Ingredion: More than a catchy name

by L. Joshua Sosland
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Ringing the opening bell on the New York Stock Exchange was an act rich in symbolism for Ilene S. Gordon, chairman, president and chief executive officer of Ingredion, Inc. Ms. Gordon participated in the daily ceremony at the exchange June 15 to mark the official name change to Ingredion from Corn Products International, Inc. and the ticker symbol to INGR from CPO.

The new name was approved 20 months after Westchester, Ill.-based Corn Products acquired National Starch for $1.3 billion. To Ms. Gordon, the new identity is crucial to helping the company’s constituents better understand what Ingredion does and positions the company for greater future success.
Ms. Gordon sat down for an interview with Food Business News June 26 while attending the 2012 Institute of Food Technologists annual meeting and food exposition in Las Vegas.

“The previous name just didn’t make sense for who we really were,” Ms. Gordon explained. “There was actually more confusion because we weren’t a commodity company or an ag company. The ag companies have a lot of their assets in origination and transportation, and they make money doing that. And we have never been in that part of the business. We’re an ingredient company. So we used the opportunity of bringing the two companies together to rename the company Ingredion.”

The company said it may be the end of 2013 before the new name and brand is fully unfurled globally, and Ms. Gordon has spent considerable time traveling to the company’s major locations as part of this process.

“We’ve been going through North America and making sure that people understand what we are trying to communicate,” she said.

While corporate name changes may be spurred by any number of factors, one influence clearly not in play in the case of Ingredion/Corn Products was weak financial performance. To the contrary, the company has enjoyed exceptional growth since Ms. Gordon assumed the reins in May 2009.

The company’s net income per share in 2011, before extraordinary items, was $5.45, up 226% from 2006. The company’s share price at the end of June 2012, at $49.52, was up 118% from when Ms. Gordon joined the company. Over the same period, the S.&P. 500 index was up 65%.

In the interview, Ms. Gordon was upbeat about the fit of the two companies that have come together to form Ingredion, citing the broad geographic footprint of Corn Products and an established reputation for innovation of National Starch.

Asked about challenges experienced in connection with the National Starch acquisition, Ms. Gordon said the integration “has actually gone very well.” She said the company was on track to achieve the $50 million of cost synergies associated with bringing the two businesses together.

“At the same time, we’ve taken the regional strength of Corn Products with the global innovation excellence of National Starch and brought the two together,” she said. “And that’s why we actually came up with a new name. It isn’t only that we are an ingredient company, but it’s a new company, the best of the two cultures.”

An international reach

Ahead of the acquisition, National Starch, owned at the time by The Netherlands-based AkzoNobel, had annual sales of $1.2 billion from sales of specialty starches to customers in the food, papermaking, consumer and industrial segments. The company’s workforce of 2,250 employees operated 11 plants in 8 countries, including new geographies for Corn Products such as the United Kingdom, Germany, Australia and New Zealand. Corn Products at the time was a global producer of dextrose and a regional producer of starches, sweeteners and other ingredients. The company had 8,000 employees operating 28 plants in 13 countries with annual sales of $3.7 billion. In 2011, the first full year the company was combined, Ingredion generated annual sales of $6.2 billion.

Even though the acquisition of National Starch instantly bumped up the Corn Products annual revenues by a third, Ms. Gordon said the aggressive pursuit of organic growth was a priority for Corn Products and will remain one for Ingredion. The key to success is identifying the specific opportunities that emerge in the company’s various geographic markets, she said.

For instance, Ms. Gordon said South America has been a target for capital investment with income growth and the expansion of the middle class there.

“So as an example, ingredients for the beer industry have been a big growth avenue,” she said. “At the same time we have been broadening our portfolio. In Europe, we’ve invested in facilities that make ingredients aimed at the clean label trend. So we have starches that are physically modified with heat as opposed to chemicals. Our customers are able to use our ingredients and print ‘starch’ on the label. That’s very important for them.”

Still, the addition of National Starch was important both for purposes of expanding the Corn Products ingredient portfolio but also to broaden the company’s global presence.

“We had never been in Europe, and (with the acquisition) we doubled our business in Asia,” Ms. Gordon said. “We will be looking to grow geographically in areas such as Asia.”

Partners in innovation

The acquisition of National Starch and creation of Ingredion have taken place at an opportune time for the ingredient business, Ms. Gordon said.

“Customers and food companies are more open, and some of them actually have outsourced some of their R.&D. to companies like ours, and that they expect to be more collaborative,” she said. “I think maybe what you are seeing is that the pace of innovation may be accelerating because the consumers want healthy foods. They want lower calories. They want more texture and flavor, and every food company will tell you we are not going to sacrifice on flavor. And so food companies they want to partner with ingredient companies like ours.”

