Danisco A/S

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Danisco A/S

Langebrogade 1
DK-1001 Copenhagen
Denmark
Telephone: (+45) 32 66 20 00
Fax: (+45)32 66 2175
Web site: http://www.danisco.com

Public Company
Incorporated: 1989
Employees: 17,712
Sales: DKr 23.54 billion ($2.8 billion) (2000)
Stock Exchanges: Copenhagen
Ticker Symbol: DCO
NAIC: 311942 Spice and Extract Manufacturing; 111991 Sugar Beet Farming; 311312 Cane Sugar Refining; 31131 Sugar Manufacturing; 326199 All Other Plastics Product Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing.

Danisco A/S has repositioned itself as one of the world’s leading manufacturers of food ingredients. The company focuses on high value-added ingredients such as emulsifiers, stabilizers, and flavorings, as well as sugar and other sweeteners, such as xylitol and fructose. Since its acquisition of Finland’s Cultor in 1999, Danisco has engaged in a reorganization of its operations, shedding its former foods divisions and most of its packaging division. Danisco Cultor oversees the company’s functional ingredients production and holds the world’s leading position in that market. Among the division’s products are emulsifiers, flavorings, enzymes, starter cultures, antioxidants and antimicrobials, specialty fats, and texture ingredients. Danisco Sweeteners is a world-leading producer of the artificial sweetener xylitol, a leading producer of fructose, and a producer of specialty sweeteners for the baked goods and confectionery industries. Danisco Sugar manufactures sugars and syrups primarily for the industrial market—which accounts for 80 percent of sugar sales—but also for the consumer market, where the company holds a more-or-less monopoly position in the Scandinavian market. Through Danisco Sugar, Danisco is the fourth largest sugar producer in Europe, behind Tate & Lyle, Eridania Beghin-Say, and Sudzucker. Other Danisco subsidiaries include Danisco Seed, which develops and produces seed products, such as beets for beet sugar production, but also sunflowers, mustard, rapeseed, and peas; Danisco Venture, a venture capital fund dedicated to investing in new businesses related to the parent company’s activities; and a 50 percent share of Genencor International Inc., the Rochester, New York-based biotechnology company. Danisco is traded on the Copenhagen stock exchange and is led by Chairman Jugo Schroder and Chief Executive Alf Duch-Pedersen. In 2000, Danisco posted sales of DKr 23.5 billion ($2.8 billion).

19th Century Sweetness

The Danisco entering the 21st century was the amalgamation of several Danish and other Scandinavian companies, some of which traced their roots to the late 19th century. Three major companies—A/S Danisco, which operated primarily through subsidiary Grindsted Food Products; De Danske Spiritfabrikker, the leading Danish distiller; and Danish sugar monopoly De Danske Sukkerfabrikker—merged in 1989 to form what became known as the “new” Danisco. To these were added a decade later another major group, Finland’s Cultor, which, apart from controlling Finnsugar, had built itself into one of the world’s leading food ingredients companies.

Among the oldest of the Danisco companies was Danske Sukkerfabrikker. This company had been established in 1872 by financier C.F. Tietgen, who also owned Privatbanken. Tietgen invested some five million rix-dollars in equity to start up his own sugar production company. Developments since the middle of the 19th century had enabled the production of sugar from beets—a crop more easily grown in Denmark and the rest of Europe than sugar cane. Tietgen’s company began operations by acquiring two existing sugar refineries in Copenhagen, while starting construction on new refineries, including one in Odense, which began construction in 1872. Tietgen’s investment capital also went to ensuring a supply of raw beets, supplementing farmers who wished to convert their production to beets. Danske Sukker also began experimenting with breeding and developing its own beet seed, but without success. Instead, the Danish beet market relied on international imports for its seeds.

