ADM Shifts Focus Away From Ethanol and HFCS, Toward Grocery Aisle
As demand for ethanol is predicted to remain flat for the next decade and high fructose corn syrup (HFCS) is losing consumer and customer support due to obesity and health concerns, ADM is undertaking a seismic shift in its business model, turning away from its legacy products and toward developing new food ingredients. This shift was evident last year when the company invested $3 billion into the ingredients sector, purchasing the group’s largest acquisition on record, natural flavorings company, Wild Flavors.
Currently half of ADM’s research budget is allocated to developing ingredients and methods to make foods and drinks taste better, as the group strives to reduce its exposure to volatile oil markets. However, the company is still working to discover the industry-changing “Rare Sugar”, or “the holy grail of sweeteners” which will have all the same properties of cane sugar but without the calories or health effects.
As the group’s corn business profits dropped 39% in the first quarter, its ingredients business, which is still a small revenue generator, saw a 17% increase in profits over the same time period. However, the drivers behind these events are still not exactly clear and it is still too early to tell if the group’s strategy will be successful in the long-term. Despite this, ADM competitors such as Cargill and Bunge are also shifting their focus to higher margin business uses for corn and other crops.