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Liquidation for pectin leader Citrico, except German plant

15-Sep-2004

Continued consolidation in the hydrocolloid industry seems imminent as leading pectin supplier Citrico International goes into liquidation, but the firm's German-based production plant Citrico GmbH is not up for sale, reports Lindsey Partos.

Citrico International, the number three global supplier of pectin extracted and blended from citrus peel, is in the hands of liquidators until a buyer can be found for the business, a source told FoodNavigator.com today.

But Citrico GmbH, the firm's German business situated in Malchin will not file for insolvency.

The €46.7 million German plant produces some 4,500 metric tonnes of pectin annually sold through the firm's international business and when unveiled in 2001 was pushed as the cornerstone of Citrico International's hydrocolloid business.

Pectin is the gelling agent that makes jams and preserves set, but also enhances the texture and appearance of a range of foods, as well as contributing to flavour release.

Mature hydrocolloid products such as alginates have historically witnessed stable prices, whereas pectin, the 'darling' of the industry, can pull in higher margins, equaling beneficial gains for the pectin producers.

The source informed FoodNavigator.com that the liquidators have until the end of the year to organise the sale of the Citrico International business. Possible buyers were not disclosed.

Dominated by a small number of industry players, makers of hydrocolloids are consolidating, particularly in the larger, more mature markets, spurred on by shrinking margins and consolidation of their international customers.

Just two months ago, the dynamics in the industry shifted when family-owned US firm JM Huber bought the number one pectin - and xanthan gum - slot with the purchase of hydrocolloid leader CP Kelco. Industry observers pitched the acquisition, which takes the New Jersey-based company deeper into additives and thickeners, in the region of $1 billion (€0.8bn).

Other ingredients firms thought to have been competing for the Lehman slice were top tier global suppliers of xanthan, pectin and carrageenan including FMC Corporation and acquisitive Irish firm Kerry Group. Xanthan supplier Danisco recently told shareholders that it would not make a pitch for CP Kelco, likely linked to its already strong position in the xanthan market and anti-trust concerns.

In recent years an important growth driver for hydrocolloids has been the increasing consumption of processed foods, itself driven by convenience.

In addition, hydrocolloids are increasingly used to make up for the change in 'mouthfeel' that comes when developers remove fat or sugar from food formulations to design health-positioned products.

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