I haven't been in the dietary supplements business as long as almost all of my sources. So when in interviews I voice surprise and consternation about the preponderance of Chinese supply in some ingredient sectors – especially in the arena of vitamins, they're a little amused. China has been a growing giant in the business for decades.
It's hardly unique to the world of functional foods and dietary supplements. It has been happening across numerous business sectors, and began when former premier Deng Xiaoping opened the floodgates for private enterprise in the late '70s.
Chinese dietary ingredient suppliers have been in the news lately, and not in a good way. I'm not talking about melamine in milk here. I'm talking about vitamin C.
A little background: I was aghast, frankly, to learn when I entered the business in January of 2010 that almost all of the vitamin C in the world is produced in China. Think about that: the supply of synthesized vitamin C, that Florida orange juice favorite of our youth, is now controlled by a handful of Chinese companies (the oranges still make their own, of course). This is old hat to many in the ingredient supply business, but it is not widely known among the general public.
The question is, how did it get that way? For years, Chinese vitamin C manufacturers were able to undercut foreign competitors on price and in the process drove almost everyone else out of the business. But in the last five years or so, some Chinese manufacturers are alleged to have used their market clout to limit production and raise prices. A price fixing lawsuit filed against four big Chinese vitamin C manufacturers is working its way through the courts. The case is already six years old, but a ruling is expected soon on whether it can be decided without a jury trial, which would greatly speed the outcome. Other lawsuits allege similar practices in other vitamin categories.
The evidence in the vitamin C suit is so overwhelming that the companies are not disputing the charges. Their defense is simply that the Chinese government made them do it. In legalese it's known at the foreign sovereign compulsion doctrine. In effect the government ordered these companies to crush their competition, and helped them do it by presumably making up their losses.
Regardless of how the judge rules in the suit, the outcome is unlikely to give rise to renewed vitamin C manufacture outside of China. The Chinese companies might have to pay compensation, but they are likely to retain their stranglehold on supply.
The lawsuit sheds light on the wider issue of the supply of ingredients in China, India and elsewhere. How does a company safely source ingredients in China? Is it a given that buying ingredients in China means lower cost, but also lower quality and higher risk? What's the situation in India and elsewhere in Asia? I’ll be examining these and other questions surroundings Asian supply in future blog posts and in an article in the June issue of Functional Ingredients magazine.