THE acquisition of a US-based chilli pepper business (CPB) will give Olam International " new products and new customers" , said Olam International' s executive director A Shekhar, benefiting both acquirer and acquiree in terms of enhanced customer reach and product offerings.

 

" With the combination of teams, we will become a very important player in New Mexico," he said. " Through the combination of two plants and two agricultural teams, we will also become a significant player for growers and create more speciality crops that we can help them grow."

 

On Monday, Olam announced that it would pay US$108.5 million for the green chilli pepper business of condiments and sauces company Mizkan America.

 

The acquisition adds green peppers to Olam' s existing range of red pepper-based spices under the agri-food giant' s food ingredients unit, Olam Food Ingredients (OFI).

 

Green chillies have historically tended to be a more niche product, but Mr Shekhar said this is changing as Mexican cuisine becomes more popular in regions such as North America and Asia. With greater demand for natural food ingredients and bolder flavours, the green chilli segment is likely to grow.

 

Naturally, Olam will have to look at expanding its capacity if it wishes to tap into the rising demand.

 

Mr Shekhar said there is room to scale up CPB' s existing operations over the next few years, but beyond that period Olam would look to make some investments to increase capacity.

 

" We also have to match capacity on the growing side," he added.

 

The asset being acquired is one that Olam has had an eye on for several years, Mr Shekhar said. It came on the block as Mizkan is looking to focus on its downstream retail business.

 

Beyond cross-selling products across existing geographies and customers within the enlarged network, Olam hopes to also add green chilli spice products to its ingredient innovation platform - combining different ingredients to create new products.

 

For instance, OFI can now produce a nut-based cheese that has a jalapeno flavour kick, or try its hand at a mole sauce - a traditional Mexican chocolate sauce with chillies.

 

" There' s a greater need to understand consumer preferences in these categories, and a greater need to combine end user applications," said Mr Shekhar.

 

Innovating across ingredients and within product categories is something OFI is already working on but is now trying to accelerate. The company is a relative newcomer to this business, but is hoping to use its upstream integration to its advantage.

 

Where OFI differs from other ingredient innovators in the industry, said Mr Shekhar, is its ability to provide transparency across the entire value chain. OFI' s investments across the value chain allow it to offer information on " provenance and traceability" of the ingredients and processes used in developing a product, which is something that packaged food manufacturers as well as retail consumers increasingly want.

 

Following the re-organisation of Olam in January, which saw the group divide its diverse businesses into two distinct operating groups - OFI and global agri-business - Mr Shekhar said innovation has been a major area of focus for OFI.

 

" This is in terms of both deepening category understanding or building expertise, and then bringing a mix of ingredients together to create these solutions," he said, adding that the company will be putting " significantly more investments" in accelerating this further.

 

In order to bring new products to the market, OFI is collaborating with independent food innovators, kitchens and companies.

 

This open innovation approach is relatively unique within the industry, and Mr Shekhar hopes this approach will allow Olam to " leapfrog" its more established competitors.

 

Over the next five years, OFI will also look out for other potential acquisitions, both organic and inorganic, across its five business groups in a " cautious and deliberate manner" . These acquisitions will extend OFI' s product range, channels or capabilities.

 

" Whether times are good or bad, what you' re doing has to be strategically coherent and relevant," he said in response to a question on the group' s decision to make an acquisition during a weak macroeconomic climate. " Many times, the best values are probably achieved when you are counter intuitive to the rest of the market."

FOOD and agri-business giant Olam International on Friday announced the issuance of seven billion yen (S$89.8 million) of five-year sustainability-linked notes.

 

The senior notes were issued to the Development Bank of Japan via a private placement under Olam' s US$5 billion euro medium-term note programme.

 

The 2.05 per cent coupon rate on the notes may be reduced - via a tiered, one-time step-down adjustment - if Olam achieves the agreed sustainability targets linked to its purpose of re-imagining global agriculture and food systems.

 

Olam' s managing director and group chief financial officer N Muthukumar said this is the first sustainability-linked fixed-rate note deal in Asia ex-Japan.

 

Both the Development Bank of Japan and Olam believe that innovative financing solutions can create social and environmental impact, he added.

 

The new notes, maturing on Dec 11, 2025, complement the Singapore-listed company' s three existing sustainability-linked loans.

 

They are also the first sustainability-linked investment for the Development Bank of Japan.

 

Australia and New Zealand Banking Group was the sole manager, sustainability coordinator and swap dealer for the notes.

 

Proceeds from the issuance will be used for the Olam group' s working capital and general corporate purposes, including financing capital expenditure and potential acquisition opportunities.