Tietgen’s Odense refinery began operations in 1873. By the end of that decade, De Dankse Sukkerfabrikker had added other refineries, including one in Lolland in 1880, originally built by the Frederiksen brothers, Erhard and Johan, who had been among the first Danes to begin sugar beet farming. Dankse Sukkerfabrikker was by then one of the country’s leading sugar refiners. Beet sugar production grew in importance throughout the rest of the century. Danske Sukkerfabrikker continued to build a prominent position in the Danish market; by the 1880s the company’s production warranted the creation of a dedicated railway network linking beet farmers to refineries.

Danske Sukker’s production grew steadily and by 1910 the company was capable of meeting the sugar demand for all of Denmark. The outbreak of the First World War presented the company with a number of difficulties, most notably the inability to import beet seeds. Danske Sukker had dropped its own breeding program in 1903. During the war years, the company turned once again to development of its own seeds. By 1920, the company’s seed production had grown sufficiently to create a dedicated subsidiary, which later became known as Danisco Seed. For much of that company’s history, however, it was more closely identified with its first major product success, that of the Maribo-N beet variety introduced in 1928. The company’s research and development efforts quickly paid off again, this time in 1930 with the development of the world’s first polyploid sugar beet—a tetraploid beet seed that was finally launched in 1950 as Maribo-P. The following decade, Danske Sukker invested more than DKr 100 million to convert its operations from split sugar manufacturing and sugar refinery facilities into a network of plants capable of producing finished product through a single combined production process. The development eliminated the need for transporting the raw sugar, which led to the closing of the company’s railway system by the middle of the 1960s.

Danske Sukker founder Tietgen’s interests extended beyond that industry. In 1881, Tietgen and partner CA Olesen founded a new company, De Danske Spiritfabrikker, uniting several small-scale distillers to form a single company for the production of Danish national drink akvavit, or “water of life,” a clear alcoholic beverage similar to gin. De Danske Spirit led a consolidation of the entire Danish distillery sector—at one time the country counted more than 2,500 small independent distillery companies. By 1923, that number had been reduced to just one, as Danske Spiritfabrikker became the sole distiller in all of Denmark. In 1924, the company went even farther, receiving a monopoly for the production of yeast and all distilled spirits in the country. The company was to hold that monopoly until the early 1970s, when Denmark’s entry into the European Community brought the spirits monopoly to an end.

The third major part of the “new” Danisco became part of the “old” Danisco at the end of the 1930s. Grindstedvaerket had been founded in the town of Grindsted in 1924 as a producer of organic chemicals. The company extended its range through the 1930s and gradually came to focus on various food ingredients, such as emulsifiers (useful for preserving the texture of bread, ice cream, and other foods), flavoring agents, and enzymes for processing foods. Danisco took over Grindstedvaerket in 1939 but the food ingredients arm became Danisco’s major operation, responsible for the majority of its sales.

Those sales were boosted after World War II with the launch of the company’s Cremodan brand of emulsifiers and hydrocolloids, used for the production of ice cream, in 1948. In the 1950s, Danisco began to spread beyond Denmark and the Scandinavian market, establishing a sales subsidiary in Germany. The following decade, Danisco launched another successful product line, Dimodan monoglycerides.

By the late 1970s, industrial production of processed foods had successfully lured vast numbers of the world’s consumers with an ever-expanding range of prepared foods. The prepared foods industry’s growth was propelled by revolutionary shifts in the work force, as women abandoned traditional roles to pursue their own careers. The growing number of working households left less time for the preparation of meals, and food companies stepped into that breach with new varieties of ready-to-eat foods. Ingredients concerns such as Danisco formed the backbone of the growing processed foods industry, supplying the additives and ingredients that promoted food preservation and enhanced flavor, as well as texturing and color agents to enhance products’ appeal to the consumer. The increasingly global scope of the food industry encouraged Danisco to boost its own international activity. A step toward this goal was the renaming of its main Grindstedvaerket to the more international Grindsted Food Products in 1980.

