MGPI to triple wheat gluten production

By Lorraine Heller

- Last updated on GMT

Related tags: Gluten, Wheat

MGP Ingredients (MGPI) plans to expand its wheat gluten capacity in
the US, as demand for the product increases following the recent
move away from imported ingredients due to contamination scares.

The news, which comes as part of the firm's third quarter results announcement, could see a threefold increase in wheat gluten production by the start of fiscal year 2008. The company's wheat gluten is sold for use mainly as an ingredient for improving the rising ability and textural qualities of bread and other bakery products. According to MGPI, the firm has the largest installed vital wheat gluten capacity in the US, but has curtailed the use of this capacity in recent years due to increased competition from more competitive gluten imports. However, the recent recall of pet food containing contaminated wheat gluten from China has resulted in a surge in demand for MGPI's domestic product. In response, MGPI said it will increase gluten production at both its Atchison, Kansas, and Pekin, Illinois, plants. The production increase, due to come hand in hand with higher pricing, is expected to begin impacting the firm's results during the current quarter. However, MGPI president Tim Newkirk cautioned that this would be subject to sustained market demand and the company's successful implementation of efforts to restore its gluten capacity. To assure customers of the quality and safety of its ingredient, MGPI points out that all of its wheat-based ingredients are produced in the US from North American wheat, and is manufactured by according to food standards. In addition, the company said it is not importing any wheat gluten for redistribution or use in the US or other markets. It also assured customers that chemicals such as melamine and aminopterin, which have been found in recalled pet foods, and which are not allowed in the US, are not used in any of the firm's processes. However, despite the clear opportunity lying ahead for MGPI, the company said it will not lose sight of existing programs designed to improve the focus and profitability of its ingredient business. "The temporary increase in vital wheat gluten demand could accelerate this process, but it will not detract from our new product commercialization programs underway. As part of our core product portfolio, we continue to work on a number of applications with the potential to enhance the performance of a variety of food systems,"​ said Newkirk. In March, the firm launched its new technical innovation center, which it claims strengthens its capabilities related to commercialization of naturally-derived ingredients. "As part of our profit improvement plan, we are concentrating our efforts on supplying our customers with a more select array of high quality, premium ingredients that address nutritional, sensory and convenience issues and that can help build value while making more efficient use of our existing capacities,"​ said Newkirk. The changes to MGPI's business could go some way to addressing its susceptibility to volatile commodity grain markets. The firm said this has "hampered growth in overall profitability"​ in its third quarter. Corn costs, which were up around 65 percent from last year, hit the firm's profits for the quarter ended April 1 2007. Profitability in its distillery segment, where corn is the principal raw material used in the alcohol production process, was slightly down on last year's figure. Total sales for the period reached $93m, an 18 percent increase from the year-ago quarter. Total ingredient sales in the third quarter of fiscal 2007 decreased by approximately $3.1m, or 14 percent, primarily due to lower sales of ingredients for non-food applications. Specialty ingredient sales for food applications were up by around 12 percent as a result of price hikes for both proteins and starches. Prices for commodity wheat gluten and starches also increased. Prices were also up for alcohol for industrial applications and alcohol for beverage applications, where sales rose 29 percent and declined 6 percent respectively. Total sales of distillery products in the third quarter rose by approximately $17.6m, or 31 percent compared to last year.

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