Mineral maker hunting for acquisition

By Dominique Patton

- Last updated on GMT

Related tags Citric acid Acid

Israeli minerals maker Gadot Biochemicals is seeking an acquisition
in Europe or the US to expand its health ingredients business.

The firm, which claims to be the largest supplier of calcium to American orange juice, has a significant share of the global mineral salts market, an area that has given it added value as revenue from its initial core product - citric acid - declines.

But as Chinese competition in the minerals business increases, it is looking to protect its strong growth momentum by offering additional nutritional ingredients.

"We're focusing on five or six groups of ingredients such as antioxidants or fibres, although minerals that we don't currently offer like selenium or iron will be the highest priority,"​ said Ronny Hacham, vice president of business development at Gadot.

Speaking at the group's headquarters in Haifa, Israel, last week, he said that "money is not a problem for the size we're looking for".

Until the early 1990s Gadot focused entirely on citric acid. But as the price continued to fall, the firm realized it had no economy of scale compared to the Western leaders and Chinese newcomers.

"We estimate that next year the Chinese will have more than 50 per cent of the global citric acid business. We decided a few years ago that we had to go to another market were we have an advantage."

It has developed a process to make calcium citrate and other mineral salts using raw citric acid as the base material. Other producers need to purify the citric acid first so this gives Gadot a cost advantage and it has not patented the process in order to protect it from competition.

It now makes 35,000 tons of citrate salts per year and only 10,000 tons of citric acid. A further 30,000 tons of the sweetener crystalline fructose has also helped drive growth, with its GM-free profile giving it a strong customer base in Europe where it commands a price premium over the rival US-made product.

Since the citrate salt plant came on stream in 2002, Gadot has seen 20 per cent growth per year but Hacham says it needs to move outside Israel to maintain this momentum. It could also benefit from proximity to key customers in the US and Europe.

"Its now hard to add more plants although we could add some capacity through new production lines. But we have exhausted our land availability,"​ explained Hacham. This means that making an outside acquisition the best route to expansion.

The firm is also working on added value calcium salts, with two patented products due to launch in coming weeks. Both are designed to resolve issues faced by beverage makers looking to add low solubility calcium salts to specific drinks - syrup-based beverages and soymilks.

"We want to be the leader in this business,"​ said Hacham, setting his sights on the position currently held by Jungbunzlauer.

He says Gadot is looking for a 15-20 per cent sales boost from a new ingredients portfolio.

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