Larry Davis: JM Swank and its affiliated companies (Lentz Milling & Armour), headquartered in Iowa, are an ingredient distributor into the US Food & Nutrition market space. Their portfolio is more aligned with base ingredients versus the Brenntag functional and specialty ingredients. The ingredient breakdown includes:
The business model is very similar to Brenntag’s: ingredient distribution to end customers, whether they are CBG or food service. Their ingredient portfolio is centered around base ingredients (those ingredients greater than 2% in a formula), while our previous portfolio was centered around additives and functional ingredients (in a finished product used at less than 2%).
The number one advantage is the broadening of our portfolio. Brenntag did not have a large base ingredient business in North America. With this acquisition, we really increased our base ingredient offerings, which we never really had before. The other thing it has given us is customers we have not been doing business with before. There is a huge opportunity for cross selling. Our customer base has increased by 50 %.
"No one has the breadth of products we have now. No other distributor has the market coverage, the dedicated fleet, base ingredients, specialty functional ingredients, process chemicals, and water treatment to offer a Nutrition customer. It makes us unique."
President Nutrition Americas at Brenntag
We are doubling the size of Brenntag Specialties' Nutrition business in the region while creating the leading food ingredients and process chemicals distributor in North America with approximately one billion US dollars in revenue. The full line means not only the specialty and functional ingredients but also base ingredients and process chemicals and water treatment products. We are now the only distributor in North America to service customers with products from all three areas.
For customers, it’s having access to the broadest portfolio of ingredients available in the market from a single supplier. No one has the breadth of products we have now. No other distributor has the market coverage, the dedicated fleet, base ingredients, specialty functional ingredients, process chemicals, and water treatment to offer a Nutrition customer. It makes us unique.
Our customers in Canada and Mexico will benefit from the acquired base ingredient producers JM Swank brings. These producers were previously not in these two countries.
Now, we are able to combine the JM Swank products with our portfolio, to expand our offering and technical expertise. Here again, we can take our JM Swank producer products and expand regionally into Canada and Mexico. Previously, they did not have coverage in these locations.
Swank has 13 warehouses. Additionally, the company has just over 100 tractors dedicated to food ingredients and 220 trailers - half of them are temperature controlled. That is a dedicated fleet solely focused on ingredient distribution. Their facilities are British Retail Consortium (BRC), Safe Quality Food (SQF) regulated, which you need to have on the food side.
Due to the expansion of our geographical presence including 13 additional warehouses and over 100 dedicated fleet trucks our suppliers and customers will also benefit from shorter distances, resulting in faster turn-around time. We will be able to offer an even more comprehensive range of value-add services, including mixing and blending services. Suppliers and customers will be able to see we have even broader coverage from a geographic perspective. The Swank specific producers will also see the benefit of Brenntag’s technical capabilities. Currently, the full portfolio is available to our customers today. Of course, there are things we still need to work through, but they are internal. We plan on expanding our mixing and blending capabilities and we are going to get very active in that respective. Currently, we have wet mixing and blending capabilities, but we are looking to expand on the dry side. Areas we will concentrate on include Stabilizers, hydrocolloids, enzyme blends, and vitamin and mineral pre-mixes. We are going to further develop our positioning from a key account and strategic accounts perspective. JM Swank has experience working with large customers and we will now be able to use their knowledge to create best practices.
Consumers are consistently demanding it, proving why this acquisition is so important to us. Base ingredients are a staple in any food product. From starch to sugar and protein: these are core ingredients that virtually every application uses. Consumers are looking and paying more attention to the label. If they don’t know what it is or it has a cryptic-sounding name, they don’t want it in there. Also, consumers are looking for things like cocoa and all the variations of cocoa. They like to see this versus a synthetic chocolate flavor. We’ve never had this before, and now we do. Our acquisition has expanded our portfolio allowing us to deem more products natural and clean label to keep up with this trend. Additives companies are constantly looking for natural alternatives that have functional characteristics because you can’t just displace them as they take care of an issue. It could be preservation – as options for natural preservation get developed, we will continue to bring them into our portfolio. Consumers want them out, but they also want their products to have a decent shelf life, so it must be a balance.
Another continuously growing trend is veganism. The majority of consumers are not necessarily vegan; it is just more consumers are looking for overall better health. Consumers are looking at their animal protein intake because they believe everyday consumption is unhealthy. So, consumers started supplementing their diet with vegan alternatives. I expect this to continue. As this demand has been increasing over the last years pricing is starting to drop, and finished products taste better. Some fast-growing vegan trends are almond milk, nut milk, oat milk. Additionally, some animal-based companies have now entered this space and more companies will continue to do so. If you look at alternative meats from ten years ago to today, it is significantly different and there has been continued product development and evolution with this trend. This trend goes hand in hand with the natural/clean label trend as well. It is the overarching idea that consumers today want better health. To comply with natural and clean label demand from consumers, companies will continuously look for new innovations to meet those labels. If consumers continue to keep demanding improvement for natural and clean label, new products and innovations will continue to evolve.
Rather than our customers having to figure out what works on their own, our Application and Development center experts can take ingredients and can showcase them in a finished product form. Most distributors are not able to do this. We pride ourselves on our technical capabilities and we know this is unique to the market space. Our Centers are a significant benefit to our suppliers as we can showcase the benefit, features, and functionality of one or many supplier products. We know everything is about speed with consumers, so suppliers are always working on the clock to see how fast they can develop a product with a good taste and nice mouthfeel. Our Application and Development centers can handle these products, so our customers don’t have to.
How has the COVID-19 pandemic impacted the Nutrition business and the market?
The nice thing about the Nutrition business is no matter what is happening in the world, people must eat. What changes is where they eat. The food serve space took a hit due to the pandemic because no one was able to go out to eat, but if you look at the retail space, groceries increased massively because people were preparing more food at home. That is the resiliency of our market. If one segment is down, you will probably see an increase in another segment. For our industry, buying habits and new product innovations will always change and fluctuate based on what is happening in the market. As a result of COVID and the supply chain disruptions the world experienced, we could potentially see an increase in innovation due to the hold. The biggest increase, in the consumers’ mind, is the overarching idea of wellness. 2021 has increased attention around a healthy eating lifestyle and how you can build immunity. It is amazing to watch how the Nutrition space has changed because it is significantly different than where it was before. We just recently had a great success with our first Global Virtual Nutrition event informing around 4,000 customers and suppliers across the globe about Brenntag’s Nutrition expertise and offering. Our team has done a great job adapting our offerings to address the consumer market trends and their request for wellness and better health. We’ve relied on our ingredient portfolio and worked through formulation ideas to improve the healthy nature of the finished products as our customers are requesting it.
We’ve spent a lot of time over the last four years building out our Nutrition business. After four years of hard work, we can help with formulations and new product development and be proactive in addressing market trends. We have the largest functional and specialties portfolio and now our customers are recognizing we are much more than just a commodities company. They see our resource offerings and understand how they can leverage these to grow their business and get products to the market quicker. This acquisition has added a unique opportunity for our organization and is transformational simple for the benefit it brings to our customers and producer suppliers. We will further build our cohesive team by taking best practices of both companies and putting them into place, helping our customers to improve their business.