contract testing labs

Where Has the Growth in Food Safety Testing Gone?

Recent earnings reports from large industrial diagnostic companies in the food safety sector indicate a slowing of growth in this typically robust market. What’s going on? Has growth in the food safety testing market peaked, paused with the economic downturn, or just moved elsewhere?

Strategic Consulting (SCI) has just released our 19th market research report on the industrial microbiology market. Industrial Microbiology Market Review: Global Review of Microbiology Testing in the Industrial Market (IMMR-4) examines the industrial diagnostics market, which includes the food, beverage, pharmaceutical, personal care products, environmental water and industrial process sectors. You can read more about IMMR-4 here.

In addition to a detailed analysis by test volume, market value, organisms tested and methods used, IMMR-4 also provides a thorough discussion of market trends, drivers, and regulatory and topical issues specific to each sector. IMMR-4 also includes a business review of competition, consolidation and key success factors, and profiles 20 leading test manufacturers serving the industrial diagnostics market.

Extensive Primary Research in the Industrial Market

industrial market, primary research, strategic consultingIMMR-4 is based on extensive primary research into all aspects of the industrial microbiology market, including detailed interviews with producers, regulators and diagnostics competitors. SCI conducted more than 650 interviews in 23 countries around the world, with close to one-third of those interviews conducted in Asia (China, India, Indonesia, Thailand, Singapore and Vietnam) due to the region’s economic importance, in both production and consumption, in the industrial market sectors.

Interview data and other information were analyzed using a combined bottom-up and top-down approach. For example, overall market estimates were derived from the test volume numbers given by production companies, and then triangulated with other information gathered through SCI interviews and pubic information research.

In hundreds of interviews over the last two years, when QA/QC managers in production plants were asked about test volume growth, the general response was “yes, growth”. The drivers for test volume growth, such as new regulations and ongoing customer demand, are not consistent across all geographies however. North American and Asian/ROW plants report growth in test volumes, while test volume in European facilities remain flat. Although somewhat diminished, growth in micro test volumes continues even in the face of world economic issues.

In fact, the total market for industrial microbiology tests is projected to increase 25.7% over the next five years, from 2.0 billion tests in 2014 to 2.5 billion tests in 2019. This represents a 4.7% compound annual growth rate (CAGR) in test volumes, which is slower than over the past 20 years. In other words, testing is increasing but not as robustly. With many production companies implementing process improvements over the last decade, growth in test volume may be tied to increased consumption alone going forward.

What’s Up with Recent Financial Reports from Diagnostics Companies?

Given the test volumes and projected growth reported by food production companies, I was a bit surprised by the financial reports of some key companies in the food safety testing market. Roka Bioscience had no new sales of its Atlas System last quarter. Neogen reported that their food safety business grew only marginally (3%) for the current quarter. And although we can’t isolate the food safety business of industry giant bioMérieux, overall their industrial business was flat for the first nine months of the year.

With leading businesses showing little or no growth in the sizeable food safety testing market, are we seeing a market that has become overcrowded, with little or no growth remaining? Based on financial reports, it’s hard to know specifically where growth remains and where things are flat or declining, as these large companies do not report on a geographic or product basis.

Is it time to recalibrate expectations for the traditionally robust food safety testing market? Has the food safety diagnostics business reached its peak in spite of major drivers such as continued media coverage of foodborne outbreaks, ongoing implementation of FSMA, industry-wide efforts such as the Global Food Safety Initiative (GFSI), and the increased consumption of food that is sourced from all over the world?

Perhaps it’s time to recalibrate expectations for the traditionally robust food safety testing market.

I’m going to venture an uncharacteristic answer and say “perhaps”. Perhaps the increased focus on industry testing over the last ten years means that for the most part, major food producers have their testing programs (and thus volumes) in place. Perhaps the five-year economic malaise that has impacted so many countries and businesses is now affecting the until now unmatched growth engine of food safety diagnostics? Or perhaps it is all of the above.

Food Contract Labs Taking Market Share

One other possibility comes out of SCI’s recent review of a particular segment of the market, contract test labs. Over the past few years, there has been a shift in where analysis is performed with some sectors sending a greater percentage of samples outside to corporate facilities or contract testing labs. The Food Sector, driven by lab accreditation requirements among other factors, is utilizing contract labs more heavily in certain geographies.

Is competition for diagnostic manufacturers coming from businesses that had previously been among their best customers? Eurofins reported 15% growth in revenues for the first nine months of 2014. As food contract labs grow their market share in food safety testing, they are able to increase their influence over the test methods and products in use, and their purchase patterns can be different from food plant labs.

Stay tuned. As 2015 approaches, we’ll continue to watch, report and comment, here and on Linked In and Twitter.

And in the meantime, let us know what you think. Are the days of double-digit growth in food safety testing a thing of the past?


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The Food Contract Lab Business Approaches 50

The third in our series of blog posts discussing the importance of food contract labs (FCLs) to the food safety testing market, this week we look at the evolution of the FCL market over the last 50 years.

Food contract labs were started by entrepreneurial scientists beginning in the late 1960s. The early FCL entrepreneurs often had areas of specialization, and set up independent laboratories to provide food company clients with services and analyses in those areas (mainly microbiology).

