Quaker Oats and Swiss healthcare giant Novartis have confirmed that their functional foods joint venture has been quietly pulled from operations, according to a report in the Chicago Tribune.
Chicago-based Altus Food was set up two years ago to develop functional foods such as cholesterol-reducing cereals and snack bars containing calcium, soy protein and folic acid.
Quaker spokesman Mark Dollins said that the demise of Altus had more to do with changing priorities at both companies rather than its products.
Soon after Altus began test marketing some products last summer, Quaker completed its $13.8 billion merger with PepsiCo, and not surprisingly, the soft drinks giant was more interested in Quaker for its Gatorade unit than its food business, which includes oatmeal, cereals and healthy snacks. In addition, PepsiCo's efforts in the functional category have been focused on beverages, such as Tropicana fresh juices with calcium, rather than food.
Similarly, since joining Quaker in February 2000, Novartis has shown little interest in functional foods. Earlier this month, the company announced plans to sell its health and functional food brands such as Ovaltine and Isostar in order to concentrate on its pharmaceuticals and healthcare businesses.
Quaker's snacks business has now been realigned with PepsiCo's Frito-Lay unit, Dollins said."We're looking at snacking opportunities differently as part of a realigned organisation, with a different structure and different strategic priorities."
News of the dissolution came as a surprise to at least one Altus supplier."We have not been informed officially or unofficially of any change," said Martin Livingston, a spokesman for Forbes Medi-Tech, a Canadian biotechnology company that developed a cholesterol-reducing ingredient called Reducol that it licensed to Novartis.
The goal for Altus had been to bring together Quaker's mass-marketing of food and beverages with Novartis' research in nutrition science. When the venture was announced, Novartis estimated that Altus could generate "hundreds of millions of dollars" in sales within three to five years. The partners would split the capital expenditures in addition to any profits.
However the functional foods business has not grown as rapidly as anticipated - just five per cent in a good year. It has also raised a great deal of controversy.
Altus operations ceased at the end of December last year but two products launched by the venture - Take Heart, a line of cereals, snack bars and fruit juice that feature Reducol, and Women's Individual Nutrition, or WIN, a line of cereals, snack bars, smoothies and fruit juices - remain on the market. The companies have not yet reached a decision on the future of the products.