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It’s all about food ingredients at Brenntag
German company bought North Liberty-based JM Swank in 2021
By Steve Gravelle, - correspondent
Jan. 7, 2024 5:00 am
NORTH LIBERTY — There may be a few of its red-and-white semitrailers on the road and its website is still out there, but North Liberty-based JM Swank is history, its role in the global food chain maintained by its corporate successor.
“We fully integrated JM Swank into Brenntag,” said Larry Davis, president for Nutrition Americas for Brenntag Group.
Brenntag, based in Essen, Germany, with operations in 72 countries, bought JM Swank from Platinum Equity in the summer of 2021 for $304 million — a major expansion of its network in North America.
It was the last corporate shuffle for Swank, founded in Iowa City in 1954, purchased by ConAgra Foods in 1992 and spun off to Platinum Equity in 2016.
"With JM Swank, we acquire a renowned leader in the North American market in the sector of food ingredients distribution,” Christian Kohlpaintner, CEO of Brenntag SE, said at the time of the acquisition.
“This strategic acquisition will double Brenntag's size in the nutrition business in the region and thus creates the leading food ingredients and food process chemicals distributor in North America, with approximately one billion U.S. dollars in revenue.”
Brenntag in 2022 generated revenues of $21 billion (19.4 billion euros) and employed more than 17,500 people.
Focus on food
When acquired by Brenntag, Swank maintained 13 warehouses across the country. With its fleet of 100 truck tractors and 220 trailers, the company’s specialty was delivering ingredients to big food processors.
“Brenntag’s customer base was up 50 percent with the acquisition,” Davis said. “It has since allowed us to extend the base ingredients (business) into both Canada and Mexico.”
“That would be no joke in that industry if you could do that,” said Frank Montabon, professor of supply chain management at Iowa State University who specializes in the food industry.
You won’t see the Brenntag name on the grocery shelf, but its ingredients are there in its customers’ products.
“It varies from the global CG (consumer goods) companies out there, the ConAgras, the Nestles, all the way down to the next tier of accounts that are regional in scale or local in scale,” Davis said. “We sell to end users.”
Brenntag split
The Swank acquisition came as Brenntag, founded in 1874, split operations into two divisions.
One supplies process chemicals for broad application areas on a local level. Brenntag Specialties, based in Wayne, Pa., concentrates on ingredients and services for food processors and the pharmaceutical industry.
The former Swank headquarters in North Liberty handles administrative, dispatching and managerial functions for its regional customers.
Further changes are ahead.
On Dec. 5, Brenntag announced it will split its nutrition and household products from its wholesale process-chemicals operation, giving each its own management and legal structure. The move was in response to pressure from activist investors arguing the move would increase share prices.
Ingredient business
Like Swank, Brenntag Specialties’ focus is delivering ingredients to food processors. Those customers look to Brenntag for what’s known in the industry as both base and functional ingredients.
“Look at the label on the back of your food product,” Montabon said. “How much complexity is on that label?”
Base ingredients compose at least 2 percent of a finished food product — think sugar, flour and salt.
Functional ingredients affect the product’s taste, texture, and appearance.
Swank’s strength in base ingredients and its reputation for reliable service made it an attractive buy for Brenntag.
“That has traditionally been more of the product portfolio that is on the Swank side of the business,” Davis said.
“With some ingredients, it’s hard to differentiate the quality of an ingredient from one company to another,” ISU’s Montabon said.
“But if they say they’re going to deliver Wednesday at 2 p.m., and they’re always on time, that’s the kind of thing that can lead people to buy from them.
“In food, generally, your distribution network is a pretty big idea,” he said. “Any number of firms have told me they know they’re paying a more expensive price for an ingredient, (but) they’re willing to do that if delivery is reliable.”
Brenntag also mixes and blends ingredients to customers’ specifications.
“It’s two areas,” Davis said. “There’s putting together ingredients for their own formula, then there’s the creation of blending — processing that’s within our own IP (intellectual property). Our blends really concentrate around the functional specialty side.”
The company’s main mixing facility for dry ingredients is near St. Louis, complemented by several facilities for liquids.
“The nutrition side of our business, which includes North Liberty, is about 280-plus (employees,” Davis said.
Staying ahead
Brenntag also operates development centers, essentially test kitchens where company experts work with customers to stay ahead of the market.
“We work with the customers in their finished-product formula to make sure they’re in line with where we see the market moving,” Davis said. “You are definitely seeing more about gut health, for example. That would be another trend that has worked itself into the norm of the consumer.”
“They talk about flavor profiles quite a bit,” ISU’s Montabon said. “If a new flavor profile becomes popular, they have to react. If you have a product where you think the sriracha profile is going to work for you, you’re going to work with those suppliers.”