Ingredients giant ADM has “re-scoped” its protein modernization investment project in Decatur, Illinois, amid sluggish demand for meat alternatives.
Speaking on the firm’s third-quarter earnings call on Monday, chairman and CEO Juan Luciano said that “weak market demand, particularly in the alternate meat category, inventory adjustments and unplanned downtime resulting from the recent Decatur incident [an explosion at its West plant] led to significantly lower year-over-year results” in its specialty ingredients division.
He added: “The plant-based protein market has been experiencing destocking and consumer demand softness over the course of the year that will likely persist into next year. Given these recent market dynamics, we have re-scoped our Decatur protein modernization investment project to better match the expected lower growth demand environment.”
ADM’s nutrition unit (housing alt proteins) experienced a 22% year-over-year decline in operating profit in the third quarter, offset by strong performances in ethanol, starches and sweeteners, flavors, and probiotics, prompting it to raise its earnings forecasts for the full year.
An ADM spokesperson told AgFunderNews: “We are rescoping the project to maximize capital spend and right size the capacity expansion to meet estimated market demand. We are also shifting focus to include modernization of our asset through automation. This will optimize production and improve efficiency, without having to expand production lines.”
Aggressive capacity expansion for alt proteins
On a mission to be “a leader in this vast and exciting [alternative proteins] space,” ADM has invested in multiple players in plant-based, cell-cultured, and fermentation-based categories in recent years, including Air Protein, Nature’s Fynd, Perfect Day, Geltor, and Believer Meats.
It has also been aggressively ramping up its plant protein processing capacity, opening a pea-protein plant in Enderlin, North Dakota, and announcing a $300 million plan to expand its soy protein concentrate plant in Decatur, “nearly doubling extrusion capacity,” according to a press release issued by the firm in April 2022.
The expansion at Decatur—which included a ‘state-of-the-art’ protein innovation center—was expected to be completed in the first quarter of 2025, said ADM, which acquired Serbian soy ingredients specialist Sojaprotein in 2021. “Between the two investments, ADM will increase its global alternative protein production capacity by more than 30%.”
ADM has not commented on how weaker demand for North American pea protein amid a flood of cheap imports from China has impacted its operations at Enderlin.
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