Fellow Israeli firm Algalo specialises in the cultivation, harvesting and processing of Haematococcus pluvialis algae for food, supplements, pharmaceuticals and cosmetics.
The investment means Frutarom will have exclusive worldwide marketing rights for Algalo products.
Founded in 2011, Algalo is based at Kibbutz Ein Hamifratz and uses low-cost photo-bioreactors to produce astaxanthin, which it says saves land and setup and maintenance costs.
Ori Yehudai, president and CEO of Frutarom Group, said the investment was part of a broad strategic move by Frutarom into natural specialty products and functional food ingredients.
He said health already made up over 75% of Frutarom's activity. Back in 2013 the company said it wanted to expand its functional foods business.
“We will work towards leveraging the cross-selling opportunities arising from this investment by expanding Frutarom's product portfolio and technological abilities and by presenting Algalo's innovative products to our thousands of customers worldwide,” he said in a statement.
"The size of the algae-based ingredient market is estimated to be hundreds of millions of dollars and has enjoyed double-digit growth over recent years.
“We foresee the rapid growth in this market continuing in coming years in light of consumer trends towards healthier and more natural products that drive the food, nutritional supplements and cosmetics companies to be innovative in developing natural ingredients and efficient in their production processes and cost structure."
He said the company intended to continue expanding in the area of health and biotechnology by intensifying investment in R&D within its own laboratories as well as through additional investments and joint ventures with research institutions, universities and start-up companies.
2015 was a busy year for Haifa-headquarted Frutarom. In September it acquired 79% of Spanish firm Nutrafur in a €10.3m sale, which it hoped would develop its portfolio of natural plant extracts for food preservation.
In June it acquired New Zealand-based fruit ingredients company Taura Natural Ingredients Holding Ltd for about $70m (€64.93m) and in February it acquired UK savoury ingredients business FoodBlenders for $2.4m (€2.23m), plus an estimated extra $600,000 (€557,000) depending on performance.