A Conversation with Robert Nolles

INDUSTRIAL BIOTECHNOLOGY: Could you discuss the history of Royal Cosun and its products, and the evolution of your business model?

ROBERT NOLLES: Cosun Biobased Products is considered to be a start-up in the Royal Cosun Group. We were officially founded in 2010, but before that we started our early-stage R&D in the biobased space about 10–15 years ago. Cosun is a Dutch agro-food company that has been around for over 100 years. It's a $2-billion company and a large producer of sugar, French fries and potato products, inulin, and fruit and vegetable concentrates. And with our food ingredient production, we do obtain a lot of biomass side streams. So the vision behind Cosun Biobased Products is to valorize those side streams better to create more value per acre. This is important for our owners, about 10,000 farmers in Western Europe. And they have an interest to sustain their business of growing crops. Cosun Biobased Products is a vehicle to do that. In 2010, when we were founded, we commercially introduced our first product to the market—carboxymethyl inulin. It is used for antifilming and antispotting in dishwashing detergents and anti redeposition in laundry detergents, among other applications outside of home care, such as water treatment and oilfield applications. In 2010, we had two direct staff and probably about five in R&D. Today, we are about 15 direct staff with 25 in R&D (direct and indirect). So we've grown quite a bit.

Last year we commercialized two new products. The first was another inulin derivative, cationic inulin, which is a softener for laundry detergent and hair conditioning. It is also a surface modifier in hard surface cleaning. We also commercialized a sugar beet pulp derivative that is a premix additive ingredient that manages water in powder formulations. It improves flowability. This year we are expecting to commercialize a microcellulosic fiber product from sugar beet pulp called Betafib. This is exciting technology because it enables new opportunities for use in encapsulated fragrances in liquid laundry detergents. Those have to be stabilized to prevent them from settling on the bottom or floating. For that you need a structure. Other applications are in the personal space, e.g., suspending particulates in (anti dandruff) shampoos, sun screens, etc.

Next year, we will commercialize a health food ingredient called arabinose, which is a special sugar that is also embedded in sugar beet pulp. It's a glycemic index reducer, which is interesting because it comes from the same crop that regular sugar is being sourced from, but arabinose suppresses the effects of regular sugar. So it is positive for blood sugar control and insulin-response control. It contributes to preventing Type 2 diabetes and potentially aids in weight control. Further out, in 2020 or 2021, we will introduce a few more products from that same sugar beet refining concept.

These are the primary products from sugar beet pulp; for the next generation of products we will be looking into derivatives of these that can be made through relative simple conversions. A lot of markets will open up. We're starting with just a few markets with our primary products—food markets, home care, personal care, paints and coatings—and then we take it to the next level. That opens up polymers, packaging materials, and engineering plastics.

IB: The trend in biobased chemicals has been toward more specialized applications that can secure a higher margin than commodities. Can you talk about the markets you are prioritizing and how you made those choices?

NOLLES: There's a couple of things that are important for us when we determine what we want to target. Obviously the chemistry has to fit with the application. Green by itself doesn't necessarily sell so well, and the premium is a hard thing to gain. We sell our products on performance, and, to be more specific, cost performance. So we are not after “cheap, low-value” chemicals. We are going after complex chemistry that is present in the biomass that can actually add value to a formulation, like a detergent. We are really focusing on demonstrating those additional benefits of the product. “Green” is always a “nice to have.” As far as prioritizing markets, time-to-market and time-to-sale are very important. If there are opportunities in certain markets that will lead to quicker sales, that's a plus. We want to have the numbers, and money coming in. We also prioritize based on our existing portfolio. If we introduce a new product and it fits in a certain portfolio for an industry, it makes it very logical for us to introduce it into the markets in which we are already present. If you can expand your product range, that's always easier than finding a new market, because you're talking to the customers already. And thirdly, we have our business case analysis for the different markets. And we try to find markets that are sizable, large enough to justify the effort.

IB: What role do you feel agribusiness companies like Royal Cosun have to play in the emerging bioeconomy?

NOLLES: We think that what we are doing—bringing biobased chemicals to the market—is very important also for production of regular food and food ingredients. We envision ourselves playing an important role in this. I already mentioned that our owners are farmers in Western Europe. They are very keen on what we are doing in biobased chemicals. It justifies growing certain food crops. It keeps it interesting for them. We do not believe so much in biofuels, in growing crops specifically for the purpose of biodiesel or bioethanol. Cosun divested this business in 2011 and sold some of technology in the biofuels space. But high-value chemicals that you can gain from side streams, that is I think very, very important. One of the things that we see is that we have to compete for the use of land. Growing food crops is extremely important, obviously, to feed the population. If you replace food crops with crops specifically designed for biofuels, we're entering into an ethical conflict. We want to stay out of that. It is not in our interest to compete with the food chain at all. We are a food ingredients supplier, so it's totally not in our interest—but it's not necessary either. Another thing that we have noticed is that over the last 10–12 years, there has been this question of whether or not we have enough land to do everything we need to. Yields of sugar beets have gone up tremendously—about 50% over the last 10–15 years—all without genetic modification. We get more and more of that biomass that we can utilize for the biorefining concepts that we are doing.

