ADM and ABF strike vegetable oil deal

By Sarah Hills

- Last updated on GMT

Archer Daniels Midland has joined with Associated British Foods in a new venture to manufacture, market and distribute packaged vegetable oil products in the US and Canada.

The two companies are pooling their expertise and resources to create Stratas Foods, which will serve the specialty food ingredient, foodservice and retail private label bottled oil markets.

Both Associated British Foods (ABF), which is an international food, ingredients and retail group, and US-based Archer Daniels Midland Company (ADM) will hold a 50 percent share.

The aim is to build on the origination and processing capabilities of ADM, and the sales and marketing expertise of ACH Food Companies (ACH), a wholly owned subsidiary of ABF.

Dan Antonelli, president of ACH and now the Chief Executive Officer of Stratas, told that Stratas will offer a range of value-added, blended oils to the food ingredients sector.

These would depend on the customer’s needs as, for example, they could be developed to meet certain taste, cost or nutrition profiles.

Antonelli added: “We use a lot of soy, canola and a whole range of other oils depending on their profile.

“Our focus is on value-added product and service offerings. We spend a fare amount of investment on specialty oil applications with certain functional capabilities.”

Stratas, which comes into effect immediately and has its headquarters in Memphis, Tennessee, is expected to produce 2.5bn lbs of oil in its first full year of operation with revenue put at about $1.4bn.

Its portfolio of products includes vegetable oil, shortening, margarine and pan spray.

ADM and ABF said customers will benefit from an “integrated supply chain, exceptional processing capabilities, industry-leading product development and strong sales and marketing”.

George Weston, chief executive of ABF, added: “This transaction is a substantial step forward in the development of our US oils business.

“The new joint venture with ADM will strengthen our US packaged oils business and will significantly enhance its long-term growth prospects.”

Pooling resources

ABF is contributing $38m of assets from its oils business, primarily in the form of trademarks, whilst ADM is contributing packaging equipment at four of its facilities in the US.

Mark Zenuk, vice president, Global Oilseeds, ADM, said: “ADM's integrated and efficient processing operations and ABF's access to high margin markets will help keep costs low and enhance profits."

The business contributed by ACH generated operating profit of $20m for the year ended 15 September 2007. The remaining ACH business will focus on its retail consumer brands.

A report Business Communications Company report suggests that overall US production of major crude vegetable oils will reach 8.6 million metric tons in 2008, with soybean oil accounting for nearly 87 per cent of the major vegetable oil production at 7.4 million metric tons.

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