With more companies pumping supplies onto the world market, xanthan gum production has significantly impacted the market price with a 40 per cent drop over the last three to five years.
"The necessary restructuring plan will give rise to the shedding of 40.5 full-time positions in Melle, three full-time positions in Vinay and two full-time positions in Aubervilliers," said Ole Rasmussen, president, Danisco France in a statement this week.
In a deal worth €320 million, Danisco, a relative newcomer to the competitive xanthan gum market, bought the food ingredients arm of struggling chemical company Rhodia in March this year, and with it a substantial slice of the hydrocolloid market, including facilities to produce xanthan production. Former Rhodia xanthan gum production sites are mostly based in France, with other facilities in the US.
The acquisition built on the company's announcement in October 2003 that it had linked up with one of the largest xanthan gum suppliers in China, the Henan Tianguan group, in a new joint venture to tackle the emerging - and burgeoning - Chinese market.
. Acquiring the capacity to manufacture xanthan gum - obtained by microbial fermentation from Xanthomonas campestris - has given Danisco the opportunity to build on its one-stop supplier philosophy with the firm no longer required to buy in the commodity.
With a total market value in the range of €230 million, xanthan volumes are approximately 40-50 m tons per year, of which about 60 per cent is used in the food and pharmaceutical market.
Growth rates for the popular hydrocolloid used in a wide variety of applications from salad dressings to beverages are currently coming in at the higher end - 5 per cent - of the generally lacklustre growth figures in the food ingredients industry.
This week the number one xanthan player CP Kelco announced a price hike for xanthan gum, but as a result of the recent Cargill, Staley and now Danisco entries into the xanthan market, it may be difficult for any price increases to stick.
Danisco added this week that the French restructuring also includes the discontinuation of dairy media production in Vinay to concentrate all Danisco's European media production in Tønder, Denmark.
Mainly targeted at the dairy industry, media consist of powder blends - milk protein, soy, glucose et al - formulated to provide the nutritional medium for lactic bacteria growth in milk and are produced through the mechanical mixing of nutrient ingredients.
Outside France, the restructuring plan will hit the Dutch functional systems sites resulting in five job losses in Niebüll, Germany, four at the innovation centre in Brabrand, Denmark and close to 20 jobs to go in Zaandam, Holland.