Hydrocolloids industry unmoved by Corn Products’ National Starch deal

21-Jun-2010 - Last updated on 22-Jun-2010 at 16:00 GMT

Related tags Starch Maize National starch

Corn Products International’s $1.3bn acquisition of National Starch is unlikely to have an impact on the hydrocolloids industry as a whole, as starches are in ‘a field of their own’, says an industry expert.

Corn Products International has said it hopes to close the acquisition in the third quarter of 2010, ending over two years of speculation over National Starch’s future – and there has also been much speculation about possible knock-on effects for the wider market.

Hydrocolloids expert and marketing consultant at IMR International Dennis Seisun told FoodNavigator-USA.com: “I agree with the financial analysts who are saying that Corn Products needed to find an avenue to expand and to diversify from commodities, especially corn syrup…The market take on it is that Corn Products overpaid and Akzo got a good deal.”

But Seisun added that other hydrocolloids market players were unlikely to do things differently as a result of the acquisition and that there is unlikely to be a major effect for the world of hydrocolloids as a whole.

There are two reasons for this – cost and labeling, he explained.

“If someone is using starch and it’s working, there’s unlikely to be a cost-effective alternative from one of the other hydrocolloids. Secondly, there’s image: It would be a negative move to take starch off the label and replace it with another hydrocolloid…Starch and gelatin are two hydrocolloids that generally are in a field of their own.”

There has been uncertainty at National Starch since 2007 when Akzo Nobel acquired its parent company ICI for $8bn to boost its presence in the coatings market, but specialty starches were not a core part of the business and an eventual sell-off was anticipated. Seisun said that uncertainty for employees at National Starch “will probably carry on for another year or two” as realignment of the business takes place. But although he does not anticipate effects on the wider hydrocolloid market, Seisun said he is interested to see the strategy that Corn Products will employ at National Starch.

“The value and strength of National in food hydrocolloids is that it has placed a lot of value on native starches,” he said. “They have spent a lot of time and money working on native starches to give them the same functionality as modified starches. It will be interesting to see whether Corn Products will continue with this strategy.”