It’s tempting to think of spices and dehydrated vegetables as commodities - in comparison to say stevia, or omega-3s - where price is all that matters. But they are anything but, says the man in charge of the spices and vegetable ingredients (SVI) division at Olam.
“The ingredients we sell are high-value ingredients, just like flavors or other value-added ingredients”, says Greg Estep, president of Olam SVI, the world’s leading supplier of dehydrated onion, garlic, and capsicums and a leading player in tomatoes.
“And they are also used in a huge number of finished products, so if something goes wrong, the consequences can be catastrophic,” adds Estep, observing how chili powder adulterated with the industrial red dye Sudan 1 prompted a massive - and spectacularly costly - recall of hundreds of finished products in the UK in 2005.
“These kinds of events have changed the way buyers are thinking about sourcing raw materials. They are getting much more rigorous.”
Events like Sudan 1 adulteration incident have changed the way buyers think about sourcing raw materials
All food manufacturers want great quality for a great price, adds Estep, who was speaking to FoodNavigator-USA following the launch of the new Olam SVI innovation and quality (IQ) center in Fresno, CA.
But they increasingly want to deal with global suppliers that can meet their needs in multiple markets, and provide the kind of traceability and quality assurance data that will reassure their customers so there is not a repeat of the Sudan 1 incident, he says.
And in this regard, Olam SVI - which is a direct supplier to nine of the world’s 10 largest food manufacturers and many of the top foodservice firms - is unique, operating a highly integrated supply chain, he adds.
“There’s not really anyone like us. For some ingredients such as onion and garlic, we’ll provide the seed to the farmers, who will follow our production plan covering everything from when and how to irrigate to what pesticides to use.
“For spices, historically, it’s been more difficult to get full traceability, especially in some emerging markets, but we’re now going right back to growers in India and other regions and integrating the supply chains.”
New innovation and quality center in Fresno has chemistry lab, microbiology lab and commercial kitchen
But where does the new IQ center fit in?
First and foremost, it will bring Olam SVI’s R&D teams for dehydrated and frozen veg, tomato products and spices together at one central location next to the HQ and close to some of the firm’s key growing and processing facilities, he says.
Second, it will serve as a hub where clients’ R&D and quality teams, external laboratories and universities can work with these teams at Olam SVI, which has grown exponentially in recent years via a series of strategic acquisitions, growing from 100 employees in 2006 to 4,500+ today.
Finally, it sends a signal to the market that Olam SVI is not just an ingredients trader, but is serious about developing value-added finished products, he says. (The center houses state-of-the-art food chemistry and microbiology laboratories and a commercial kitchen for prototype development.)
The Chinese are producing less than half what they were producing just 3-4 years ago
So where are the growth opportunities in Olam SVI’s key product areas?
In the US, increasing demand for hotter, spicier foods coupled with the growth of the Hispanic population is driving strong growth in spices, he says, while in emerging markets, strong sales of processed foods and snacks coupled with rising meat consumption is driving “substantial” growth for multiple spice and vegetable ingredients.
In tomatoes, meanwhile, Olam SVI is benefiting from a sharp drop in tomato production in China, he says.
“We’re seeing substantial growth in exports of tomatoes from California. The Chinese are producing less than half what they were producing just 3-4 years ago because of rising labor costs and some other factors.”