(21% of total revenue)
The Natural Colors Division supplies natural color solutions for the food industry, in particular the beverage, confectionery, ice cream, dairy, fruit preparation and prepared food segments. The colors are extracted from natural sources, such as berries, roots and seeds, and Chr. Hansen masters a number of encapsulation techniques that help stabilize the appearance of colors in various food applications.
In recent years, consumer demand for more natural products has increased. Chr. Hansen is well positioned to capture these opportunities by providing improved cost-in-use solutions, addressing the significant potential in emerging markets and developing an enhanced product offering. In addition, work continues on new transformational technology, such as a fermented carmine solution.
The increased consumer demand for natural and “clean label” products, combined with stricter regulation of the use of synthetic solutions in food and beverages, especially in the EU, has led to a conversion from synthetic colors to natural solutions.
In 2014/15, the conversion to natural colors continued in Latin America and APAC, while the European market experienced increasing penetration of more advanced natural color solutions. Conversion in the US remained slow, but major US food & beverage manufacturers continue to announce their intention to convert to natural ingredients, including colors, over the coming years.
Chr. Hansen sources a wide range of natural raw materials through a global sourcing network. During the year, Chr. Hansen continued its efforts to pass on expertise to selected raw material suppliers to improve standards and farm yields.
As a significant part of the raw materials, including carmine, annatto and turmeric, are fully or partly sourced in USD, developments in the USD exchange rate affected costs related to sourcing negatively in 2014/15.
Chr. Hansen created value for its customers in 2014/15 through innovative solutions to increase the stability and cost-in-use of natural colors, including new additions to the FruitMax® range of coloring foodstuffs , including:
To strengthen commercial focus and prepare for future growth, the Natural Colors Division went through a major reorganization during 2014/15, including a management change and integration of the sales and application functions.
Revenue increased by 10% to EUR 175 million, corresponding to organic growth of 9%, primarily due to strong growth in the prepared food, confectionery, dairy and meat categories, while revenue from the beverage category was at the same level as in 2013/14.
The Americas region showed strong growth, primarily driven by Latin America, while conversion to natural colors in the US market remained slow throughout the year.
The EMEA region showed solid growth, partly driven by anthocyanin and natural carotene products as well as increased penetration of the FruitMax® range of coloring foodstuffs.
Revenue across the APAC region was lower than in 2013/14, except in Australia and New Zealand, which experienced good growth from conversion.
EBIT amounted to EUR 14 million, compared to EUR 21 million in 2013/14. The EBIT margin was 8.3%, down 4.7 percentage points on 2013/14.
The decrease was primarily due to increased raw material costs as a result of the stronger USD, a negative effect from the reorganization, including one-off costs related to the management change, and increased freight costs.
The return on invested capital was 17.4%, compared to 26.2% in 2013/14. Invested capital increased by EUR 2 million, or 3%, to EUR 86 million.