Cargill meets hydrocolloid challenges with investment

By Jess Halliday

- Last updated on GMT

Related tags Cargill E number

Cargill is continuing its long-term investment in its hydrocolloids
business with a €3m investment in its factory in Baupte, France,
which is aimed at improving productivity and maintaining the
highest quality standards.

The agrifood giant's hydrocolloid portfolio falls under Cargill Texturizing Solutions, the division that also houses solutions from starch, soy, cultures, lecithins and functional systems.

Fabrice Bohin, global business director for hydrocolloids at Cargill told that improving productivity is important because of forces affecting the market.

"We see costs going up as a result of raw material prices ," he said, citing seaweed shortages in Asia as a result of climate change as affecting carageenan, for instance, and high fruit prices as affecting pectin.

Increasing energy prices have also had an effect on rising costs.

"Industry has tried to compensate with productivity," said Bohin.

He cited growth rates of 2 to 8 per cent in the hydrocolloids market, stemming in particular from customers developing low fat products that engender specific texture issues, as well as demand for indulgent products.

But this growth story goes hand-in-hand with a high level of competition - not least since Chinese producers entered the market a decade ago.

In fact, Cargill is a relatively new player in the market, but one that has bagged considerable market share in a short space of time.

In five years the company has gone from zero presence in hydrocolloids to being one of the top three players, said Bohin.

The €3m that Cargill is investing in the Baupte facility, which it has owned since acquiring Degussa Food Ingredients in 2006, is part of a general programme of investment in hydrocolloids to the tune of "a few hundred million dollars" in recent years.

In 2001 it entered into a joint venture to produce xanthan gum in China; and in 2005, it acquired the capacity to produce pectin when it bought up Citrico.

The following year, in addition to buying Degussa Food Ingredients, Cargill also bought out its joint venture partner for the Chinese facility.

This gave it complete control over ensuring that all necessary standards are met.

The plant in Baupte is mainly involved in the production of "strategic growth vehicle " xanthan gum and carageenans.

Bohin said it is the flagship of the company's seven hydrocolloid factories, housing its worldwide knowledge centre for the ingredient category, as well as application labs and R&D facilities.

Currently 340 people are employed at the site.

But while he said the €3m to be channelled into this site "stresses that hydrocolloids are strategically important to us in the total texturants business package," Bohin added that this is just a portion of regular yearly investment.

Cargill is also active in innovation in the hydrocolloids arena.

The company is constantly investing in renewing its product line, but Bohin said that innovations tend to be incremental, aimed at improving ease of use, for instance.

"In hydrocolloids, a real breakthrough is not something you see very often in the market - such as a whole new E-number," he said.

Cargill is presently in the pre-launch phase for a new xanthan product that has been developed over the last 18 months, but details of its specifications are not yet being communicated.

Innovation tends to be linked to customer requirements.

For example, Cargill has been working on fat reduction techniques for meat applications.

Moreover, there is considerable transfer of knowledge on xanthan gum between the Baupte plant and the plant in China, enabling innovation in that region too.

However Cargill's China plant does not just cater to the Asian market (although this is an area of good potential due to the growth in convenience foods there).

For hydrocolloids, the biggest market is Europe, followed by the Americas - although it does depend somewhat on the technology - xanthan is bigger in the US, and pectin in Europe, according to Bohin.

As for the position of hydrolloids within the broader texurising portfolio, Cargill sees the various solutions as synergistic:a customer may use one or more kind of ingredient in the same product, depending on requirements.

In hydrocolloids, Cargill wants to strengthen and improve its top three positioning.

But in textures as a whole, Cargill's aim is "to be recognised as a preferred partner of customers".

Privately-owned Cargill does not issue a breakdown of financial results by business division, but last week it posted overall net earnings of $954m for its second quarter, an improvement of 44 percent from last year's takings.

The six month results show the company earned $1.87 bn, a 61 percent increase on last year.

The growth was said to have been bought about by heavy investment across the board.

Over the past seven years, Cargill spent more than $18bn to expand the company's global footprint.

In that time, the group has posted continuous sales growth.

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