Chr. Hansen expects e-commerce growth and “fully-focused” bioscience transformation

08 Jul 2021 --- Chr. Hansen has published its Q3 2020/21 financial results, reporting an overall 8 percent organic growth, but 0 percent organic growth in its Health and Nutrition segment.

This was “as expected” due to higher comparables as customers built safety inventories during lockdowns throughout the pandemic.

Within the Q3 period, Chr. Hansen’s Health and Nutrition segment reports €100 million (US$118.2 million) in revenue. In contrast, segment revenue during Q3 2019/20 was €74.9 million (US$88.5 million), but achieved 12 percent organic growth.

“It is a matter of looking in the crystal ball and understanding when this COVID-19 impact will be over. It’s very hard to judge, even though we were conservative,” CFO Lise Mortensen tells NutritionInsight. Chr. Hansen’s acquisitions have not yet counted into its organic growth reporting.

Building COVID-19-related safety inventories
Chr. Hansen’s Human Health segment was negatively impacted by large customers that adjusted their order volumes to reduce elevated stock levels and respond to slower demand. 

“The part of [the Human Health segment] that counts into organic growth is the more traditional channel where physical stores predominantly dominate in Europe. That is not back to any growth at the moment,” Mortensen explains.

European end-markets have not started to pick up, but Mortensen is confident that physical stores will come back once Europe “really gets on its feet.” 

Expanding in e-commerce
In the meantime, Chr. Hansen secured itself a “very promising” e-commerce channel with the acquisition of probiotics player UAS Labs. Here, Chr. Hansen’s growing online presence counts less into its organic growth calculations.

“[UAS Labs] is on full steam. We are happy about this because it proves that it was the right thing to acquire UAS and broaden our base. We will still cover the traditional market, it will still be there, but it’s very good to see that it picks up in the e-commerce channel,” Mortensen highlights.

Ultimately, Chr. Hansen will continue to “serve the markets where there is demand,” regardless of virtual or physical commerce ventures.

The year’s not finished
On top of the UAS Labs acquisition, Chr. Hansen purchased HMO specialist Jennewein Biotechnologie and women’s health company HSO Health Care throughout 2020.

“The acquired businesses will only count into what we call ‘organic growth’ after a full year,” Mortensen explains. “We need to cross the 12-month mark on UAS, but I can say across our acquisitions, UAS Labs is by far the biggest.” 

HSO and Jennewein also performed “very well” in Q3, Mortensen adds – “slightly better than expected.” Moreover, HSO and UAS Labs are already integrated into the Chr. Hansen business commercially, but the company is still working on the production side.

“We didn’t expect to have three acquisitions and divestment within the first year but we managed to do that,” says Mortensen.The company is transforming into a “fully-focused” bioscience company.

“This is the benefit of going into acquisitions in this space where we buy our way into different market channels. I don’t believe in these pandemic times that dietary supplements and human health will ever become unpopular.”

HMOs on the horizon?
Within the emerging HMO market, Chr. Hansen has received EU approval of its LnNt strain. While capacity expansion is in the pipeline, the company has not commercialized the product yet. 

“Of course, we are still excited about it, but there are a lot of steps before you get to the marketplace and see revenue rolling,” Mortensen flags. 

“We are cautious to report a lot of activity when in all reality, not a lot has moved over the past quarter on the commercial side. However, it is in the long-term plan.”

Clear company focus
Chr. Hansen’s broader aim is to transition into a “fully-focused” bioscience company. Toward this end, it divested its Natural Colors segment, now known as Oterra, to focus on microbial and fermentation technology platforms.

Overall, Mortensen confirms Chr. Hansen is “definitely” on track to achieve its 2025 goal of investing approximately three-quarters of its R&D spending toward NPD.

“We have set very high ambitions as to how we will commercialize our innovation. We benefit from a common technology platform across microbial and fermentation solutions, cultures and enzymes businesses.”

In previous NutritionInsight interviews, Mortensen revealed Jennewein acquisition speed bumps and APAC potential for HMOs regarding Chr. Hansen’s Q1 and Q2 financial reports, respectively.

By Anni Schleicher