MARKET DEVELOPMENT
19-06-2001
ADM plans launch of `fat-reducing' vegetable oil
Chicago Tribune (soyatech.com): Jun. 13--Archer Daniels Midland Co.,hoping to tap a growing market for health-oriented foods, is pressingahead with plans to launch a "fat-reducing" vegetable oil in the U.S.The Decatur-based grain-processing giant is joining forces with Japan'sKao Corp. to produce a cooking oil they contend is less likely than otheroils to be stored in the body as fat. The product, to be sold under anas-yet-undetermined name, is designed to let overweight Americans havetheir cake and eat it too.The oil ADM hopes to roll out in the U.S. is metabolized by the body in amanner different than other fats, ADM said. That quality, the companyemphasized, makes it significantly different from Procter & Gamble'sfake-fat olestra product, which was designed to pass through the human gutlargely undigested.Since P&G spent hundreds of millions of dollars to develop olestra, theproduct has had disappointing sales--in large part because of consumerconcerns over unwelcome gastrointestinal problems the product occasionallycreates.ADM, which has much more modest early-stage sales targets in mind for itshealth-oriented cooking oil, said the ADM/Kao product doesn't createsimilar side effects.Kao scientists developed the oil, and the Japanese company currently sellsit in Japan under the brand name Healthy Econa."In two years, it went from a laboratory product to the largest-sellingcooking oil in Japan," an ADM spokesman said.On Wednesday, ADM and Kao are expected to announce that they've formed anequally owned joint venture to produce and distribute the oil in the U.S.,Europe and certain other markets outside Japan. The venture will constructa pilot plant in Decatur, which will begin producing the specialized oilby November, according to the two companies.The product can be made using either soybeans or the oilseed known ascanola."We believe that DAG can become a major new product line for ADM," saidADM's president, John D. McNamara. Initial market forecasts, he said,indicate product sales could reach $150 million annually.But ADM and Kao are moving relatively slowly, waiting for certain U.S.regulatory clearances that the partners think will broaden the potentialmarket. "We've seen others get ahead of things in terms of marketdevelopment," said spokesman Larry Cunningham, in a laconic reference toP&G's ill-starred olestra rollout.ADM doesn't expect to introduce the oil before late 2002, and officialshaven't put a figure on the long-term sales potential for the oil, saidthe executive vice president, but "we know it's something that could makea significant contribution to the bottom line."For ADM, which generated total sales in the latest fiscal year of $12.9billion, a one-half share of the projected $150 million in sales wouldrepresent only a slight financial impact. But the joint venture increasesthe commodity-processor's nascent bid to push into the higher-marginconsumer segment.The alliance also increases ADM's presence in the still-evolving butpotentially lucrative market for "functional foods," in which foodstuffsare altered or enhanced so that they offer not just healthy nutrition, butspecific health benefits.Oat-bran cereals are already marketed for their ability to reduceblood-cholesterol levels, for example, and Johnson & Johnson makes thesame cardiac-health claims for its cholesterol-lowering Benecolmargarine-like spread.ADM currently produces a soy protein that some food makers use as anadditive in making nutraceuticals, including a food product aimed athelping women avoid developing osteoporosis. But to date, it hasn't solddirectly to consumers."If (the oil) is marketed even reasonably smartly, it could be incrediblypopular, Brian Wansink, an associate professor and food-marketing expertat the University of Illinois, told Dow Jones newswire recently. Wansink,who thinks the product could prove helpful to U.S. soybean farmers, alsosaid the oil "could be one of the biggest things to happen to the soyindustry in 15 years."The oil ADM will begin co-marketing with Kao is produced through a processthat substantially increases the amount of a naturally occurring compoundknown as diacylglycerol, or DAG. Because DAG is metabolized in the bodydifferently than other oils, ADM contends, the product is more likely tobe burned for energy rather than stored as body fat.In fact, ADM said, clinical studies conducted in Japan have suggested thatDAG oil in fact "may increase overall metabolism, helping to reduce theamount of fat already stored in the body."Such assertions underscore why nutraceuticals remain a controversialelement in the food industry. Drugs developed by pharmaceutical makersmust go through years-long studies that prove to the satisfaction of theFood and Drug Administration that the compound is not just safe, buteffective as a treatment. In contrast, products sold as food--even thosethat make limited health claims--don't have to clear such hurdles, andneed only be certified as safe to consume.The FDA ruled several months ago that Kao's DAG oil is "generallyrecognized as safe" in a crucial designation that cleared the way forlimited sale of the product in this country. The FDA's ruling permits saleof the product as a cooking oil and as a spread; the agency hasn't yetcleared the product for use in food processing, a segment AMD considersone of the most promising potential markets.The venture to be announced Wednesday, which fulfills a tentative letterof intent the two companies signed earlier this year, aims to use thestrengths of each partner, ADM said. According to McNamara, the president,ADM's principal contribution will be "our access to key markets and (our)vast production capabilities," while Kao's will be the technology itsscientists developed.ADM declined to provide details on how much financial funding the venturewill receive
