DSM establishes Inner Mongolia hydrocolloid facility to meet Asian demand for healthier foods
The company, together with Zhejiang Haixing Investment, recently acquired a majority equity stake in Inner Mongolia Rainbow Biotechnology, which has since been renamed DSM Rainbow (Inner Mongolia) Biotechnology (DRB).
This adds to DSM's and Haixing's existing 60-40 joint venture in gellan gum, DSM Zhongken Biotechnology in Zhejiang province.
DSM will own 65% of DRB's shares, while Haixing will own 27%; DRB founder Gu Li Quan will own the remaining 8%.
With much of Asia looking to consume 'clean label' foods lower in fat and sugar, DSM has expressed its intentions to meet this need via its food hydrocolloids, used in the thickening agents like gellan gum, one of the company's products.
Its main customers in this aspect are the dairy, confectionary and beverage sectors.
Speaking to us at DRB's inauguration ceremony in Chifeng, DSM's executive VP of Corporate Strategy and Mergers & Acquisitions Philip Eykerman said, "People want food with less sugar and fat, and for that, you have to rethink the texture and structure of food.
"It's a good opportunity to rethink the sort of hydrocolloids one is using. Our hydrocolloids are naturally produced, which is a good solution for what people are looking for these days."
DSM Rainbow is situated along the China-Mongolia-Russia Corridor of the Belt and Road Initiative, which was chosen for a host of reasons.
Eykerman said, "This site is located in what will be a national industrial zone, which is very important to us. The region will be a biotech hub, and there are already a number of other biotech companies there.
"In terms of geography, it's close to the dairy activities in China, and benefits from the area's low energy costs. There's a whole series of advantages to being located here."
Growth and diversification
In addition to gellan gum, DSM Rainbow will apply its hydrocolloid production to the development of xantham gum and welan gum.
Eykerman told us: "There's still quite a lot of work to be done to bring this facility to the standards we would like it to reach, and we'd like to go into new areas, in addition to gellan gum. There is some expansion opportunity at this particular site."
He added that there were 120 employees at the facility with "very strong processing capabilities".
"We have very broad know-how that includes bio gums for different applications, and applying this know-how to healthier eating is an interesting growth area.
"The prime goal is to grow. We want to be the fastest-growing natural gum producers in the world. With our portfolio and our geography, we are very well placed to meet our objectives."
DSM China president Jiang Wei Ming told us: "The APAC food industry has tremendous potential. Traditionally, most Asians prefer food that is not too sweet or salty, so our hydrocolloid business fits the market well.
"Japan has been very quick (to innovate) in this area, but countries like Singapore, Taiwan and even China are following closely."
He also said, "I believe DSM won't be the only player (on the market). I don't mind having competition; I just want people to believe in the industry.
"Of course, we hope to be the best, and I'm personally confident we can be."
The company also aims to incorporate a higher level of sustainability in its practices at its new Chifeng facility.
Jiang said: "Northern China has a water shortage and as a rule, we don't use underground water; we use surface water."
He added that DSM in China aims to be fully sustainable within the next decade, saying it would be "difficult, but it can be done".
"It won't just be for water, but for energy. We want to rely more on solar energy and, every year, we invest a lot of money into upgrading our processes. It's not a one-time payment but a continuous investment.
"China has changed a lot in the last 10 years. (There used to be) many more irresponsible manufacturers using cheap labour and polluting the environment but now, there's much more sustainability."
He said the country's industry standards are increasing, with more companies using their resources more efficiently, affording employees better working and living conditions.
"It's a very encouraging change and in the last two or three years, it has been radical and accelerated."