Dive Brief:
- Archer Daniels Midland Co is giving less attention to its ethanol business, the company's long-standing legacy item, as demand slows for the biofuel industry, potentially one of the most transformative moves in ADM's long history. Also, ADM is seeing sales of its other primary product, high-fructose corn syrup, deteriorating due to consumers' health concerns.
- As the world's largest corn processor, ADM has instead turned to other new, innovative corn products to remain relevant in the industry. In particular, the company is leaning toward what it hopes will be what it calls "Rare Sugar," a product that would have the taste and baking capabilities of sugar without the calories.
- ADM hopes that any of these products will be the next game changer like ethanol or HFCS. According to Reuters, "Half of ADM's research dollars go into finding ways to make food and drinks taste better."
Dive Insight:
ADM CEO Juan Luciano said at a conference that the company is entering its second of three phases meant to overhaul the company, which began in 2011.
The first phase dealt with capital discipline, cost reductions, and cash generation, all of which significantly contributed to higher returns. ADM is now refocusing on how to boost earnings and returns in a three-part formula: optimization of the company’s agricultural services, corn, and oilseeds segments, increased operational efficiencies, and strategic expansion, particularly at certain port facilities, World-Grain.com reported.
According to Reuters, trade sources say that ADM will also cut back on its sugar trading operations, which, similar to its shift from ethanol and HFCS, could signal ADM's response to the ailing sugar industry.
Also, Alberto Peixoto, global head of the company's sugar business, has reportedly left the company after less than four years, though he declined comment to Reuters. Additionally, "the company said it did not comment on rumours, speculation or personal matters," reports Reuters.
ADM doesn't have nearly the presence in the sugar industry as it does for ethanol and corn, so this wouldn't have nearly the same dramatic impact.