ADM's nutrition business slows, but execs are confident in … –

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The company holds a strong footprint in both human and animal nutrition with an annual operating profit of more than $700m, but executives speaking at Barclays’ annual Consumer Staples Conference in Boston last week acknowledged a decline in the space from two years ago and now anticipates a slower growth rate than predicted in December 2021 when the company laid out an aggressive medium-term framework for growth through 2025.
“In our business, there’s always going to be cyclical market forces, and in some years, they’re going to be positive, and in other years, they’re going to be negative. The last few years, it’s clearly been net positive,”​ but in nutrition the market has declined relative to what it was two years ago and as such, ADM’s nutrition business “will continue to outpace the market, but probably at a lower growth rate than we highlighted in December ’21,”​ CFO Vikram Luthar said at the event.
Vince Macciocchi, president of nutrition and chief sales and marketing officer at ADM attributed the slowdown in nutrition in part to widespread destocking that has negatively effected many CPG companies in recent months.
The company’s plant-based meat business has been particularly hard hit in this area.
“We continue to see destocking along with a slower rate of demand for plant-based. And that’s not all plant-based. It’s primarily a plant-based meat category. We will see opportunities in plant-based around alternative dairy, around specialized nutrition, around precision fermentation, and other opportunities in the protein space, but particularly on the plant-based meat category, we continue to see some softness,”​ Macciocchi said.

ADM’s nutrition business also took a hit due to fulfilment issues in its flavors and pet businesses for most of late 2022 and thus far in 2023, Macciocchi said.
“We expect to experience those for the balance of the year and then should be rectified by 2024,”​ he added.
Despite this challenge, Macciocchi said ADM is “still very optimistic”​ about its flavors business, noting it had a record second quarter, achieving growth of 21%.
“Our flavors business is largely a beverage business. It’s a unique go-to-market, a differentiated value proposition, really around systems. And we do business with start-ups, mid-tiers [and] FMCG multinationals. So, with the full value chain from a customer perspective. We expect that growth to continue at an accelerated level,”​ he said.
ADM also sees significant growth potential within its nutrition business by helping food and beverage manufacturers manage inflation with more “cost-out innovation,” or helping them innovate and renovate products with less expensive ingredients and processes, Macciocchi said.
“Innovation in the DNA of this business and where we want to spend all of our time or as much as we can focus on new product innovation. There’s also a cost-out opportunity around trading down to privately held or private label materials and also reformulating products to a lower cost point and not jeopardising the integrity of the finished product,”​ he said.
At the same time ADM is helping others manage costs to offset inflationary pressures, it is also carefully monitoring input costs on its side and its manufacturing costs “to make sure that we’re dealing with inflation in an effective manner as well,”​ he added.
Finally, ADM sees potential to reinforce its nutrition business through mergers and acquisitions, which have been a key focus for the company in the past 10 years.
“Nutrition continues to be a very ripe space for M&A,”​ Luthar said. “We will always be disciplined, right? The business obviously has got to make strategic sense, that is a given. But we got very discipled on value and returns,”​ as illustrated by more than 50 acquisitions and 20-plus partnerships ADM has forged over the last decade – many of them in the nutrition space.
“We invest our money where our strategy is. Our strategy was to grow nutrition, and we invested accordingly, so we still believe a lot of opportunity in that space to create competitive differentiation value through technology,”​ Luthar said.
He added for some “interesting technology plays, we won’t be averse to invest a sizable amount of capital because we have the balance sheet and we are willing to stretch that balance to be able to do deals that make strategic sense and create the right value for us in the long term.”
Through this multi-prong approach, both executives reiterated their confidence in ADM’s nutrition segment despite recent slowdowns, noting they are still very bullish about the future and they see a pathway to achieve the company’s growth objectives – even if at a slower pace.
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