“We are focused on ensuring the safety and quality of our food and beverage ingredients as well as the availability of products into the supply chains of our customers. And I’m pleased to say that thus far, we’ve been able to do an excellent job in that regard,” said Ingredion president and CEO Jim Zallie on the company’s Q1 earnings calls yesterday.
The company reported an $18m increase in capital expenditures to $98m for the first quarter compared to the same period last year due investments in “plant-based proteins and other growth projects” including the acquisition of stevia supplier PureCircle last month.
“As evidence of our company’s agility and commitment to execute our strategy, despite the challenges, I’m pleased that even during the pandemic, we reached an agreement on the strategic acquisition of PureCircle,” said Zallie.
“The pending acquisition of PureCircle allows us to strengthen our business model, aligning with one of the most important food and beverage trends shaping the industry, sugar reduction... 85% of North Americans reduced their sugar intake over the last few years. So, I think that bodes really well for us as we’re positioned now with PureCircle.”
However, because of the uncertainty COVID-19 has caused throughout the food and beverage industry, Ingredion has withdrawn its previous full year guidance for 2020.
“We have moderate visibility into Q2 but cannot fully predict how consumer behavior will evolve in response to infection rate in different locations for the remainder of the year. In Q2, we anticipate that net sales will be down versus prior year in each reporting segment,” said Ingredion EVP and CFO, Jim Gray.
‘Significant uncertainty’ exists in foodservice
The company anticipates foodservice volumes to be down significantly going into Q3 2020 due to the sudden halt in consumer traffic into restaurants and bars across the globe.
“This sudden decline in demand will negatively impact our ingredient volume sales into these segments. But, we anticipate... trends in quick service restaurants where a lot of those products are sold, will be picking up once the stay-at-home orders are relaxed,” Zallie said.
Meat supply chain issues may prompt 'heightened focus on plant-based diets'
Zallie added that Ingredion’s continued investment into the plant-based protein category, including its $140m investment into a plant-based facility in Canada in 2018, will also help the company weather the impact COVID-19 has had as the animal protein supply chain has been hit by a series of plant closures due to coronavirus.
“I think that there’s going to be certain trends that are going to endure through this that will be consumer trends that we’ll need to pivot towards. And some of these are already manifesting themselves right now, and we’re going to be following those very, very closely,” said Zallie.
“Overall, this trend towards plant-based eating, especially when you look at some of the concerns around the meat supply right now, I think it’s only going to bring heightened focus on plant-based diets,” he said.