Solbar bounces back with US plan

Following average growth of around 30 per cent per annum Solbar, which started out as a kibbutz-run business, made its initial public offering (IPO) in 2004. This process, described by VP sales and marketing Gary Brenner as "difficult", was extensively covered by the Hebrew press.

Issues over soybean sourcing had an impact on the financial performance of the newly public company: over 90 per cent of its soybeans were sourced from Brazil, and the darker colour of the beans affected product quality and functionality. A low point followed some poor quality batches, and at the end of 2005 a restructuring programme was initiated.

As part of this, Solbar made the strategic decision to source all its non-GMO, identity preserved soybeans for specialty isoflavone products from the US, on the grounds of better quality and yield.

"Overnight this put us in a better position in the market," said Brenner, who added that growth has rebounded to the pre-IPO rate of around 30 per cent.

"In 2006 the market and our customers have been good to us. We have regained market share in almost every market."

The company is investing significantly in the US, and expects that market to yield strong sales in the future. It has established a logistics office in Chicago, in recognition of the importance of the supply chain to success in the US, and has recruited several well know people from the soy industry to help advance sales: Jose Cadillac, Greg Kesel and Omri Kaufmann.

"We are now in a position to be a supplier to major food companies," said Brenner. "We think we will be a significant number three player in specialty proteins."

The top two spots in the market are occupied by US companies ADM and Solae.

"Our assumptions are that the US market is undergoing changes in the entire supply base in soy products," said Brenner - an observation that extends to the whole food ingredients industry since manufacturers are looking to suppliers for solutions, rather than just ingredients.

In order to do this, a company needs to upgrade its technical support, look at its formulations with a view to reducing costs, and increase functionality, he said.

"We are evolving into a company that can do that. Solbar was a soy supplier. Now it is a supplier of solutions."

In 2006-7 has the ability to offer the full range of soy proteins for non-meat uses such as bars, vegetable analogues, supplements and beverages. Previously its focus had been on meats.

"Our conviction is that Solbar has to reach up to new areas for soy proteins. We already do that for isoflavones in Europe."

For instance, Solbar is the sole supplier of textured soy for Pot Noodles in Europe. It expects that its Bontex product, which is quick hydrating with a bland, non-soy flavour, will now be used in the US for similar products.

Earlier this year Solbar signed new distribution agreements in Finland, Eastern Europe, France, Benelux and Scandinavia.

In July it was announced that the FITE Fund, controlled by Ishav Davidi, had reached an agreement with Kibbutz Hazor to invest NIS 80m (c €14.5m) for a 47.5 per cent stake close to the market opening price.

Solbar said it aims to raise a further NIS 20m (€3.6m) from banks, after which it will offer share allocations to bondholders in exchange for bonds that have fallen by 50 per cent since their issue.