Consolidation marks Novozymes with relocation of supply chain activities

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Ongoing impact of consolidation in the global food and drink
industry is evident in the cost-cutting exercise by Novozymes', the
world's number one enzyme supplier, set to relocate all Swiss
supply chain operations to Denmark as demand for small packaging
falls,reports Lindsey Partos.

Acquired in 1983, Novozymes Switzerland performs two basic functions - marketing for global food business, and production (finishing, small packaging) and logistics.

But, in parallel to consolidation, the demand for small packaging has dropped off as customers opt for 1000 litres, not 1 litre, deliveries.

An isolated business case, according to Andrew Fordyce, general manager of Novozymes Switzerland, the closure of production and logistic operations in Switzerland will eliminate double handling and double shipping.

"The operation is not large enough to be sustainable,"​ Fordyce tells

Declining to disclose precise figures, the general manager anticipates the relocation will bring 10 per cent savings on supply chain capacity costs for the group.

Currently supplying "more or less all over the globe"​ customers of the Swiss operations will be serviced out of Denmark, one of three strategic production sites for the group, China and the US being the remaining two.

But the relocation, due for completion by 1 October this year, will affect more than a third of employees in Switerland's Dittigen, that today runs with about 90 staff in total.

The 3500-strong firm is currently in discussions with the impacted employees to discuss "alternative solutions".

Bagsvaerd-based Novozymes dominates the enzyme market with about 50 to 60 per cent market share. US biotech firm Genencor falls into second place with an approximate 30 per cent slice. But news in January this year that fellow Danish firm Danisco will acquire Genencor, in which it already has a hefty stake, will push Danisco into the number two position.

While the volumes of pure enzyme protein produced are very small, their value reached over $2 billion (€1.53bn) in 2004. A recent report​ from Business Communications Company​ estimates that by 2009 the market will reach €1.83 billion.

Lacklustre growth for enzymes is coming in at about 2 to 3 per cent year on year. But there are signs that the bakery enzyme market, that currently constitutes about a third of the overall food enzyme market, could actually bring the strongest gains.

Recent research from market analysts Frost and Sullivan pinpoints these enzymes as the fastest growing segment with a compound annual growth rate of about 7.2 per cent.

The market for bakery enzymes came in at €32.1 million in 2003 and is expected to climb to €52.3 million by 2010.

With €47.4 million in value and 43.7 per cent of the total revenues, starch and sugar processing enzymes are the largest market but with a slow growth rate hit by industry consolidation, says the Frost & Sullivan report, tipping the CAGR at a low 2.3 per cent between 2003 and 2010.

Novozymes and competitor Genencor International represent the top two players in starch and sugar processing enzymes controlling 97 per cent of the market between them. In the US their major customers in the industry include agribusiness Cargill, starch firm AVEBE, and UK sugar and sweeteners group Tate & Lyle.

In February this year sales for the food division at Novozymes rose just a wisp, contributing €193 million to total turnover of €800 million. The rest of the firm's portfolio, technical and feed enzymes, and microorganisms, provided the remaining 75 per cent of turnover.

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