Vitamins Market is Stable but Remains Fiercely Competitive

25 June 2001 00:00  [Source: ICB Americas]

The vitamins market has remained fairly stable over the past six months, except for biotin, which has experienced significant price increases due to a shortage of capacity. Vitamin C is plagued by overcapacity and pricing pressure exists in the other major segments. The pricing pressure led to recent restructuring in the vitamins market, but industry leaders Roche and BASF are proceeding with expansions in their vitamin operations.

The current worldwide market for the three largest vitamins--A, C and E--is roughly $2 billion, according to Leo Hepner, president, of the UK-based L. Hepner and Associates. Vitamin E is the largest market with over $1 billion in sales, with vitamins A and C at about $500 million each. The lesser vitamins (B1, B2, niacin, B5, B6, B12, D3, folic acid, and biotin) have sales in the range of $50 million to $150 million each. On a sector basis, vitamins in the global animal feed market are growing at 2 to 3 percent and in the pharmaceutical/food market at 4 to 5 percent, according to L. Hepner and Associates.

Competition from Chinese manufacturers continues to place downward pressure on pricing for most vitamins. Key markets for Chinese producers include vitamins B1, B2 (riboflavin), C and E, and overcapacity in vitamin C is increasing price pressure. Northeast Pharmaceutical Corp. is planning to build another 15,000-metric-ton vitamin C plant, according to the Chinese State Information Center. Northeast Pharmaceutical is one of the four major vitamin C manufacturers in China, which also include North China Pharmaceutical, Shijiazhuang Pharma-ceutical and Jiangshan Pharmaceutical. The Chinese Pharmaceutical Depart-ment of China's State Economic and Trade Commission is warning that a new price war is inevitable due to overcapacity for vitamin C.

As a consuming region, Asia remains a bright spot for the vitamins market, with demand increasing now that the economy has recovered. Eastern European markets have been experiencing slow growth, but Mr. Hepner expects they will take off in the near future with increasing economic prosperity. In developed regions, a greater interest in more healthy diets and the increased used of vitamins in cosmetics are also contributing to the growth rate. The market for vitamin premixes also remains positive as the interest in using the mixes over individual vitamins in animal feed, food, and pharmaceutical applications continues to grow.

Biotin is one vitamin for which prices have increased substantially over the past year due to shortage of capacity, notes Mr. Hepner. Prices for biotin have shot up from $1.50 to $2.00 per gram to $6 per gram or more. Masaya Yokota, regional manager, sales and marketing, Tanabe, notes that the company has had difficulty satisfying demand from all of its customers, especially spot basis customers who have suddenly been asking for material, presumably because other suppliers do not have product available. Merck has withdrawn from the market altogether, although Roche recently upped biotin capacity. Merck had produced 300 metric tons of pure biotin and biotin containing raw materials at its sites in Darmstadt and Gernsheim, Germany.

Vitamin A and vitamin E prices remain at a low level and the signs of recovery noted in 2000 have not yet been confirmed in 2001, says Olivier Reboul, director of commercial operations says at Aventis Animal Nutrition (AAN), which produces vitamins A, B2 (in a joint venture with Archer Daniels Midland Company), B12, and E, and is the major marketer of vitamin B12. However, demand for both vitamin A and E is in line with expections--5 to 7 percent for vitamin E and 2 percent for vitamin A. AAN has observed a price increase in vitamin B2 over the last few months due to a shortage in worldwide supply.

An official at Cognis Nutrition and Health, which produces natural mixed carotenoids and natural source vitamin E, says the company expects the demand for natural-source vitamin E to pick up and continue to grow as consumers become more aware of its benefits as well. The company says that natural mixed carotenoids continue to experience growth as consumers awareness of benefits increases and new applications in animal feed and food coloring are developed.

The feed-grade choline chloride market is moving toward a balance in supply and demand, in part due to an improvement in the Asian economy and poor returns reducing the recent oversupply, notes Reuben A. Murray at Chinook Group Limited, which manufactures choline chloride (vitamin B4). Cost increases in tri-methylamine due to a tightening of supply and natural gas-derived raw materials continue to apply upward pricing pressure on choline chloride. Use of technology suppressing the tri-methylamine molecule and favoring a shift to more economically attractive co-products of methylamine production appears to be a driving force on the raw material supply side of the equation.

The market for D-calcium pantothenate is currently experiencing fierce competition, placing downward pressure on pricing, observes Youichi Takizawa, manager, fine chemicals group, in the international marketing department, at Daiichi Pharmaceutical Company, which manufactures vitamin B6 and pantothenates.

Roche, BASF and Aventis Animal Nutrition (AAN) are the three leading vitamin manufacturers and the market continues to see major restructuring. BASF acquired Takeda's vitamins business last year, and Aventis announced plans of divesting its vitamins business as Aventis S.A., the parent company of AAN, continues its search for a buyer for its animal nutrition business. The sale of the company is progressing but nothing has been completed at this point. At press time, one suitor for the $520 million AAN was CVC Capital Partners, a London-based equity company. There is also speculation that the industry leader in vitamins Roche may be interested in divesting its vitamins business as part of an overall company restructuring.

Earlier this month Novartis bought a 3.7 percent stake in Roche for SFr 4.83 billion ($2.75 billion), and analysts see further restructuring in Roche, which could include possible divestment of its vitamins business. Also, Roche an-nounced in May that it was cutting 8 percent of its workforce or 3,000 jobs to improve performance in its pharmaceutical business. The primary sites affected are Roche's Nutley, N.J. and Palo Alto, Calif., facilities and sites in Welwyn, UK, and Basel, Switzerland.

