Chr. Hansen eyes US$118m potential in fermented plant bases

26 Aug 2020 --- Chr. Hansen has launched a new strategy geared toward fermented plant bases, adding to its existing microbial platform to improve the future of food with good bacteria. This “lighthouse,” detailed in the company’s new 2025 strategy, puts a renewed focus on Food Cultures & Enzymes, Animal and Human Health, while the natural colors business is under review. Another major area of innovation is slashing food waste, which comes as consumers increasingly prioritize sustainability.

“We define ‘lighthouse’ at Chr. Hansen as a business area that we think has a long term revenue potential in excess of €100 million (US$118 million), and also, of course, a business area where we expect higher growth that we will see elsewhere in the portfolio,” Christian Barker, Executive Vice President of Health & Nutrition at Chr. Hansen, tells FoodIngredientsFirst.

Its most recent lighthouse, fermented plant bases, taps into the plant-based trend by providing solutions for spoonable and drinkable fermented milk alternatives and fermented beverages.

“We can see a huge trend toward fermented plant bases in most parts of the world now. In addition to a lot of consumer interest, there are also a number of innovators creating new products in that space,” says Barker.

Christian Barker, Executive Vice President of Health & Nutrition at Chr. Hansen.The fermented space is an area in which Chr. Hansen has had experience for more than a century. This history will give the company an advantage, according to Barker. 

“Historically the source of protein we worked with for fermentation in foods was predominantly dairy and meat. Now we are doing the same thing with different protein sources. That means that there’s a lot we can leverage in our existing capabilities and also parts of our existing product portfolio in this new space.”

Barker says that the first-generation product has already been on the market for a couple of years. “As we look ahead, my colleagues in food cultures and enzymes will be launching second-generation products as well in the coming years. Certainly, it is now a big area for us,” he adds.  

“Breaking new ground”
Chr. Hansen’s lighthouses are expected to form the majority of its absolute growth. In addition to its new fermented plant bases, they include Bioprotection, Plant Health and Bacthera.

“Each of the four lighthouses holds tremendous potential. We are breaking new ground when it comes to fighting food waste, shaping the future of food and contributing to sustainable farming and the development of pharmaceuticals based on bacteria,” says Mauricio Graber, CEO of Chr. Hansen. 

Bioprotection is a special culture range that prevents spoilage, reduces food waste and increases the safety of dairy and other foods. The long-term market opportunity is estimated to be around €1 billion (US$1.2 billion) with an addressable market of around €200 million (US$236 million) in 2025. 

Plant Health includes crop protection solutions with a focus on bionematicides, biostimulants and biofungicides. The long-term market opportunity is estimated to be more than €1 billion (US$1.2 billion) with an addressable market of around €400 million (US$472 million) in 2025.

Bacthera, meanwhile, is a joint venture (JV) with Lonza AG in contract manufacturing for live biotherapeutics. Within the next five years, the JV aims to put the first commercially approved drugs based on bacteria on the market. 

Chr. Hansen’s newest lighthouse is fermented plant bases, solutions for fermented dairy alternatives.In financial terms, the company also plans to increase its underlying EBIT margin before special items, before portfolio changes and currency impacts, with efficiency gains and scalability benefits from operations, as well as synergies from recent acquisitions, to be partly reinvested into the business during the strategy period. Average growth in free cash flow before acquisitions and special items is expected to exceed the average absolute EBIT growth.

Reconsidering natural colors 
Barker explains that a reevaluation of trends and a fresh look elevated the importance of Chr. Hansen’s strategy and organization. “Our purpose focuses on growing a better world naturally and doing so by using microbial solutions to improve food health and productivity,” he says. 

In realigning with its core values, the company has decided to review the options for its natural colors business, which may ultimately result in the selling off of the division. 

“We don’t know yet if that will be the case, but that certainly is one outcome. If that happens, then it also means that Chr. Hansen becomes a much more focused company from a technology standpoint, where we focus entirely on microbial solutions and fermentation-based technologies. That really is an area that we think we have the capabilities and core competence that’s second to none in the world,” Barker affirms. 

Chr. Hansen’s natural colors division last year unveiled its natural red alternative to carmine and also a red 40 replacer – the Hansen sweet potato, using traditional breeding methods. However, earlier this year, the company reported a decline in its natural colors momentum. This was amid a decrease in raw material prices for pigments carmine and annatto in Q1, the coloring ingredients that Chr. Hansen’s natural alternatives seek to replace. 

Honing in on core competencies takes Chr. Hansen down a different avenue compared to other players in the industry, observes Barker. 

“We see some players becoming more diversified across many different technology types. We’ve chosen a very different path, which is a path of focus on the things that we believe we are uniquely good at.”

Looking forward, Barker predicts that the sustainable food supply will continue to become more important in the minds of many consumers. “That also means reducing food waste as expanding shelf life will remain big focus areas for many of the big players across the food supply chain. Another major point is reducing the reliance on chemicals in agriculture naturally.”

Barker also shared with NutritionInsight that the new strategy will see more investments in the expansion of its microbial platform and technological capabilities, with the company allocating approximately three-quarters of its R&D spending during this strategy period toward new product development.

By Missy Green, with additional reporting by Katherine Durrell