USA: Cargill explores options to exit malt business

Cargill, the largest privately held corporation in the United States and the world’s third-largest maltster with a combined malting capacity of about 1.55 million tons, is exploring options to exit the malt business. Bloomberg cites today undisclosed sources close to the company that “the Minneapolis-based company is studying possibilities including a potential divestment of part or all of its malting operations globally.” The value of the business is estimated at more than $1 billion.

Cargill has operations in 8 countries on 4 continents. The EU (with operations in Belgium, Spain, Germany, France and the Netherlands) and Argentina each account for about 30% of the total production while Australia makes up about 25% and Canada the rest with 15%. In the last 10 years Cargill closed operations in USA, Russia and Australia with a combined capacity of more than 700,000 tons of malt. The latest announcement was the closure of Cargill’s 440,000 t Spiritwood plant in North Dakota by the end of October 2018, which had been up to date one of the largest malting plants in the world. (inside.beer, 17.4.2018)

In the last years other leading malting groups increased capacities or extended their reach with new production facilities in other countries.

Malteries Soufflet, the world’s largest malting group, announced in October 2016 to buy a 4-year-old malthouse in India, its first foray into the Asian market. In May 2017, it became known that Soufflet will buy the remaining 30% of its malthouse in St. Petersburg, Russia, from the country’s leading brewer Baltika (inside.beer, 29.5.2017). And finally in June this year, Soufflet said it would build a new 60,000 t malting in Ethiopia (inside.beer, 13.6.2018).

Likewise Boortmalt, the world fifth largest maltster, announced last year to set up a new 60,000 t malting plant in Ethiopia, to increase its Antwerp malthouse by 120,000 t to 440,000 t (inside.beer, 8.2.2017) and to increase production capacity at its Athy malting, located 80 km southwest of Ireland’s capital Dublin, by 30,000 t. (inside.beer, 9.11.2017)

Latest production increases by Cargill e.g. in Argentina are already more than 5 years ago and were more than offset by the aforementioned closures.

With increased consolidation of the global brewing industry, malting has become increasingly a high-stake game, where capitally strong, long-term-oriented investors, which are strongly rooted in the agribusiness, dominate the business. All of the five largest malting groups have a strong background in farming and trading of grain and other agricultural commodities or are directly owned by agricultural cooperatives.

Also, Cargill started in 1865 as a grain collector and trader. In the second half of the 20th century Cargill expanded into downstream production, like milling, starches and syrups. In 1979 Cargill entered the malting business and acquired in the following years Malteries Leon Dreyfus from Belgium (1984), Hendrickx Crijns in The Netherlands (1986), 2 malt plants from El Aguila Breweries in Spain (1989), Ladish Malt in the USA (1991), Schreier Maltings in the USA with a 58% stake in Prairie Malt, Canada (1998), and Joe White Maltings in Australia (2013). In addition, the company built new maltings in France (1988), Germany (1994), Argentina (1998, 2006 and 2009).

Today Cargill is an international conglomerate with diverse interests in agriculture, animal nutrition, beauty, bio-industrial, food & beverage, industrial, food service, meat & poultry, pharmaceutical, transportation and risk management.

In 2018, Cargill plans to have sales of US$ 114.7 billion (up 5% from the year before) with net earnings of US$ 3.1 billion (+9%).

As the company diversifies its business more and more the focus of the business has shifted to other areas of interest. In addition, malting is a highly volatile and partly low-margin business, which makes it not very attractive to investors from outside the agricultural business.

Since the departure of Cargill’s long-standing president and global managing director of the malting division Doug Eden in June 2015, who served in this position for more than 15 years, the company has seen two changes in the last 4 years with Sabine Sagaert based in Mechelen, Belgium, serving a little more than 2 years in this position and Jennifer Shomenta Maki heading the division for the last year again from Minneapolis, Minnesota.

When asked about a possible divestment of the malt business, Cargill told Bloomberg in an emailed statement: “We believe in the long term success of the malting industry. At any one time our malting business is assessing initiatives--including potential partnerships with other companies--to further progress our business strategy.”

 

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