Whey protein prices should either begin to level off or start declining in October, Rob Reed, director of sales for All the Whey, told NBJ. Amino acid prices, however, are likely to remain high for at least the rest of the year, raw material suppliers agree.
The skyrocketing price of whey has led at least one smaller player in the area to drop a product line, and impacted margins and retail prices for those who stayed in the game. An import alert affecting amino acids impacted supply and hiked prices earlier in the year, and new developments in China have kept those prices high. These factors, combined with growing concerns over food and import safety, are creating a dynamic situation on the supply side of the SNWL industry.
Price Decrease Slated For Whey Protein
Whey protein has shot up 40 percent in pricing since November of last year, "increas[ing] every month or so by up to 50 cents a pound,” he said. The national average price for 80 percent concentrated whey protein isolate is now $4.60 per pound, and 90 percent concentrated whey protein isolate is averaging around $5.10 per pound, Reed said.
Increasing demand for whey protein and sweet whey powder, and a dry milk powder shortage that has sent milk prices soaring to nearly $4 per gallon, are primarily responsible for the price hikes, Reed noted.
Demand for whey protein has increased 30-40 percent in the past year, Reed said, noting that All the Whey supplies to over 60 percent of the major nutritional companies in the industry. “We’ve actually seen a lot of increase ... with large international companies that order in bulk,” he said. Rising demand is also driven by an increasing use of whey protein among new groups such as seniors.
While the price of whey protein is slated to level off or start doing down in October, “it’s never going to come back down to a dollarsomething,” he told NBJ.
Amino Acids Will Remain Pricey
It took industry three months to convince FDA to remove amino acids from an import alert on Chinese vegetable protein instituted after the pet food poisonings, Compound Solutions CEO Barry Titlow told NBJ. “That was a big hole that hundreds of thousands of dollars went into.”
Not only were shipments tied up in the U.S., resulting quality initiatives in China eventually backlogged product leaving the country. “China insisted all of their factories get registered and go through additional testing. The net effect was exports that were ready to go were also held up,” he explained. "At one point, they clsoed the road into the Shanghai seaport becasue there were so many trucks backed up ... It was huge."
“That’s just being unraveled now," Titlow said. "We’re still seeing effects of delays on exports out of China as those companies get registered," he added.
“I would expect further price increases going on as well as shortages until quality factories can ramp up production,” he concluded. Firms are “not so inclined to ramp up production without some kind of firmness in the market. They can increase their capacity and then end up being over-capacity in the marketplace, which would drive prices down,” he noted.
The price of amino acids has also been impacted by the increasing cost of energy, transportation and other factors as well, both Titlow and All the Whey Vice President Paul Lariviere noted. Additionally, Titlow said a decision by the Chinese government to substantially reduce the export tax refund on many chemicals, including amino acids, has led to at least an 8 percent increase in prices from this action alone. If China decides to end the entire refund system, as has been rumored, that would affect all chemicals coming out of China, including vitamins, he added.
Lariviere also does not see any indication of amino acid prices receding, “especially in light of what’s going on with products coming out of China,” he said. “Most people are looking for products not made in China, and those are slightly more expensive to begin with,” he said. In fact, All the Whey has discontinued dealing in creatine and glutamine sourced from China. “There was nothing wrong with what we were getting out of there,” he said, but “the trust factor is not there with the general public.”
Quality Starts Trumping Price
Titlow also commented on the impact of Chinese import concerns on his business. One downstream effect is that clients want to know an ingredient's country of origin, Titlow said.
"China has been in the news, but there's certainly been this type of problem coming out of India and out of Mexico,"he noted. "It's not just China," Titlow said, adding: "We've certainly had our hands full with domestic contaminants."
Another effect is most customers are “finally waking up to the value of suppliers who do audits and have control over their supply chain,” Titlow said. “All of a sudden price is not such an issue,” Titlow observed, and the increases involved are “pretty large,” he noted. Titlow’s clients are also showing an increased interest in auditing foreign firms or hiring independent testing firms to audit the firms for them.
“We get E-mail blasts from all these socalled factories in China and India and all over the world, and they’re still offering you ‘the best price and best terms in the world,’” Titlow observed. “They haven’t caught on. They’re still trying that old business model that got changed this year.”