Looking more specifically at where Ingredion stands out in the in the marketplace, Ms. Gordon cited sweetness and texture as areas of particular expertise. Customers are invited to the company’s technical center in Bridgewater, N.J., to craft a particular texture.

Elaborating on the challenge of using science to precisely find a desired texture was Jim Low, vice-president, marketing, U.S./Canada Ingredient Solutions, who said technological advances helping Ingredion meet customer needs have been considerable. With additions at the company’s texture center of excellence in Bridgewater, he said the company not only is able to find the texture the customer wants but is able to find the solution much faster than in the past.

“We have some tools to allow us to really rapidly develop new concepts and new products for our customers,” he said. “We start with Culinology, the marriage of the culinary arts and food science. In texture, we have developed Texicon, a language that can help translate from consumer language to precise, scientific measurements. And we have the only textural robotic experimenter in the world where we can rapidly analyze hundreds of samples in what would take scientists on the bench a long time to do, we can do it very rapidly to advance that innovation together with our customers.”

To meet customer needs to offer consumers value, Mr. Low said Ingredion is focused on finding ways to replace expensive ingredients with more economical alternatives while “making sure the sweetness and texture of the eating experience are the same.”

Ingredion takes a similar approach to other customer needs — taking existing products, and finding a way to enhance them, he said.

“It’s the same thing around nutrition,” he said. “We can help certainly fortify products with some of our nutritional offerings. We can also help reduce things that consumers perceive as negative. We can take out fat, we can take out calories, we can take out caloric sweeteners and replace them with other products so they can still get the same eating experience.”

A major corn sweetener supplier in the United States and abroad, Ingredion has a long history as a global ingredient supplier, Ms. Gordon said.

“In fact, we’ve been the leader in South America for over 50 years and that’s not just Brazil, but Brazil, Argentina and Colombia,” she said. “When the company was part of CPC and then split off, CPC was a very global food company. And so, today 52% of our company is outside North America, 70% is outside the U.S. and that ratio has been there for a number of years.”

Ms. Gordon was quick to dispel possible misperceptions about Ingredion and its corn refining legacy. Corn sweeteners do not account for a large proportion of Ingredion business, and corn refining is not a struggling business, she said.

“Corn sweeteners for the beverage industry actually are only 14% of our total company sales,” she said. “And high-fructose corn syrup is one out of a thousand ingredients. We actually only participate (in) the HFCS market in five countries, and three of those are in North America. Now in terms of North America, because North America includes Mexico and we’ve had NAFTA, you’ve seen operating rates to be strengthening over the last year or two. As Mexico has grown both in G.D.P. and the middle class, it’s really strengthened the whole supply/demand situation. And of course, sugar is more expensive than high-fructose corn syrup, and so the beverage companies have chosen a blend of the two. Many of the food companies, especially in the U.S., that switched from high fructose to sugar for their marketing image, are switching back because they don’t want to pay the premium, and it didn’t really grow the brand. Because basically, the products (HFCS and sugar) are the same.”

The corn refining industry, led by the Corn Refiners Association, has been leading an aggressive campaign to counter criticism of HFCS. Ms. Gordon said the message being conveyed by the corn refiners is an important one, and one that has gained some traction.

“Our industry is not trying to say we are better or worse than a competitive product, but rather that it’s all about balance for consumers and caloric intake,” she said. “I think we’ve worked hard to say that we are no different than sugar in terms of who we are, and I think we’ve been successful in communicating that. At the same time, you know, there are certainly people who will run ads to position their products in a little different light.”

A graduate of the Massachusetts Institute of Technology with a bachelor’s degree in mathematics and a master’s in management, Ms. Gordon had no experience in the food ingredient industry before joining Corn Products International in May 2009 as c.e.o. She said she found the transition from Alcan Packaging, a $6.5 billion business she led from 2006 until 2009, to be a natural one.

“In packaging, it’s all about how you deliver value to your customers,” she said. “Many of my customers were the food and beverage industry, so it was a similar challenge. Of course in the ingredient business, what I was drawn to was a very successful company with long standing history, great values and a great quality image among its customers. It’s a very global company with a great balance sheet. So what attracted me was the opportunity to really help lead this company into the next chapter, to be a $6.2 billion dollar company, No. 390 on the Fortune 500.

“It has really been a great three-year journey and we look forward to our ability to continue to grow,” she said. “Food companies are looking at us as a partner, and maybe even a new partner now that they see this ingredient company with a new name that says exactly what we are — a great partner to help them develop new products they need to be successful long term. So we are at a very great moment for our company and for our customers.”

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