In the spotlight - Tereos goes global
Ingredients group is eyeing Latin America, Asia
The lure of the world's emerging markets was demonstrated again this week when one of Europe's biggest sugar producers set out its stall to become one of the planet's biggest food ingredient suppliers.
France's Tereos Group, the number three sugar refiner in Europe, outlined plans to combine its international operations into one unit in a bid to give greater focus to its ambitions of expansion in Latin America and Asia.
Tereos plans to merge its European cereal operations with its Indian Ocean sugar cane assets and its Brazilian-listed subsidiary Açucar Guarani to form a business generating US$2.5bn in sales.
The new company, called Tereos Internacional, is to be based in Sao Paulo but listed in Brazil and France and will produce sugarcane, ethanol, starch and starch sweeteners across over 100 markets.
This transaction is, quite literally, a big deal for the food and beverage sectors. Over half the new entity's revenues already come from food and drink - its customers range from Brasil Foods and brewing giant InBev to Coca-Cola Co., Danone, Kraft Foods and Nestle.
The company insists, perfectly reasonably, that the formation of Tereos Internacional will create a business supplying a broader portfolio of products and serving more markets. Diversification and the spreading of risk in what can be a volatile market is key.
And, as Tereos Group president Philippe Duval tells just-food, as his company's customer base consolidates, the need for ingredients suppliers of scale and of global reach intensifies.
"Clients will have a 'one-stop shop' company to supply food ingredients for them globally," Duval says. "It should improve our relationships [with customers] in the medium term because we are clearly positioning ourselves as on of the few providers in the sector capable of accompanying them in their geographical development."
For many a food multinational, that geographical development involves expanding in regions like Latin America and Asia. The headquarters of the business will be in Brazil, a market attracting inward investment but also seeing the rapid expansion of domestic food giants. Given one of the pillars of Tereos Internacional will be Brazilian sugar refiner Açucar Guarani, the new company looks well placed to serve the growing number of powerful of domestic and international players in Brazil.
Duval is also quick to point out that Asia offers potential for the new entity. Tereos Internacional is not present in Asia but expansion in the region is high on the company's list of priorities, especially, as Duval emphasises, as the continent will drive growth in starch consumption over the next five years. Between 2010 and 2015, starch consumption is forecast to grow by 7.4% a year in Asia. In South America, the next most buoyant market, growth is forecast at 4.8%.
"In starch, the Asian market is the fastest-growing in the world. We are not present there, so there is a huge scope for growth, most likely through acquisitions, but also organically," Duval explains.
There is, as yet, no firm date for the IPOs. According to Tereos, the transaction should be completed by June following an EGM to approve the move.
Tereos Group's origins date back to the 1930s, with the creation of the Origny co-operative. The modern-day Tereos Group was formed in 2003 after the merger of French sugar group Béghin-Say and the beet sugar co-op Union SDA.
Two years later came another merger, this time with the Sucreries & Distilleries des Hauts de France co-op, a move that created one of Europe's largest sugar groups.
Tereos Group remains a co-operative of 12,000 French farmers. Stock-market listings and forays into Sao Paulo and Shanghai may be worlds away from fields in France but demonstrate, perhaps, the true internationalisation of agriculture and today's food industry.
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