Samyang banks on biotech and specialty ingredients as world faces supply chain challenges
01 Dec 2023 --- With climate change causing increased uncertainty in food production, more businesses are looking for ways to keep production moving in times of scarcity. Last year, in particular, was difficult for the starch market when nearly all hydrocolloids were in short supply.
And while this crisis is easing, sugar prices are now at a ten-year high, producing industry-wide effects. Sugar is a crucial energy component needed to create a variety of ingredients, from sugar replacements to yeast extracts.
The World of Food Ingredients speaks with Sanghoon Lee, head of food ingredients and executive vice president at Samyang Corporation, about how the company has navigated supply challenges to starch and sugar. He also discusses how the company plans to expand beyond its South Korean home base by focusing on biotechnology, nutrition and application solutions.
How was Samyang affected by the starch shortages last year?
Lee: Last year was a painful year for us. We were only partially affected by the starch shortage, but as I’m also in charge of procurement, I understand the situation very well.
The procurement and raw material costs increased so rapidly that it had a significant impact on our cash flow. In the end, we could continue supplying our customers and maintain trust with them, but it came at a financial cost.
Sugar reduction will remain a top priority for Samyang as it works to expand the global market for allulose. The lesson learned from this experience was two-fold. The first one is that there is a need to diversify the supply chain and enhance product flexibility to optimize the supply chain issue. The second thing is that there should be a continuous effort to expand the product portfolio to lower-risk raw materials. Commodity starch and commodities, in general, are very sensitive to supply chain dynamics. We should rely more on specialty ingredients to limit these supply chain issues.
Have you also been affected by the recent high sugar prices?
Lee: We are a food ingredient company that procures more than 500,000 metric tons of raw sugar per year for the sugar business. So nowadays, sugar is a more significant problem in terms of price. Raw sugar is at the highest price that it has been in ten years. It rapidly increased due to the supply issues from India and Thailand.
How will Samyang navigate these challenges?
Lee: We will supply sugar to the Korean market and partially export it. We should charge higher prices, but that is relatively difficult to do. Like other governments worldwide, the Korean government is sensitive to price inflation for the most essential food staples. They monitor it for the consumer but also in the B2B sector. South Korea has a free economy, so they do not set the price but encourage companies to keep prices down when possible.
What are your plans for growth ahead?
Lee: In terms of organic growth, we have commercialized different materials, such as allulose and kestose, using our own technology. We intend to continue developing and commercializing innovative materials in the area of sugar reduction and nutrition. Based on a strong pipeline, we are actively exploring opportunities for regional expansion beyond Korea, both in terms of sales and manufacturing. Regarding organic growth, we are actively seeking partnerships with other companies for sugar reduction, flavoring and nutrition materials.
Lee recommends reducing dependency on price-sensitive commodities in favor of specialty ingredients.Sugar reduction is priority number one, as well as flavor. We are considering options like investments or joint ventures based on the item and partnership. We are also open to merger and acquisition opportunities if they fit well.
Is this partnership with other companies who produce flavors part of your ambition to be a global solutions provider?
Lee: Yes, indeed. In Korea, we have a full portfolio both for ingredients and solutions. But beyond Korea, we are looking to strengthen our customer base and capabilities for local solutions. We would like to incorporate more problem-solving capabilities in terms of flavoring and material base as well.
Will the company explore precision fermentation in the future?
Lee: We already have precision fermentation capabilities and a dedicated R&D center for biotechnology. To produce allulose, we partially rely on precision fermentation and would like to advance this technology in the future. We have the whole value chain technology for the enzymatic process that produces the “no added sugar” ingredient.
How has your business strategy evolved?
Lee: It is aligned with the solution development. We would like to enhance our capability in terms of the solution base. We are focused on sugar reduction and nutrition while significantly improving the level of research and development to provide more solution capabilities.
We are preparing to become an important player in providing solutions for key categories, including functional beverages, confectionery, dairy and some cereal and nutrition bars, so we have the four or five categories we are targeting. We would like to add our ingredients and application capability for that.
Click here to read more from this interview in the latest edition of The World of Food Ingredients.
The trends-focused issue will zoom in on consumer data from Innova Market Insights to forecast industry movement in the year ahead. The main takeaways will be presented in a LinkedIn live event this Wednesday, December 6, at 4 pm CET.
By Missy Green
