Photo Caption: Margins are squeezed on rising costs.Food additives on hike

31 October 2005 00:01  [Source: ICB Americas]

The bitter after-effects of higher energy and raw material costs are taking a toll on food ingredients producers. The bitter taste of higher energy and raw material costs has taken a toll on food ingredients producers, who have responded by raising prices for products ranging from acidulants and emulsifiers to hydrocolloids, vitamins and flavors.

In November, CP Kelco will implement a global price increase across its carrageenan, carboxymethylcellulose (CMC), pectin and xanthan gum product ranges. Prices of CMC will increase by 7 to 10 percent, biogums by 5 to 10 percent, and pectin and refined carrageenan by 4 to 8 percent.

“We have aggressively pursued multiple initiatives to reduce costs, however, we continue to face strong increases in raw materials, energy and freight costs,” says Bruce Dructor, vice president, operations and business management at CP Kelco. “The price increases allow CP Kelco to offset some rising costs while continuing to invest in innovation and technology development.”

Other hydrocolloids producers joined the pricing movement. In November, Hercules’s Aqualon business will institute a global price increase for sodium cellulose gum of 20 cents per pound, and for methylcellulose and derivatives of 50 cents to 80 cents per pound. FMC BioPolymer, which supplies alginates, carrageenan and microcrystalline cellulose, initiated a price hike on its food and pharmaceutical brand products by 5 to 10 percent.

FMC notes the dramatic price rise of critical raw materials seaweed and pulp, in addition to energy and transportation costs. International Specialty Products (ISP) will also raise global prices on all alginate-based products by 7 percent in November in response to escalating alginate raw material in the past 12 months.

“Energy cost increases have exacerbated an already difficult trading environment,” says an ISP official. “We will continue an aggressive cost-containment program and improve operating efficiencies to absorb the effects of these cost increases wherever possible.”

In the acidulants and vitamins sector, several citric acid producers have raised prices ranging from 10 percent to 15 percent. The price hikes were driven by tightening supply and rising energy costs (see CMR 10/24/05, p.17). Lactic acids are also going up by 5 to 10 percent because of higher raw materials and processing costs.

Reilly Industries Inc. and Lonza are raising their niacin (vitamin B3) and niacinamide prices. Reilly’s products increased by 7 to 10 percent in October, while Lonza’s 10 to 12 percent price increase will come into effect on January 1, 2006.

Other recent price hikes include Solae Company’s lecithin products (5 to 15 percent); Huber Engineered Materials’ food- and pharma-grade calcium carbonates (10 percent); and most of American Ingredients Company’s food additives products (1 cent per pound).

Even before the impact of rising energy costs, many sectors of the food additives market had been under pressure from Chinese competition, according to a recent report from Leatherhead Food International. “Value growth in certain areas is being affected by price cuts as cheaper Asian products flood the international market.”

Leatherhead places global sales of food additives at $22 billion per year, with growth rate of 2 to 3 percent over the next three years.

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