ABF and ADM Create US Packaged Vegetable Oils Partnership

Stratas Foods will serve the foodservice, speciality food ingredient and retail private label bottled oil markets. It is expected to produce 2.5 billion lbs of oil in its first full year of operation with revenue of some $1.4bn.

28/10/08 Associated British Foods (ABF) the international food, ingredients and retail group announces it has reached agreement with Archer Daniels Midland Company (ADM), the global agricultural processor, on the creation, with immediate effect of Stratas Foods, a joint venture for the manufacture, marketing and distribution of packaged oil products in the US and Canada. ABF and ADM will each hold a 50% share in the joint venture.

Stratas Foods will serve the foodservice, speciality food ingredient and retail private label bottled oil markets. It is expected to produce 2.5 billion lbs of oil in its first full year of operation with revenue of some $1.4bn. Its broad portfolio of products includes vegetable oil, shortening, margarine and pan spray and its foodservice brands include Whirl and Frymax.

The joint venture combines the strengths of two leaders in the packaged oils industry. It will build on the sales and marketing expertise of ACH Food Companies (ACH), and the origination and processing capabilities of ADM. It will offer an integrated supply chain, exceptional processing capabilities, industry-leading product development and strong sales and marketing.

In exchange for each of their 50% shareholdings, ABF is contributing $38m of assets from its oils business, primarily in the form of trademarks, whilst ADM is contributing packaging equipment at four of its facilities in the US. The business contributed by ACH generated operating profit of $20m for the year ended 15 September 2007. The joint venture will be headquartered in Memphis, Tennessee.

The remaining ACH business will be focused on its retail consumer brands which include Mazola corn oil, Argo corn starch, Karo corn syrup, Fleischmann's yeast and its spice brands in North America. In Mexico it mainly includes Capullo vegetable oil and Inca shortening. Brands are now expected to account for virtually all of ACH's revenue compared to only half before the formation of the joint venture.

Mark Zenuk, Vice President, Global Oilseeds, ADM, said: "By joining ADM's sourcing and processing with ABF's sales and marketing, Stratas Foods will benefit both customers and shareholders. ADM's integrated and efficient processing operations and ABF's access to high margin markets will help keep costs low and enhance profits. We are proud to join with ABF in creating a world class packaged oil business."

George Weston, Chief Executive of Associated British Foods, said: "This transaction is a substantial step forward in the development of our US oils business. The new joint venture with ADM will strengthen our US packaged oils business and will significantly enhance its long-term growth prospects. ACH will focus on the growth of its retail consumer brands. We look forward to working with ADM to ensure this joint venture realises its full potential."