Explaining the rationale for the €2.3bn ($3.12bn) acquisition to US analysts in a call this morning following its announcement, Woertz said ADM planned to create a fourth business unit with $25bn in sales called WILD Flavors and Specialty Ingredients that also pools ADM’s existing expertise in this area.
ADM’s CEO predicts that WILD will be a growth engine for her company that will enhance its R&D, innovation and marketing capabilities, and – as the No.1 supplier of natural ingredients and natural flavour systems for beverages – accelerate its earnings growth.
Woertz said consumers in both developed and emerging markets are demanding better and more varied diets, which is in turn is driving demand for specialty ingredients.
“Consumers want more protein from plant and animal sources. They want products that promote health and wellness, they want greater use of natural ingredients, more convenience foods, more localization of flavors and more choice,” she said.
“There is a significant market today for specialist ingredients that deliver these attributes, which is expected to grow,” she added, noting that ADM already served this market, using ‘stealth nutrition’ to help create healthier foods and beverages.
WILD can be our ‘growth engine’ – ADM CEO
Historically, ADM has been strong in texture, function (emulsifiers to keep beverages smooth and creamy, for example) and nutrition (vitamins, minerals, proteins, fibers), but Woertz said WILD brought it taste expertise.
“What we have not offered until today is taste, and taste is king. It remains the biggest driver of beverage buying decisions, even more so than price,” she said.
“With this acquisition of WILD Flavors we are adding taste to that platform. We will be able to offer a complete system to our food customers, to help them formulate or enhance their products,” she added.
Emphasizing her belief that WILD could be a “growth engine” for ADM, Woertz said both companies focused on adding value to basic agricultural raw materials and wanted to grow in developing markets.
“We’re strong in food, they’re stronger in beverages,” she said. “We’re strong in North America, they’re strong in Europe. We work particularly well with the large CPG firms – they have very strong relations with SMEs and a lot of opportunity for growth,” she said.
Together the two companies were uniquely positioned to undertake NPD and effect reformulations to cut sugar, fat and salt, she said, given ADM’s expertise in fiber and protein and WILD’s in taste.
WILD can help ADM crack countries like Brazil
Addressing ADM’s broader rationale for the deal, Woertz said the company had thought about expanding downstream to “higher margin, higher growth, more stable types of earnings – because as you know the commodities business can have its ups and downs”.
With little overlap between the two businesses, ADM sees an opportunity to accelerate WILD’s North American food sales and scale-up both firms’ operations in places like South America, India and Asia.
“We are both working on scaling up our businesses and there is an opportunity to scale them up together in a more efficient manner,” said ADM president Juan Luciano.
He gave one example. WILD’s beverage customers in Brazil will give ADM access to that market with its protein specialties, he added, which will help the combined firm penetrate the nutrition beverage space there.