Nestle set for coffee bean breakthrough

Nestle, the international food giant, could soon be selling genetically engineered Nescafe The company looks set to link up with ForBio, an Australian plant biotechnology group which can grow caffeine-free coffee beans. UK investors could get a slice of the action when ForBio floats in the UK next year.

Nestle, the Swiss food giant, is expected to sign a joint venture with a plant biotechnology company, soon to float in the UK, to produce the world's first caffeine-free coffee beans. According to sources at Nestle, the company is planning a link-up with ForBio, an Australian company specialising in plant genetics.

The deal will allow Nestle to sell caffeine-free coffee more cheaply and with improved flavour and aroma, increasing Nestle's stranglehold on the US $20bn-a-year world coffee market. Nestle makes Nescafe, the world's number-one selling instant coffee. The fast growing soluble coffee market is worth a third of the total.

ForBio, which was planning to list on the London main stock market this year valued at around pounds 60m, has apparently delayed its flotation plans until early next year in order to conclude the deal with Nestle. Both Nestle and ForBio yesterday refused to comment on whether they were in discussions.

ForBio, based near Brisbane and listed on the Australian Stock Exchange, believes it can solve two of the coffee producers' biggest headaches. At present producing caffeine-free coffee requires expensive chemical washing of the processed beans, which also impairs their flavour and smell. Removing caffeine this way costs producers $1bn a year in the US alone.

ForBio with its US partner Integrated Coffee Technologies Inc (ICTI), in which it has a 17 per cent stake, have discovered how to genetically alter coffee plant seeds to yield caffeine-free beans.

Speaking from ForBio's offices in Woolloongabba, Queensland, Bob Mullins, head of ForBio's international operations, said large scale propagation of caffeine-free plants would be possible in two years time. Meanwhile ForBio, founded and owned by Scottish-born millionaire Bill Henderson, is collecting a breed of elite coffee plants which can ripen uniformly.

Coffee beans are found at the centre of the coffee plant's bright red, cherry-like fruit, the pulp of which must be removed before the coffee bean is processed. Any pulp left with the bean spoils the flavour when the bean is processed. Getting a batch of coffee plants to ripen uniformly increases the chances of removing all the pulp. ForBio's Rapid marker technology identifies plants most likely to produce superior flavoured beans, and selects plants with the same maturation rates.

Though Mr Mullins would not comment on any commercial aspects of their technology, in any deal with Nestle, ForBio is likely to get a share of sales plus licence fees for its technology. Its partner ICTI, because it owns the caffeine-free genetic technology, would probably take a royalty on the sale of each plant. Once mass propagation is feasible, Nestle is likely to strike an exclusive purchasing agreement with coffee producers licensed to grow the genetically altered plants.

ForBio, which unusually for a biotech is already profitable, is not stopping at coffee. Genetically elite tea plants are in view. Meanwhile, in an audacious about turn, ForBio has just shipped half a million genetically improved teak plant seedlings grown by robot in Somerset to Malaysia. The elite teak plants flower less often than normal ones and so produce trees with more bark. ForBio is also exporting genetically altered date palms grown in England to the Middle East.