Agribusiness giant Archer Daniels Midland has agreed to purchase Florida Chemical, a division of Houston’s Flotek Industries, for $175 million in cash. Florida Chemical is a large producer of citrus oils and other citrus-derived ingredients.
Those ingredients are in high demand, according to ADM. “Citrus is one of the fastest-growing flavor categories and the single most important taste profile for beverages,” says Vince Macciocchi, president of ADM’s nutrition business.
Flotek, an oilfield chemical firm, acquired Florida Chemical in 2013. The two may seem like an odd fit, but Flotek had been a big buyer of citrus-based solvents, such as D-limonene, from Florida Chemical.
In contrast, ADM plans to take advantage of Florida Chemical’s supply chain and processing expertise to expand its offerings to the high-margin food and beverage market. In that realm, the ingredients are valued for their clean label attributes and ability to modify flavors in reduced-sugar products.
In addition to D-limonene, Florida Chemical sells essential oils made from oranges, grapefruits, tangerines, limes, and lemons. It also sells purified citrus isolates such as α-pinene, myrcene, and α-terpineol. The terpene α-terpineol smells similar to lilac and is used in perfumes, cosmetics, and flavors.
In 2014, ADM gained a large natural flavors portfolio and research expertise with the $3.1 billion acquisition of the Swiss firm Wild Flavors. At the time, Wild was the sixth largest flavor and fragrance company in the world.
Last year, ADM acquired Colorado-based Rodelle, a supplier of vanilla and other natural flavor products. With that deal came a stake in a vanilla farmer association in Madagascar. ADM has also bought up plant protein and probiotic ingredient businesses.
As is the case with vanilla, the supply chain for citrus ingredients can be plagued by shortages and volatile prices. The industry is currently threatened by citrus greening disease, a bacterium that destroys fruit. And last winter, Hurricane Irma resulted in the worst year for Florida’s orange crop since 1945.
CORRECTION: This article was updated on Jan. 30, 2019, to correct the name of the molecule shown in the structure and mentioned in the body text.