Texturant unit at Degussa spears China as new facility opens up

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Related tags: Degussa, Food

Despite the shadow of an impending sale, German hydrocolloid
supplier Degussa is moving up a gear in the burgeoning Chinese
market, opening a new production unit to ramp up supplies to the
area, writes Lindsey Partos.

Bringing texture and stability, hydrocolloids are used widely, and increasingly, in the global €3.2 trillion global processed food industry.

The number three carrageenan supplier, Degussa announced it has started to roll out texturising blends at its new facility in Shanghai, China.

The blends will largely target the local dairy, ice cream and confectionery industries.

Degussa joins an increasing number of European ingredients suppliers heading to the East to improve squeezed margins knocked by higher commodity prices at one end of the chain, and increasing pressure from retailers at the other end.

Rising consumer spending power has marked a change in the eating habits of China's 1.3 billion people; who are transforming the country's food sector, both domestically and in foreign trade.

China food industry sales took off in the mid 1990s, quadrupling from under 100 billion yuan (€9.2bn) in 1991 to well over 400 billion yuan (€37bn) just ten years later.

Degussa's 'business as usual' move comes despite the shadow of an imminent sale. Ending months of speculation, in October last year Germany's third largest chemical firm puts its flavours and texturants units on the market.

The food ingredients business pulled in sales of €527 million in 2003, generating a small slice of overall revenues for the group that peaked €11.4 billion last year.

But the division's sales were not enough to help the two business units - Flavors & Fruit systems and Texturants systems - match the performance of larger commercial players.

Degussa told FoodNavigator.com, at the time of the sale announcement, that the food ingredients division is "too small to be able to attain a leading market position on its own"​.

The break up of the firm begun last month with the Dusseldorf-based firm announcing the sale, for an undisclosed price, of its fruit preparation business (€64 million in sales last year) to private American equity company Speyside Equity. The sale has prepared the ground for a total divesture of its remaining food ingredients unit, expected in the first half of the year.

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