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October 5, 2011

Cargill Increases Focus on Latin America

CargillBrazil has recently become an important focus of investment for Cargill as it looks to build its already fast-growing ingredients business in that country and the wider Latin American region. Earlier in the year, it announced plans to build a new corn processing plant for starches and sweeteners in Brazil, which will involve an investment of R$350 million and will add a further 30% to its corn crushing capacity in South America. This follows Cargill's R$197 million investment in one of its existing Brazilian plants in 2010, which increased that site's capacity by 70%.

Latin America outpaces global market

The move comes as Brazilian and wider Latin American demand for starches and sweeteners continues to flourish. Forecast growth rates for the corn-derived ingredients that Cargill sells in Latin America show that growth in the region is outpacing global growth rates in most categories. For example, polyol sweeteners in Latin America are forecast a CAGR of 3.4% over 2010-2015 compared with 2.6% worldwide, while other corn-derived sweeteners (including dextrose, maltodextrin, maltose syrup and glucose/corn syrup) are forecast a 3.2% CAGR in Latin America compared with 2.8% worldwide. Native starch is the only category in which global sales are growing faster than in Latin America, although the latter's market for modified starches is very strong.

It has been reported that the new plant will also allow Cargill to expand its product range in Latin America, using technologies from other sites around the world to create new products for its Brazilian and other regional customers. A notable absentee from Cargill's Latin American portfolio is high fructose corn syrup, which has been facing tough times in North America but remains strong in Latin America with forecast growth of 2% over 2010-2015, compared with a global increase of just 0.4%. It remains to be seen whether this might also be included in the product range for the new Brazilian plant, which is scheduled to be up and running in 2013.

Innovation facility to serve increasingly important customer base in Latin America

In addition to the investment in a new corn processing plant, Cargill has also been dedicating funds to its R&D activities in Brazil. During 2011, the company has opened a new advanced technology and innovation centre in Campinas, São Paulo, following an investment of R$20 million. This facility features multiple laboratories and services for customers in the beverage, baking, confectionery, convenience foods and dairy categories and covers innovation for the entire food ingredients portfolio.

Latin America was Cargill's fourth most important regional market in 2010, accounting for 12% of total revenues, behind North America (37%), Asia Pacific (25%) and Europe (19%). However, the company has stated that this regional business is growing rapidly and it is certainly supporting this growth through investment.


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