Chr Hansen opens world's biggest dairy cultures plant

By Dominique Patton

- Last updated on GMT

Related tags Chr hansen Milk

Danish company Chr Hansen has shored up its lead in the dairy
cultures business after doubling capacity at its plant in France,
now said to be the world's largest.

Nor will growth stop there, as freely available cash from the firm's new equity owners will allow for further capacity expansion and acquisitions.

Officially opening the renovated Arpajon site yesterday, Chr Hansen said the DKK120 million (€16.1m) investment would guarantee its 40 per cent share of the market for cultures sold to yoghurt, cheese and other dairy product makers.

"From a marketing point of view, we have moved ahead of the competition over the past couple of years and we intend to do everything to keep that position,"​ said Lars Frederiksen, the firm's new chief executive.

He told that cultures is a 'very important' part of its ingredients activities, which also include enzymes, colours and flavours. The bacteria account for more than 40 per cent of the group's turnover ((€460m in 2004) and this is expected to grow further as the group builds a presence in new markets like the Far East, India, China and the South American region.

"We're growing approximately 10 per cent a year,"​ said Frederiksen, although in some markets, such as the US cheese sector, growth is up to 50 per cent annually, thanks to the success of the firm's Easy-Set product, targeted at high volume cheese makers.

"All our factories are running at full capacity,"​ claims the CEO. "We are actually in the process of evaluating whether to build a new cultures plant so that we have the space to cope if ever anything went wrong in one of the existing three."

The plant would likely be in Denmark, he said, to take advantage of the bigger logistics platform there.

"We're also making an extension to our Milwaukee plant that will start by the end of the year,"​ Frederiksen added.

Demand for dairy cultures has been significantly boosted in recent years by the invention of what Chr Hansen calls Direct Vat Set (DVS). The term refers to highly concentrated and standardized cultures that are ready for use by dairy customers, replacing the complex process of re-inoculation that dairies were required to do up until the 1990's.

This outsourcing of culture making improves flexibility and offers consistent performance and production efficiency for customers, according to Chr Hansen, but also requires extra capacity at the supplier.

The firm's new plant now ships around 40 tons of cultures per week, as well as storing some of the natural colours and enzymes made by the Danish firm for distribution to French customers.

Although the group also makes cultures in Denmark and the US, France has proved a strategic location as the home to many of its key accounts, such as Danone, Yoplait and Nestle.

After adding new 29 metre cubed fermenters, extra software and machinery in quality control labs and space for sensory panel testing, Chr Hansen says it can serve these clients better than before.

"The speed with which we are able to develop new strains is key to our advantage as well as the high degree of flexibility we have here,"​ said Claus Ahleskov, director of production and logistics, during the inauguration yesterday.

The fundamental technical knowledge and know-how in cultures is also important, believes Frederiksen, as is innovation in new areas like functional foods.

The group is a leading supplier of probiotics to the dairy industry and has seen strong interest from multinational partners for a lactic acid bacteria developed to lower blood pressure.

Acquisitions may drive further growth although in cultures the firm could run into anti-trust issues.

"The new ownership want to be right at the centre of the whole consolidation phase in food ingredients. And it's very important that we have the possibility of participating in this game,"​ said Frederiksen.

"Money is not an issue for private equity groups and they're keen for us to look at acquisitions,"​ he said, adding that the firm will likely stay in the same product areas.

He declined to reveal when the group's first acquisition might take place but it is certain that before being sold on, expected within three to five years, the business will have seen some changes.

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