Asian Oversupply Forces Ingredient Prices Down

BASLE, Switzerland—An influx of inexpensive functional foods and nutraceutical ingredients from the Far East is causing many European and US companies to rethink their manufacturing and distribution strategies.

Although some have established or expanded facilities in the Far East to capitalise on the cheaper labour and other input costs, others have entered into joint ventures with Asian companies to procure supplies. Still others are improving productivity at their own Western-based facilities.

World leaders in the vitamin C market, German-based BASF AG and Swiss-based Roche, have reacted to an excessive volume of supplies from China that have resulted in a sharp decline in the price of vitamin C from $4.80/kg at the beginning of 2000 to the current $2.80/kg.

Roche responded by renovating its existing vitamin C facilities in Scotland and the US.

"To deal with all the cheaper imports coming in out of China, we have been overworking our existing plants and upgrading and modernising our technologies," said Roche spokesperson Horst Kremer. "We dealt with the opposition by optimising our processes. We are now in a position to compete with the Chinese."

Roche has also set up manufacturing plants in China to stay competitive in other aspects of its vitamins business. "We are producing vitamins A and B6 and citric acid in China," Kremer said.

By establishing joint ventures with Chinese companies, BASF is setting a trend for pharmaceutical and nutraceutical manufacturers to follow. In the case of vitamin C, many Chinese companies have produced too much too soon, resulting in stockpiles of vitamins to last five years. Without a local market, many Chinese manufacturers face extinction unless foreign investors come to their aid.

And it's not just China. In Thailand, US-based Kemin Foods has invested in a plant where it processes the marigold flowers for its patented Flora Glo lutein ingredient. Now, cheaper forms of lutein have begun appearing on the market from various Asian sources, a fact Kemin is only too aware of.

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