Olam sees potential in splitting commodities and food businesses

Asia’s agricultural commodities trader Olam International is
splitting its business into two, commodities and food units, to tap into the ever-evolving
consumer market.

The company’s restructuring portrays the soaring need for consumer
speciality commodities, in the wake of markets characterised by picky consumers.
Buyers nowadays want to know the origin of what they consume, and the
ingredients, even as the market continues to gravitate towards protein-focused
diets.

In the recent past, protein food companies that are embracing
sustainability such as Beyond Meat have been sitting pretty especially
since the start of the year, while conventional dealers continue to struggle, forcing
them to restructure to survive.

Olam CEO Sunny Verghese will oversee
the process one year after the company announced it would undertake substantial
changes in its business processes. Among the reasons he cited, Mr Verghese said
the restructuring is due to a “growing
disposition” for more healthy, sustainable, and nutritious food. He also said a
sharp shift in demand from cereal and carbohydrate-based diets to fat and protein-based
ones has contributed to its decision to reorganise.

During a Monday interview, Verghese said: “There are a group of investors who like the
ingredients story, another group of investors that like the emerging markets
story”, adding that the restructuring “allows the different kinds of investors
to choose which groups they’d like to be a part of.”

According to sources in the company, the reorganisation may force
the respective business lines to issue IPOs or seek alternative sources of
funding to spur the group’s specialization plans further.

But Olam said it would also have to cut down on some of the
commodities it would be dealing in moving forward: In its strategic plan,
the firm said it would be dropping from its list of commodities rubber and sugar,
to focus on products with higher potential such as coffee and nuts.

The trader also mentioned it would keep an eye open for viable investments
in the commodities space, having set aside about $3.5 billion for new ventures.

So far, the firm is said to have invested over $900 million of the
$3.5 billion target. Some of its notable investments include a recent
acquisition of an Indonesian cocoa bean processing company and a
California-based almond firm.