The ingredients industry is worth US$24bn but has a surprisingly low profile. Yet with NPD fuelling fortified foods and health ingredients, things are changing fast. Rajiv Desai flags up the high-growth products and introduces us to the industry’s rising stars – the players working closely with manufacturers to innovate and fulfil consumer demand.
The next time you go to the supermarket it is more than likely you will bring back some kind of processed food. Most food products by law carry a list of the ingredients that have been used and while you may be able to spot water or salt on the listing, you might not know much about the fats, oils, sweeteners or the specific flavouring or colouring that go into your favourite drink or food product. Food manufacturers rely on sourcing ingredients from outside sources but where exactly do they go to get their essentials?
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The ingredients industry is worth an estimated at US$22–24bn a year. This is a drop in the ocean compared to the size of the processed food industry but without the ingredients industry, food innovations like ready meals would not exist. New product innovation owes much to the pioneering work of ingredient firms which work closely with food manufacturers to formulate new food products. They provide food companies with a broad range of services including consultancy, training and analytical services, which help fuel the food making process.
Most ingredient companies work behind the scenes within their research laboratories to provide manufacturers with a mix of ingredients that fit their needs, whether these be related to taste, health or an improved shelf life. A typical fruit juice beverage for instance includes a variety of industrial ingredients like sweeteners, acidulants, stabilisers, colours, preservatives and flavours but the formulation of these ingredients can be varied to give the unique sensory quality the manufacturer demands. A manufacturer may want the product to have a particular flavour but in a mass-produced product the formulation of the beverage must take into account how different ingredients interact.
There is an array of industrial ingredients on the market, but it is likely there is a producer who can supply food manufacturers with the exact ingredient they want. There are companies which market niche products like gelatine, but in general the big sectors of the industry include colours, flavours, sweeteners, fats & oils, hydrocolloids, emulsifers, antioxidants, vitamins & minerals and texturant systems. There are also application-specific ingredients areas like dairy, bakery and confectionery.
The development of the industry is reliant on the growth in consumption of processed foods around the world. A downturn in food manufacturing has a knock-on effect for the ingredients industry, but the development of emerging markets like Russia, Asia and South America are increasing the size of the market and making ingredients a global concern. The major ingredients firms now have a worldwide sales, distribution and manufacturing network to optimise their earnings.
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The ingredient industry is susceptible to changes in food trends and consumer lifestyles. Growth areas include ‘good for you’ ingredients that reflect the trend for healthy eating and functional foods amongst consumers. New product development driven by ingredient companies has led to the increasing fortification of foods. Ingredients like vitamins; dietary fibre, lipids, polyunsaturated fatty acids, calcium, plant sterols and pre- pro- biotics are becoming commonplace in foods like pasta, milk and bread. Conventional ingredients like sweeteners and fat replacers have also been boosted by this trend.
Within the field of functional ingredients, the dairy sector heads formulation developments but market areas like confectionery, where we are seeing chewable vitamin sweets and chewing gum that can help dental care, are also beginning to open up as the difference between traditional food and use of medicinal ingredients becomes increasingly blurred. Nutraceuticals like Sam-E, an ingredient touted to be strong as the anti-depressant Prozac, have been developed for use in food. Collagen, an ingredient more known for its use in cosmetics, has already made its debut in bottled water.
One of the hottest ingredients in recent years is soya following an approval of a health claim relating to cholesterol by the FDA in the US. Seen as a niche ingredient until recently, food manufacturers are now falling over themselves to incorporate soya-based ingredients into their foods. Herbal or botanical ingredients like ginseng, kava kava and echinacea are also a popular addition to foods, particularly in the beverage and confectionery sectors.
Convenience foods like ready meals and snack foods are another growing sector for the ingredient industry as they have increased the need for both flavours and preservatives, while organics have helped to boost the market for natural colours and flavours. Foods that use alternatives to traditional ingredients like non-dairy milk have also opened up new avenues of growth.
