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Agriculture

DSM-Firmenich to separate its animal nutrition business

The company points to low prices for vitamins for the livestock industry

by Aayushi Pratap
February 16, 2024

Cows eating feed out of a long trough.
Credit: Shutterstock
DSM-Firmenich wants to get out of the animal nutrition business.

DSM-Firmenich, which formed in a merger last year, has given up trying to fix its animal nutrition business and says it will separate the operation—a step that typically leads to a sale—by 2025.

The company attributes the decision to rising competition, a decline in pork production in China, and global destocking following the pandemic. “These difficult market conditions led to unprecedented low levels of vitamin prices, as well as under-utilization of the vitamin asset base, resulting in a very weak performance of the essential ingredients activities” of the business, the company says in a press release announcing its 2023 earnings.

The separation plan doesn’t come as a surprise, considering that the company has been struggling with its vitamin business. Last year it closed vitamin C and B6 plants in China and paused production of vitamins A and E at its Swiss plants.

DSM-Firmenich’s animal nutrition business, which has around 6,000 employees, generated sales of $3.4 billion in 2023, a 15% decline from 2022, owing mainly to poor vitamin sales, the company says in its earnings report. By separating the entity, the company hopes to save $215 million by 2025.

Joshua Haslun, research director for agrifood and health at Lux Research, says the rising demand for all-in-one animal nutrition and health products may have affected DSM’s vitamin business. “A lot of companies are trying to innovate animal products that can reduce carbon emissions while improving livestock performance,” he says. “As a result, people are less and less interested in purchasing one-off ingredients such as vitamins.”

DSM-Firmenich plans to retain ownership of two newer animal-related businesses: the methane-reducing feed supplement for ruminants known as Bovaer and its share in Veramaris, a joint venture with Evonik Industries that makes an algae-based alternative to fish oil. Because these products are new compared with vitamins and in sync with goals of reducing emissions, it makes sense to hold onto them, Haslun says.

The 2023 merger combined DSM, a maker of food and beverage ingredients for both humans and animals, with Firmenich, a world leader in flavor and fragrance ingredients. The new company organized itself into four main businesses: perfumery and beauty; taste, texture, and health; human nutrition and care; and animal health and nutrition.

In a note to clients, the investment firm Jefferies points out that separating the animal health and nutrition business—and likely selling it—will make the company more Firmenich-DSM than DSM-Firmenich.

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