Chr. Hansen optimistic about long-term potential of probiotics as antibiotic replacers

By Jane Byrne contact

- Last updated on GMT

© GettyImages
© GettyImages

Related tags: North america, Livestock

The Danish company reported strong organic revenue growth of 10% in the first three months of its FY 2017/18 - September 1 to 30 November 2017.

Organic growth for the first three months of 2017/18 in Chr. Hansen's health and nutrition division was also 10%, corresponding to a revenue of €48m, all from volume/mix, compared to €46m in Q1 of the prior year.

Animal health delivered strong growth, while human health showed modest growth.   

Outgoing CEO, Cees de Jong, said the company has lowered its expectations for organic growth in health and nutrition for the full year due to the challenging market conditions for cattle in North America.

Swine and silage segments 'strong'

FeedNavigator spoke to Chr. Hansen CFO, Soeren Westh Lonning, to hear more.

“We saw generally strong sales within the silage and swine segments, we saw reasonable sales in the poultry business, but continued tough conditions for the cattle segment, especially beef cattle in North America.”

The company is seeing ongoing regularization of market conditions. “There has been gradual improvement [in that regard] over the past four to five quarters for us.”

In terms of the poultry market, growth varies by region, he said.

“There was solid growth in the poultry segment in North America; in some other geographies, such as in Latin America, we saw weaker development. In certain markets, where we rely on distributors, you might see a little bit more quarterly fluctuation.”

The cycles are longer in the beef segment in North America, so it takes a while to get recovery in that market, he said.

In January 2016, Chr. Hansen acquired a US microbial technology developer, Nutritional Physiology Company (NPC), for $185m. Kansas based NPC’s portfolio included probiotics mainly focused on the feedlot and dairy cattle segments.

“In hindsight, perhaps, we didn’t buy at the right time during the cycle, and that affected, partly that acquisition, but also our animal health business. Sales are progressing better than they were a year ago but we are still seeing a little bit of softness in that particular segment. The case for making the acquisition, nevertheless, is still intact. We have been able to extract synergies to compensate. For example, one of the drivers for our increased silage sales was that new customer base.”

Probiotic potential 

The market for microbial-based solutions for animal health is developing well, and that is due to the increased focus on reducing the use of antibiotics in livestock production, he said.

“The percentage of chickens that has been reared entirely without antibiotics has increased a lot over the past two years - in North America we see it has moved from 10% to around 40% in that time.

“Poultry is the category that we had expected to see the fastest penetration of probiotics as replacement of antibiotics and that has definitely been the case. It also attracts more competitors given that it is a consolidated market and due to the fast production cycles. Those two factors go hand-in-hand.”

Looking ahead, the company expects increased penetration of other species categories in relation to the use of probiotics as substitutes for antibiotics.

“We fundamentally believe we need to find alternatives to antibiotics in livestock production. Probiotics are one of the best alternatives, and we are very optimistic about the long-term potential of this category.

“We have soft launched a new product for poultry, which is a combination of three different bacterial strains to address multiple challenges in one product. That will help us differentiate further in the market and drive sales growth going forward.

“We are also very focused on building that pipeline for further growth opportunities.”

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