Over time, some of these labs grew into regional, and even national, networks of labs. Deibel and Silliker Labs are prime examples of FCLs that followed this path in the 1970s and ‘80s, and into the early ‘90s.

food contract lab, Silliker, Deibel, SGS, Eurofins

As 2000 approached, the FCL industry was undergoing major changes:

  • With financial support from their new owner, Merieux Alliance, Silliker undertook an aggressive, international growth-by-acquisition initiative.
  • IEH Laboratories began its extensive growth, principally through acquisitions of independent U.S. labs.
  • With its public listing in 1997, Eurofins embarked on an impressive growth spurt, also fueled mainly by acquisitions, that now totals 190 labs.
  • SGS began to expand into the food contract lab space, becoming a major player in the field.

TIC Companies Enter the Food Contract Lab Market

It is also worth mentioning that over the last ten years, more and more TIC (Testing, Inspection, Certification) companies are entering the FCL market. What was originally a business based on food safety expertise is evolving into one more tightly tied to the broader testing, inspection, and certification market.

Testing Inspection Certification Company, SCS, Bureau Veritas, Dekra, TUV, DNV,Germanisher Lloyd

The global TIC industry is huge, with revenues of more than $120 billion in 2010. TIC companies started over 300 years ago to provide common measurements for shipping and other commercial activities. Today the TIC industry is growing worldwide, but particularly in the emerging economies of Asia and South America, spurred by a combination of regulatory and economic factors. One key driver is increased global trade and a resulting consumer demand for improved food quality and safety. As a result, leading food manufacturers are requiring third party inspections and certifications of products and services.

Like the food contract lab market, the TIC market also is consolidating, and over the past five years there have been significant and sizable acquisitions. The ten leading TIC companies represent only 37% of the global market, but all are billion-dollar companies with tens of thousands of employees and more than 1,000 locations globally. In addition, all of these companies occupy market-leading positions in both emerging and developed economies. Most of the top-10 companies provide testing, inspection, verification, audit, accreditation and consulting services, and attempt to manage global supply chains and reduce operational, product and market risks to clients. In other words, these TIC companies have strong existing relationships with all the global food companies.

These strong, multi-faceted relationships are powerful springboards for the TIC companies in the food contract lab market—and NOT something that the traditional FCL companies have to offer. Thus TIC companies have some unique advantages over other FCLs (e.g., bundled pricing and multiple international contact points), even the more global traditional FCLs. As of now, at least four of the top-10 TIC companies are in the FCL business, and two of them (SGS and Eurofins) are among the top-3 global FCL companies based on 2013 revenue estimates.

It is hard to forecast what’s next for the food contract lab market. Given current trends and drivers, the market clearly will continue to grow and take share. Not as clear is which companies will be the dominant FCL companies five years from now.

In our next blog: What does the boom in FCLs mean for food safety diagnostics companies?


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5 Food Safety Testing Trends Expected for 2014

Food safety testing is changing dramatically, and new research from Strategic Consulting, Inc. projects 5 emerging trends for 2014.

Two new reports from Strategic Consulting, Inc. (SCI), a management consulting firm focused on food safety and industrial diagnostics, point to five major trends for 2014 in the global food microbiology testing market. SCI’s food microbiology research reports are based on extensive interviews with QA/QC managers in food processing facilities around the world, and one-on-one discussions with food safety experts from academia, government and industry, as well as diagnostic test manufacturers.

With public concern about food safety growing, and the increasing globalization of the food supply chain, it is a critical and challenging time in the food microbiology diagnostics business. There are a number of dynamics at play that present both opportunities and minefields for players in this field. As in any market, those well informed and positioned will benefit.

Data from two new reports, Food Micro, Eighth Edition: Microbiology Testing in the Global Food Industry and Food Contract Lab Report (FCLR) point to five major trends for 2014: read more…

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Food Safety Testing Shifts to 3rd Party Contract Testing Labs

A new report from Strategic Consulting, Inc. details the growing trend in food companies to send quality and safety testing offsite to third party contract testing laboratories. The volume of food testing conducted at contract labs is growing at a faster rate than the total food testing market, and is expected to continue to do so over the next five years.

Food companies around the world increasingly rely on 3rd party contract testing laboratories for their food quality and safety testing. In 2013, worldwide revenue for food contract testing labs will exceed $3 billion, with a compound annual growth rate of 9.4%. SCI’s Food Contract Lab Report (FCLR) is the first report to examine this market segment in detail, and reviews test volumes, revenues and emerging trends in quality and safety testing conducted by third party laboratories for food companies around the world.

With the volume of food testing conducted at contract labs growing at a faster rate than the food testing market as a whole, this trend has implications for both food companies and diagnostic test manufacturers. read more…

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Some Thoughts on Food Safety Summit 2012

Food Safety Summit always leaves me with mixed feelings. Spring is a good time of year for the show, and its D.C. location means excellent attendance by government regulatory personnel. However, Food Safety Summit never seems to totally come together, and every year it leaves me wondering if my time and money have been well spent by attending. read more…

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Food Pathogen Testing Moving to Outside Testing Labs

An emerging trend in food safety testing: Pathogen analysis moving to contract labs or corporate testing centers

We’re seeing an emerging trend in food safety testing that we believe has big implications for diagnostic equipment manufacturers: Pathogen analysis is increasingly being conducted outside of food plants in contract labs or corporate testing centers.

Food Micro-5, Strategic Consulting’s latest market research report on food safety microbiology testing, shows sizable growth in both routine and pathogen testing in the U.S. food industry. With pathogen testing growing at twice the rate of routine testing, it all adds up to increased opportunity for diagnostic test manufacturers.

Even more important, however, is where that analysis is taking place. Increasingly, SCI is seeing food plants deciding to send their samples outside for analysis, either to contract testing labs or corporate testing centers. In fact, the volume of samples sent outside for analysis is growing at an even faster rate than the pathogen testing market is growing. read more…

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