Reformulation and the bid to stem commodity costs

By Jess Halliday

- Last updated on GMT

Related tags Milk

Palsgaard, CP Kelco and Danisco have said they are researching
ingredients' potential to reduce reliance on commodities in food
products, but are manufacturers really prepared to reformulate to
help control costs? reported last month that developing ingredients to reduce use of commodities in formulations is an emerging trend in the industry. Amongst the first to stake this area of focus was Danisco, which said in July that it is developing a range of emulsifiers aimed at reducing the need to use commodity products such as wheat, gluten, and vegetable oils in food formulations. ​Since then, Palsgaard has announced the launch of its IceTriple emulsifier-stabiliser system, which it says allows for a 20 to 25 per cent reduction in total milk solid content in a standard ice-cream, depending on the recipe and processing conditions.​CP Kelco is also seeking to combat high dairy prices. It is looking into the use of its GENU pectins in yoghurts to replicate the viscosity and creaminess more normally provided by dairy proteins obtained from skimmed milk powder or whey. The innovations are coming to light at a crucial time, as the impact of high commodity prices is causing food ingredient prices to rise, and as a consequence putting manufacturers' margins under pressure. The question is, however, whether commodity-avoiding formulation is yet on the agenda for food manufacturers, or whether they are looking at other ways of coping with high prices - such as passing them on to retailers, or streamlining productivity. ​In a trading update issued yesterday, Northern Foods said it is in discussions with its customers, and has "madegood progress in recovering […] commodity cost increases".​ The company expects high commodity prices to remain for the rest of this year. In fact, a recent report from the FAO predicted that we may be seeing the effects for as long as a decade. Northern foods chief executive Stefan Barden was reported in The Financial Times​ yesterday as saying that his company will not be changing the formulation of any of its branded products to off-set commodity costs. "There has not been any more than the usual level of talk about reformulation of own-label products,"​ said the newspaper. A spokesperson for Unilever told that his company is reformulating products in response to high commodity prices, but he was unable to say whether any new ingredients specifically designed for this purpose are being factored in. For example, in spreads the company has some leeway in the types of oils that can be used. As long as quality, taste, and health profile are not affected, this does not really matter to the consumer, he said. Likewise, Nestle told that it was "early to recognise the changes in the input cost environment.""The company reacted by hedging, extending supplier contracts, reformulating a few products, as well as pursuing its efficiency programmes,"​ said a spokesperson - although she did not precise when this action was first implemented. She added that "product renovation"​ is part of Nestle's commitment to continuously improve the nutritional value of its products. While price increases of raw materials might support product reformulations but are by no means the driver of this long-term process. Moreover, Nestle also falls partly in the same camp as Northern Foods, insofar as passing on costs, said to be possible as a result of Nestle's brand strength. In the first half of 2007 it effected price increases on a group level of 2.1 per cent. As Nestle points out, much of the reasoning behind reformulation in the past has been driven largely by the trend towards healthier eating. For instance, trans-fat elimination has been a major target for snack food manufacturers; others have focused on reducing salt, sugar and overall fat content. Unilever, too, has had a nutrition enhancement programme in operation for the last two to three years, which involves looking at 20,000 products to see if what can be done to make them healthier or reduce additives. A recent report from the Farm Foundation in the US gave an interesting perspective on the development of low fat products in that market. Changes to milk marketing order prices in 2000 set incentives for fat content, it said. This, combined with dairy quotas, as stimulated consumption of low fat milk and the rise of low-fat Italian cheeses. Likewise, sugar quotas and sugar and corn price policies are cites as reasons for the increased use of high fructose corn syrup.

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