October & November 2003

It's On - but fasten your seatbelts

The deal is on but it has taken forever to finalise. The initial announcement that DSM would take over Roche Vitamins made in early 2002, was followed by second thoughts, renegotiation, third thoughts but in September 2003 the deal was finalised. A sigh of relief by all that Roche Vitamins is no longer in limbo - separated from its old parent and not yet adopted by its new parent.

Roche Vitamins brings two new product sectors to DSM: vitamins [every vitamin except niacin and vitamin B12] and citric acid [surface fermentation plant 'Citrique Belge]. Several other Roche Vitamin products are also made by DSM, including carotenoids, PUFAs and feed enzymes. At the request of the EU Competition Authority the feed enzymes sector of DSM/Roche has been re-structured resulting in an integration of the feed enzymes activities of DSM, Roche and Novozymes. BASF who acted as distributor for DSM feed enzymes has separated and will go its own way, possibly setting up its own manufacturing plant for feed enzymes.

Despite weak prices in vitamins, volume continues to increase largely due to demand from the feed and dietary supplements sector. DSM is bound to face a rocky path and must reach a clear strategic decision whether to manufacture every vitamin or act as distributor for Chinese-made products. Vitamin C will need yet more cold strategic thinking. Should DSM develop the microbial route that Roche embarked upon or revert to the safer traditional Reichstein synthesis from sorbitol. For further aspects of vitamin production and distribution in our survey: Vitamins - Production, Producers, Processes, Markets and Outlook by 2010

What about citric acid? Is it worthwhile continuing to operate the Belgian plant in the face of the price collapse. Maybe now is the time to bow out of this business? Further information can be read in our survey: Citric Acid - Markets, Producers, Applications, Prices and Process Economics

The feed enzymes business has a rosy future for DSM in its position as market leader although prices continue to be under pressure. DSM is involved in a broad range of enzymes for foods, ranking as no. 3 in the global industrial enzymes business. This has grown at an annual rate of 4-5% p.a for the past years and is likely to continue thus.

Unlike vitamins where Chinese companies control 20-30% of the market, in industrial enzymes Chinese companies account for a marginal share of the business. There are only two noteworthy Chinese enzyme companies controlled by Novozymes and Genencor. Maybe this is the secret why cut-price products don't flood Western markets. Our survey: Industrial Enzymes for Starch, Dairy, Detergents, Baking, Textiles, Foods - Current Status and Outlook by 2010 analyses this sector.