A good culture shock? “We are yet to explore most of our good bacteria bank,” says new Chr. Hansen CEO

26 Oct 2018 --- The role of microbes in addressing some of the world’s most pressing problems around agriculture, animal and human health is tremendously promising, with countless untapped bacterial strains yet to be exploited. This is according to new Chr Hansen CEO, Mauricio Graber, who sees organic growth through innovation and regional expansion as the cornerstone of the company’s continued advance.

“Chr. Hansen built a very good business through their knowledge of lactic acid bacteria,” says Graber in a detailed interview with FoodIngredientsFirst. “But when I look at what we have with one of the largest commercial libraries of good bacteria, we haven’t explored more than 20 percent of our good bacteria bank. The more we start to look at these strains, the more we can find incredible things that we can do with microbes.”

Mauricio Graber took the helm as new Chr. Hansen CEO on June 1, 2018, having previously served as President of the Flavours Division of Givaudan S.A. and a member of Givaudan’s Executive Committee since 2006.

Last week, Chr. Hansen reported its Q4 and full financial earnings. The Danish-headquartered company announced that it had achieved all the overall financial targets set at the beginning of the year and raised its ambitions 9-11 percent organic growth for next year. Graber welcomes moving into a company with “a very strong and consistent performance within the food ingredients and biosciences segment.” Chr. Hansen has a turnover of €1.1bn with 7 percent of this being reinvested back into R&D.

“Chr. Hansen guides for 8-10 percent topline growth and consistently performs at that level. I am particularly happy that Q4, which we just reported last week, finished on a strong note. We closed the year with 10 percent growth for Q4 with a strong short-term guidance for the fiscal year 2018/2019,” he notes. 

It is the company’s core business of Cultures & Enzymes,which represents 59 percent of their business,that has performed the strongest.

Graber stresses that all of the businesses contributed strongly to this performance. “Our core business of Food Cultures & Enzymes continued to be a fantastic business with a growth of 12 percent for Q4 and for the full year. Our Health & Nutrition business, which holds a lot of potential for the future of Chr. Hansen also delivered growth of 10 percent in Q4 and 8 percent for the full year. While the Natural Colors business was slightly below our expectations at 6 percent in Q4, we expect that it will benefit in the longer term from the trend towards natural conversions and come back to 10 percent growth,” he adds. 

Interestingly, it is the company’s core business of Cultures & Enzymes, which represents 59 percent of their business, that has performed the strongest, with bioprotection and probiotics forming key pillars here. Graber explains that the growth in their core business is down to several factors. 

Firstly, the company still have dairies who could be converted to their cultures & enzymes. “Every time we convert a dairy to produce a fresh dairy yogurt or cheese, we build a larger market share within the segment,” he stresses. 

Secondly, the company has also made a lot of progress within bioprotection, which goes in line with Chr. Hansen’s commitment to sustainability and reducing food waste. “Bioprotection grew by 30 percent [in the 2018 year] and I’m very excited by that because it is growing while doing good. It is using good bacteria to prevent food spoilage. Many of our customers using our bioprotection find that it not only helps them to convert properly but in their brand proposition to get fewer consumer complaints and a better standard of products,” he adds. 

Thirdly, he also notes a renewed interest in probiotics in food & beverages. “There is a very high level of consumer engagement in probiotics, not only in supplements but also in food & beverages. That’s a global trend in China, in Europe and the Americas,” he explains. 

“A combination of those and the cross-selling opportunities for food cultures, enzymes, bioprotection and probiotics is what contributes to that growth. Our food enzymes business is also growing fast. We see lactose-free products growing and we have the leading lactose enzyme that enables dairy products to be lactose-free,” Graber adds.

Despite European regulatory hurdles around even using the term “probiotics” Graber is hopeful that these healthy bacteria will have a “better future than past” in the region. “What I see since joining Chr. Hansen four months ago and deepening myself more in this area is that we have two of the world’s best-documented probiotics in the form of LGG (Lactobacillus rhamnosus) and BB12 (Bifidobacterium 12). This is particularly the case for LGG, which is the best documented probiotic strain. We have tremendous science behind how much they support the immune system in school children in reducing lost school days because of the common cold, which offers a wonderful contribution to society,” he notes. 

Immunity and gut health will still form the pillar of probiotic research going forward for the company, despite areas such as sports nutrition, mental health and weight management increasingly being mentioned in the trade media. “I think immunity overall is an area that is quite important for us. Gut and gastrointestinal health is important. We view baby health as an important area, whether for gastrointestinal health or the prevention of common colics in babies. We also see a lot of opportunities in feminine health,” says Graber. 

