Timing wrong for Danisco sugar-ingredients split

By Jess Halliday

- Last updated on GMT

Related tags: Sugar, Danisco

Danisco's board yesterday rejected a proposal to cleave the company
into two businesses, one for sugar and the other for ingredients,
because of on-going EU sugar reform. But the plan remains on the
table for the longer term.

The Danish firm has been mulling the future of its sugar operations for some time, as indeed have other companies, in the wake of EU sugar reform that came into effect last year. The rationale behind the demerger proposal is that having two separate companies would ensure the best future development opportunities for both areas of activity, while giving shareholders the choice on whether to back sugar or ingredients. "We agree that the proposed model is workable, but the timing is wrong,"​ said Anders Knutsen, chairman of the board of directors, at the annual general meeting. Pursuant to the reform - which aims to improve competitiveness by reduce sugar and sugar beet prices, reducing production with a quota sale scheme, and reducing exports - the future structure of the industry is not yet clear. Thus, for now, a valuation of Daniso's sugar business is not possible. Danisco expects the structure to be firmed up within the next one to two years, and that is the timeframe it has adopted for changing the ownership structure of the sugar business. Although the idea of splitting up the company has been live for a while, Knutsen said that discussions were accelerated by newspaper reports that put the idea out in the open. Despite the basic aim being independent listing for sugar, Knutsen said this does not rule out other options that could actually create more value than a demerger. One such option could see the sugar division becoming part of a conglomerate tying growers and sugar production closer together. "Danisco and the agricultural sector have always been interconnected so no matter what solution we choose, the good relationship with Sugar's raw material suppliers, the growers, must be the cornerstone of the future Danisco Sugar." ​ He added that another option could see Danisco "taking an active part in a consolidation of the European sugar industry".​ Consolidation has already been initiated by a number of key players, with a spate of sell-offs - both of business units and sugar quotas - and efforts to refocus activities on other areas of the food industry. Tate & Lyle, for instance, is developing in the area of value-added ingredients, with a particular emphasis on health and wellness. Such a strategy is not dissimilar to Danisco's, whose ingredients activities embrace enzymes, cultures, emulsifiers, pectin. "We are currently looking into the possibilities of creating additional growth through acquisitions in our present activity areas, but we are also working actively to broaden our platform in the health and nutrition segment,"​ said Knutsen. Earlier this year Danisco opted to sell its flavours division to Firmenich. At the same time, however, it cut a partnership deal with its buyer so as to keep a hand in flavours to some degree. The exact workings of this partnership have yet to be elucidated. In its annual results announced in June, Danisco reported a three per cent drop in revenue to DKK20.362 bn (€2.74bn), which was blamed on sugar reform. The sugar unit contributed 34 per cent to the company's overall revenues compared to 37 per cent in the previous year. The ingredients division contributed to 66 per cent of the company's revenues this year, compared to 63 per cent in the previous financial year. For its part, the ingredients division recorded organic revenue growth of five per cent (the exchange rates translation into Danish currency for accounting purposes brings this growth down to three per cent on paper).

Related topics: Commodities, Cocoa & Sugar, Ingredients

Related news

Show more

Related products

show more

Better-for-you is better for business

Better-for-you is better for business

Valio | 20-Sep-2022 | Application Note

The challenge confronting chocolate and confectionery manufacturers is how to balance taste with consumers’ demand for confectionery that allows for indulgence...

Finding a sweet balance between health, indulgence

Finding a sweet balance between health, indulgence

Cargill | 09-Aug-2022 | Technical / White Paper

The confectionery category has had a wild ride the past couple of years. Amid the pandemic, consumers sought comfort in indulgence; now, they're looking...

Create sugar-less chocolate with Isomalt

Create sugar-less chocolate with Isomalt

BENEO | 10-May-2022 | Technical / White Paper

Almost 1 in 4 consumers in the US say the best way to control sugar intake is eating less sugar-full candy. But nobody likes to give up on a good tasting...

Related suppliers