Ingredion capitalising as texture shapes innovation
Ingredion has placed its speciality ingredients business “at the centre” of its strategy, based on consumer and technology trends.
Ingredion also believes texturisers are a “large and increasingly influential” part of food formulation. According to data cited by the firm at its most recent investor day, global ingredient sales total $150bn and texture industry sales account for $40bn of this total.
Demand for texturisers is being supported by an increase in front of pack texture claims, which increased by 79% in number between 2011 and 2016, representing a compound annual growth rate of 12%.
Accordingly, incoming CEO James Zallie indicated, the company has developed a “speciality starch focus” that it believes will support growth in 2018. As products are reformulated, in particular, Zallie said it is “very important to build back texture”.
“Our specialty starch focus… is centred around the breadth and depth of the portfolio that we have. So breath across various starch types - that would be corn tapioca, potato, rice and variations thereof,” he detailed during a call with analysts this week.
The group expects clean label innovation to underpin its future development, he continued. “We continue to expand functionalities for those products… Under that clean label wholesome umbrella, our starch texturisation program… is a big drive.”
Acquisitions have enabled Ingredion to ramp up its presence in the starch space. “From a product focus standpoint our potato starches, which we acquired with Penford acquisition a couple years ago, continue to do well because it provides different functionalities in certain applications like snacks and meats and cheese. And then also we're very optimistic on the prospects for our rice starch acquisition from Banglen just this past year. And year-on-year we are anticipating very healthy growth from that rice portfolio not just in Asia Pacific but also in the EMEA as well as in North America.”
Seizing speciality sales
Speciality sales currently account for 28% of Ingredion’s business. The company sees this unit “in the mid-30% five years out”, Zallie revealed.
Vertical Group analyst Brett Hundley expects that the competitive environment and cost pressures to make growth in speciality – and the potential acquisitions - more of a focus in the coming year.
“Core margins are stable, but they are incrementally harder to drive higher now. Given some inflationary trends and some increased competition, specialty performance and M&A become increasingly important, in our view,” he said.
Ingredion, which reported a 2% increase in full-year sales to $5.8bn earlier this week, said that higher speciality sales were improving its margin profile. The company indicated that it expected its sales mix to see further benefits from higher margin speciality sales in the coming year.
On M&A Hundley notes that ingredient valuations are currently high. However, he adds that the group can leverage its balance sheet to support investment.
Zallie also sees potential in developing partnership arrangements in order to access new customers. “Our go-to-market model globally and how we're positioning with our customers makes us in a very attractive partner, and that's why many companies come to us to want to leverage the sales marketing capabilities in the reach that we have globally.
“We're very open minded to partnerships, but at the end of the day as it relates to M&A partnerships, it's all about value creation, it's all about shareholder value creation, and we're going to be very disciplined.”
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