Dive Brief:
- In the last year, while Cargill has been buying new businesses and divesting old ones that no longer serve the company’s strategies, it has also struggled with falling earnings, a weakening global economy, and low prices for commodities, impacting its grain business.
- In an effort to invest in businesses that are less likely to be affected by commodity swings, Cargill has boosted its food and ingredients portfolio. Last year, the Minnetonka, MN-based company purchased ADM’s chocolate business. This complements Cargill’s cocoa business which is subject to commodity price fluctuations.
- Cargill is well underway with efforts to tighten its bottom line by increasing operational efficiencies, for example, consolidating its U.S. grain business from six divisions to four divisions. In other activity, this week the company announced it will eliminate 20% of its shared-class antibiotics used at a total of eight beef cattle feed yards. The decision will impact nearly 1.2 million head of cattle. This news builds on the company’s decision in 2014 to eliminate growth promoting antibiotics from its U.S. turkey business.
Dive Insight:
Cargill isn’t expected to be a major player or acquire large companies in the ingredient space, but it will continue to build on its existing technologies, John Rogers, senior vice president, corporate finance, Moody's, told Food Dive.
The company assists manufacturers in meeting new FDA regulations, like non-PHO emulsifier replacements for bakery products, among others. Many of the ingredients are developed at the company’s innovation center in Minnesota, part of a $5.5 billion expansion in 2014.
Cargill’s history is on the commodities side of ingredients. By moving downstream into the ingredient space, the company intends to reduce the volatility of its earnings over time, Rogers noted.
In regard to what these initiatives mean to the industry overall, Rogers says in general, large players such as Cargill, ADM and Bunge are all moving this way into more value-added food products.
ADM and Cargill are pursuing different avenues. Where Cargill’s products tend to be an outgrowth of its commodity businesses, ADM is stepping further downstream into the flavors market with the purchase of Wild Flavors, which has limited connections to its existing businesses. "To some extent, ADM is looking for other opportunities in this market, which may be closer to their overall established businesses."