And having said that, I think we can play an important role in the biobased economy and that has been acknowledged in a way by the European Union. They are supporting our biorefining concepts. They are embracing it. Royal Cosun is a main partner in Pulp2Value, a public-private partnership between the European Union and the Bio-based Industries Consortium.

What we are doing is similar to what other agribusiness firms like Cargill and ADM are doing, although the way we develop our products is somewhat different. We like to stick pretty close to our own biomass, to our side streams. We're not restricted to that, but it's our main focal point. The source determines what you can do with it. So in a way we could be similar to companies like Cargill, but at the same time we are bound to our sources, which dictates where we go. You can't get everything out of one type of biomass. And in a lot of cases, to maintain certain affordability of the materials that we are bringing to the market, the easier a process is, the better it is. It keeps the cost low. For instance, if we can extract arabinose from sugar beet pulp without doing any chemical conversion—just extract, purify, and sell—that makes the ingredient cheaper than conducting a chemical conversion and investing–in additional equipment.

IB: How would you characterize consumer awareness and formulator interest in biobased chemicals? Do you think it is evolving?

NOLLES: I mentioned before that we really focus on cost performance of our ingredients. We try to offer some unique properties and that should be appealing to formulators. That's typically how we start engaging with them. And the green is a “nice to have.” A lot of formulators like it. If it's more sustainable, who doesn't like it? But in the end it is all about cost performance. If you cannot deal with that, stay out of the business, basically.

With respect to consumers, we do see a shift from “green” to “sustainable.” The environmental impacts might not be the largest concern. Preserving the planet for future generations is definitely appealing to consumers, particularly with millennials. At the same time, it is always a question as to whether or not they will pay a premium—even if they tell you that they will. You never know. So that brings us back to: The only thing that matters is cost performance.

IB: What policies would you like to see put in place by legislators to support the emerging bioeconomy?

NOLLES: Legislation definitely helps, if certain “bad” chemicals are restricted, that always helps. It forces a change. Sometimes to get change, you need to enforce things. A very practical example from daily life is from the moment supermarkets starting charging people for plastic bags, the number of people refusing bags and bringing their own dramatically increased. Not that plastic bags are so expensive, but it is a punishment. That helps to create awareness. If you look at legislation in the biobased space, we don't believe so much in subsidizing green chemistry. We're not really asking for that. We actually think that it could have an adverse effect, because if you create a business based on subsidies, it's not self-sustaining. What happens when the subsidy stops? It collapses. In addition, you don't want a change in administration to lead to a collapse in your business. So we are more in favor of trying to ban certain “bad” chemicals. That also leads to a lot of creativity in the market, if you force formulators to formulate without certain options. It's not easy, but they will manage. A good example from the soaps and detergents space is the removal of phosphates. Initially, the performance of the products changed and consumers were complaining. But the large companies got their acts together and reformulated. And now everything is ok. There is a new baseline and everyone is happy. Prices are slightly higher, but we made a great step for sustainability. So legislation can help.

IB: How do you maintain a culture of innovation?

NOLLES: Royal Cosun is a pretty conservative company. Agribusiness firms in general tend to be pretty conservative. A couple of years ago, in 2012, Cosun began implementing a long-term vision or strategy to enter into the biobased chemicals space. The good thing about a conservative industry like the agrifood industry, is that once the goals are set, they tend to stick. Because we're not stock-listed, we're not shifting our direction constantly. After that strategy was set, the whole mentality within the company is slowing changing. The company is becoming more innovative, and is investing more in R&D capabilities. We have to do that, because we are investing in the diversification of our business. New products into new markets, which is the hardest thing to do for a company. Cosun's board, comprised of people from the conservative agribusiness industry, had to get used to talking about companies like Haliburton or PPG and how they play in their field. It's not a familiar world.

IB: What are the main technical hurdles facing your business, and what is your strategy for overcoming them?

NOLLES: As we are diversifying, we have to build up knowledge in new application areas. One thing we are doing for each of our ingredients is building application know-how. We do application research in-house, and depending on the market we might go all the way into formulating products. We do performance testing for say, dishwashing products that we formulate in our labs. That requires time, skills, training, and a change in mentality, because you are shifting from hardcore R&D to very practical product development. That can be a challenge, because you'll need different people to do that. In some cases, you have to bring in new people with experience, in say detergents formulation. The purpose of that is to translate the product's functionalities into customer benefits, what you actually want to achieve.

It's not so much a technical challenge, but depending on the market that we are entering, we at times have to decide to what extent we want to be active in the supply chain. Depending on the market, you have to find partners to collaborate with. Usually they are a little bit further down the value chain. But you have to partner to be successful. And in order to do this effectively, you sometimes have to know more about the applications to identify the optimal partner. It's always two-way traffic.