Dive Brief:
- Cargill is selling its dressings, sauces, and mayonnaise (DSM) business to Ventura Foods, to be completed in the second quarter of 2016, according to a news release Monday. Neither company disclosed financial terms of the deal, but it includes Cargill's Port St. Lucie, FL, facility and its DSM assets at two other plants, which will be relocated to Ventura plants.
- The other two facilities, in Gainesville, GA, and Sidney, OH, will continue operating as part of Cargill's Fats & Oils Group. There, the company will maintain production of oil and shortening products for North American manufacturers, retailers, foodservice companies, and food distributors.
- With a renewed focus on oils and shortening, Cargill scientists have also developed fat systems that lower saturated fat levels in shortenings for baking applications up to 40%. Commercial applications for the research are still years away, but this represents a step forward for companies looking to make better-for-you bakery products.
Dive Insight:
The DSM divestiture is more evidence of Cargill becoming a leaner company, such as divesting its pork business to JBS last year. Fiscal 2016 is poised to be Cargill's big year for divestments, The Wall Street Journal reported.
But at the same time, Cargill has expanded in other areas of the company, such as acquiring a ground beef processing facility and a Norwegian aquaculture company. In addition to divestments, fiscal 2016 should also be a major acquisition year for Cargill, according to The Wall Street Journal.
The general trend for Cargill has been to move away from or offset commodities, which made up much of the company's portfolio, in lieu of ingredients-based businesses that are less volatile. That includes acquiring ADM's chocolate business to balance Cargill's existing cocoa business.
Another trend has been to produce ingredient solutions to replace ingredients that consumers are trying to avoid. For example, Cargill has begun growing non-GMO corn and soy in the U.S. Earlier this year, Cargill developed ways to reduce antibiotics use in poultry and created non-PHO-based emulsifiers.
Such changes were needed, as Cargill had reported two consecutive years of declining profits. In its latest quarter, the company reported a turnaround with a 13% increase in net income, but revenue dipped 11% on lower commodity prices. On that earnings call, Cargill chairman and CEO David MacLennan said he didn't anticipate a significant turnaround in the near future for the currently tough agricultural market.