The emergence of China as a supplier of ingredients for Western foods, beverages and supplements is altering the landscape for ingredients suppliers in Europe, the US and other markets.
Chinese ingredients have typically been characterised as ?low cost but inferior quality? in Western markets, but this perception is changing, forcing large and small ingredients companies to rethink their strategies.
Vitamin C, glucosamine, lutein, citric acid as well as a plethora of traditional Chinese medicines are but a few examples.
?If China?s ingredient industry expands at the breakneck speed of the rest of the economy, then we might expect further margin pressure from this area,? warned investment bank Goldman Sachs.
?Chinese ingredients have come a long way and are often better than their European counterparts,? said Kaare Axelson, managing director of newly founded UK-based supplier Acceptus.
?Because of heavy backing by the Chinese government, strict GMP practicses and widespread private investment, their standards have gone through the roof. The image of them lagging behind in technology is old hat.?
Cost advantages do remain, however, and many suppliers have set up operations in the Far East, often at the expense of ?home? production.
?Whether it?s sustainable in the long term is debatable,?said a UK spokesperson for international supplier Buckton Scott. ?But right now there are good opportunities out there. We?ve been in China for 30 years.?
Many such companies are also selling ingredients into the $275 billion Chinese food market. In the case of an ingredient like glucosamine, China leads the world in production and quality.
Although the shrimp-derived ingredient was prohibited in Europe for more than two years as part of an embargo on Chinese products of animal origin, this ban has been lifted, which should exert downwards pressure on prices and trouble the Indian glucosamine industry, which stepped in to the breach.
China is the EU?s second-largest trading partner behind the US.