High times for bakery

Appropriately, the market for them is as dynamic as their activity in the manufacturing process. In its impact assessment of the introduction of food enzyme legislation, published in July last year, the European Commission (EC) estimated global annual sales of enzymes for food and drink processing to be €650-750M. European value sales are worth €420M and are growing at 7%, according to DSM Food Specialties. Novozymes leads the global market with a whopping 40% share. And taking its performance, an impressive 18% growth in sales and 20% growth in profits in 2006, as a yardstick, the sector has a lot of potential.

"Bakery enzymes, starch and sugar processing enzymes and dairy enzymes are reported to be the three largest segments," says the EC in its impact assessment.

Economic benefits

A market breakdown shows the drive to create healthy products and improve efficiency lies behind the growth in some sectors, while others are struggling because of rising raw material costs.

"I understand that there's high growth in bakery, but we're not active there," says David Stroo, marketing director at Chr Hansen. But he concedes that life is tough in dairy, where enzymes are mainly used for cheesemaking. "A lot's going on with milk and milk powder prices so manufacturers with powder plants are switching from cheese to powdered milk production because there's more money in it," says Stroo. "If the cheese market isn't growing, dairy enzyme sales won't grow."

While rising commodity prices are acting as obstacles to growth in some areas, they are offering opportunities in others, where enzymes can cut production costs. "One of the main benefits of enzymes is economic," says Anders Ostergard, marketing director for feed, food and specialties at Novozymes. "They can be used to make food at lower cost by speeding up processes, cutting waste or increasing yields."

The Cake Toolkit, put together by DSM and starch giant Avebe, combines economy and health trends. It's a set of three ingredients, comprising the enzyme CakeZyme, Delite - a natural taste potentiator - and the new gelling agent Etenia, that's scheduled for launch in November. "This innovative toolkit enables cake manufacturers to create great tasting cakes with up to 35% less fat or 25% fewer eggs, enabling them to reduce costs," says Mario Pires, DSM business manager for enzymes. "This combination will also allow for extended shelf-life in cakes."

Aside from cost savings and health benefits, sales increases are also being fuelled by swifter development, according to Stuart West, md at UK enzyme manufacturer Biocatalysts. "Developing new enzymes used to be laborious. Now, the whole process, from identifying the enzyme to cloning it, takes three years and costs are becoming more predictable."

Geographically, while the biggest markets are Europe and the US, the areas to watch are central and eastern Europe and Asia. "All the big enzyme companies are growing fast, with part of this growth coming from serving the Chinese market - it's the biggest market in the world for beer, for example," says West. According to DSM, there's still room for growth, new innovations and consolidation, for example in China, where there are 100 enzyme manufacturers.

Novozymes' Ostergard says: "There's increasing growth from the Third World. As the amount of processed food consumed rises there are more opportunities for enzymes." He boasts that the company's recent acquisition of Biocon's enzyme business in India will boost sales there.

More growth brings more competition and a greater challenge for manufacturers to stay afloat, especially in a hard commodities market. The result is increased polarisation between the large, well-established companies covering many bases and the smaller specialists. "Two decades ago there were more enzyme companies than there are now and they were making similar products," says West. "Now there are only two or three major companies making enzymes for commodity products. The rest are becoming forced into niche product areas." Firms are being forced to become increasingly selective over the sectors they focus on, he says. And because the larger businesses have developed strongholds in the broader markets, the opportunities lie in enzymes with increasingly specialised applications.

At the same time, there's growing consolidation, with the bigger players snapping up smaller fry. "Start-ups don't get far before specialising or becoming absorbed by other companies," says Ostergard.

Overall the sector is healthy and vibrant. "We make money on food enzymes and in general the market is profitable. But it's the biggest or the first to enter with new solutions - and patent protection - that makes the money," says Stroo.

Legislation welcomed

That said, the smaller companies may have to face not only obstacles caused by stiff competition, but those created by raised costs from stricter regulation.

As the market grows, there is an increasing need for comprehensive legislation to govern the use and labelling of enzymes in Europe. Only two enzymes, lysozyme and invertase, are currently covered by EU law. No safety evaluation of other food enzymes at EU level, no labelling requirements and no authorisation procedure exists. Under proposed legislation, which has already had its first reading in the European Parliament, harmonised rules have been floated for the evaluation, approval, control and labelling of all food enzymes. There will also be a list of positive enzymes used in food for technological purposes.

On the whole, the industry has reacted positively. "It has been a long time coming," says Pires at DSM. "Only three countries in Europe have food enzyme legislation. One overall piece of legislation will foster quality control and traceability. Having one system will make things simpler and clearer." The legislation would also strengthen export markets outside Europe, says West at Biocatalysts. "People often say they can't believe enzymes are not regulated in Europe, which interferes with trade."

Stroo at Chr Hansen supports a harmonised enzyme Regulation, although Denmark already has its own - rather strict - legislation. "For other countries a new EU Regulation may be more demanding than what local players are used to, as with the proposal for a positive list of enzymes."

But there could be drawbacks. The expectation is that there would be a two-year transition period for manufacturers to build dossiers supporting the use of particular enzymes. European Food Safety Authority approval would then take six months and approval from Brussels would take a further nine months. West believes the process is unnecessarily time consuming. "The European Parliament wants to ensure there's a need for a particular enzyme. But companies wouldn't spend thousands of pounds to compile scientific support for enzymes if there wasn't a need."

Stroo says stricter requirements could be bad news for smaller players. They will have to invest more time and money in gaining approval for enzyme use than they would have done previously, an estimated cost of €150,000 to €350,000. "You'd probably only get payback if you covered a big part of the market."

There's also considerable debate over labelling. Currently, enzymes used as processing aids would not need to be labelled, pleasing manufacturers.

But some Member States have proposed amendments calling for enzymes to be labelled whether or not they are present in the final product, according to Kirsten Birkegaard Staer, director for external affairs at Novozymes. "Some countries are worried that they will have to label more than they are used to, but these are only proposals. The Commission and the Council are against them."

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