Ingredion's $3.6 billion purchase of rival Tate & Lyle is set to create an innovation powerhouse as more food companies rush to reformulate products and meet consumer demand around health and taste, according to the ingredient giant's CEO.
The acquisition, set to close in the second half of next year, will expand Ingredion's texture and healthful solutions segment to encompass more than 50% of its total portfolio from about a third today. The deal could also propel Ingredion's overall revenue to $10 billion from $7.2 billion today.
Tate & Lyle will add to Ingredion's texture portfolio and enhance its ability to improve mouthfeel, fiber fortification and sugar reduction, Jim Zallie, Ingredion's CEO, said at a Barclays conference earlier this month.
The acquisition will also build in supply redundancies to ensure the ingredients giant can serve customers without disruption, even with tariffs and other geopolitical uncertainties.
"Ingredion, with this acquisition, intends to be the go-to provider for texture and healthful solutions that make healthy taste better," Zallie said.
As food manufacturers race to meet demand for healthier products with added protein or fiber, Ingredion has made a concerted push into texture, mouthfeel or other attributes that help ensure that reformulated products still taste the way consumers expect.
Food and beverages that provide multi-textural experiences have also been gaining traction, underscoring texture's importance even outside the health and wellness space. Consumers are looking for foods that provide unique experiences by combining different textures, such as pudding with boba or candy with both crunchy and chewy elements.
Ingredion has relied on M&A to expand its presence in trends such as functional ingredients and health and wellness. The company took a majority stake in stevia maker PureCircle in 2020 and a year later acquired KaTech, a texture and stabilization company. Earlier this year, Ingredion acquired Benicaros, a prebiotic fiber made from upcycled carrot pulp residue shown to support immune health.
Tate & Lyle will give Ingredion "more texture tools in the toolbox" to drive growth and enable it to take advantage of an ongoing "reformulation boom," Zallie said. The acquisition will also enhance the company's ability to provide more solutions around fiber fortification and sugar reduction, two important aspects in health and wellness reformulation.
With Tate & Lyle set to expand Ingredion's scale, it could also allow the ingredients provider to offer food manufacturers "more affordable solutions," paving the way for companies to pursue healthier reformulation without the high price tag.
Ingredion, which sells its products in over 120 countries to more than 17,000 customers worldwide, has been one of the biggest beneficiaries of the food industry's shift toward clean-label formulations and better-for-you innovation. The company's texture and healthful solutions segment marked 5% sales growth in the second quarter, the ninth consecutive period of growth.
"Ultimately, Tate & Lyle will accelerate our shift toward higher-value and higher-margin solutions and position Ingredion to be an even stronger innovation partner and reliable supplier," Zallie said on an earnings call in August.