Another highly interesting area of development comes at the crossroads of food and pharma, however. In the US alone, over 50 million people take painkillers on a daily basis, bringing gut health issues with it in itself. “We are developing a strain that is effective in reducing the impact of people taking aspirin or painkillers on a daily basis and resultantly suffer from GI problems or the formation of gastric ulcers,” he notes. “So imagine the potential that these strains have. When we continue to develop and scale-up strains, we will continue to partner with pharma companies to do that. We made two exciting announcements this year. One was with Prota Therapeutics on Level 3 trials on the prevention of peanut allergy and the second is a strain against ulcers,” says Graber. “When asked about the potential for cocktails where probiotics can be added to existing pharma products such as aspirin in order to help combat pill fatigue, Graber confirmed that “that is obviously a logical avenue to explore.”

The role of microbials in addressing the area of food waste is also particularly interesting. Graber stresses that the global population will increase by 2 billion people from where we are today to 9.5 billion in 2050, which means that that will require us to produce 70 percent more food to feed it. At the same time, one-third of food goes to waste today. “That’s a tremendous amount and what Chr. Hansen has done is to commit to bringing technologies to reduce food waste. We started in the categories of dairy and processed meat because they are two categories where we are already active. So it is about using good bacteria to prevent the formation of mold or bad bacteria and it is a very good solution. That was the foundation for our bioprotection products,” he notes. 

The company offers two generations of products that address the bioprotection space: Generation 1 and Generation 2. Generation 2, is a stronger level of bioprotection for countries without a great cold storage chain. “In Brazil, for example, if you need to ship from the south to the north of the country, the cold storage is not great and our second generation strains perform very well under those conditions,” he adds. 

Graber explains that the company will continue to advance their technologies within that space and develop into new categories with a lot of potential waste. “That could be in areas such as vegetables, salads and salmon. The tests into those categories are very promising,” he adds. 

So what about growth through acquisition at the company? Graber stresses that at the core of Chr. Hansen is the organic growth story. “Very few companies can perform and deliver against a guidance of 8-10 percent growth and increasing margins in our segment,” he notes. “As an incoming CEO, harnessing and protecting that is very important.” 

He does stress, however, that Chr. Hansen has been involved in some small bolt-ons in recent years. “LGG was an acquisition from Valio, NPC was an acquisition on animal health in the US that propelled and supported our entry into key categories within that. That’s also a very exciting thing for me as we are reducing the use of antibiotics in farming and using probiotics as a way to ensure good farming practices and reducing the impact on humans of bacteria that are antibiotic resistant,” he notes. 

Corresponding with their results announcement last week, Chr. Hansen further expanded its enzyme production and presence into the traditional segments of specialty cheeses, with the newly announced acquisition of Austrian-based ingredient supplier Österreichische Laberzeugung Hundsbichler GmbH. “The small acquisition in Austria with animal rennet continues to support our development in specialized cheese that uses animal rennet functionality,” he notes. 

More of these types of bolt-ons can be expected going forward. “As we look into the future and see any bolt-ons in the spaces that we are plant, human or animal health or food cultures & enzymes, we would definitely have a look at it. But we do not need to make acquisitions as our organic growth is very solid. But in this fast pace of change that we see with consumers in the market, we will be open to bolt-ons that help our strategic intent,” he adds. 

Chr. Hansen was under private equity control [PAI Partners] from 2005-2010 and has been a publicly listed company since. For Graber, the years of ownership really shaped the company in terms of cost discipline, with a focus on delivering results. This ethos remains strong in the midset of the company today. “Every company has its history and views the world through a different lens. Chr. Hansen, before being acquired by the private equity firm, PAI had lost some of its way in acquiring a lot of food companies and not being focused,” says Graber. 

When therefore asked about potentially going into the flavors space due to his own Givaudan background, he noted that focus was key. “What Chr. Hansen does in being a bioscience-based company and leveraging this platform is unique and quite specialized and I would rather see us continue to focus on the strategic area that we have identified, rather than venturing into other segments where we would not have the strong leadership and innovation platform,” he stresses. 

It may ultimately be the sustainability angle that is key to companies with fermentation-based knowledge, Graber concludes. When announcing their results last week, the company reconfirmed that the products behind 82 percent of their revenues directly support three of the 17 UN Sustainability Development Goals. “We are really contributing to a more sustainable world by leveraging our fermentation capabilities,” he notes. 

By Robin Wyers