Survey reveals that suppliers are riding out the financial crisis
The global downturn is proving to be a curate's egg for US supplement-ingredients suppliers, with companies facing operational difficulties on the one hand but rising sales on the other.
That's the verdict of Nutrition Business Journal's (NBJ) 'Raw Material & Ingredient Supply' special issue, which says businesses in the sector are feeling the pinch because access to capital and credit is much tighter, with product development slowing as a result.
However, at the same time company turnovers appeared to be broadly insulated from the financial crisis in 2008. Early estimates indicate that supplement raw-materials and ingredients sales to US manufacturers grew a highly respectable 7.9 per cent to approximately $2.9 billion last year. This is faster than in 2007, when supplement-ingredients sales to US manufacturers increased 6.4 per cent to $2.7 billion.
The 2008 figure is based partly on a survey of RMIS executives conducted last November by NBJ, a sister publication to Functional Ingredients. When asked to provide 2008 sales estimates, 31 per cent said they expected value sales growth to exceed 25 per cent, while 27 per cent pegged growth at 5-10 per cent. Eight percent of survey participants indicated they expected sales to remain flat in 2008. However, no one forecasted that sales would decline in 2008.
In terms of volume growth, 27 per cent of participants estimated their companies' volume growth for 2008 would be 5-10 per cent, and 19 per cent forecasted volume growth greater than 25 per cent.
NBJ said sales were kept buoyant in 2008 by consumers' continuing commitment to buying supplements, illustrated by a recent Council for Responsible Nutrition survey, which found that 51 per cent of US supplements users would not let the state of the economy change their supplements-purchasing habits. However, higher raw-materials prices have been a factor, too.
Patrick Rea, NBJ publisher and editorial director, said companies in the ingredients sector should be braced for a tough 2009. "Raw-material and ingredients-supply companies will not be able to escape the challenges presented by the continued downturn in the global economy," he warned.
But he added, "However, we continue to forecast solid growth for the US nutrition industry in 2009 and beyond, which means suppliers' products will remain in demand for the foreseeable future."