Welcome to Grasse, a small scenic city located on the French Riviera, also known as the perfume capital of the world. It is home to 2 hidden champions in the flavor and fragrance industry. One of them, Robertet, is a 170 years old company and a 70+bagger on Euronext Paris.

Grasse has been at the center of the global perfume industry for at least 3 centuries but the story of Robertet starts in 1850. Jean-Baptiste Maubert and another partner then built a factory, later acquired by Paul Robertet in 1875, which is the foundation of today’s company.

Over the years, Robertet has mastered the art of extracting and distilling essences and oils from flowers traditionally grown in Grasse (roses, lavender, jasmine...) and other raw materials from all over the world.

The ever-growing appetite for organic / luxury products have made Robertet a must-have supplier for the perfume and food industries. It has thus become the world leader for natural ingredients, fragrances and flavors with €554m in revenues for ‘19, incl. 64% outside Europe.

This leadership status has been achieved through a combination of organic growth, successful acquisitions on every continent and a strong focus on R&D. Robertet now boasts 14 creative centers worldwide and it processes 400 raw materials from 60 countries.

Over the past five years, Robertet has grown its earnings per share at an annualized 11%. Not bad for a company still 47%-owned by the Maubert family and with a net cash position! But, as you would expect, this has also attracted its largest competitors’ attention.

What makes Robertet most valuable is the scarcity of such sizable players in the natural ingredient/flavor space. That’s why its larger Swiss competitor, Givaudan, acquired another French rival, Naturex, in 2018 for €1.3 bn at a sky-high EBITDA multiple north of 20x.

This is also the reason why Firmenich grabbed a 20% stake in Robertet at the end of 2009 for an average price of ca. 700€ per share. Givaudan then upped the ante and bought 5% at above 800€. The battle was on.

But Philippe Maubert somewhat dampened its competitors’ mood and was extremely clear: “Robertet’s independence is non-negotiable”. Meanwhile, speculation has fueled the share price that reached a peak of 1068€ last February. That made the stock a 72x-bagger vs. its low of 1990!

The company now enjoys a market cap of €2.4Bn for an EV multiple of 25x ‘19 EBITDA and a PE of 42x. This is again due to Robertet’s status as a unique gem in a traditionally recession-proof industry. Despite this and favorable prospects, the share price looks rather high.

The investment certificate (with no voting right) offers an alternative way to invest in Robertet at a 19% discount. That said, the liquidity is so thin that building a sizable position is close to impossible.

Let’s be clear, Robertet is a fantastic company but it might be worth waiting until it gets priced more attractively. I’m not a shareholder but, had I not overthought it and missed the boat in 2015, I could have bought shares at a PE of less than 15x. Value investing is not dead!

A big thank you to @FoxCastlehold for our earlier exchanges on Robertet and to @alluvialcapital, who published an amazing blog post earlier this year here: https://otcadventures.com/?p=2087