Jim Zallie, EVP Global Specialties and President North America and EMEA, told FoodNavigator-USA: “The National Starch deal was a transformational acquisition and buying Penford continues our transformation further into the specialty ingredients business.”
And further bolt-on acquisitions will continue this diversification process at Ingredion, which changed its name from Corn Products International in 2012, and has been steadily broadening its portfolio ever since, adding stevia ingredients, and recently moving into pulse flours, protein and bran ingredients via a deal with Alliance Grain Traders.
Said Zallie: “We have a tremendous global footprint and go-to-market model and that capability will continue to serve us well as we look at other bolt-on acquisitions around texture, clean label, wholesome and health and wellness.”
We’re very excited by the focus Penford has had on non-GMO
But what does Penford bring to the table?
“We have expertise in a variety of starches but primarily in corn and specialty corn," said Zallie. "Whereas Penford has a lot of capability in specialty potato starches, which is very complementary to our portfolio. It also has a large capability on corn but more for industrial-grade applications.”
(Ingredion has no manufacturing facilities for potato starch, but currently sells potato products from Dutch potato starch giant Avebe everywhere outside of Europe.)
Buying a company with expertise in potatoes also opens up new opportunities to tap into non-GMO trends, he said.
“We’re very excited by the focus Penford has had on non-GMO because potato is non-GM, while we ourselves have a completely non-GMO identity-preserved process down in Indianapolis, which I believe is the only corn wet milling facility in the US that is 100% IP non-GMO.
“We’ve got approval from the Non-GMO project for the majority of our products out of that facility, so that combined with Penford’s products gives us a tremendous capability in Non-GMO.”
But the non-GMO trends a niche or something that could become mainstream?
Said Zallie: “There is a certain segment and a growing niche - my personal view is that non-GMO will grow as a significant niche although it’s hard to grow mainstream - and we are prepared to provide offerings to those that want non-GMO ingredients for consumers that are willing to pay for them.”
Meanwhile, Penford’s capabilities in gums and hydrocolloids following its recent acquisition of Gum Technology Corp also unlocked new opportunities, he said.
“Starch is the backbone, but we are keenly interested in formulating more and more with complementary hydrocolloids as one of our innovation springboards is textural innovation."
The synergies are real
As for synergies from joining forces with Penford, he said: “The synergies are real. Penford is a nice-sized company [it generated 2013 revenues of $467m vs Ingredion's $6.3bn], but obviously on the smaller side in relation to the corn wet milling industry, and one of the things we pride ourselves on is our corporate procurement capability, so we think we can bring a lot to the table there.
"And certainly on the logistics side we have more capability to bring additional synergies across the network.”
So what will happen to Penford’s headquarters, president & CEO Thomas Malkoski and the rest of the senior management team when the deal is finalized?
It’s too early to talk about this, said Zallie, but added: “Ingredion and Penford are both demonstrated experts in formulation science and both are extremely resourceful in terms of using various food starch bases and modify and formulate them into systems for a variety of food applications. We’re buying Penford because we value their business and their capabilities.”
Ingredion said the acquisition of Penford could close as early as the end of this year.
Click HERE to read more about the deal.