Interview: Jungbunzlauer Marks 150 Year Anniversary, Buoyed by Both Commodity and Specialty Growth
11 Jan 2017 --- Industrial-scale biotech, jobs and investments in Europe and North America, coupled with growing global sales of biodegradable ingredients using renewable raw materials – this is the story of Jungbunzlauer. Vibrant and sustainable – those two words characterize the company that celebrates its 150th anniversary in 2017 and can look back on its successful development under the ownership of the Kahane Family during the last 50 years. The company had completely evolved from being an alcohol fermentation distillery into a fermented ingredient supplier in 1962.
Today, Jungbunzlauer has revenues of €700 million, with 1,050 employees. Company revenue exists of two-third commodities and one-third specialties [which includes xanthan gum]. CAGR growth since 2008 has been 6%, which more or less correlates to annual volume growth. Around 50% of the company’s business relates to food & beverage applications and beverages (e.g. organic acids as flavor enhancers). The rest is broken down as follows: 15% detergents, 15% personal care/supplements/pharma and the remaining 20% industrial applications [e.g. gluconic acid in cement or safe plasticizers].
“We were founded in 1867 in a city in Bohemia called Jungbunzlau. In those days it was an alcohol fermentation distillery. Its location and the wars and revolutions from 1900 to 1945 led the company to be dismantled several times for political reasons,” Tom Knutzen, Chief Executive Officer of Jungbunzlauer Suisse AG explains to FoodIngredientsFirst in a detailed interview. “By having one major plant of an alcohol distillery in Austria, they started to work on the fermentation of organic acids and producing citric acids. From 1962, they started to do this, it was bought by the family that is still the owner today [the Austrian originated Kahane family] in 1967 and that then became the backbone of what Jungbunzlauer is today.”
Knutzen joined Jungbunzlauer in 2012 after five years of leading Danish food ingredients supplier Danisco, before it was taken over by DuPont. He wanted to continue in the food ingredients sector and joined Jungbunzlauer, a very different kind of company, with a rich history, based in Basel, Switzerland.
Knutzen notes that the 150 year storyline of Jungbunzlauer is that there are basically no acquisitions, it is all about pure organic growth. “It is about taking one plant in Austria and turning it into the biggest western citric acid and xanthan gum plant today. It is about building and reconfiguring in Germany, it is building a new plant in France and in Canada. The company is very focused on the fermentation of non-GMO strains, which ties in well with the non-GMO corn carbohydrates used. There is a preference to the role that we play when you speak about green, sustainable and biodegradable; and that’s the core of what we do,” he notes.
Today Jungbunzlauer is one of the world’s leading producers of biodegradable ingredients of natural origin. All products are manufactured in high-tech plants by fermentation, where non-genetically modified organisms transform carbohydrates from corn into ingredients. This is reflected in the company’s guiding vision “From nature to ingredients.”
Jungbunzlauer is committed to being the supplier of choice when quality, reliability and sustainability are key parameters for the customer. Contributing to making products healthier and safer for consumers globally sets the agenda for the company’s owners as well as its employees.
“We are fermenting the three basic organic acids: citric acid, gluconic acid and lactic acid. We are fermenting the stabilizer xanthan gum, which is unique compared to all the other stabilizers because it is done by fermentation, making it scalable. We have one zero calorie sweetener in the form of erythritol. Those are the five fermented products,” Knutzen explains.
“Out of the three organic acids, we make the derivatives which either function as special salts, when you take a citric acid and then attach for instance zinc, magnesium, calcium, for mineral fortified products or infant formula products, with a high bioavailability of minerals. Then there is another arm where you make the acid esters, which is a toolbar for industrial use for products requiring contact with food or the mouth. The biggest product here is the safe plasticizer CITROFOL used in cling film, toys, flooring etc.,” he explains.
The market dynamics of this very basic industry have changed dramatically in the last couple of decadesm as Chinese companies take a major share of the pie. Knutzen notes that if we go back 25 years, this industry was almost completely dominated by Western European and North American manufacturers. Then the Chinese came in because this industry is scalable and went from single-digit market share to holding around two-thirds share today. “During these 25 years, many Western Europe and North American companies went out of business or kept the assets that they had resulting in a dilution of market share, as market is growing at 3-4% compound, as these relatively basic components, it tend to grow with GDP growth,” he says.
But the supply side has changed radically and Jungbunzlauer is claimed to have been the only company to build and invest over all these years, so that the company’s global market share today is more or less what it was 25 years ago, in a market that has more doubled over this period. Others have invested in other things, but we invested in our core.
For Knutzen, there are two axes for future company growth. “One is about reliability, quality and availability. This is because there has been a shift in what is happening in China. They went through many years of investing in new capacity and now you see that capacity is being taken out of business or not being used. Since there was not a lot of capacity built in the remaining part of the world and the market is growing, this oversupply situation seems to be narrowing. We sense among customers that there is quite some focus on ensuring longer term supply. It’s a question of the ease of availability, with a just in time supply chain, which seems to be questioned by customers, which is favorable to us,” he notes. 
“The other issue, when eyeing growth opportunities for our portfolio, is that it seems to be that the basic organic acids are very known ingredients, but their derivatives, which you use for mineral fortification, are creating growth because the minerals have a higher bioavailability, when used in mineral enriched products. We produce these organic acids in our intestines every day, so even though they are E numbers, there is a high acceptance level, as you try to create a shorter label list,” he adds.
Finally, he noted that the acids or special salts have a functionality, but also a taste profile. “By combining the acids, when creating low calorie products, they have a masking ability. So the way you combine them in a beverage or food, helps our customers make products with a shorter label list and secondly a taste profile that allows them to go lower calorie or lower sodium [e.g. sub4salt (a patented mineral salt blend)],” he concludes.
Future growth will come from both commodities and specialties. “We are as proud of producing volume products (e.g. the world market is over 2 million tons of citric acid globally per year) as we are of our specialties. The commodities are the building blocks and if we do that with the right quality and at the right cost points, then we have the basis for doing the specialties. We are deliberately expanding our commodity and specialty businesses, with more application work, but at both ends. We see growth in both areas, and the one supports the other,” he notes.
One of the company’s strengths as a family owned company is that it has been possible to take a bit of a longer view to things, which would have been harder if we were a listed company. “In the last 9 years, we have invested €850 million in fixed assets, which is a lot of money if you take the size of our business into consideration [€700 million]. That’s an investment level that is substantially higher than our depreciation level, meaning that we have built more capacity, have vertically integrated and we have invested in process optimization, better yield and lower energy use,” he explains.
“We are active in where customers are heading and what the trends are, but we are also focused on the ingredients sphere, where we have some very basic big volume components. So it is a little less about what is the next molecule of tomorrow, but rather how do we combine these basic commodity ingredients that we process, convert them into specialties and produce truly novel components that the big food and beverage companies need? Also those companies are very focused on how to produce the more sustainable, healthier, safer products of tomorrow,” Knutzen concludes.
A detailed interview with Tom Knutzen will appear in the February issue of The World of Food Ingredients.
by Robin Wyers
