Ingredients supplier Maypro enters sales deal that includes Nebraska Cultures probiotics
“Wilke is essentially exiting the nutrition business,” Lifton, who is the vice president in charge of Maypro’s proprietary branded ingredient division, told NutraIngredients-USA. Maypro, which already has a stable of branded ingredients including MicroActive Curcumin and MicroActive Resveratrol, will add Wilke’s list, at the top of which stands probiotics from Nebraska Cultures.
“The Nebraska Cultures probiotics were a big draw. They have more flexibility than some of the larger incumbents in the US market, such as Danisco. They have a variety of proprietary strains,” Lifton said.
The role of the ingredient supplier is changing rapidly, Lifton said. One of the trump cards a broker used to hold in his hand was the information of where to go to get the best prices or the highest quality goods, or, in the best of all possible worlds, both. That advantage faded as the world grew smaller from an information standpoint and for many branded ingredients, which tend to come from world-class facilities in major industrial centers, it has all but disappeared, Lifton said.
“The larger players know where to buy the raw materials themselves,” he said.
So it has been a case of adapt or die, he added.
“You have seen some companies that have specialized and become one or two ingredient companies. For the larger ingredient suppliers, the ones doing more than $50 million in annual business, we have seen massive consolidation in that space. The DSMs and BASFs of the world are gobbling them up,” he said.
Service, more than price
Lifton said Maypro sees itself more as a service organization, rather than a mere ingredient store. The ingredient is merely the most visible aspect of an ongoing relationship with the client.
“From a business model perspective, we see ourselves as being more in the service business rather than the product business,” Lifton said.
In order to be able to play that game, you have to be able to meet the ground rules, he said. Your company has to be in a position to partner with your customers and help them carry some costs and, especially, mitigate risks. And that requires money. Lots of it.
“Customers are expecting more of a value add from their ingredient suppliers. You have to be able to offer them a price which is the same or very close to what they could get directly from the manufacturer. In order to be able to do that, you have to become a very high volume buyer from the ingredient manufacturer,” Lifton said.
On the risk mitigation side, Lifton said an ingredient supplier like Maypro can help a company manage its inventory, which can be challenging in a rapidly shifting marketplace. Suppose a major customer places an order for large amount of a given ingredient, and decides later it really only needs 75% of its original estimate. That manufacturer might have to eat the overage if it were dealing with a smaller company, seeing as how cash flow constraints would likely prevent a smaller supplier from taking back inventory and the manufacturer would be unlikely to peddle its excess inventory to a competitor. Maypro can hold the order and absorb those types of excess inventory situations, Lifton said.
“Then, if you can say to your customer, you can get the same price from me as from the manufacturer and we take care of risk, it becomes a much more competitive calculation,” Lifton said. “Even if the price is a little higher, say in the range of 3%, in many cases, even the large players like NBTY choose to buy through distributors if they get the right value add. They can get similar prices, but they get a range of benefits particularly in risk management. We have the working capital capability to be able to do that.”
Among the other value adds that customers are coming to expect are formulation advice, forecasting on market trends, and ingredient preparation including blending, granulating and milling. And having boots on the ground in some of the areas where the ingredients are sourced is a must, too, Lifton said.
“You have to be able to litigate in China if there is a problem which we have a history of being able to do,” Lifton said.