Vegans Trigger Rethink at No. 1 Maker of Cheese Cultures

(Bloomberg) -- The world’s biggest supplier of the bacteria that turn milk into cheese is adjusting its production to acknowledge that veganism isn’t just a passing fad.

Chr. Hansen A/S, which is based north of Copenhagen, is preparing for a slowdown in the market for dairy-milk products and plowing more funds into cultures used to ferment plant-based alternatives such as yogurt made from almonds, coconuts and oats.

“Plant-based alternatives have to be a part of our strategy: you can argue how much is it going to grow, but you cannot argue it’s a fad,” Chief Executive Officer Mauricio Graber said in an interview.

The comments provide a hint on where Chr. Hansen’s strategic review might land. Graber, a former Givaudan SA executive who’s been running the Danish company since mid-2018, is drawing up a blueprint for future growth that he intends to present to investors in April.

Though Graber says Chr. Hansen hasn’t fallen behind in targeting the vegan market, as such, he also acknowledges that his company “probably could have started our investments earlier.”

In addition to bacterial for dairy alternatives, Chr. Hansen is developing new enzymes and yeasts to improve alcohol-free beer and wine, as well as additives and natural colors for meat-free burgers. Current technology has already shortened beer brewing to a matter of days rather than weeks, without a loss of taste, Graber said.

M&A Thoughts

Graber says Chr. Hansen is unlikely to spend its money on mergers. He points to International Flavors & Fragrance Inc.’s $26.2 billion acquisition of DuPont Co.’s nutrition and bioscience division, which has upped the ante in the ingredients space.

Rather than a game changer, Graber says IFF’s acquisition is a “very complicated deal” that’s likely to distract management. Instead of replicating such deals, Chr. Hansen will try to collaborate with flavors and fragrance makers, he said.

Chr. Hansen reported first-quarter results on Wednesday that disappointed the market, in part as management said its previous revenue guidance had been too optimistic. Shares of Chr. Hansen fell 6.1% yesterday, and they declined an additional 0.7% on Thursday.

What Bloomberg Intelligence Says:

“Chr. Hansen needs to keep spending heavily on R&D to even match its newly reduced longer-term organic sales mid to high-single digit goal. This new forecast could be adjusted again when management’s strategic review is completed in April if these targets are reliant on significant pricing, which isn’t entirely within its control.”

--Duncan Fox, BI analyst

To contact the reporter on this story: Andrew Noël in London at anoel@bloomberg.net

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