Leading Dutch dairy group Campina, slated to merge with Denmark's Arla Foods, said it will strengthen ties between its own food scientists and those at the food research unit of Wageningen University through a new collaboration.
Campina, the owner of dairy ingredients firm DMV International, hopes the agreement will bring about 'innovative strength' that will lead to new food business.
"Wageningen University has one of the most respected concentrations of food scientists in the world. By combining their and our knowledge we will be able to boost research power in the field of dairy related products," commented Toon van Hooijdonk, corporate director R&D/QA at Campina.
Along the length of the food chain, profits for players are currently knocked by squeezed margins: both from raw material prices at one end, and a fiercely competitive retail climate at the other.
Ingredients companies hoping to not only compete, but improve their returns, have had to react sharply to this increasingly hostile environment.
"In order to drive growth we need to constantly top up our portfolio with new products," Alexander Wessels, managing director of Campina's DMV International recently said to FoodNavigator.com.
But financial returns through new product development demand a serious investment in R&D.
Without disclosing the exact percentage of sales DMV dedicates to R&D, Wessels placed spending (on sales of €0.5bn) in the "middle" of the industry average. Industry observers estimate R&D spending for the ingredients industry broadly falling from a low of about 2.5 per cent to a high of over 12 per cent.
Over the next year DMV International is expected to pour in excess of €60 million into innovation through new R&D facilities and ingredients processing plants.
In recent years DMV, along with a growing number of ingredients companies, has identified high-value, low volume products (such as its award winning cysteine peptide health ingredient) as a profitable way to surf the tide of squeezed margins and increasing competitiveness.
'High-value' products, for instance whey derivatives, are enjoying double digit growth against a background dogged by low single digit growth.
While the ingredients industry as a whole is bobbing along at about 4 per cent growth, the global whey derivatives market, by contrast, is achieving an average of 10 per cent global growth.
But in order to enjoy the bounty of high margin ingredients, the initial investment has to be ploughed into development work, suggesting the leverage of agreements such as the closer collaboration with food scientists at Wageningen University.
At the end of last year Campina and Arla Foods announced their intended merger. Still to gain regulatory approval, if cleared combined the two leading European dairy co-operatives with 27,000 employees, will have annual revenues of €10 billion.
The ingredients division - represented by Campina's DMV and Arla Food Ingredients - would contribute about a tenth of this figure, some €1.38 billion, rolling over 665 000 tonnes of ingredients.