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‘We need to address the issue of colours’, says Chr. Hansen CEO

By Caroline Scott-Thomas , 16-Jan-2013

Chr. Hansen Q1 results

Danish ingredients company Chr. Hansen has reported increased profit and revenue in the first quarter, although lower carmine prices and volumes continued to hit its natural colours division.

The company reported earnings of €48m during the quarter, up 16% compared to the prior year period, and revenue of €179m, a 7% rise on Q1 last year.

The firm’s cultures and enzymes division, which generates the majority of its revenue, saw organic growth of 10%, driven by ingredients for cheese, meat and fermented milk. Health and nutrition delivered organic growth of 9%, but its natural colours division contracted 10%, primarily on lower prices for carmine.

CEO Lars Frederiksen told FoodNavigator: “In 2013, first of all the whole issue of colours is something we need to address and keep our eyes on.”

He said that carmine raw material prices went from $15-20 a kilo about two years ago up to $120 a kilo, and they have since retreated to previous levels.

“We have to sit out this price effect. In 2012, we saw declining prices of natural colours. In certain cases we have not been aggressive enough with our pricing. That is something we will have to modify to make up some of the value we have lost.”

This means that for some ingredients the company may lower its natural colour prices in the coming year, he said.

“We are still seeing the same underlying trend that we have seen for a couple of years now, which is a conversion from synthetic to natural colours,” he said. “…It is very rare these days that you see a new product being introduced with synthetic colours. Natural is the new standard in colours.”

Despite carmine volatility Frederiksen added that the company has seen good uptake of other natural colours, including anthocyanins, beta carotene and turmeric.

Probiotics

He said probiotic sales were under pressure following rejected health claims in Europe, but this was more than compensated by sales in Asia and South America.

Last year, the company wrote off €4m after an immunity trial for its probiotic strains delivered results that were insufficient to attain an EU health claim. It still has two probiotic trials in the pipeline, this time focusing on gastrointestinal health.

“We have no indication [of the results] at the moment,” said Frederiksen. “Much of the harm has already been done to the probiotic market. If the trials come out negative I am not so overly concerned about the negative impact on our numbers.”

He said that many companies were finding other ways to deal with the health claims issue, such as combining probiotics with vitamins for which health claims are allowed.

Looking at specific regions, the company saw revenue and organic growth increase in Asia and the Americas, while European sales contracted 1%.

“We will also continue to focus on building our business in Asia,” Frederiksen said.

Frederiksen also reaffirmed the company’s outlook for the year ahead, predicting organic revenue growth of 8-10%, excluding the carmine price effect, or 7-9% including the carmine effect.

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