Danisco shifts flavour unit from Sweden to Belgium

- Last updated on GMT

Related tags: Baltic sea, Baltic states, Sweden

Danish ingredients giant will shut down beverage flavour operations
in Sweden as tough competition bites and business is impacted by
growing consumer demand for health positioned drinks, reports
Lindsey Partos.

The unit, that turns out flavours primarily for beverages but also ice cream and dairy products, will close down and move to Danisco's flavour headquarters in Louvain-la-Neuve in Belgium. The €2.23bn firm has reassured customers that supplies will be unaffected.

"We wouldn't have taken the risk to close down the operations if we thought we'd harm business,"​ Flemming Lyngholm, managing director at Danisco Sweden explained to FoodNavigator.com​.

Food and beverage firms in the Nordic zone have experienced more difficul times in recent years. Heineken, for example, recently closed down operations there and many companies are having to reorganise to maintain their ability to compete.

A key reason for the Danisco shut down - likely to see the majority of the 72 employees losing their jobs - is the change in consumer habits. "People now want diet products and water, products that do not use as many flavours, or just different flavours,"​ said the managing director.

Recent figures from Zenith International back this up. The market research firm claims bottled water sales in the UK alone surged by 18 per cent to 2,070 million litres in 2003, worth almost £1.2 billion in retail sales, continuing the double-digit growth trend of recent years. Still water sales rose by 20 per cent, and they continue to be the main driver of growth in the market as a whole.

"Greater public understanding of health issues has enabled bottled water to capitalise on its hydration benefits,"​ said Zenith research director Gary Roethenbaugh.

Bad weather conditions and heavy taxes also played a role in the resulting closure of operations. Companies operating in Sweden are faced with a 25 per cent VAT, competing against products supplied from countries with considerably lower taxes.

"This is currently a political discussion in Sweden and Denmark because consumers are looking to buy products sourced from eastern and southern Europe because of the very low taxes,"​ commented Lyngholm.

Danisco Sweden said it was currently in discussions with the trade unions in order to trace the best way forward for the employees. The firm will retain a sales unit in Norrköping, Sweden for the Nordic market as well as the Baltic States and Russia.

In an interview with FoodNavigator.com late last year Jos Kleppers, president of the flavours division at Danisco​ confirmed the company's ambitions to become one of the top five global flavour players. The firm is currently ranked number eight.

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