LONDON, Dec 23 (Reuters Breakingviews) - Food additives used to get a bad rap. But the rise of natural or functional ingredients which can make food taste or feel a certain way is bringing them back into vogue. They look set to be the M&A flavour of the year. Swiss manufacturer Givaudan (GIVN.S) reckons the market for flavours, fragrances, and beauty and functional ingredients is worth more than $45 billion a year and is evolving quickly. Take meat alternatives. Fake burgers or chicken breasts made from peas, soy or chickpeas often taste bitter and make your mouth feel weird. Companies like Symrise (SY1G.DE), a $20 billion German group, create patented recipes to balance out these properties. Investors have benefited: Givaudan has returned 70% to investors over the last two years, according to Refinitiv. Designing bespoke products allows the $48 billion company to charge more and secure repeat orders. Its EBITDA margin was a market-leading 24% in the first half of 2021. Others are racing to catch up. The $39 billion DSM (DSMN.AS) is spinning off its industrial chemicals unit to focus on ingredients like enzymes, which enhance the taste of fruit juice without altering its nutritional properties. Britain’s Tate & Lyle (TATE.L) and Ireland’s Kerry (KYGa.I) have dumped legacy businesses to focus on specialised ingredients and additives, respectively. Bigger M&A may follow. Large customers like Nestlé (NESN.S) or L’Oréal (OREP.PA) prefer to work with a smaller number of suppliers. The $26 billion takeover of DuPont’s (DD.N) nutrition and biosciences unit by International Flavors & Fragrances (IFF.N) in late 2019 offers a blueprint. Bankers are watching the $37 billion company to see whether its increased heft translates into more market share. Already-high valuations mean deals will need more than cost savings to stack up, though. DSM has a pantry packed with nutrients, enzymes for making gluten-free beer, and ingredients that preserve food without artificial additives. Swallowing Symrise would add taste and smell. With a modest premium and factoring in debt, the German group would cost 23 billion euros. Assuming DSM could squeeze out similar cost savings to those IFF targeted from its Dupont purchase, Symrise would earn almost 850 million euros after tax in 2025, according to Breakingviews calculations. That would be a slender 4% return on DSM’s investment. To justify a deal, the Dutch group would need to boost sales as well. The lure of higher margins is another potential driver of consolidation. The $36 billion Archer-Daniels-Midland (ADM.N), which flogs commodities like oilseeds and corn and has a 5% EBITDA margin, is making small acquisitions in speciality ingredients. Buying a larger target like Kerry or Denmark’s Chr Hansen (CHRH.CO) offers a fast-track to higher profitability. The sector has all the ingredients for a busy year for deals.