Fontarome finds the recipe for growth

Last updated on May 13th, 2019 at 02:43 pm

 

Most people living in Milwaukee and Wisconsin haven’t heard of Fontarome Chemical Inc., but the products made by the St. Francis-based company are in almost every cupboard, refrigerator and medicine cabinet in the nation.

Fontarome’s chemicals fall into two categories: synthesized flavors and scents that are mixed into flavorings, which then are made into foods; and active ingredients and their building blocks for pharmaceutical companies.

The company’s flavors and scent chemicals are often three steps removed from the eventual food product, said Carl Sheeley, president and owner. For example, Fontarome makes an artificial strawberry flavor that is sold to another company, which creates the flavoring and sweetening compound used in Kraft Foods’ Jell-O.

“We sell to the flavor company which sells to the food company which sells to the consumer,” Sheeley said.

The company’s flavors are being used in Jolly Ranchers candy, several types of chewing gum and many other common processed foods.

Fontarome’s pharmaceutical intermediaries – the active pharmaceutical ingredients (APIs) in prescriptions and their building blocks – are used in prescription medications made by some of the leading drug makers in the world, Sheeley said. Most medications that come in pill, capsule or caplet form have only a few milligrams of active ingredient in them, he said, which is what Fontarome makes.

Fontarome focuses on a group of four to five types of molecules that fit its competitive advantages, Sheeley said. Many of those molecules are used to make APIs for drugs that work on the central nervous system and are used to treat depression, schizophrenia, anxiety and other psychiatric conditions.

Many large, publicly traded pharmaceutical companies such as Pfizer outsource the production of APIs because of the high cost of manufacturing those products, Sheeley said. Those large companies become Fontarome’s customers.

“We have three world-class chemists working for us,” Sheeley said. “These are guys that go to the bar and while they’re drinking a beer, they’re writing molecular structures down on a napkin and arguing how to make an amino group.”

When drug manufacturers are developing a new drug, they often want to keep their formula secret, Sheeley said. Those companies will often ask Fontarome to supply chemicals that are the building blocks for APIs that might be used in those drugs.

“For new drugs, they want to control (the APIs),” he said. “So they’ll say, ‘Just give us the ingredients.'”

Worldwide growth for flavor and scent chemicals is between 2 and 5 percent per year, Sheeley said. Development in countries like India and China will lead to more people trying more processed foods, Sheeley said, which will lead to more opportunities for Fontarome.

“A lot of new countries are becoming industrialized, and once (people) have the money to try new things, their palette changes,” he said. “New flavors are available and that drives the sale of flavored foods. China is a big, big market.”

Demand for pharmaceuticals has dramatically increased in the United States over the past decade and shows no signs of slowing down. That demand should mean plenty of sales for Fontarome.

“There are more people taking drugs, much greater than even 10 years ago,” Sheeley said. “Our affinity for drugs, especially in the U.S. is huge. And it’s growing. And pharmaceutical companies need to keep their shareholders happy. They’re shedding their non-core business, like the fine chemical manufacturing production of APIs.”

Fontarome was founded in 1978 as a subsidiary of Wixon Inc., a food flavoring manufacturer located just across the street from Fontarome’s headquarters in St. Francis. Both companies were owned by a French parent company at the time, which wanted to enter the U.S. chemical market, Sheeley said.

In 2004, Wixon’s current owners bought the company from the French parent company, and Sheeley purchased Fontarome from the French parent company.

When Sheeley bought Fontarome three years ago, it had 30 employees, but had lost a significant amount of money the year before. To keep the company’s doors open, 12 employees had to be laid off almost immediately, he said.

In 2004, Fontarome increased sales and made a profit. But a 2005 failure on a major project put the company in jeopardy again, Sheeley said.

“The person supervising (the project) did not have the right skills,” he said. “I sent a duck to eagle school.”

The company not only lost a large amount of money, but also six to eight months worth of work and a major relationship with the client. If it was going to stay in business, something needed to change.

Sheeley enlisted Milwaukee-based Succeedia Inc., a business consulting and coaching firm to help him restructure and reinvent the company. Succeedia not only developed a new business plan for the company, but it also analyzed the personalities and skill sets of all of Fontarome’s managers.

“Fontarome was in a turnaround situation, and Succeedia had turned around six or seven other companies,” Sheeley said. “We had to make some changes in employees’ responsibilities, and we had to remove some people too. The personality profiles they did on the managers allowed me to understand each of them better. And they shared my personality profile with all of the managers.”

In 2005, Fontarome lost money. But after the changes Succeedia recommended, Fontrome’s sales increased about 15 percent in 2006, when it turned a significant profit. And the company is on track to increase its sales about 30 percent this year, Sheeley said.

He declined to disclose the company’s specific profits or losses.

“When I bought the company, we had between $10 million and $12 million in sales,” Sheeley said. “This year, I think we will have more than $17 million in sales. The objective is $100 million, which should take no more than 15 years. I hope to do it in the next five to six years.”

To help its future growth, Fontarome is preparing to install a new 6,000-gallon liquid nitrogen storage system, which will replace an existing 3,000-gallon tank. The company also is working on a new water cooling system that will greatly reduce its consumption, both lowering its water bill and its environmental impact.

Employment at Fontarome has doubled over the past year to between 40 and 50 people. Sheeley is looking for another four to five employees now.

“We’ve torn this company down to nothing,” he said. “Now, we’re building it back up with the right foundation.”

Fontarome  Chemical Inc.

Address: 4170 S. Nevada Ave., St. Francis
Founded: 1978
Products: Synthesized flavor and scent chemicals for processed foods, active ingredients for the drug industry
Revenue Growth:
30 percent for 2007
Employees: 40 to 50
Web site: www.fontaromechemical.com

 

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