That name change accompanied Danisco’s entry into the world’s primary market for processed foods, the United States, with the construction of a factory in Kansas. The company reinforced its North American presence with the opening of a factory for the production of pectin, a thickening agent, in Mexico. Over the next several years, Danisco’s operations spread around the world. In 1983, the company bought a production facility in France, followed by the purchase of a new plant in Spain in 1985. The company built its own Brazilian operation, an emulsifier plant, in 1986. Another emulsifier facility was constructed in Malaysia in 1990.

Company Perspectives:

Values: We create value. Danisco is managed by principles of value creation. We use our financial and human resources to add value to our customers by supplying innovative products and services based on our in-depth understanding of the customers’ needs and requirements. We ensure profitability for our shareholders and strive to increase Danisco’s market value. And finally, we want to act as a good citizen in social and environmental respects.

Recipe for a Food Ingredients Giant in the 1990s

Despite the loss of its monopoly in 1973, De Danske Spiritfabrikker remained Denmark’s dominant distiller throughout the 1980s. De Danske Sukkerfabrikker had also secured the dominant position in the country’s sugar industry, both as producer and as distributor, extending its control of the domestic market in 1989, when it acquired the country’s last remaining independent sugar refinery, Sukkerfabrikken Nykobing.

A number of other key elements of the “new” Danisco also had been undergoing rapid development. One of these was the later Danisco Sweeteners, which had been founded originally in 1976 as a joint venture between Finnsugar—later known as Cultor—and pharmaceuticals maker Hoffman-La Roche to produce the new artificial sweetened Xylitol. This product, which proved to have anti-tartar properties as well, became a widely used ingredient in sugar-free foods and candies, such as chewing gum. Cultor itself was to become a major part of the “new” Danisco; the company was quickly establishing itself as one of Scandinavia’s leading food ingredients groups, particularly with such acquisitions as the food ingredients operations from the United States’ Pfizer.

Cultor also brought with it its 50 percent interest in another United States-based company, Genencor, founded in 1982, which had built a growing business around its genetically manipulated biotechnology products. Meanwhile, Danisco Seed also had been working in the biotechnology sector during the 1980s; in 1990, the subsidiary’s research resulted in the first outdoor planting of a genetically manipulated beet plant.

The 1989 merger of De Danske Spiritfabrikker, De Danske Sukkerfabrikker, and Danisco was one of the largest merger operations ever carried out in Denmark and created one of the company’s largest industrial groups. The company’s core businesses complemented each other well, creating so-called “cluster” competencies. The three components continued to pursue developments in their own sectors, however, now under the umbrella name of Danisco.

Danisco Sugar proved to be one of the fastest growing components of the new Danisco. After establishing itself as the single remaining sugar producer in Denmark in 1989, the division started its drive to become one of the dominant players in the European sugar market. In 1991, the company acquired eight refineries in what was now the eastern part of the re-unified Germany. The following year, the company took over the entire sugar industry of Sweden, making it the fourth largest sugar company in Europe. Later in the decade, Danisco Sugar continued to expand in its core European market, such as with the 1998 purchases of stakes in sugar refineries in Poland and Lithuania.

The Grindsted Food Products unit changed its name to Danisco Ingredients in 1995, at the same time as it acquired a new pectin plant in the Czech Republic. The company continued to add to its operations through the end of the decade, notably with the acquisition of an emulsifier factory in Sweden in 1996, and the purchase of the United Kingdom’s flavorings manufacturer Borthwicks in 1997. The company added another flavorings producer in 1998, Beck Flavors, based in the United States, as well as companies in Germany and Malaysia.

The year 1999 marked a new turning point for Danisco. In that year the company merged with Finland’s Cultor, creating one of the world’s largest food ingredients groups. As part of the merger, Danisco’s ingredients arm took on a new name, Danisco Cultor. The company created the new Sugar and Sweeteners Division, merging Danisco’s sugar production with Cultor’s sugar arm, Sucros Oy, and its Xylitol and other artificial sweeteners operations. At the same time, Danisco took over Cultor’s stake in Genencor, leading the two companies to develop a cooperation agreement in 2000, calling for the development of new biotechnology products for the food ingredients sector.

