Chr. Hansen reviews Natural Colors division, boosts focus on plant-based fermentation

By Flora Southey

- Last updated on GMT

Chr. Hansen is increasing focus on fermentation solutions for plant-based products, such as coconut-based yogurt alternatives. Pic: GettyImages/OlenaMykhaylova
Chr. Hansen is increasing focus on fermentation solutions for plant-based products, such as coconut-based yogurt alternatives. Pic: GettyImages/OlenaMykhaylova

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In its newly launched 2025 Strategy, Chr. Hansen plans to increase focus on its microbial and fermentation technology programmes. Non-microbial assets therefore, such as its Natural Colors division, are not central to the new strategy, CEO Mauricio Graber told FoodNavigator.

Yesterday (24 August), Chr. Hansen released its 2025 Strategy. Its ambition is to create a ‘differentiated bioscience company’ with focus on its microbial and fermentation technology platforms.

This puts the company’s Food Cultures & Enzymes and Health & Nutrition divisions ‘at the centre’ of the new strategy, FoodNavigator was told by CEO Mauricio Graber. Non microbial assets, however, are not.

The Natural Colors division falls into this non-microbial category and is therefore undergoing a strategic review to determine whether Chr. Hansen is ‘the right owner’ for the business, Graber explained.

To divest or not to divest?

The Natural Colors division develops natural ingredients for food and beverages and boasts the ‘largest pigment portfolio in the industry’.

Made from natural colours and fruit and vegetable concentrates, Chr. Hansen has more than 600 unique products. The division is responsible for a new vegetable variety commercialised last year, the Hansen sweet potato Ipomoea batatas​, which serves as an alternative to carmine – traditionally made from crushed cochineal insects.

The company's Natural Colors division offers an alternative to carmine. Pic: Chr. Hansen

A ‘global market leader for natural colours’, the division offer ‘an attractive return profile’, noted Chr. Hansen. Graber, too, stressed the division is ‘a great business’.

“More consumers and customers are demanding clean labels. Natural colours provide signature colours for brand owners that have a connection with consumers – because the sense of colour is all important for consumers.”

However, the CEO voiced concerns Chr. Hansen may not be the right owner for the business, given the trajectory of the new strategy. As a result, the division is undergoing a strategic review, which is expected to be completed ‘within the next few months’.

If it is determined Chr. Hansen is not the ‘right owner’, the business will be put up for sale.

Another alternative, Graber explained, could be that Chr. Hansen decides it is ‘partly the right owner’. In this scenario, the ingredients supplier would need to partner with ‘somebody who is willing to invest more in that business’.

“Between keeping it, divesting it, and everything in between, we are not leaving any stone unturned in our strategic review, to make sure that we [stay true] to our strategy priority, but also to do what’s right for the future of the Natural Colors business,” ​we were told.

A shining light on fermented plant bases

In the 2025 Strategy, Chr. Hansen also announced plans to increase focus on fermented solutions for plant-based food and drink products. The company is doing so by creating a new ‘lighthouse’, titled Fermented Plant Bases.

What is a lighthouse? “Lighthouses were introduced in 2013 and…are businesses which have the potential to achieve a revenue of over €100m and the potential to group faster than the group,” ​Graber explained. Other Chr. Hansen lighthouses include Bioprotection, Plant Health, and Bacthera.

Fermented plant bases, therefore, is an ‘exciting, high focus area’ with a ‘high potential’, he continued.

yoghurt LightFieldStudios
Chr. Hansen is increasing focus on fermented solutions for plant-based food and drink products. Pic: Getty/LightFieldStudios

The lighthouse responds to growing demand for plant-based food and drink products. Chr. Hansen’s solutions – which serve three categories: dairy, meat, and beverages – are all ‘plant-based related’, explained VP Food & Beverages Laurent Hubert in a recorded Q&A. “We are talking here about vegetables, fruits sometimes, or grains, that are used in different types of matrixes.”

Increased demand for plant-based solutions stems from consumers’ growing interest in non-animal sourced foods. “Consumers are embracing flexitarianism, so they are not per se avoiding dairy, they’re just expanding their repertoire of the type of products they are consuming,” ​said Ross Crittenden, head of Commercial Development of Fermented Plant Bases.

“Plant-based is attractive because of its sustainability and health credentials…and so consumers are adding this to their diet.”

Chr. Hansen says under its Fermented Plant Bases business, it will be offering clean label solutions that help ‘build texture’ and ‘create good flavour’ for plant-based products – whether that be oat or coconut-based yoghurt alternatives, non-dairy milk alternatives, or fermented drinks such as non-alcoholic beer and kombucha.

Financial outlook

Between 2018/2019 and 2025/25, Chr. Hansen has set ambitious targets. The company aims to deliver mid- to high single-digit organic growth, averaged over the period, and an increase in EBIT margin before special items, before portfolio changes and currency impacts.

Alongside the ingredients supplier’s financial ambitions, Chr. Hansen has detailed non-financial ambitions to achieve by 2025, which tie-in its focus on environmental sustainability.

Within the next five years, for example, Chr. Hansen aims for 100% renewable energy, circular management of biowaste and recyclable key packaging materials.

The company hopes to achieve more than 80% of its revenue from products that contribute to the United Nations’ Sustainable Development Goals 2,3 and 12.

Further, concerning gender equality in the workplace, by 2025 the company aims to have a 1:1 equal ratio between female employees and women in management.

“The margin improvement is expected to be based on efficiency gains and scalability benefits from operations as well as synergies from recent acquisitions, which will be partly reinvested into the business during the strategy period,” ​noted the firm.

Chr. Hansen also said it plans to deliver an average growth in free cash flow before acquisitions and special items exceeding the average growth in absolute EBIT before acquisitions and special items.

The highlighting of acquisitions here is relevant to the company’s newly announced M&A strategy. From the base year 2018/2019 until 2024/25, Chr. Hansen intends to “strengthen its technology platform across its competencies, such as cultures and probiotics, dairy enzymes, and value-added fermentation through acquisitions and the expansion of the R&D partner network”. ​The company will not investigate acquisitions that diversify away from its focus on microbial fermentation.

Of course, it can be challenging for companies to assess and predict financial outlook given the current COVID-19 pandemic and consequent economic uncertainties, but CEO Graber said in the long-term, the outlook looks positive.

While Chr. Hansen has demonstrated resilience amid the crisis, Graber told this publication it is ‘not immune to any impact’: “We are obviously concerned about an economic recession.”

In the short-term, economic uncertainty and lower levels of disposable income could have an impact on sales of probiotic and protein products – which can often carry higher price tags.

In the long-term, however, Graber predicts the impact of COVID-19 to prove ‘net positive’ for Chr. Hansen, due to increased attention on health. “There is more focus on immunity, and a lot of what we do with human health and probiotics…contributes to better immunity [and] gut health for consumers.”

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