Castlefield Stock Story - Treatt

By David Elton

In this latest Stock Story, Castlefield Fund Manager David Elton introduces a recent new holding - specialist ingredients manufacturer, Treatt.

A recent new holding within our Sustainable UK Smaller Companies Fund is a natural extracts and ingredients manufacturer, Treatt. We have long admired the company and a de-rating of the shares presented an opportunity to initiate a position late last year.

Treatt is a supplier of flavours and aromas principally used in drinks. Based in Bury St. Edmunds, Suffolk, RC Treatt & Co. was established in 1886 and today sells 3,000 products to customers in more than 90 countries. It provides ingredients and ingredient solutions to both the flavours and fragrance industries and directly to some of the world’s biggest food and drinks makers, as well as household goods giants (i.e., for scented cleaning products).

The company has evolved from a commodity-based ingredient trading house into a supplier of value-added ingredients. This has brought substantial sales growth and higher margins.

Treatt combines expertise in flavours and fragrance solutions and a good relationship with its customers to help them create appealing and innovative products; all Treatt’s top ten customers have been with them for more than a decade, indicative of a strong market position. Over the past few years, Treatt has undertaken substantial capacity expansion.

Firstly, in the US, where its new site was completed in 2019. Then, most recently, it relocated its UK factory to a new site in Bury St. Edmunds. The latter involved a rationalisation of the company’s footprint from six buildings to one integrated facility and the installation of the latest equipment.

The new UK site is 110k square feet with expansion opportunity in a module way, and thus future proofed. With it comes far greater efficiency too; for example, 27 fork trucks were used at the old site but now they only need seven.

Treatt management always felt they had great people and products, but more modern facilities were needed. This forward looking expansion provides this, and further establishes it a science-led manufacturer of ingredients and an industry leader. We were able to visit the new site last year, before investing.

Treatt’s growth potential is well underpinned by increasing demand from consumers wanting to eat healthier and more natural food and beverages. With almost 90% of group revenues now from natural and clean-label products, Treatt positions itself towards authentic flavour, taste, and fragrance with natural ingredients, often countered by a reduction in sugar.

As well as its sourcing expertise and technical capabilities, we believe one of Treatt’s greatest assets is its culture. Although somewhat intangible and potentially hard to measure, indicators of strength here include: a substantial proportion of vacancies filled internally; fostering interesting science-led careers; and receiving various employment awards.

Crucially for us too, as an employee-owned business, we are pleased to see an impressive 73% of permanent staff are shareholders, creating strong alignment.

In a nutshell, we believe Treatt is a highquality business worth owning. It is run by motivated and aligned people, who are focused on a strategy of increasing its value to customers and promoting healthier lifestyles.

Written by David Elton


With investment, capital is at risk.