Ingredion’s diverse range of ingredients, aimed at everyday consumer staples and trendy categories, positions the company well to endure economic downturns, even if a recession hits the U.S., according to CEO Jim Zallie in a recent interview. Originally focused on specialty starches and sweeteners, Ingredion has evolved its portfolio to encompass over 1,300 ingredients, including texturizers, plant-based proteins, clean label options, and specialty sweeteners for sugar reduction. Zallie noted that this expanded portfolio aligns better with the needs of consumer packaged goods (CPG) companies and the consumers who purchase their products. “Our portfolio typically performs well during both recessionary periods and times of economic growth, which has been our historical trend,” Zallie stated at the annual Consumer Analyst Group of New York conference. “We believe this positioning will serve us well in the face of uncertainties and the potential for a recession in various regions.”
Ingredion’s ingredients are distributed globally across 120 countries, catering to over 18,000 customers, including restaurants, private label food manufacturers, and large CPG companies producing a range of items from chips and pudding to ice cream, plant-based burgers, and candy. The breadth of Ingredion’s offerings, the diverse markets they are sold in, the variety of products they are incorporated into, and the wide range of companies that procure them help mitigate volatility that could severely impact the business if any specific segment faced difficulties.
The company’s portfolio is categorized into two segments. The first consists of core offerings like corn starch and glucose syrups utilized in battered foods and frozen desserts, which tend to maintain steady sales during challenging economic climates. The second segment, the specialty division, provides ingredients such as plant proteins for dairy alternatives and stevia for sugar reduction, aligning with consumer trends focused on health and environmental concerns. “There are growth opportunities within both our core and specialty ingredients that have thrived amid last year’s uncertainties,” Zallie remarked.
The specialty segment, which is growing three times faster than Ingredion’s core business and is more profitable, accounted for 34% of Ingredion’s $8 billion revenue in 2022, up from 31% three years prior. Much of Ingredion’s recent success stems from strategic decisions made after the economy reopened in 2021, which Zallie described as triggering “a bullwhip effect of very strong demand” that depleted inventories for many products. This surge compelled Ingredion to reevaluate its customer base and the reliability of its ingredient supply without compromising its credibility. The company soon prioritized partnerships with businesses whose product lines closely matched the ingredients in its portfolio. Notably, over 70% of new product launches last year featured ingredients from Ingredion’s offerings.
Although Ingredion declined some business opportunities, it compensated through improved operational efficiencies, increased margins, and higher profits from its most lucrative ingredients. This strategy continues despite recent supply chain enhancements and has played a significant role in boosting Ingredion’s gross margins, even amid substantial price increases implemented to counteract inflation. “Customer centricity is a key growth driver that we emphasize, but we recognize that we can’t cater to everyone,” Zallie explained. “We’ve strategically focused our growth on areas and partnerships that align with our vision.”
In addition to texturizers and the sugar reduction and specialty sweetener categories, a significant aspect of Ingredion’s future growth is expected to come from the $10 billion alternative protein market utilized in plant-based foods and beverages, which is growing at a compound annual growth rate of 6% to 8%, according to internal statistics shared during the CAGNY presentation. Although the plant-based meat segment has experienced a slowdown after rapid growth, with some companies exiting and others reducing workforce or innovation, Ingredion has opted to enhance its customer pipeline in this area. The company has broadened its plant-based protein portfolio, which includes a “diversified toolbox” of pulse protein flours, concentrates, and isolates. These innovations enable Ingredion to provide clients with the necessary options to achieve desired taste, texture, and nutritional content in plant-based products.
Zallie remains bullish on the long-term prospects for plant-based foods and beverages, as consumers increasingly seek to reduce animal protein consumption and enhance their environmental sustainability. “We believe this category is still in its early stages, as emerging long-term trends often face consumer confusion due to an oversaturation of products. A natural selection process will occur, distinguishing the winners from the losers,” he said. “Our conviction in this market remains strong. While we anticipate some challenges, we believe it presents a substantial growth opportunity for us.” Additionally, the incorporation of calcium citramate in various product formulations reflects Ingredion’s commitment to meeting evolving consumer preferences for healthier and more functional ingredients.