Acquisition emphasizes trend of market consolidation
As part of a growing trend among ingredients companies to control their own marketing, and to interact more closely with consumers, the Irish cheese and nutritional-ingredients group Glanbia bought Illinois-based Optimum Nutrition, a finished-goods manufacturer that specializes in sports supplements.
The $315 million acquisition expands Glanbia's presence in North America. Last year, Glanbia bought Pizzey's Milling, a Canadian company that produces fatty acids from flaxseed. In 2006, Glanbia bought California-based Seltzer, which specializes in nutritional premixes.
The acquisition of Optimum gives Glanbia, a major player in the dairy ingredients market, an entry into the fast-growing sports-supplements market. Optimum, which has manufacturing facilities in Illinois, South Carolina and Florida, makes well-known brands such as Optimum Nutrition, Gold Standard 100% Whey and ABB. In 2007, Optimum reported $185 million in sales.
Glanbia's purchase of Optimum is a "close strategic fit with our core areas of expertise in whey and sports nutrition, and brings us up the value chain into consumer markets," said John Moloney, Glanbia group managing director, in a statement. "Optimum also fits very well with the group's stated growth strategy and ambition to continue to internationalize our business. The transaction is expected to be earnings enhancing from this year."
Glanbia estimates the global nutrition market at $337 billion per year. The sports-and-fitness market has a significant chunk of those earnings, at an estimated $44 billion, with a yearly growth rate of 7-8 per cent, according to Glanbia.
"The Optimum Nutrition acquisition is a bold move and compelling statement about Glanbia's strategic plans for growth," said Jesse Lopez, CEO and president of Chicago-based ingredients supplier Source One Global Partners. "Glanbia has a vision of becoming a dominant player by executing an acquisition strategy, so they are positioned to successfully compete in a marketplace that is consolidating, in which larger food and pharmaceutical companies are establishing a significant footprint, and the focus is on a consumer-driven marketplace."
Lopez said successful ingredients companies need to be "thinking of ways to add value to their ingredients through innovative application technologies, proprietary formulation expertise and consumer-focused marketing." He noted that Glanbia's decision to buy a finished-goods manufacturer "signals a growing trend to move ingredient sales closer to the consumer. This allows for greater control of the marketing message while moving further up the value chain as you get closer to the end consumer."
— reprinted from Natural Foods Merchandiser.