The commodity price spikes of 2008 may have settled down, but in the coming years a steady climb in such prices may challenge food and beverage formulators. Efficient management, which includes managing ingredient costs, may become vital for survival, said Bruce A. Scherr, chairman and chief executive officer of Informa Economics Inc., based in Memphis, Tenn., and involved in international and commodity/product market research, analysis, evaluation and consulting.
Manufacturers have worked in a favorable environment for ingredient prices in recent decades. Commodity prices, when factoring in inflation, generally declined from 1970 to 2000, Mr. Scherr said. The CRB index, a weighted average of the prices of 19 commodities in the three categories of energy, agriculture and metals, gives credence to this statement. In 2002, the index was hovering below 200 when using 100 as the 1967 index. According to the U.S. Department of Labor, $100 in 1967 had the same buying power as $539 in 2002.
"This kind of environment fosters inefficiency," Mr. Scherr said.
That environment is gone, he added.
The CRB leaped to about 600 in 2008 before settling back to about 400 earlier this year. Economic expansion in such countries as China, India, Brazil and Russia will put the CRB index on a steady climb based on increasing demand, and not supply shock, over the next few years, Mr. Scherr said.
"There are about 15 countries that are in rapid economic expansion," he said.
Meanwhile, slow economic expansion in a post-recession will make it difficult for North American food and beverage manufacturers to pass on rising commodity prices to consumers.
"You have no choice," he said. "You are either efficient or you’re gone."
Ingredient suppliers have responded with cost-saving ingredients and opportunities. They even have created web sites devoted to efficiency and value in the food and beverage arena.
The Danisco web site at www.danisco.com/value offers more than 160 solutions for adapting food and beverage formulations to market conditions. The application areas include dairy, bakery, beverage, ice cream, meat, culinary, confectionery, fruit, oils and fats, and brewing.
National Starch Food Innovation, Bridgewater, N.J., uses the www.foodinnovation.com/valuematters web site to promote and explain its "Value Matters" program. One of the program’s principles is to identify conventional and costly ingredients that may be replaced with more economical starch-based alternatives. Texture, processing performance and shelf life properties are matched with the appropriate specialty starch or combinations.
"The intent behind the Value Matters initiative is to assist our customers in facing current economic challenges while maintaining or increasing consumer loyalty for their products," said Joseph Light, head of global development for National Starch Food Innovation. "We are committed to leveraging our global presence to identify the most cost-effective routes to develop successful end products."
Climbing commodity prices may affect all major food and beverage categories, including sauces, baked foods, and meat and poultry. To help manufacturers deal with rising costs, ingredient innovations keep coming in practically every category.
Sauces and dressings
Dairy, tomato and oil costs all may affect profit margins in the manufacturing of sauces and dressings.
Grande Custom Ingredients Group, Lomira, Wis., this year launched Grande Bravo 600, a whey protein with a mild-bland milky flavor that creates high viscosity in water without heat. It may save up to 50% over the cost of heavy cream and cheese or imported milk proteins, said Michelle Ludtke, senior food technologist. The ingredient also may save ingredient costs for cheesecakes, meats, bakery, dips, spreads, sauces, soups, ice cream and frozen dessert.
National Starch offers Dial-in Texture Technology, a system designed to take trial and error out of product development and reduce time to market. The company showed several prototypes created while using the technology at the Institute of Food Technologists’ annual meeting and food exposition in Anaheim, Calif., in early June. The prototypes included an oil-reduced salad dressing, a reduced-tomato solids barbecue sauce and a reduced-fat and milk solids Alfredo sauce.
Commodity prices have even affected such staple tomato-based sauces as ketchup. Tomato paste prices were stable until recently when water issues and the cost of energy drove up prices in California, said Tim McGill, president of McGill International, San Francisco. Processing tomato prices reached $77.20 per ton in 2008, up from $71.20 in 2007 and $66.40 in 2006, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service.
To alleviate costs, McGill International recently introduced a tomato extender that reduces tomato paste use by more than 20%. The ingredient is derived purely from tomatoes and has no starches or gums, Mr. McGill said. A dehydration and milling process accentuates the viscosity building attributes in tomato skins.
"The beautiful part about this is, because it’s derived from tomato and just tomato, it labels out as tomato," Mr. McGill said. "Now you have a tomato extender without a label change."
Eggs and milk are two potentially expensive commodities used often in bakeries. J&K Ingredients, Paterson, N.J., offers cost-saving solutions for both commodities.
Vita-Ex egg extender reduces the cost of using eggs in sweet goods, Danish, rolls, donuts, cookies and cakes by 20% to 66%, according to the company. The ingredient includes egg yolks and whole egg solids. Milk-Free, a bakers protein supplement, was developed specifically for use as a replacement for non-fat milk solids in all yeast-raised bakery products.
Whether bakeries choose to use vanillin alternatives from Symrise, Teterboro, N.J., will depend on volume, said Carol McBride, vanilla category director for Symrise’s sweet business unit.
"Some of the big companies have $100,000 as a threshold," she said. "If they are not going to save that much, they are not going to pursue it."
Vanillin alternatives might be used in enough volume to have a significant effect in such baked foods as cookies, frostings, cake mixes and bakery mixes, Ms. McBride said. Other potential applications include confectionery fillings or compound coatings and beverages such as milk drinks, coffee creams, ready-to-drink coffee and ready-to-drink tea.
Vanillan alternatives may offer other benefits in taste and color since they are designed up front to minimize any differences, Ms. McBride said.
Also in the baked foods category, emulsifiers and emulsifier systems may reduce fat content and ingredient costs at the same time, said Mike Augustine, director of Innovation for Danisco, New Century, Kas.
Meat and poultry
To save on meat costs, companies may want to maximize the amount of water and texture in a system while maintaining the same eating quality, Mr. Augustine said. Hydrocolloids may tie up the water and promote proper texture, he said.
"We help people to bind water, control water, and at the same time keep the viscosity and the flavor where they want it to be," he said.
Also from Danisco, Grindsted Meat Line stabilizer systems give cooked, emulsified, ground and restructured meats a satisfying flavor and texture and good sliceability, according to the company. They may improve yield and minimize cooking loss.
"Meat is probably the most expensive raw material used in food," said Jesper Kampp, meat group manager. "Grindsted Meatline compensates for texture when cheaper raw materials are used."
International Dehydrated Foods, Inc., Springfield, Mo., has introduced Powdered Beef Broth No. 5432, a savory blend of beef extract and flavorings that in some instances may replace or reduce more costly beef extract. It fills a niche where beef extract is not necessary but real beef extract is needed for labeling, according to the company.
"The bottom line is that formulators can get all the flavor that they need from beef extract using IDF’s Powdered Beef Broth, but without the extra expense and hassle," said George Tucker, technical sales representative.
Givaudan Flavours, Dubendorf, Switzerland, offers chicken flavors that may be used in such applications as chicken soups, bouillons, burgers and nuggets. The company recently introduced new chicken flavors designed to help food manufacturers create consumer preference for their products in tough market conditions.
Givaudan also uses its proprietary Virtual Aroma Synthesizer (VAS) and portable min-VAS to evaluate the performance of new ingredients in flavors, to develop new essence and signature flavors and to screen and validate preferences with consumers and customers.
"The VAS enables greater speed to market, increases a flavor’s likelihood of consumer acceptance and can be connected on-line, enabling global collaboration of Givaudan’s flavor development teams," said Michael Peters, director, Global Flavour Creation Technology, for Givaudan Flavours.