Company Reports

• Ingredion is projecting their specialty business portfolio will be the major driver for growth over the next four years, growing to $2 billion in annual sales by 2022 (from 32 to 35% of net revenue).
• I see the biggest opportunity for cell based tech to play a role in Ingedion’s specialty portfolio in the enhanced protein segment for the development of animal free animal proteins.
• I estimate cellular fermentation to make up 5% of Ingredion’s specialty business within the next 4 years (between Clara Foods distribution and their own internal development).
• Ingredion has an edge in their deep understanding of consumers and long standing client relationships that lend them to recognize how and when to introduce a cell based ingredient to the market.

Company Overview: Ingredion Incorporated (NYSE: INGR), headquartered in Westchester, Illinois, is a global ingredient solutions provider with annual net sales of $5.84 billion in 2018.

Based on the company’s most recent 10K report and their presentation at the Consumer Analyst Group of NY Conference in February 2019, the company presented a 4-year timeline for growth that resides within their specialty business portfolio. Specialty business comprised 29% of Ingredion’s net sales for 2018. According to Ingredion’s 4-year outlook, they project specialty to become a third of their business, growing to $2 billion in annual sales by 2022 (32 to 35% of net revenue).

What does Specialty Business mean? Custom formulations that Ingredion develops based on specific requests from clients. They believe this segment has most growth potential as basic commodity performance is weakening and consumers are demanding more highly functional ingredients. Some examples of highly functional ingredients include ingredients that improve food texture (such as crunchiness), ingredients that improve food nutrition (such as low calorie sweetener), or ingredients that increase food protein (such as egg whites).

PREDICTION: I see the biggest opportunity for cell based tech to play a role in Ingedion’s specialty portfolio within the enhanced protein segment. As companies look to increase clean digestible protein that is not derived from animals, they can turn to cellular fermentation for the creation of animal free animal proteins. Benefits include cost reduction and marketability (environmental impact, vegetarian, high protein).

Cell Based Involvement to Date:

• In April 2019, Ingredion invested in cell based protein company Clara Foods to develop and scale animal free animal proteins (i.e. eggs that are molecularly identical to eggs from chickens, but do not require raising chickens). The exact investment amount is unknown, but we estimate this partnership is valuable for Ingredion as it lends them an inside look into cellular fermentation technology and the ability to offer Clara’s egg proteins derived from yeast to their current customer base.
• Ingredion has its own laboratory capable of producing cell based proteins for internal use as well as through partnerships.

I asked Ingredion to provide details about how they might consider incorporating cellular fermentation into their product development with clients:

1. Analyze customer overall objectives, which includes functional properties, cost, labeling, and other requirements.
2. Choose the best solution based on that discussion and assessment.
3. Ingredients made through fermentation will be assessed as to their ability to deliver on the overall goal of the customer vs. potential other options. We will then choose the best option(s) for the customer to evaluate.

What I Think: Ingredion would consider using cellular fermentation if it offered a better price, a specific functionality, or increased marketing value to consumers. Taking all of this into consideration, I estimate cellular fermentation will make up 5% of Ingredion’s specialty business ($100M) within the next 4 years (between Clara Foods distribution and their own internal development). This space is a huge growth opportunity for Ingredion IF they can optimize their technology and incorporate it into their process faster than competitors like ADM and Cargill or emerging B2B companies that are more focused on cell based tech.

SEC Sources: 2018-10K, 033119-10Q

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• Cell Based Tech has no business relationship with any company mentioned in this article.
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