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Suppliers hike prices as inflation bites

Increases reach 10-40 per cent as raw-material costs spiral

United States Suppliers of functional ingredients are finding themselves caught in the crisis gripping the world's food markets, as prices continue to spiral ever higher. Barely a week is passing without news of yet another major player hiking prices as they find they can no longer absorb the inflation sparked by soaring commodity and oil prices.

With the rice markets in turmoil following droughts in Australia, floods in Bangladesh and the enforcement of export restrictions by governments in major supplying nations such as Vietnam, India, Egypt, China and Cambodia, rice-derivatives manufacturer Beneo-Remy has increased its prices 40 per cent. "We are faced with a force majeure situation," said Vincent Caluwaerts, sales and marketing manager at the Belgium-based supplier.

Croda Health Care has increased prices of its Incromega concentrated omega-3 fish oils by 10-20 per cent, depending on grade. "Some of our raw materials have doubled in price over the last 12 months and we are no longer able to continue to absorb this impact," said vice president David Cheery.

They are not alone in feeling the pinch. In June, Norway-based Borregaard Ingredients said its vanillin prices would rise by 10-20 per cent because raw-material prices were rising. "We are unfortunately no longer able to carry this increase alone and see no other way than to share a part of the cost increase with our customers," said Thomas Marwedel, business director.

The rapid escalation in raw-material costs plus the steady increase in energy, transportation and packaging costs have reached a point that we can no longer maintain current prices.

— Dave Eckert, vice president North America, Cognis Nutrition & Health

Dutch company DSM recently announced it was to increase the price of its fat-soluble vitamins by at least 10 per cent. "The price increase is necessary due to significantly higher costs of raw materials, energy and transportation and due to higher demand for DSM-quality vitamins," said the company in a statement.

Germany-based Cognis Nutrition & Health, meanwhile, announced that from June its North American customers faced the first price increase in more than six years for the company's natural-source vitamin E and natural plant sterols. "The rapid escalation in raw-material costs plus the steady increase in energy, transportation and packaging costs have reached a point that we can no longer maintain current prices," said Dave Eckert, vice president North America.

For at least one supplier, however, rising food prices are presenting a commercial opportunity to be exploited as food manufacturers seek ways to mitigate price increases.

Missouri-based soy protein supplier Solae, a joint venture owned by Bunge and DuPont, was at the IFT Food Expo in New Orleans this month promoting its Supro Max structured vegetable protein as an ingredient that could be used to enhance the quality of lower-grade meat or replace expensive dairy proteins.

"There has never been a better time for food companies to consider soy protein as an economical, functional and healthy alternative to other proteins," said Jean Heggie, director of marketing.

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