AAK
Fat is beautiful! (but is the company over-earning?)
AAK ($AAK.ST) is a SEK 69 billion (€6.4 billion) Swedish company that produces and refines plant-based oils and fats (sustainable alternatives to traditional animal sources) for the food, personal care, and technical products industries.
AAK is controlled by Melker Schörling AB with a ~30% stake (the rest is free float). MSAB is a holding company started by Melker Schörling, who in 1987 became the CEO of Securitas ($SECU-B.ST) and acquired a major investment in the company; he left a decade later and his vehicle today has participations in several major Scandinavian businesses: in addition to AAK and Securitas, MSAB is also in Assa Abloy ($ASSA-B.ST), Hexagon ($HEXA-B.ST), Nibe ($NIBE-B.ST), Hexpol ($HPOL-B.ST), Absolent Group ($ABSO.ST), Anticimex and Greenbridge.
While the company is headquartered in Malmö (Sweden), its origins trace back to Denmark: in 1871 Aarhus Palmekærnefabrik was established to process palm kernels and renamed Aarhus Oliefabrik in 1892 when it focused on the production of vegetable oils, primarily for margarine. In the 1960s, growth by acquisition of companies abroad and modern production capabilities helped Aarhus Oliefabrik become a market leader within speciality fats, in particular in the fractionation of shea kernels (shea butter is an important ingredient in solutions for chocolate, cosmetics, skin care, and much more). Meanwhile, Karlshamns AB was established in 1918 in Sweden to produce soybean meal for animal feed; Kooperativa Förbundet (KF) acquired Karlshamns in 1932 to use fats with competitive prices in their margarine production and later in the 1970s it began exporting speciality fats to chocolate manufacturers. In 2001 Melker Schörling acquired the shares held by KF, and in 2005 merged it with Aarhus United (the new name of the Danish entity) to become AarhusKarlshamn, or AAK.
Segments and Products
AAK is the leading European producer of high-value added oils and fats for customers such as Nestlé and Mars which wish to substitute traditional ingredients with modern, plant-based alternatives that deliver on taste, texture, and affordability: whether it’s achieving the smooth, velvety texture of premium chocolate, enhancing the juiciness and mouthfeel of plant-based burgers, or perfecting the sticky, glossy finish of a barbecue sauce, the right fat blend is essential to delivering the desired product experience.
Demand for these products is clear: consumers are increasingly health conscious and want food producers to replace ingredients, like saturated fats, with healthier alternatives. But consumers are a fussy bunch, and AAK must ensure that new recipes do not affect taste. Additionally, solutions need to be cost effective: orders will only flow if customer costs are reduced.
