Danisco gets into gum
linking up with one of the largest suppliers in China, the Henan
Building on the one-stop-supplier philosophy, the new kid on the xanthan gum block Danisco has made inroads into the market this week, linking up with one of the largest xanthan gum suppliers in China, the Henan Tianguan group.
The Danish ingredients group is looking to substantially strengthen its global share of the xanthan gum market - currently dominated by hyrocolloid leader CP Kelco. This latest joint venture in China - Danisco Tianguan (Nanyang) - gives Danisco 80 per cent of the shares in the xanthan production of the Chinese company, a production capacity that hits approximately 2 billion tons.
Before the joint venture, the plant - founded by the municipal government - primarily produced xanthan gum for the Chinese market. Now, the plant will target the international food markets, the largest being Europe and the United States.
Danisco will inject cash into the joint venture - figures not disclosed by the company - aiming to achieve a return that exceeds the cost of capital within three years.
"Xanthan is a new product in Danisco's product portfolio. As part of our growth strategy, we will be able to produce high quality xanthan and sell it at competitive prices to both internal and external customers," said Alf Duch-Pedersen, CEO at Danisco, in a statement this week.
With a total market value in the range of €230 million, xanthan levels are approximately 40-50 billion tons per year, of which about 60 per cent is used in the food and pharmaceutical market. Growth rates for xanthan gum are currently coming in at the higher end - five per cent - of the generally lacklustre growth figures in the food ingredients industry.
"Xanthan is still one of the fastest growing hydrocolloids. Its versatility and now its low price make it a hydrocolloid of choice," Dennis Seisun from analysts IMR International, the publisher of IMR's Quarterly Review of Food Hydrocolloids, told FoodNavigator.com.
"The ethanol precipitation issue with Chinese xanthan has more or less been resolved. There is no safety issue as agreed by the FDA," he added. Stressing that China seems to be the place for many new production facilities, "they have a good base of experience in producing xanthan gum and domestic consumption increases in China itself should take up some of the large volumes being brought on stream," commented Seisun.
CP Kelco - created from Monsanto's Pharmacia corporation's Kelco biogums business and Hercules's food gums operations - is the dominant force in the xanthan gum market. Also up at the top is French company Rhodia that, along with CP Kelco, announced a price hike for the additive earlier this year.
But according to Seisun, as a result of the recent Cargill, Staley and now Danisco entries into the xanthan market, it will be difficult for any price increases to stick.
UK ingredients company Tate & Lyle joined the list of xanthan suppliers at the end of last year.
In 1980 the EU approved xanthan gum, a hydrocolloid used in a multitude of applications in the food industry, under the E-number 415, some eleven years after the FDA cleared this high molecular weight polysaccharide as a food additive for the US market.