LONDON — Tate & Lyle, P.L.C. foresees three ways to strengthen its business mix over the next five years. By 2020 the company wants 70% of its profits to come from specialty food ingredients, 30% of its specialty food ingredients sales to come from Asia Pacific and Latin America, and $200 million of sales to come from new products.
“Over the last five years Tate & Lyle has been evolving from, essentially, a commodity sugar and bulk sweetener business to a more value-based business focused on specialty food ingredients,” said Javed Ahmed, chief executive of London-based Tate & Lyle, in a Nov. 5 earnings call. “It is a strong and higher quality business today, and our aim is to further strengthen it over the next five years by building on the foundations we have laid.”
Mr. Ahmed said the percentage of profits from specialty food ingredients increased to 47% in fiscal year 2015 from 32% in fiscal year 2010. Now the goal is 70% of profits by 2020.
“We expect to get there through a combination of organic growth and selective bolt-on acquisitions, which we continue to actively pursue,” Mr. Ahmed said.
He said Tate & Lyle expects to further increase the geographic spread of specialty ingredients, excluding Splenda sucralose, by increasing the proportion of sales from Asia Pacific and Latin America to 30% by 2020.
“This would mean the more mature North American region accounting for no more than 50% of sales, despite the expectation of growth in North America over the period,” Mr. Ahmed said.
North America currently accounts for about 60% of specialty food ingredients sales, excluding Food Systems and Splenda sucralose, but the specialty food ingredients business in North America has grown at a compound annual growth rate of only 0.4% over the past four years, he said. Future growth could come in such subcategories as healthy snacks and nutrition bars, he said.
In China, the dairy category looks promising, Mr. Ahmed said.
“In this category, we have built substantial technical expertise and good relationships with the top three Chinese dairy companies,” he said. “Our highly functional specialty starches, fibers and sweeteners have enabled us to drive good volume growth and achieve customer wins in lines such as fermented milk and yogurts.”
He added Dolcia Prima, Tate & Lyle’s new low-calorie sweetener, has been approved for use in Chile and Colombia.
For new products, Tate & Lyle’s ambition is for products launched within the last seven years to equal or exceed 10% of specialty food ingredients sales by 2017 and to generate sales of $200 million by 2020, Mr. Ahmed said.
“We continue to manage our innovation pipeline through a disciplined process with clear stage gate milestones,” he said. “Over the last 18 months we have focused the pipeline on fewer but larger opportunities such as Dolcia Prima, thereby enabling greater investment for each project.”
Tate & Lyle on Nov. 5 reported financial results for the six-month period ended Sept. 30. Adjusted operating profit of £100 million ($152 million) was up 22% from £81 million in the same time period of the previous year. Six-month sales of £1,176 million ($1,790 million) were down 2% from £1,200 million.
Within specialty food ingredients, adjusted operating profit of £76 million was up 28% from £59 million in the same six-month period of 2014. Six-month sales of £447 million were up 5% from £426 million. Within bulk ingredients, six-month operating profit of £42 million was down 11% from £47 million, and six-month sales of £729 million were down 6% from £774 million.
