Covance plans to invest $14 million in a nutritional chemistry and food safety laboratory in Michigan as part of an effort to expand the contract research organization’s (CRO’s) food safety testing capabilities. The CRO also entered into a seven-year, $42-million contract with Kellogg Company, which will be an anchor client to Covance’s new facility.
Covance will take over much of Kellogg’s analytical chemistry, micro- biology and stability testing and will provide food-testing services to other manufacturers.
Covance’s corporate senior vice president James Lovett compared the deal with Kellogg to the CRO’s 2008 deal with Eli Lilly in which Covance agreed to provide a broad range of drug development services to the pharma company in a 10-year contract valued at $1.6 billion.
“It’s a very unusual arrangement in the food industry,” Lovett said. “It’s not an exclusive arrangement, but I think it’s fair to say that [Kellogg is] looking to us as their primary partner with respect to lab testing for their food. It’s a significant expansion of an existing relationship that goes back many years. It puts us into new kinds of testing that historically we didn’t do for Kellogg.”
Covance’s new 30,000-square-foot laboratory, located in Battle Creek, will open at the end of next year and will create approximately 40 new jobs over the next several years. Covance expects to receive close to $4.3 million in financial incentives from the state of Michigan and the city of Battle Creek.
The facility will be affiliated with the new National Center for Food Protection (NCFP), a global food protection resource development and collaboration network in Battle Creek. The NCFP’s mission is to improve the safety of the global food supply through food safety testing, inspection training and technology development. A Covance representative will serve on the advisory board for the NCFP’s Emerging Technology Accelerator initiative.
Covance’s nutritional testing and food-safety business is small relative to Covance’s overall business, Lovett said, but the company expects the food-testing market to grow as the emphasis on food safety increases.
“Covance is always going to be the drug development company, but we are increasing our focus on nutritional testing and food safety,” Lovett said. “There’s a big increase in focus on food safety at the FDA, and legislation is pending in Congress that could potentially increase the amount of testing on food imported in the United States and maybe even domestic food. Right now, we only test about 1% of food imported to the United States, and reports are that the FDA would like to be testing something like 5%, which would put us in line with developed nations.”