes
    1
    Sanctions
    0
    esg energy transition
    80
    Discrimination Workforce Rights Issues
    5
    esg controversies critical severity
    No

    Backward Integration market report transcript


    Global Market Outlook on Backward Integration

    Based on the direct and indirect factors analyzed for shortlisted countries, China, Ghana, Vietnam, India, and Turkey, were identified as the most favorable countries for agricultural backward integration. However, few countries with high potential for integration with strong availability of unique crops do not fall under the most favorable countries, due to their unsupportive macroeconomic factors.

    Direct factors favorable backward integration

    • Cost of starting business
    • Net FDI inflows
    • Percentage contribution of agriculture in GDP
    • USD vs. local currency
    • Farmer's adaptability
    • Availability of unique varieties
    • Presence number of co-operatives
    • Presence of rivalries

    Symrise: Vanilla Backward Integration

    10 percent of Symrise's total returns from vanilla operation in Madagascar is reinvested in the form of education, reforestation, and the sustainable cultivation of various agricultural raw material. 

    Symrise has fully integrated its vanilla operation in Madagascar to create synergies in R&D, product development, and global marketing

    Background

    Symrise implemented farm level integration in 2007 to remove intermediates from the supply chain. Before 2007, Symrise procured vanilla through Aromatics S.A.S, French flavors raw material provider. At present, nearly 7,000 farmers are benefitted through the company's sustainable supply chain model.

    Overview on Sustainable Supply Chain Model

    • Until 2013, Symrise procured Vanilla from Madagascar, exported to Germany plant, where vanilla processing was carried out to produce vanillin through fermentation process. End users procured the flavor from Germany
    • In 2014, Symrise invested €3 million to build a vanilla processing plant in Madagascar, as Madagascar is the largest producer of vanilla that contributing to nearly 85 percent to the global production
    • Present supply chain model has advantages of reduced cost of production, continuous supply of raw material, traceability, and contribution to the welfare of local farmers
    • Nearly, 7,000 farmers and 30,000 people depend on Symrise for their livelihood. The group pays half of the insurance to the people and invests in small village schools. 10 percent of total returns from vanilla processing is given back to the village people through welfare activities
    • Drivers for Integration: Consumer's shift from artificial flavors to natural flavors

    AVT Natural Products Limited: Marigold Backward Integration

    AVT natural products is a subsidiary of A V Thomas group of companies with business units in Marigold Oleoresins, Spice Oleoresin & Essential Oils and Tea processing. 65 percent of revenue for the company is from Marigold Oleoresin, which is used in nutraceuticals, poultry pigmentations, food colors, etc.

    IFF–LMR: Rose Backward Integration

    Long-term Vision – Sustainable Sourcing

    IFF ‘s vision 2020 is to implement sustainability as a core practice and culture and to lead positive transformational changes toward regenerative, healthy, and abundant world.

    Sourcing Model of Rose for Fragrance - IFF

    • IFF–LMR uses Rosa x damascena for rose oil extraction
    • Plant locations: France and Turkey
    • Sourcing method: In France, it is backward integrated with its own farms and in Turkey, the company depends upon the farmers
    • In 2013, IFF invested $50 million to expand the existing capacity to 18,000 square meter along with a new 2,000 square meter creative facility

    Rose Oil production in Turkey

    • Turkey is the leading producer of Rose variety, Rosa damescena, which is used by the fragrance industry.
    • Nearly, 70–75 percent of Rose oil produced globally is from Turkey.
    • Belarus and Morocco are the other two other large rose producers.

    Challenges in Backward Integration

    • Varying weather pattern in Turkey for Rose production
    • Declining Rose cultivation area because of the migration of young population to towns
    • Presence of Union of Agricultural Sales Cooperatives for Roses, Rose Oil, and Oil Seed (GULBIRLIK), which produce large quantity of Rose Oil in Turkey
    • High requirement of pesticides
    • Lack of state-support for rose production