Danisco rides China ingredients boom

- Last updated on GMT

ASPAC Danisco, the Asia Pacific division of Denmark-based
ingredients giant Danisco, has recently reported organic sales
growth of 32 per cent for the nine months up to January 2004.
Simon Pitman spoke to the division's president, Tero
Huopaniemi, to find out what drove this significant growth.

Danisco​ has been present in the Asia Pacific region in its current form since the early 80's, and in that time the division has built up a significant presence, in particular China, where the division is currently riding the wave of investment in the food processor sector. Substantial growth over the last few years is rapidly turning the country into the division's flagship market, as demands for increasingly complex ingredients mean that many food processors in China are turning to foreign companies such as Danisco to meet their requirements.

"There are three key issues which have afforded ASPAC Danisco its recent growth in the Chinese market,"​ said Huopaniemi. "Firstly, we have invested heavily in local production capacity and human resources, especially in product/application development and sales. Secondly, we sell the majority of our products directly through our own sales force - not through middlemen - and thirdly, we are attuned to our customers' strategic needs - and in many cases have been behind the consumer food/beverage launches over the few years."

The dynamics of the Chinese economy has also had a significant impact on ASPAC Danisco's performance there. Phenomenal economic growth, a sustained population growth and the increasing desire to eat processed, western style foods have all boosted the company's position.

Strong technology anchor

"Demographics have helped us, though we are growing faster than the market at the moment,"​ said Huopaniemi. "We have a strong technology anchor, not only in our global innovation group but also through our large business in Japan, where much of the current food technology/product concepts originate."

But how long can this performance in the Chinese market be sustained? The strong growth rates have characterised ASPAC Danisco's performance throughout the Asian Pacific region, with overall organic growth remaining well into double figures. Add to this the continued strong performance of the Chinese economy, and Huopaniemi feels that sustaining long-term organic growth rates of 25 - 30 per cent will not be that much of a hurdle.

ASPAC Danisco's presence in the China market has been carved out by doing business with all the major multinational food and beverage organisations. Big names such as Kraft, Nestle and Danisco all have a major presence in the field, created through the successful marketing of a blend of western and Chinese-style brands. Danisco's existing strong links with the multinationals has been a boon to the company's business efforts in the region. However, China's market does remain divided into two firm camps of domestic and multinational players.

Natural innovative safe ingredients

According to Huopaniemi the types of ingredients the multinationals are looking to source from ASPAC Danisco are natural, innovative and safe ingredients. Often a character of developing markets is a reliance on synthetic ingredients, but Huopaniemi says that in the Chinese market the emphasis is on taste and health-related issues, which means more emphasis on natural ingredients.

ASPAC Danisco's growing presence in China has come about because it is able to provide services and products that domestic suppliers are hard pushed to match, says Huopaniemi. " We seem to be the supplier with the ideas and the performance products right now, and this is clearly a business platform that we have brought from abroad, based on decades of experience in other markets."

He went on to explain that the domestic ingredients market is still relatively young, with much still to be learned from the major players. ASPAC Danisco's strength in the China market is derived from an extensive product portfolio that none of its competitors can currently match, he emphasized. Taking the example of the dairy sector, Huopaniemi explained that his division can simultaneously supply starter or probiotic cultures, flavours, sweeteners, dietary fibres and anti-microbials.

complex market to crack

However China is a complex market to crack, and doing business there can often be frustrating and time consuming. Interestingly, Huopaniemi said that in his experience the business model in China is similar to any other - although helped by the fact that Danisco is doing business with multinationals who often work along western business lines. Nonetheless, he did stress that the market means greater pricing and cost-in-use pressures than found in some of the more mature markets, an issue that he has worked hard to address through constant dialogue with clients.

In 2002/2003 ASPAC Danisco acheived sales of $230 million (€191m) and Huopaniemi believes that the division will achieve continued sales growth of 20-30 per cent in the coming financial year. Currently it has around 600 employees and is headquartered in Tokyo, with sales offices and innovation facilities in Seoul, Beijing, Shanghai, Guangzhou, Singapore, Kuala Lumpur, Bangkok, Sydney and Auckland; in addition to manufacturing units in Penang, Singapore, Sydney, Auckland, Kunshan and Nanyang in China.

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