Tate & Lyle to acquire dietary fiber business in China for $237M

Dive Brief:

  • Tate & Lyle is spending $237 million to purchase Quantum Hi-Tech (Guangdong) Biological, a prebiotic dietary fiber business in China, from ChemPartner Pharmatech.
  • The ingredients provider said the acquisition is aligned with its goal to become a growth-focused food and beverage solutions company while strengthening its position as a player in the rapidly expanding global dietary fiber market.
  • Prebiotic dietary fibers play a major role in supporting digestive health by helping good bacteria grow in an individual’s gut. These ingredients are increasingly being sought after by food and beverage manufacturers, as well as consumers turning to better-for-you offerings to improve their physical and mental health. 

Dive Insight:

As COVID-19 has shown, shoppers care about what goes into their bodies more than ever and they are placing a greater priority on products that contain functional attributes such as prebiotics.

Some brands have even made prebiotic fibers a focal point in what they sell. PepsiCo’s KeVita has Prebiotic Shots it claims are the first of their kind on the market. Better-for-you soda brands Olipop and Poppi tout the use of prebiotics in their drinks. Functional food brand Uplift sells bars, powders, puffs and other products loaded with the ingredient. Mondelēz International took a minority stake in the company in 2019. And Clif Bar’s Luna brand uses it as well, citing research noting its positive impact on the gut.

Prebiotics, which are found in many fruits and vegetables, are not actually digested by the body but rather they pass through the digestive system where they become food for the bacteria and other microbes. An estimated 70% to 80% of immune cells are found in the digestive system, according to research, with those guts that are the healthiest typically receiving a diet of plant foods high in fiber.

As people look to increase their intake of functional ingredients while curtailing consumption of things such as sugar, companies like Tate & Lyle are shrewdly bulking up their portfolios to reflect this shift. When food companies look to add a new product that incorporates plant-based ingredients, clean label or functional additives, those businesses that supply them need to dabble in many of these areas at the same time and have a diverse portfolio.

The acquisition is “very much in line with our purpose to support healthy living by improving gut health, and driving sugar and calorie reduction and fibre fortification for consumers across the world,” Nick Hampton, Tate & Lyle’s CEO, said in a written statement.

The transaction is expected to close in the second quarter of this year.

The acquisition comes as Tate & Lyle considers splitting itself into two entities: Food & Beverage Solutions and Primary Products. Food & Beverage Solutions is the division that produces Tate & Lyle’s newer ingredient innovations, including sugar and calorie reduction, adding fiber and texture, and stabilization. 

Ahead of a potential split, Tate & Lyle has been bolstering the Food & Beverage Solutions division through deals and acquisitions.

In 2020, it purchased stevia producer Sweet Green Fields and an 85% stake in Thailand-based tapioca maker Chaodee Modified Starch. The deals brought new options to Tate & Lyle’s ingredients portfolio, both in terms of ingredients and function as well as sources. The Quantum acquisition adds further heft to the division that could make it a more sought-after partner should Tate & Lyle decide to move forward with a separation.