Consolidation marks ingredients industry in 2004

- Last updated on GMT

Related tags: Ingredients, Denmark, Arla food ingredients

The announcement yesterday that DMV International and Arla Food
Ingredients could merge is a further example of how the rising
power and ongoing growth of the multiple retailers is putting
constant pressure on ingredients companies to keep up with the
pace, deliver products at competitive prices and guarantee
supplies, reports Lindsey Partos.

A gain in critical mass, consolidation, and economies of scale are two of the only routes open to them, providing sufficient leverage to meet the challenge.

In a clear example of constructing such largeness, earlier this year ingredients giant Danisco acquired the ingredients unit of French chemical firm Rhodia.

The €320 million deal instantly leapfrogged the Danish firm into the number two cultures position from world four, and substantially boosted its xanthan gum position.

"One of the key questions from our customers is 'can you follow our growth?'​ Fabienne Saadane-Oaks, president of the new Danisco Cultures unit tells FoodNavigator.com.

By acquiring the leverage Danisco is now in a stronger position to face the growing pressure from its international customers, as they also consolidate and build new markets.

The Danisco-Rhodia ingredients merger is not an isolated case. The roll call of ingredients players on the market keeps on growing, and it's not just the small firms.

On Thursday, two leading European dairies, Campina of the Netherlands and Denmark's Arla Foods, that own DMV International and Arla Food Ingredients respectively announced their intention to merge.

Named Campina Arla, the group would have annual revenues of €10 billion, and the ingredients division would contribute about a tenth of this figure, some €1.38 billion, rolling over 665 000 tonnes of ingredients.

The news builds on previous divestment, or full sale, announcements. Late last month the major stakeholder in number one cultures supplier Chr. Hansen decided it would pull away from the ingredients slice of the company to focus on the pharmaceutical unit.

The ingredients operations of Chr. Hansen include cultures, enzymes, colours - where it is the number one natural colour supplier - flavours, seasonings and sweeteners.

Industry players with the clout to acquire Chr Hansen may well meet with competition concerns. As such, observers could suspect the group will be broken up into units.

But the CEO of Chr Hansen, Erik Soerensen told FoodNavigator.com that this is definitely not the case: "The ingredients business will not be split up, it is all or nothing."

And ending months of speculation, the flavours and texturants units at Degussa, Germany's third largest chemicals group, are now on the auction block as the firm looks at selling the food ingredients arm or finding a partner for its business.

Global pectin supplier Citrico, and Denmark's speciality oils and fats firm Aarhus are also up for sale.

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