However, Roche maintains that it is not selling its vitamins business. Raimund C. Hoenes, marketing manager for the food industry unit of Roche Vitamins Inc., the vitamins and fine Chemicals (V&FC) division of Roche, points out that the vitamins group has restructured over the last two years. It says the company continues to be the clear market leader with more than 40 percent market share and is back on the growth track.

In April, Roche opened a new 8,000-ton-per-year premix plant in Deinze, Belgium, for manufacturing vitamin premixes for use in pet foods. Roche also expects to open a 2,000-ton-per-year vitamin premix plant this year in Isando, South Africa, which will specialize in products for the pharmaceutical and food industries and will serve the southern part of the African continent.

Last October, Roche opened new vitamin B2 (riboflavin) and biotin production facilities in Grenzach, Germany, which use a new fermentation process. The new plant represents an investment of over DM 200 ($92 million) Roche also opened a new vitamin B6 (pyridoxine) production plant in Shanghai, China, last October and announced plans to build a new 25,000-ton-per-year vitamin E facility in Sisseln, Switzerland, at a cost of SFr 170 million. The project is part of a global plan aimed at systematically upgrading the division's production facilities to the latest technological standards, optimizing plant capacities and making sure manufacturing operations are located as strategically as possible.

Roche is launching two new products this year--Dry Vitamin E 15 percent CC and Beta-Carotene 10 percent CWS/S, according to Mr. Hoenes. The new dry vitamin E product is a specially formulated ingredient that will bring the health advantages of an antioxidant to clear beverages such as water and flavored seltzers while also maintaining visual appeal. The beta-carotene product is a high-potency, starch-based product that functions effectively in a wide range of beverages while providing a nice orange color and is nutritionally important as an antioxidant and as a precursor to vitamin A, according to the company.

Roche, through its V&FC division, offers vitamins A, D (cholecalciferol), E (synthetic and natural source), K1 (phylloquinone, phytonadione, phytomenadione), B1, B2, B6, C, pantothenates (calpan, panthenol), biotin, folic acid, niacin/niacinamide, B12, beta-carotene, apocarotenal, apocarotenoic ester, canthaxanthin, astaxanthin, lutein, zeaxanthin and lycopene and vitamin premixes.

After the successful integration of the former Takeda vitamins business, BASF now has a 28 percent share of the vitamins market. The merger eliminated a former weakness in BASF's sector of water-soluble vitamins and is one key element of the company's expansion strategy. As part of the expansion strategy, BASF started a á600 ($540 million) investment program to expand capacities and safeguard cost leadership in vitamins. BASF produces vitamins A, beta-Carotene, B1, B2, B6, C, D, E, calpan/pantothenates, choline chloride and folic acid.

As a first step, the company will spend á100 million to double capacity for vitamin E and its precursors to 20,000 metric tons per year at its Ludwigshafen site. This stepwise capacity increase will take effect from 2002.

Simultaneously, BASF's Wyandotte, Mich., facility will undergo a complete phase-out of vitamin production by the end of the year. Vitamin E oil production will be transitioned to the Ludwigshafen site after the closure of the Wyandotte plant. The company's Whitestone, S.C., premix plant was scheduled to close June 15. Premix production will be moved to the Neosho, Mo., and Georgetown, Ontario, Canada sites. By restructuring its US vitamins production, the company hopes to save on costs in what has become a highly competitive market.

To improve yield in fermentation-based vitamin processes, BASF, in cooperation with the University of Salamanca in Spain, improved the productivity of the fungus Ashbya gossipi for the synthesis of vitamin B2, which resulted in a capacity increase of the vitamin B2 plant in Ludwigshafen to 1,000 metric tons per year without asset spending.

Feed additives are also key to BASF's vitamins strategy, according to J. Meyer, director of strategic marketing, animal nutrition for BASF. Feed additives are comprised of not only vitamins but also carotenoids, amino acids, enzymes and organic acids. To serve this market, BASF runs 25 feed premix plants in 22 countries worldwide. Additionally, BASF recently built a 2,000-metric ton-per-year feed vitamin premix plant in Kuala Lumpur, Malaysia that went on stream in June 2000.

Eastman, along with several partners, completed a National Institute of Standards and Technology (NIST-ATP) project in September 2000 to develop a new ascorbic acid process based on fermentation technology. Eastman is currently piloting its process with Genencor International and is involved in negotiations for the construction of a new worldscale production facility that is expected to be operational by 2003. Eastman Chemical produces its Nutriene tocotrienol in Kingsport, Tenn., and its vitamin E TPGS NF in its Peboc division in Wales, the UK.

Other fine chemical producers are in select product positions in vitamins. Nepera Inc., part of Cambrex Corp., produces niacin and niacinamide. The market for niacinamide is growing at roughly 4 to 5 percent per year, according to a Cambrex official. Most of the growth derives from increased use of feed additives in developing nations. However, competition from Japan and third world expansion of cGMP capacity continue to result in some price erosion.

Lonza Group also manufactures niacin/niacinamide as well as chromium picolinate and L-carnitine and its derivatives, which are sold under the Carnipure trademark. The leading form is Lonza's patented L-carnitine-L-tartrate, according to Reto Rieder, global director, marketing and sales nutrition. L-carnitine products are sold as dietary supplements and for the animal feed market.

Other vitamin manufacturers include ADM (vitamin E), Chinook (choline chloride), Eisai Company (vitamin K1), Kongo Chemical (folic acid), Solvay (vitamin D), and Sumitomo Chemical Company and Tanabe Seiyaku Company (biotin). Bioproducts Inc., DuCoa, UCB and Akzo Nobel manufacture choline chloride. Merck KGaA exited the vitamin B6 and biotin businesses in 2000.

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