IFF: high sugar prices are driving reformulation demands

By Ben Bouckley

- Last updated on GMT

Related tags High-fructose corn syrup Sugar Starch

High commodity prices are driving demand amongst food companies to reformulate products for the sake of affordability, according to International Flavours & Fragrances (IFF)

During IFF’s recent third quarter earnings call, John Roberts, research analyst at US-based Buckingham Research asked management whether “record global sugar prices”​ were driving reformulation activity amongst customers, even despite US market moves to replace high fructose corn syrup with sugar in some products.

Hernan Vaisman, global president of flavours at IFF replied: “The bottom line is that we have a lot of reformulation recommendations, requests from customers, related to the high sugar price increase.”

“There are opportunities, which is why we have a sweetness enhancing product that helps customers to reduce sugar content. And at the same time, it helps them to reduce costs while stressing a healthy product position.”

Nick Peksa, commercial director for global commodities intelligence firm Mintec told FoodNavigator.com that “while it isn’t all doom and gloom for food ingredient commodity prices, the general basket trend is up”​ , which he said was spurring food industry reformulation activity.

Mintec reports that September prices for staple food industry ingredients such as sugar rose 26 per cent on the LIFFE index, due to worries about a poor sugar cane crop in Brazil, while EU liquid egg prices also rose 8 per cent.

Cocoa replacer

Meanwhile UK cocoa prices hit a 33 year high of £2,732 per tonne in July, but have since fallen to around £1,900 per tonne, due to “over-speculation”​ by hedge fund Armajaro, said Peksa, as well as a good harvest for major West African producers.

Andrew Fuller, product development technologist at UK-based malted ingredients firm Muntons told FoodNavigator.com that price pressures were still evident in the EU market.“Speaking to European cocoa powder suppliers, their allocation for this year is fully taken, with no spare capacity until mid-2011. So we think shortages will continue”.

“Anecdotally, since I’m speaking as a non-specialist, we’ve spoken to people who’ve paid between £3,500 and £4,400 per tonne for cocoa in recent months​.”

Fuller said Muntons had launched its new clean label, malt flour-based ingredient ‘Maltichoc’ in an attempt to capitalise on the cocoa spike, with cocoa powder reductions of 50 per cent claimed with no loss of product quality.

Muntons describes Maltichoc as a blend of roasted malt flours and dried malt extracts with a bitter/roasted flavour and “a sweet background”​, which is designed to “complement and extend”​ bitter chocolate notes in baked goods and provide a rich chocolate colour.

Fuller said: “The cost of Maltichoc is less than half the current approximate market price for cocoa, and we’ve had reformulation interest from Europe, the US and beyond, mainly from the food service sector where changing labels is a non-issue, but also for NPD.”

Clever manufacturing

While Peksa agreed that reformulation is a live issue, he suggested that food and ingredient companies see it as an opportunity to forge new alliances.

“I was at a chief procurement officers meeting last week where the issue was discussed. There is food inflation, but it’s hard to raise prices, and within the industry everyone recognises the need to work together across the supply chain to reformulate."

“Traditional businesses especially see this as an opportunity to innovate within the supply chain. Take cocoa. A technician says, ‘this is the only cocoa product we wish to use’, but if it is significantly more expensive than viable alternatives then his firm has a problem.

“Purchasers are approaching telling development teams they need to cut costs, and this presents an opportunity to work with new suppliers, change product specifications slightly. It’s about clever manufacturing rather than hammering down suppliers on prices.”

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