Huber completes CP Kelco acquisition

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Family-owned US firm JM Huber completes on the CP Kelco purchase,
buying straight into the number one pectin and xanthan gum slot.

Terms of the deal were not disclosed, but industry observers have pitched the acquisition, which takes the New Jersey-based company deeper into additives and thickeners, in the region of $1 billion (€0.8bn).

CP Kelco, formed in September 2000 from Hercules' Food Gums division and Kelco Biopolymers division of Monsanto Pharmacia, is currently the number one supplier of pectin and xanthan gum, both used extensively by the food industry as thickeners and stabilisers.

"We think highly of CP Kelco, an industry leader in the promising and high growth food additive industry,"​ said Tom Lamb, who will assume the position of president and CEO of CP Kelco, replacing current CEO Bob Toth after a transitional period.

With a total market value in the range of €230 million, xanthan volumes are approximately 40-50 m tons per year, of which about 60 per cent is used in the food and pharmaceutical market. Growth rates for xanthan gum are currently coming in at the higher end - 5 per cent - of the generally lacklustre growth figures in the food ingredients industry.

"Xanthan is still one of the fastest growing hydrocolloids. Its versatility and, now its low price, make it a hydrocolloid of choice,"​ Dennis Seisun from market analysts IMR International​ recently commented to​.

Huber steps into the leading xanthan gum position just months after French firm Rhodia gave up its number two xanthan gum slot to Danisco when the Danish firm acquired its food ingredients arm in a €320 million deal.

With a new market leader for this popular hydrocolloid - used in a wide variety of applications from salad dressings to beverages - the market could expect some changes.

The number two xanthan player Danisco appears to be confident that the Huber acquisition will not have a major impact in the hydrocolloid arena.

"This is a vertical integration for Huber that sees it expanding into food ingredients business,"​ Dan Togo Jensen, investor relations at Danisco said to recently.

JM Huber is a newcomer to the food additives industry, only entering the world of stabilisers and suspending agents in January 2001 with the purchase of Finnish company Noviant, the world's biggest producer of carboxymethylcellulose (CMC) with a 30 per cent slice of the world market.

CMC is used extensively in food formulations such as dressings, ice cream, baked goods, puddings and sauces to stabilise, thicken and bind.

Earlier this year both CP Kelco and Rhodia announced a price hike for xanthan gum, but according to Seisun, as a result of the recent Cargill, Staley and now Danisco entries into the xanthan market, it will be difficult for any price increases to stick.

UK ingredients company Tate & Lyle, which owns Staley, joined the list of xanthan suppliers at the end of last year.

And movement in the pectin slice of the hydrocolloid industry is imminent as Citrico International, the number three global supplier of pectin extracted and blended from citrus peel, last month goes in the hands of liquidators until a buyer can be found for the business. Citrico GmbH, the firm's German business situated in Malchin, will not file for insolvency.

Possible buyers might include the Braes group, (owners of Swiss pectin firm Obipektin), ambitious US agri-firm Cargill, German firms Herbstreith & Fox and Degussa.

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