Distributor GWI predicts which ingredient prices will rise, remain stable, or decrease, based on information from its China-based manufacturers.
Ingredient prices are constantly changing, and 2014 is no exception. Distributor Green Wave Ingredients (GWI; La Mirada, CA) has the word on which ingredients will likely see price hikes in the coming year-as well as which will remain stable or decrease-based on information from its China-based manufacturers, as well as the company’s own market trend analysis.
On the Rise
Prices of branched-chain amino acids (BCAAs) are on the rise and may be volatile this year. While prices were low in 2013-particularly for valine and leucine-due to oversupply from China, they are expected to recover this year and “supply might get tight,” GWI warns. Glutamine prices are also expected to change; while the price dipped to record lows in early fall 2013, by the end of the year prices started to rise. But “this increase does not forecast a continuously rising price level at this point,” the company says. Stay tuned.
BCAA popularity in the sports nutrition market is one reason demand is growing over supply.
“The sports nutrition industry has a significantly broader base of consumers than in the past. The industry has been penetrating new consumer segments beyond the hardcore athlete,” says Jim Schultz, GWI’s founder and CEO. “Now, the everyday consumer segment is focused less on performance and more on elevated nutrition for wellness and health reasons. As the market segments continue to grow, supply and demand is the key for these price increases.”
The good news? Schultz predicts BCAA prices will stabilize as industry increases production capacity. Also, he suggests keeping an eye on the pre-workout nutritional supplement market, as “we observe more orders and a strong, consistent demand” from that category.
As for other ingredients, look for price hikes for ascorbic acid and choline bitartrate. Ascorbic acid prices spiked significantly since November 2013-about 15%-20%. They will likely continue rising over the first half of 2014-a change from the first half of 2013, when prices hit record lows. Rising prices may be due to “the loss that manufacturers experienced for about two years, as well as the cutback in output, which some of the manufacturers use to control their supply levels,” says GWI. “Some manufacturers only supply [for] the need of their established customers to fulfill blanket orders, but don’t accept any business from new customers.”
A “booming” market drove up prices for choline bitartrate, the company says. Supply is now tighter, and prices and demand will continue rising during the first half of this year. “The situation could possibly change in the second half of 2014 if new manufacturers decide to tap into this market,” GWI says.
Two ingredients that won’t break the bank this year are sodium hyaluronate and sucralose. Sodium hyaluronate prices are expected to decrease gradually over the year due to growing competition.
The sucralose market was “weak” last year, driving prices down to their lowest last December. Oversupply will continue lowering prices this year. “The current price level may force manufacturers to close down or lower their production cost, but as they have already made investments, the production will continue and the market will stay competitive,” says GWI.
Steady Goes It
While prices might not decrease, they will at least remain steady for many ingredients.
Formulating Options Despite Price Changes
How can formulators make decisions when dealing with prices unknown? Partner with a distributor like GWI with a constant ear to the ground-both domestically and in China-on supply and demand, of course. Historical data also helps paint a helpful picture of price cycles.
But also, lock in blanket orders with your distributor, Schultz advises. “An agreement based on a fixed price can help to prevent price jumps and sudden increase of costs,” he tells Nutritional Outlook. “Working with a distributor that is creative with a large purchasing volume can assist in lowering down costs.”
A distributor can also help save costs by optimizing supply-chain management. “As UPS/freight costs are increasing as well starting out in 2014, manufacturers should…ask their supplier for package deals and customized freight options,” Schultz says.
Nutritional Outlook magazine