The division, called Solanic, will be tasked with creating new value from potatoes by refining, developing and marketing non-starch based ingredients from potatoes with a higher added value.
The company believes that this will open up new applications and markets for its products, and move the company away from the commodity end of market and towards value-added ingredients.
For example, Avebe said that Solanic is in the process of developing high performance proteins that offer manufacturers many advantages in comparison to animal proteins. The division claims to have protected its innovations through product patents and exclusive cooperation agreements.
Solanic plans to start commercial production in autumn.
"In the next few years, Avebe intends to grow its profit considerably, and making investments in innovation is crucial to that goal," said Avebe chairman Okke Koo.
"In addition to starch, potatoes contain other high quality components, which can deliver value to the food and drug industries."
The launch of the division follows the divestment of all non-strategic activities and the completion of restructuring in 2006.
This period was reflected in Avebe's net loss of €4.6 million for financial year 2005/2006.
The result included a one-off charge of €12.7 million for additional redundancy packages both at home and abroad.
The company has also carried through the disinvestment of non-core activities outside of Europe, such as the sale of the interest in tapioca starch in Thailand and the sale of production companies in Brazil and China, though part of this deal remains subject to approval from the Chinese government.
"The year 2007 marks the beginning of a phase of renewed profit growth, based on innovation," said the company in a statement.
"An innovative initiative is already on the right track with Eliane, a unique high-performance potato starch, which was introduced last year."
Indeed, Avebe has consciously been focusing on its core business of potato-based ingredients. Waxy potato starch sales alone, which have a higher added value, have quadrupled compared with 2004/2005, and the firm has also opened a new dextrin plant in Ter Apelkanaal.
The launch of Solanic reflects this focus.