Key Dates:

1872:: CF Tietgen creates De Danske Sukkerfabrikker to produce beet sugar in Denmark.
1881:: Tietgen and CA Olesen found De Danske Spirit-fabrikker as a leading akvavit distiller and exporter.
1910:: Danske Sukker’s production is able to meet the entire Danish market demand.
1920:: Danske Sukker begins research and development in beet sugar seeds and forms future Danisco Seed.
1923:: Danske Spirit acquires Danish distillery monopoly.
1924:: Danske Spirit extends monopoly to include all yeast and spirits production; I/S Grindstedvaerket is founded as an organic chemicals concern.
1939:: Danisco takes over Grindsted, which is then expanded into food ingredients production and becomes Danisco’s main subsidiary.
1954:: Danisco opens sales subsidiary in Germany and begins international expansion.
1980:: Grindsted changes its name to Grindsted Food Products and opens its first factory in United States.
1981:: Danisco opens pectin plant in Mexico.
1983:: Company acquires alginate production facility in France.
1989:: Merger among Danske Sukker, Danisco, and Danske Spirit creates “new” Danisco; Danisco Sugar acquires the last independent sugar refinery in Denmark.
1992:: Danisco Sugar takes over the entire Swedish sugar industry, becoming the fourth largest sugar producer in Europe.
1995:: Grindsted changes its name to Danisco Ingredients.
1999:: Danisco merges with Finland’s Cultor, creating one of the world’s largest food ingredients companies.
2000:: Danisco begins restructuring, shedding noncore operations (food products; packaging); the company starts production of flavorings in India.
2001:: Danisco acquires Australia’s Germantown and the United States’ Florida Flavors.

Following the Cultor merger, Danisco moved to reorganize its operations, focusing on a new core of Ingredients, Sugar, and Sweeteners. The company began selling off its now noncore operations, including Danske Spirit and the company’s former frozen foods and other foods subsidiaries, which were jettisoned in favor of the higher-margin ingredients sector. The company also had begun to build up a packaging arm—notably with the acquisition of the United Kingdom’s second largest flexible packaging company Sidlay in 1999—but by 2001 Danisco had decided to abandon that sector to focus on its more closely related operations.

Although sugar and sweeteners remained an important part of Danisco’s operations, representing, together with Danisco Seed, some 28 percent of the company’s sales, food ingredients were claiming a rising share of Danisco’s revenues, reaching 25 percent by the end of the company’s 2000 year. This unit saw new significant developments at the turn of the century, such as the beginning of flavorings production in India, and the 2001 acquisition one month later of the United States’ Florida Flavors, a fruit flavorings supplier to the fruit juice industry. In August 2001, the company paid $100 million for the purchase of the Germantown division of Australia’s Goodman Fielder, giving the company a leading position in the worldwide texture agents market. At the same time, Danisco announced its intention to step up its activities in China and the rest of Asia, forecasting that these markets held the strongest promise for growth in the near future. These moves helped confirm Danisco’s transition into a worldwide food ingredients leader for the new century.

Principal Subsidiaries

Danisco Sugar; Danisco Seed; Danisco Pack UK; Danisco Foods; Danisco A/S; Danisco Cultor; Danisco Venture; Danisco Sweeteners.

Principal Competitors

Amalgamated Sugar Company LLC; Associated British Foods; Bahlsen GmbH & Co. KG; Eridania Beghin-Say; Imperial Sugar Company; Cumberland Packing Corp.; Ezaki Glico Co., Ltd.; Nippon Beet Sugar Manufacturing Co., Ltd.; Südzucker AG; U.S. Sugar Corporation; Kerry Group; Tate & Lyle plc.