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Current Position:Home » News » Condiments & Ingredients » Ingredients » Topic

Food ingredients firms resist rising costs

Zoom in font  Zoom out font Published: 2012-08-07  Origin: nutraingredients  Authour: Rod Addy  Views: 93
Core Tip: Food ingredients firms are resisting the impact of rising costs by switching to less expensive options and delivering added value products, solutions and blends to customers, according to Euromonitor International.
Commenting on the release of Euromonitor’s report'The market for packaged food ingredients', Lauren Bandy, ingredients analyst at the group said ingredients processors were fighting back against tough market forces.


“As elsewhere, higher energy and raw material prices are negatively impacting production costs in the ingredients industry,”
said Bandy. “Nevertheless there are also new opportunities in some categories, as suppliers look to develop cheaper alternatives to costly ingredients.

“For example, as cocoa prices continue to fluctuate, cheaper alternatives such as cocoa butter equivalents are becoming a popular alternative.

Value-added ingredients

“At the other end of the spectrum, value-added ingredients and complete solutions and blends which allow a manufacturer to tackle more than one ingredient requirement in a single purchase are also attracting a growing interest.

“Botanicals for example, which come at a premium price, fit well with a healthy and natural product image whilst serving multiple purposes as a colour, flavour and antioxidant.”

Bandy said she expected volume sales of botanical ingredients to rise by 30% between 2011-2016.

Key trends

According to the Euromonitor report, five key trends are driving the packaged food ingredients market as a whole. These are: health and wellness; convenience; indulgence and sophistication; natural products and ethical products.

In particular, types of products covered by the ethical products trend included fairly traded and organic botanicals, cocoa and sweeteners, plus sustainable and organic fats and oils and emulsifiers. The use of enzymes to deliver more sustainable production methods was also a big part of this trend.

Given the tough market, ingredients players could not afford to shirk on investing in research and development (R&D), said Bandy.

Largest ingredients companies

Of the largest ingredients companies, DSM spends the most on R&D - €350m annually, according to Bandy. Givaudan came second, with spend at about €240m and Kerry Ingredients third, with spend of more than €160m annually.

These statistics fitted the current trend that businesses focused on speciality and technical ingredients such as botanicals, cultures and proteins, tended to spend more than those focused on commodities and bulk ingredients, she said.

For example, ADM, which is most active in the latter market, has a current R&D spend of €50m, a marked contrast to DSM, according to Euromonitor.

Economic uncertainty

“The ongoing economic uncertainty is probably the single greatest challenge for food ingredients companies today,”
 said Bandy. “They have to ensure short-term financial growth while finding the funds to invest in R&D and sustainability to ensure long term progress.”

Health and wellness offered opportunities and challenges. In particular, the systematic rejection of ingredients-related health claims in the past three years looked set to hit some categories hard, she said.

“For example, soy proteins and probiotics grew by 25% and 50% respectively in volume terms over 2006-2011, but with their health claims rejected by EFSA (the European Food Safety Authority), these ingredients will struggle to repeat that performance over the next five years.”

 
 
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