DSM acquires dairy flavor maker First Choice Ingredients for $ 453 million

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Dive brief:

  • Royal DSM will acquire US dairy-based savory flavoring company First Choice Ingredients for $ 453 million. The transaction is expected to close in the fourth quarter and is subject to regulatory approval.
  • With this acquisition, DSM obtains a company with estimated sales of $ 75 million in 2021. It also takes control of three manufacturing plants owned by First Choice Ingredients and its approximately 100 employees. First Choice Ingredients, in turn, is expected to see its growth accelerate through DSM’s existing supply chains, which will allow it to expand outside of the United States.
  • In recent years, DSM has strengthened its position in the trend categories. It acquired the bio-based aroma and fragrance intermediates business from Amyris in March to develop its sustainable aromas business. In 2019, he bought Royal CSK, a Dutch company that cultivates semi-hard cheeses, thereby strengthening its position in dairy products, which is DSM’s most important segment in the food and beverage sector.

Dive overview:

First Choice Ingredients is a developer of Clean Label concentrated dairy flavors created through natural fermentation and reaction technologies. The ingredients are designed for use in conventional and plant-based dairy applications. This acquisition is in line with both current consumer trends and DSM’s growth strategy to create innovative and sustainable ingredients.

Herbal products are a popular choice for consumers looking for more eco-friendly purchases. Dairy substitutes are a key category. According to the World Wildlife Fund, the dairy industry contributes 2% of total US greenhouse gas emissions. FCI’s dairy-based flavors are concentrated to be 5-20 times stronger than raw ingredients, which means manufacturers can flavor more with less and reduce their overall impact on the environment.

Much like sustainable food products, those with clean labels have seen a resurgence of interest, which the pandemic has only amplified. Almost two-thirds of consumers say they try to choose foods made with recognizable ingredients, according to a study by the International Food Information Council published in June. FCI is capitalizing on this trend with the kind of solutions that have become the industry standard rather than a differentiating quality.

With such a population of buyers concerned about how their products are made, it’s no surprise that DSM is interested in adding less chemical-sounding ingredients to its portfolio. The recent acquisition of the Amyris division has also broadened its offering in this category. Amyris is built around its No Compromise brand of clean ingredients.

While DSM handled mergers and acquisitions, it was also active in its own innovation. In 2018, she formed a joint venture with Cargill to develop stevia-based sweeteners. In 2019, it announced a partnership with the French agro-industrial group Avril to collaborate on the development of plant proteins from GMO-free canola.

This latest acquisition extends DSM’s presence in another innovative category: fermentation. This technology has gained momentum as a way to develop protein. Companies that produce fermented protein have attracted a record amount of funding in 2020, according to a report from the Good Food Institute. The method is emerging as a popular way to make everything from meat analogues and ingredients to dairy and egg protein without animals.

With hundreds of ingredients, a strong focus on R&D and its own proprietary fermentation technology, FCI offers DSM many options to better position itself in categories with high potential for future growth.


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