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Emerging middle class fuelling KMC’s international growth


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Established in 1933, KMC is a Danish farming cooperative owned by three independent potato starch factories based in Toftlund, Brande and Karup. The business has enjoyed remarkable growth during the last seven years thanks to its innovative food solutions all cultivated from the “humble and unglamorous potato.” An acronym for Kartoffelmelcentralen which simply means ‘potato starch company’, KMC has ambitions that far exceed its rather modest name as Managing Director Nicolai Hansen explains: “The cooperative was established to sell potato starch in Denmark, but since then its proposition has evolved. Today, 95% of turnover comes from export markets, half of which are outside of the EU. And while commercial activities are still the main component of our operation, we also now add value to the product.”

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Annually, KMC produces more than one billion kilos (one million tonnes) of potatoes, between September until the end of the year. From this yield, it creates 250,000 tonnes of starch as well as 20,000 tonnes of flakes and granules, which it sells to 80 countries worldwide; including the US, Germany, UK, Russia, Japan and China. ‘Adding value’, refers to scientific and technological advances in recent years, which has enabled KMC to develop considerable and in-demand expertise in the global food industry. By substituting common proteins used in dairy based and confectionery products with potato starch, KMC’s solutions enable food manufacturers to make cheaper, healthier and less controversial products: “Essentially, we break food down to its basic components and then rebuild it again, substituting animal proteins like milk, egg and gelatine with plant based raw materials.”

KMC focuses all its resources on re-imagining foods, and with its solutions used in a growing range of “on-trend” vegan cheeses, mayonnaises and sweets such as wine gums and liquorice, turnover in 2017 is expected reach circa €190 million, a 15-20% increase from the previous year. But what is causing this upsurge in demand for vegan products? Health is a driver suggests Nicolai, as is awareness of animal agriculture’s impact on climate change and people’s concerns about cruelty and safety in food supply chains. He claims, however, that these are only indicative factors of a much broader development: “The global middle class will treble in size between 2009 and 2030 — from approximately 1.8 billion to 5.5 billion people. This is significant not only because of aggregated wealth and spending power, but also because middle-class consumers are more educated and concerned about what they eat. As well as health, factors such as convenience, taste and price come into play; as do ‘softer’ elements like sustainability, transparency, corporate social responsibility and food safety.”

While the growth in demand for plant based foods is currently a Western trend, within the next decade KMC expect it will be a global phenomenon. Nicolai emphasised though that the cooperative’s role isn’t to educate the market about the perceived benefits of a plant based diet, but rather to serve the interests of their farmers and then customers: “We ensure as much value as possible is gained from the potatoes to maximise dividends and offer effective solutions to the food industry. There is an element of education in that we show manufacturers how food can be made in a different way — sometimes it's healthier, often there are ways to make it more sustainable or cheaper — but we’re reacting to demand and serving the needs of consumers rather than instructing them.”

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Nicolai admits it’s been profitable to grow potatoes during the last seven years, and with farmers receiving high dividends for raw materials they’re willing to invest in land and grow more potatoes. KMC currently employs 180 people — 300 if you include those working in the factories — and its efficient processes means average turnover per employee is high. Investment is currently directed at rebuilding and modernising all three factories and when the project is complete in 2019, Nicolai confirms they will be the most modern potato starch factories in the world.

Nicolai highlighted how KMC’s customer focus also extends to R&D. Done in collaboration with its food manufacturing partners, this approach ensures a transfer of knowledge about the various properties of starch and how they apply to different product types. Solutions are designed with customers and made using their production facilities; KMC then works alongside its partners to conceive ways to increase product marketability and achieve scale. The market insight offered by Nicolai and his team is invaluable is analysing cultural considerations regarding what constitutes mayonnaise, confectionery, cheese, etc. in different regions of the world, leading to varied marketable solutions. In his words: “Insight must be detailed and accurate, and processes flexible, to ensure the solutions are the best they can be to meet consumer needs.”

The Danish food cluster is one of the strongest in the world, and KMC will play a major role in shaping the industries future, offering its expertise to a new national food research strategy — a collaboration between the Danish Food Association, the Agriculture and Food Council and other companies from the domestic food industry.

The aim is to define future research for the Danish food cluster by addressing common challenges and opportunities and facilitating a circular economy by promoting market driven innovation. An aspect of the discussion, Nicolai confirms, will be the issue of plant versus animal diets, as well as broader nutritional topics: “It’s all about encouraging ‘outside-in’ thinking and approaches; listening to the market, seeing what’s happening around the world, bringing ideas back to Denmark and then using our collective strengths to benefit our industries.”

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Cutting edge ‘era-defining’ solutions and a central role in the Denmark’s food future must mean people are queuing up to join KMC? Not quite, according to Nicolai, but the situation is improving. The strong Danish economy means it’s competitive and difficult to recruit talent at a rate to match KMC’s growth and, although its reputation is good, with a different and unique proposition to other ingredient companies, it has sometimes proven difficult for the business to attract certain types of specialists. One of Nicolai’s key initiatives since being appointed Managing Director is working with universities to attract graduates who can be trained in the competencies it needs. He explains: “Students write papers for us to gain experience, and we’re establishing a training academy to teach a variety of specialist skills that will match our needs as we grow. By targeting younger people, the average age of our employees has lowered during the last five years.”

While there may be a low interest in studying the natural sciences, Nicolai is confident that a growing appreciation for raw materials and ‘back to basics’ food will further benefit KMC. The ingredient industry in Denmark is strong, and with an already healthy talent pool of people with relevant skills within the cluster and a beneficial rotation of talent, Nicolai claims KMC’s proposition will be increasingly of interest to those in the ingredients industry seeking opportunities to work with alternative ‘vegan’ food solutions: Working with potato starch doesn’t sound interesting, but when people see the outcome of the work we’re doing, their opinion soon changes.”

KMC’s mission statement has two parts: ‘let’s take food forward’ is an open invitation to potential customers and employees to join KMC in helping create the future of food; and ‘humble origins, global capabilities’ refers both to the humble life of the farmers as well as the humble potato, while reinforcing its aim to compete in international markets. Nicolai states that these slogans inspire employees and customers alike: “They help people recognise our history and heritage, but also provide a reminder that we’re not afraid to take on the world.”