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Karlshamns buys up British flaked fats

06-Sep-2004

Swedish oils and fats firm Karlshamns, which saw its profits slip at the end of 2003, has acquired UK flaked fats company Kelanco, and with it a drive into value-added speciality fats for the booming UK convenience food market.

The deal, concluded last week, gives the Karlshamn-based firm its first production facility for flaked fats, adding to the flaked fatty acids and flake feed materials currently in the Swedish company's portfolio.

"We already have a plant for powdered fats, the Kelanco purchase and its UK production base complement this," a spokesperson for Karlshamns told FoodNavigator.com.

After profits for the group slipped to SK106 million (€11m) from SK109 million for the first nine months up until 30 September 2003, the firm said at the end of last year it would be looking to focus on high-margin, value-added products to kick back the bottom line.

"Although the UK is the number one convenience food market, we're aiming to tackle the overall European market with the Kelanco acquisition,"added the spokesperson.

Flaked fats, used in all kinds of applications where solid fats can be found, are fats that are crystallised on a cooling roller into their solid form. The flake's form, size and thickness have considerable impact on the functionality of the fat. They are a convenient way to handle fats, used instead of 25 kg solid fats, said Karlshamns.

The firm will look to this latest acquisition - the UK business has an annual SK15 million turnover - to generate much needed profit in 2004. Hardening competition, particularly from across the Atlantic, has seen US giants eating into the European market for oils and fats. Last year the world's number one oilseed processor US Bunge acquired French rival oilseed processor Cereol - the parent of ingredients company Central Soya in a move that gave it access to key operations in Europe.

"Hardening competition in the vegetable oil industry had negative effects on the oils & fats contribution margins," commented the president of the firm, Jerker Hartwall, last year.

The Swedish firm is composed of oils and fats, technical products and feed materials business areas, and although sales figures for the nine month period were up slightly by 1.2 per cent, gross contribution from the oils & fats division of the group dropped from SK505 million in 2002 to SK494 million for the first nine months of 2003.

The division, coming to terms with the loss of Carlshamn Mejeri - one of the group's largest customers in terms of volumes but which moved its entire production operations to Finland in the second quarter of 2003 - said at the time it would instigate strategies to balance the loss, adding that volumes of value-added products - notably to bakeries and large-scale catering - were on the up, whereas those of standard products had dropped.

Increasing competition in the cocoa butter replacer market has also pressurised margins for Karlshamns, despite new EU rules expected to open up the market.

In 2000 the EU cleared a controversial directive allowing other vegetable fats to replace up to 5 per cent of cocoa butter in products marketed as 'chocolate' in the EU. The new rules came into full force in the autumn of 2003, but so far suppliers of cocoa butter replacers, among them Karlshamns , have been disappointed by sales.

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