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Corn Products International hit by lower demand, higher costs

By Caroline Scott-Thomas, 29-Jul-2009

Related topics: Sweeteners (intense, bulk, polyols), Suppliers, Food finance

The global recession has hit Corn Products International’s bottom line as its products – including high fructose corn syrup (HFCS) – experience lower demand, particularly in North America, the company said.

In a conference call with analysts, Corn Products International’s chief financial officer Cheryl Beeb said that the company had noticed some shift away from beverages such as Pepsi and Gatorade, for which it supplies high fructose corn syrup, but did not attribute the trend to a wider consumer move away from HFCS.

“There is some trading down as people, in other words, are looking to spend less on products, so they may go to a water or they may go to a private label type drink, so we did see some shifts, but…that is more related to the economy,” Beeb said. “…If you look at some of the high fructose numbers for beverage, they are actually firming up.”

Although the company reported a second quarter loss of $85m, this was still better than analysts were expecting, and there are positives on the horizon.

Beeb said that the company anticipates the second half of 2009 to improve as corn prices are expected to come down later this year.

“As we’ve seen corn costs come down, grain costs come down and sugar prices go up, we have an expectation that we’ll see some level of sales increase.”

The effect of the recession has also been softened by the strength of the Brazilian real, she said, and the currency is expected to get stronger.

As for the reasons for its negative results, the company said it had been affected by higher corn costs, unfavorable foreign currency translations and lower volumes.

High fructose corn syrup has also been hit by a lack of demand from the foodservice sector, as people are eating out less during the recession.

Beeb said: “In North America, some of the weakness that we saw was on the food side in terms of some of the high fructose going into food companies that purchase and sell foods to restaurants. As you know, the demand for eating in restaurants has been weak.”

Corn Products International supplies starch, HFCS, glucose and dextrose.

HFCS controversy

Campaigners against HFCS point to epidemiological studies that have linked the consumption of sweetened beverages and obesity, as well as some science that claims that the body processes the syrup differently from other sugars due to the fructose content, leading to greater fat storage.

However, industry associations like the Corn Refiners Association (CRA) have repeatedly claimed there is no scientific evidence to suggest that HFCS is uniquely responsible for people becoming obese.

The company did not mention this debate in its results and did not associate it with any losses.