DSM Integrated Annual Report 2021

DSM Food Specialties

Highlights 2021

About DSM Food Specialties

DSM Food Specialties is a leading global supplier of specialty food enzymes, cultures, probiotics, bio-preservation, texturizing hydrocolloids, sugar reduction, and savory taste solutions to customers in the food & beverage industry in dairy, baking, beverages, and savory. Our ingredients and solutions are widely used to create a broad range of food products, from grocery favorites such as yogurt, cheese and soups to specialized products including gluten-free bread and beer, plant-based meat alternatives and dairy alternatives, lactose-free milk and dairy, and sugar-reduced foods and beverages.

Demand for our products is driven by five main market trends:

  • enhanced taste and texture experience
  • improved health and wellness
  • sugar reduction
  • more efficient and sustainable production
  • reduction of food loss and waste

At the center of it all is the consumer, who increasingly seeks food that is healthy, eco-friendly, and made using recognizable and trusted ingredients.

With over 150 years’ experience in biosciences and fermentation, we aim to help our customers provide consumers with delicious, nutritious, and high-quality food and beverage options, helping to make existing diets healthier and more sustainable, and giving growing numbers of people around the world access to affordable, quality food.

DSM Food Specialties performance

Food Specialties delivered strong organic sales growth of 9%, driven by volumes in the year with good business conditions in its key segments of dairy, baking, brewing and savory, supported by improving conditions in food services. The fourth quarter saw a strong acceleration of volume growth, with 15% organic sales growth, partly driven by customers’ preference for higher inventory levels owing to increased uncertainty around global supply chain and inflationary challenges.

Acquisition of First Choice Ingredients

In 2021, we acquired First Choice Ingredients, a leading supplier of dairy flavors. With headquarters in Germantown (Wisconsin, USA) and three manufacturing facilities in the vicinity, First Choice Ingredients and its approximately 100 employees have built a leading position in the US taste market as a developer of clean-label, fermented and cultured dairy flavors for taste and functional solutions across a wide range of applications.

Our acquisition of First Choice Ingredients will be highly synergetic for both companies. We will be able to further accelerate the company’s growth by offering its products outside the US to our broad global customer base and integrating its solutions into our full offering for Food & Beverage customers. Conversely, the acquisition gives First Choice Ingredients access to our own world-leading biotechnology toolbox, fermentation know-how, and global customer relationships.

Growth in fresh dairy and cheese

Health and well-being are a key growth driver across fresh dairy, and we maintained momentum in all categories during 2021. The lactose-free segment continues to grow significantly faster than traditional dairy worldwide, as a rising numbers of consumers, especially in the 18–34 years age bracket, are turning to lactose-free options on account of their perceived health appeal. There was good traction for our broad range of ingredients and solutions supporting immunity, gut health, and healthy lifestyles, including our enzymes, cultures and probiotics, as well as vitamins and nutritional lipids from DSM’s wider nutrition portfolio. The plant-based dairy alternatives market, in particular drinks (i.e., alternative milk), continues to grow vigorously. Our Delvo®Plant portfolio of enzymes, which are part of our integrated solutions offering and help alternative dairy producers tailor the taste and texture of their products, was shortlisted as a finalist at the prestigious Food Ingredients Europe Innovation Awards.

In the cheese segment, we continued to grow and gain market share, thanks to a broadened and deepened portfolio resulting from the successful integration of Royal CSK’s specialty dairy solutions business. Royal CSK was acquired at the end of 2019 and fully integrated in the course of 2021. New product introductions also helped drive growth in this segment.

Baking and Beverages

Increased use of locally sourced grains and raw materials boosted interest in our baking enzyme portfolio, helping in the global effort to protect against resource scarcity by enabling the use of locally grown crops and reducing reliance on imported raw materials. Meanwhile, consumer demand for bread and baked goods with improved nutritional profiles and health benefits continued to grow.

