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Moving a Fortune 50 company into functional foods

From commodities to higher-value offerings

Our Client's Challenge

Our client, a Fortune 50 company, sold commodities. Most of its business was characterized by slow growth, low margins, and a lot of volatility (caused by fluctuations in commodity prices). They were searching for opportunities that could provide sustainably higher growth rates and higher margins. Based on certain of their core strengths, they became interested in functional foods, and were thinking about selling functional food ingredients. Their question, therefore, was:

Can we build a profitable business selling functional food ingredients, and if so, how?

Our client viewed this move as potentially part of a strategic transformation of their entire company. Their project leader felt that this project was very important, as he had to present our work to their Board of Directors.

Scientia Advisors' approach

Our approach was to answer two over-arching questions:

• Which markets are most attractive for you?
• Which acquisitions will best fill out your aggressive strategy?

We assessed the field of functional ingredients for their scientific soundness, and eliminated those ingredients that lacked high-quality clinical support. For those ingredients that we did not eliminate, we assessed market sizes, growth rates, and competitive opportunities, and selected several attractive markets.

Then we asked: "What does it take to win?" After studying other company's efforts, we identified successes, failures, and the reasons why. This led to a set of key success factors. Comparing those requirements to our client's capabilities allowed us to determine where there were gaps. It became clear that the best way to successfully enter the field was via a series of strategic acquisitions.

Scientia Advisors identified the acquisition targets that best fit the strategy, and conducted due diligence on those companies. Scientia Advisors developed pro forma financial forecasts (based on market share capture models) for the various acquisition scenarios.

The Results

Our client's project leader made a convincing case to the Board of Directors that they could undertake a transformational strategy and become a global supplier of functional food ingredients. Scientia Advisors' work:

• Showed the Board why
• Showed the Board how
• Provided solid insights, backed by very detailed analysis of mountains of data

The Board approved the strategy and authorized the acquisitions.