For a company that generates more than $100 billion in sales each year, Cargill is adamant that its one-year-old division focused on animal and human health ingredients is run with the mindset of a startup.
The Minnesota-based commodities trader formally launched the business unit in September 2019 to expand its understanding of gut and digestive health and their connection to the body's immune system using science. By establishing the division, Cargill and those companies it partners with can move quicker to develop new ingredients and ensure that what is discovered does a better job performing its intended function.
"We're seeping our strategy in the fact that the consumer is going to want more," said Chuck Warta, president of Cargill Health Technologies. "For sure, they have been excited for years about finding a probiotic in their yogurt, etc., etc., but we see that really shifting."
Warta said the healthy lifestyle more consumers are leading today has prompted people to take a deeper look into products that can have a specific impact on their body, such as improving their immune system or digestive health. This trend was intensified during the coronavirus pandemic.
"We believe they are going to expect those products to be very indication specific. I have this problem, this is the best probiotic for me," Warta said.
Chuck Warta, president of Cargill Health Technologies
Courtesy of Cargill
While Cargill Health Technologies generates a small portion of Cargill's annual revenue that totaled $114.6 billion in its fiscal 2020 ended May 31, Warta said it could reach at least $1 billion in sales within the next three or four years.
The market for functional foods has been sharply growing and there is no sign the upward trajectory is going to abate anytime soon. According to Fior Markets, the global market for these ingredients is projected to rise to $117 billion by 2027 from $69 billion a year ago — an annual increase of 6.74%.
A survey from ingredients giant Archer Daniels Midland published in September found 57% of global consumers are more concerned about their immunity because of the pandemic. ADM also said more people are focusing on metabolic health's impact on weight management; eating to improve mental health and personalized nutrition. Many of them plan to spend more money on health- and wellness-related items.
Cargill's own portfolio spans a variety of ingredients, such as EpiCor, a fermented postbiotic that can be used to help maintain good digestive health. Cargill has filed with the FDA for GRAS status, or Generally Recognized As Safe, a requirement needed before any ingredient can be intentionally added to food and beverages. Cargill already has been sharing prototypes that include EpiCor with customers in snack bars, chocolates, beverages and drink mixes, among other products, in anticipation of receiving its GRAS approval.
Permission granted by Cargill
With more companies creating ingredients for healthier foods, Warta acknowledged the industry is "very competitive," but said those that will be the most successful are the ones that use science and data to back up their product and what it is expected to do.
"Understanding that is going to be an important part of the portfolio that’s going to separate winners and losers down the road as consumers continue to educate and learn more about the impact of these things on their overall health,” Warta said. "For us, that's the sweet spot we're trying to carve out and build our strategy around."
Cargill Health Technologies not only plans to develop its own ingredients that it could license out to other companies but also partner with food, beverage or other ingredients companies to create them.
Despite getting a late start compared to some of its competitors, Warta said Cargill Health Technologies has a number of advantages that others in the space do not have.
It has access to decades of work already completed at Cargill and the backing of a cash-rich parent company that views Health Technologies as one of its future growth engines. Cargill also is focusing more of its work on prebiotics, a move that should separate it from large probiotic manufacturers such as DuPont, Chr. Hansen and DSM.
So far, Cargill has invested more than $1 billion in the division with an agreement to double that in the next few years, Warta said.
While researchers have known there was a connection between the gut and brain or the gut and the immune system, it was only since about 2015 that the technology became available to understand those connections and develop products to improve them.
"Whether you have been in this business for three decades or you’ve been in it for a few years like we are, that’s a pretty level playing field. So our belief is we’re not playing from behind just because we’re small in this space," Warta said. "The fact that we’re fairly new and have the resources behind us of a Cargill, we believe that is where we can really advance ourselves quickly and compete. We think we’re just as good positioned as anybody to be a winner on the other end.”
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Cargill upstart predicts $1B in sales as demand for healthy ingredients surge - Food Dive
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