Hot topics dominating the ingredients industry reflect wider concerns in the food industry. Genetic modification and biotechnology remain a concern as most ingredients involve some chemical process. Biotechnology could for instance allow the efficient mass production of colours and flavours. Consumers, particularly in Europe and the Far East, are suspicious of the role that biotechnology is playing in the production of their food. Ingredient firms have sought to reflect these concerns by producing ingredients to GM-free standards, as well as producing natural and organic lines to their products.
Major players
Major players involved in the market reads like a who’s who of the manufacturing world. Companies participating include pharmaceutical companies like Roche and Novartis, chemical giants BASF and DSM, consumer products group Henkel and multinational food manufacturers like Campina Melkunie, Arla Foods and Kraft Foods.
In recent years the industry has like the food manufacturing sector sought to consolidate as manufacturers realise that they need to offer an extensive portfolio of ingredients to become more cost effective and boost a stagnant market. For instance Danisco’s merger with Finland’s Cultor Food Science to form Danisco-Cultor food ingredients resulted in a product line up that includes antimicrobials, antioxidants, enzymes, emulsifiers, fat replacers, flavours, flavour ingredients, functional systems, specialty sweeteners, starter cultures and textural ingredients.
Most of the major industry players operate across a variety of ingredient sectors. These include pharmaceutical giants, Roche (vitamins, colours, Carotenoids), BASF (vitamins, PUFA’s, carotenoids), Eridania Béghin-Say (starch, fats & oils, sugars), Kerry Ingredients (flavours, coating systems), Archer Daniels Midland (starches, emulsifiers, nutraceuticals, soya and cocoa) and Chr. Hansen (dairy ingredients, colours).
A number of companies have also set up independent operations, spun off from a much larger parent company. Examples in recent years include flavour company Givaudan’s departure from Roche Pharmaceuticals, France’s Rhodia from chemicals giant Rhone-Poulenc and the planned spin off of Novo Nordisk’s enzyme business as Novozyme.
Ingredient sectors
The flavour industry is the largest single sector of the food ingredients industry accounting for US$5bn. Most companies in this sector like Givaudan, Robertet and Wild operate on an international basis. Hydrocolloids that encompasses, amongst others, starches and gelatin, is the second largest sector with a value of US$2.8m. Most companies that operate in this sector tend to focus on one ingredient. The starches sector includes the Cerestar subsidiary of Eridania Béghin-Say, and corn processors Cargill and Archer Daniel Midlands. The gelatin market is dominated by DGF Stoess who recently acquired Leiner Davis, the world’s largest producer of edible gelatin from Goodman Fielder.
Modosodium glutamate (MSG) is the single most used ingredient in food products today. The market is worth $US1.9bn a year (this figure does not include the huge Chinese market) and is dominated by Japanese firm Ajinomoto, which accounts for a third of the world market. The most fragmented ingredient market is enzymes with over 400 manufacturers supplying local concerns.
Growth areas for the industry include emulsifers like lecithin where the market has expanded beyond its traditional applications like bakery mixes and margarines to confectionery and desserts, while the sweeteners market has grown on the back of consumer concern over high sugar consumption in food products. The colour industry has been boosted by a return to natural sources of colouring as the food industry reflects consumers’ concerns about additives.
While dependent on the processed food market for long-term growth, the challenge for the industry is to keep ahead of the ever-changing food market by fuelling product innovation with ingredients. This means that is must not only take into account consumer concerns about food safety but also reflect the trend towards a healthier lifestyle. In line with the emergence of functional foods, many of the established companies have begun to expand their operations to provide ingredients to boost traditional lines. Health ingredients will be the biggest growing sector of the industry in the next five years fuelled by both consumer and food manufacturer interest in the area.
By Rajiv Desai, just-food.com deputy editor
We have a great report entitled “Growth strategies in Ingredients”. To find out more – click here.
