Givaudan, Symrise, DSM shares drop on global fragrance cartel probe

By Ludwig Burger and John Stonestreet

(Reuters) -Shares in Givaudan and Symrise took a beating on Wednesday after the Swiss antitrust agency named them as part of a quartet of companies in the crosshairs of international competition watchdogs.

Swiss competition commission COMCO said its probe was targeting market leaders Givaudan, domestic rival Firmenich, which is merging with Dutch chemicals group DSM, U.S.-based International Flavors & Fragrances and Germany's Symrise.

The more than $5 billion scents industry creates and makes fine fragrances for brands including Calvin Klein, Hugo Boss and Gucci, while also designing the smell of household products of global companies such as Procter & Gamble and Colgate-Palmolive.

News of the probe into the supply of fragrances and fragrance ingredients broke late on Tuesday, when Givaudan confirmed it was being investigated. The Swiss authorities were the first to name all companies involved.

Shares of Symrise, which on Wednesday forecast a 2023 core profit margin slightly below market expectations, dropped 2.6% at 1158 GMT, though the company's chief executive said he did not expect the firm to be affected and its role was primarily that of a witness.

Givaudan dropped 2.8% and DSM lost 3.1%, underperforming a 1% decline in the STOXX Europe 600 Chemicals index, while U.S.-listed International Flavors & Fragrances (IFF) was down 2.9% at Tuesday's close.

COMCO said several raids were carried out in conjunction with the European Commission, the U.S. Department of Justice Antitrust Division and the UK Competition and Markets Authority.

The Swiss agency added it acted on suspicion the companies "coordinated their pricing policy, prohibited their competitors from supplying certain customers and limited the production of certain fragrances".

It said that the ingredients in question are used in cosmetics, personal care products, detergents and cleaning products.

"If these concerns prove true it would mean a substantial reputational damage for the fragrance sector and also Givaudan, next to potential fines and future weaker negotiating power," analysts at Swiss brokerage Vontobel said.

The British watchdog on Tuesday set a deadline of early 2024 for analysing and reviewing information gathered from the companies.

Firmenich confirmed that antitrust authorities carried out unannounced inspections at its offices in France, Switzerland and Britain.

The company said it was closely monitoring the situation and fully cooperating with the investigators.

Spokespeople at Symrise and IFF also said the firms were cooperating with authorities.

Symrise said on Wednesday it had a 12% share of the combined market for fragrances, flavours, aroma chemicals and cosmetic ingredients last year, with Givaudan, IFF and Firmenich accounting for 18%, 22% and 11%, respectively.

The German company added that fragrances accounted for 13.2% of the 39 billion-euro overall market, working out to 5.1 billion euros ($5.37 billion) in industry fragrance revenue in 2022.

The upper limit of fines imposed for breaking EU competition law is 10% of a company's global revenue.

($1 = 0.9492 euros)

(Reporting by Ludwig Burger in Frankfurt, John Stonestreet in London, Patricia Weiss in Frankfurt and Paul Arnold in Zurich; Editing by Jason Neely and Shounak Dasgupta)