- Danish ingredients supplier Chr. Hansen is considering the sale of its Natural Colors business, according to Food Ingredients First. Following an initial evaluation of the company’s portfolio, the Natural Colors unit was not found to fit into the microbial and fermentation technology platforms that underpin the company.
- In the company’s Q3 financial results, the Natural Colors division posted 1% organic revenue growth driven by its Fruitmax brand.
- The results of the full strategic review of the company, which includes research on the Natural Colors unit, will be presented Aug. 25.
As consumers tend to eat first with their eyes, color is an integral part of any product. While finding the perfect shade is already hard enough, the question of which colorings should be used in a new offering becomes even more tangled as manufacturers weigh whether they are aiming for a more natural option or synthetic colors.
With the general progression away from artificial ingredients, coloring has become a consideration for consumers when evaluating items on grocery store shelves. A GNT global consumer survey done in 2017 found 79% of consumers define "natural" as being made without artificial colors. As a result of increasing interest in choices that feature naturally sourced colorants, Zion Market Research projects the global natural food color market will top $1.77 billion by 2021 — an annual growth rate of nearly 5.2% from 2016 to 2021.
While natural colors may be a growing segment overall, it is not leading the pack in Chr. Hansen's portfolio. Not only did the segment achieve minimal growth this quarter, but it posted negative growth in the first part of the year. While its natural colors continue to struggle, the company's Food Cultures & Enzymes business grew 8% over the quarter and its Health & Nutrition segment jumped 12%, meeting the goals company leadership set for itself in the first quarter of 2020. The company announced at the beginning of the year that it will target mid- to high-single digit organic sales growth annually until 2024.
This slow growth in natural colors is not for lack of trying. Last February, Chr. Hansen commercialized a sweet potato-based pigment under its Fruitmax brand. Following 10 years of research and selective breeding, the ingredients company released its blend of vegetable-based colors, which includes both red and orange, in a format that does not have an off taste and does not use carmine derived from animals. The result of these years of research is a vibrant color whose sales the company said "remained strong."
Still, the success of one line of natural color did not prove to be enough to bolster the overall growth of the business unit. By divesting this lagging arm, Chr. Hansen may be able to increase its investment in its higher growth segments.
The company that snaps up Chr. Hansen's natural colors business could benefit as consumers are more interested in them. But natural colors in general face hurdles. It's more difficult to use natural colors to make a crayon-box variety of vibrant shades, especially of blue hues. General Mills reverted back to its artificially-colored Trix cereal after trying a more natural alternative because of complaints about the colors. But Big Food has continued to invest heavily in launching products with natural colorants. Some companies have even reformulated stalwart brands to include natural pigments. Campbell's Pepperidge Farm debuted Goldfish Colors snack crackers with hues sourced from plants and Nestlé switched the color source of Butterfinger's yellow center from Yellow 5 and Red 40 to annatto, which is derived from the seeds of the achiote tree.
Ingredient groups continue to experiment in the space and search for solutions. Last year, Diana Food North America, part of Germany's Symrise Group, debuted organic, sustainably sourced colors. Netherlands-based GNT Group introduced a high-intensity blue food coloring under its Exberry brand made from spirulina, a blue-green algae. The group also has a range of liquid and powder reds, purples and pinks sourced from carrots, blackcurrants, radishes, blueberries and sweet potatoes. Any of these companies, which have more of a focus on colors, may be open to welcoming a new, proprietary set of natural shades into their portfolios.
Correction: A previous version of this story incorrectly stated a date by which the decision to sell the unit would be made.