Hochdorf Could Buyout Swiss Baby Food Specialist Pharmalys After Taking Majority Stake

26 Jul 2016 --- Hochdorf, the Swiss dairy, ingredients and baby food provider, is to acquire a majority stake in Pharmalys Laboratories, one of its biggest baby care customers, and could further increase its stake in the baby food specialist over time.

The Swiss company has signed a memorandum of understanding with Pharmalys, also of Switzerland, as it looks to grow its baby food division.

The division currently accounts for around 110,000 CHF ($111 million) in annual sales, compared to its core dairy ingredients division which makes up 415,000 CHF ($421 million) in yearly sales.

Speaking to NutritionInsight, Marcel Gavillet, (pictured) Hochdorf CFO, said acquiring the majority stake in Pharmalys, thought to be a 51 per cent stake, will mean it can become a significant player in the business-to-consumer market.

He said: "We do not want to stay a white label producer. We want to become a B2C (business to consumer) business."

According to Gavillet, Hochdorf had several discussions with possible acquisition targets before settling on Pharmalys, a private business which is one of its biggest baby care customers. Financial details of the stake have not been disclosed.

Gavillet said Hochdorf could in the future increase its stake or perhaps even buyout Pharmalys.

He said: "This is absolutely possible. The owner of the target is a private person. It absolutely possible perhaps in five, six, seven, eight years Pharmalys decides to become a little bit smaller. Then it is absolutely possible that we can increase our pot. We have the first right of refusal.”

"For Pharmalys it [the deal] is a good thing because its promotes its products with Swissness [originating from Switzerland]. It is dependent on us because in Switzerland there is no other producer except Nestlé and Nestlé doesn't produce white label products. So if you want to sell Swissness then you have go together with Hochdorf."

"So for Pharmalys it is a good thing as it can secure its supply and for us it's a good thing because we become closer to the customer."

Pharmalys currently has over 500 staff globally and Hochdorf is expecting to grow headcount with the promise of no job cuts.

Gavillet said: "This number can increase because Pharmalys expects to grow. It gains each year one or two countries. I expect it will become bigger in the future and will also increase the number of staff.”

However, it is unlikely that Hochdorf will now go on a spending spree with further targets line up.

"We have nothing in the pipeline," the CFO said.

Speaking more broadly about the baby food and ingredients market, Gavillet said: "In the division of the dairy ingredients is it is a very difficult market. We have a plant in Germany, and one in Lithuania, there the market in the European community is very, very difficult. It's too much milk on the market and the Russian embargo is really a mess for the European Community."

"In the division of baby food, the sensitivity of the price is not as big as in the dairy ingredients so our main focus is really baby food.”

by John Reynolds