The beverages sector continues to seek a reduced environmental footprint and production efficiency improvements, while satisfying fast-changing consumer demand for new experiences. Our enzymatic solutions help brewers to boost efficiencies and at the same differentiate their offerings with new and preferred flavors in fast-growing categories including craft, low- and no-alcohol beers, and in hard seltzers.

Continued growth of savory segment in market for plant-based, vegetarian and vegan options

There was strong demand for savory taste ingredients and further rapid evolution of the market for plant-based, vegetarian and vegan options alongside traditional meat and dairy choices. This market continues to boom as increasing numbers of consumers adopt a ‘flexitarian’ approach to meals. We further expanded our market reach with our comprehensive portfolio of integrated solutions for plant-based meat and fish alternatives, leveraging our full range of capabilities in taste, texture and health. There was a marked increase in the number of customers looking to fortify their products in support of improved nutritional claims. In November, our first-of-its-kind vegan fish flavor Maxavor® Fish YE won a prestigious Food Ingredients Europe Innovation Award, coming top of the ‘Plant-Based Innovation’ category. For more information on the rapidly growing plant-based fish alternatives segment, see the case study in this Report. As part of our strategic Food System Commitments we are committing to reaching 150 million people with nutritious, sustainable plant-based protein foods by 2030.

Demand for our core savory taste and flavor solutions based on our yeast extract and process flavor technology platforms remained robust despite a challenging operating environment.

Accelerating growth in plant-based proteins

In December, we accelerated our growth in plant-based proteins through the acquisition of Vestkorn Milling. Employing 55 people and based in Tau on the south-west coast of Norway, Vestkorn Milling is one of Europe’s leading producers of pea- and bean-derived ingredients for plant-based protein products. The company is well positioned in the alternative protein market, supplying proteins, starches and dietary fibers for plant-based foods, pet food and animal feed. Vestkorn Milling’s proteins, starches and dietary fibers are highly complementary to our own portfolio. The acquisition is a further step in our strategy to build an alternative protein business and will provide synergy with our innovative CanolaPRO® rapeseed protein isolate, which will commercially launch in 2022.

CanolaPRO® provides an excellent basis for meat and dairy alternatives as well as for sports nutrition applications, offering versatile functional benefits in terms of taste and texture, as well as being a nutritionally complete protein. Having established the Olatein joint venture to produce and bring CanolaPRO® to market with Avril in 2020, construction continued on the state-of-the-art production facility at Dieppe (France) during 2021 in preparation for commercial introduction by the end of 2022. Promising pre-commercial product development projects on multiple applications including CanolaPRO®-based milk alternatives, creamy spreads, ice cream, ready-to-mix drinks, and protein bars are under way with various food & beverage companies.

Fermentative Stevia gains traction

The Avansya partnership with Cargill for fermentative Stevia continued to build its sugar reduction business with the sustainably produced EVERSWEET™ stevia sweetener. The global COVID-19 pandemic has increased societal awareness of the need for more balanced food and nutrition for individuals and populations alike. Reduced and zero-sugar consumer end-products incorporating EVERSWEET™ were successfully launched by customers across our target segments in 2021, with further product development projects initiated. Meanwhile, EVERSWEET™ was approved for use in additional markets in the Americas and Asia-Pacific, with further registrations in the European Union and elsewhere also underway.

Rebound in demand for hydrocolloids

Hydrocolloids are thickeners and stabilizers that dissolve, disperse or swell in water to provide a broad range of important functionalities and physical attributes including gelling, texture, mouthfeel, viscosity and suspension. Our hydrocolloids are primarily delivered in the form of plant-extracted pectin and fermentation-derived bio-gums. Both are used as gelling and stabilizing agents in a variety of foods and beverages. Demand for our hydrocolloids rebounded well in 2021, driven by a stabilization of the gellan gum / biogums market and strong demand for pectin, particularly outside of China. Interest continues to grow in meat and dairy alternative applications for hydrocolloids, along with new areas such as soft-gel capsules.

Organic sales growth
Organic sales growth is the total impact of volume and price/mix. Impact of acquisitions and divestments as well as currency impact are excluded.