DSM sheds bakery ingredients to focus on high margin core activities

Related tags Bakery ingredients Nutrition

In a €197.5 million deal food and pharma group DSM sheds low growth
bakery ingredients operations to private equity firm Gilde, freeing
up the Dutch firm to increase its focus, and opportunities, on high
margin, health promoting ingredients, reports Lindsey
Partos.

Identified as a key strategy for growth, the largest fermentation company in the world has clear ambitions to concentrate on products with health boosting functionalities (health enhancing, adding nutritional value) than those provided by bakery ingredients, currently witnessing sluggish growth.

And as the health-enhancing, functional food ingredients become more popular, DSM is set to benefit from its position between food and pharma.

"These trends limit the operational and technological synergies between DSM Bakery Ingredients and the core of DSM's food and nutrition businesses," says the Heerlen-based firm in a statement today.

DSM's low growth, low profitability bakery unit brought about 4.5 per cent of sales (€350 million) to the group's overall €7.75 billion turnover last year.

But the unit is still the number three world player in bakery ingredients, supplying yeasts and bread improvers.

This latest deal with Dutch equity firm Gilde includes all activities as DSM Bakery Ingredients, except the Baking Enzymes unit which was transferred to DSM Food Specialties in 2004, and DSM Bakery Ingredients' stake in a joint venture in South Africa (Rymco).

DSM Bakery Ingredients employs about 1300 people and has production facilities in the Netherlands, Germany (Uniferm joint venture in Werne and Monheim), Italy, Chile, and the UK.

Reporting on 2004 figures last month, DSM said sales at its food speciality unit - that sells dairy, savoury, beverage and nutritional ingredients - had risen by about 10 per cent.

At a wisp of 2.8 per cent growth, bakery ingredients fell below the global ingredients market, currently growing at about 4 per cent.

Overall, food ingredients at DSM brought about 17 per cent of sales to the group's €7.75 billion turnover last year, that includes pharma and antibiotic products, a rise of five cent per cent on the 12 per cent contribution in 2003.

The sell-off today, expected to close in the third quarter of 2005, follows DSM's divestment month of its hydrolysed vegetable protein operations to industry conglomerate Oterap Holding.

But divestment and movement in food units are likely to be over for the year.

When asked by FoodNavigator.com if the lastest divestments were 'pretty much it for the year', a spokesperson said 'yes'.

"Although difficult to tell if anymore divestments are likely, we don't normally surprise the market," he added.

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