Challenges abound. But the marketplace is ready, as gathered at Food Ingredients China.
Dated: 1 May 2008
BY DAPHNE TAN
Food has always been a big part of the Chinese culture historically. It is no less important today, as the world’s dragon economy gobbles up growing quantities of processed food and raw material ingredients each year.
Food Ingredients China ended its three-day run in Shanghai in March against a backdrop of increasing food prices, a more competitive business environment and scandals of unsafe China-made foods. Aside from that last issue, Asia Food Journal went on the grounds of the show to ask what could be critical for food companies in 2008. The answer was clear throughout: it’s not about commoditizing ingredients but product differentiation; not simply cost-cutting but meeting the competition with innovation and customer-focused R&D. AFJ reports.
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Magdelene Wong
Innovation Manager
DSM Nutritional Products Asia-Pacific
“It’s about value-add”
 “Food manufacturing today must be cost effective and differentiated, and food products of high quality. Because of the high costs of raw materials, agriculture production is affecting downstream processing in the food supply chain more today. Also, sophisticated consumers are demanding 'natural products', which are often taken to mean organic-based, or additive- and GMO-free. As we are in the ingredients market, we try to communicate these health benefits to consumers. We do this through ingredients branding activities, even though the end-consumer would never hear about DSM. Some of these activities include our marketing and branding for Fabuless, a natural ingredient used in dairy products and supplements that can aid in weight control. Another natural ingredient is Teavigo, which can be added to food and beverage products to boost catechin levels, the most powerful antioxidant found in green tea. A challenge for us now is the increasing price of milk, which has affected the cost of producing our milk peptides. We have to hedge against this increasing price and also look for cost effective manufacturing processes. To differentiate ourselves from other companies, we have undertaken market research on behalf of our customers. By doing this, we are going closer to our customer and understanding what they want and think about a certain concept. This makes us a value-add supplier, as we not only provide the ingredients but can also advice and show them the results of research we have done.”
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Helen Hu
Regional Marketing Manager
Novozymes China
“Address the issue of high protein cost”
 “We have seen the price for soy protein go up, which has caused the price of meat to increase. Because of the current high prices, manufacturers are looking to get more out of their raw material. We try to help customers deal with this through our enzyme products. Enzymes can be a solution as they are environmentally friendly. Our customers can reduce their use of soy as enzymes help release more protein nutrients. This reduces processing time in food manufacturing and also cuts down water usage as less soy powder is used. In China, one of our customers, a manufacturer of soymilk and beancurd, found himself spending more on soy powder after prices of soybeans went up. With our R&D, he has managed to improve soy protein levels in his soymilk while maintaining costs. He also learnt how to make a smoother beancurd or tofu, giving him both product differentiation and better nutritional levels in his products. We are also in the midst of working with two big dairy companies— Yili and Mengniu—to manufacture China-made processed cheese. The cheese market share is growing in China and we see great potential to develop locally made cheese products here. We have also seen particularly good responses to our enzymes in the Philippines and Malaysia, where they are used to treat waste in the fish and fruit processing lines.”
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Richard Schleif
Director of Marketing
Fortitech
“Creativity and a nutrient approach to business”
 "The key challenge for us is the rising price of vitamin B & C products, especially in China. Prices are highly volatile but that’s not unique to us—it’s affecting all food and beverage ingredients suppliers who source for raw materials. How do we maintain reasonable prices yet stay competitive? Putting pressure on suppliers and making bulk purchases can lower prices. But prices are relative to the market and every ingredients supplier is subject to rising prices. Creativity and product differentiation has become more important that ever. The focus is very much on health and taking a nutrient approach to the business. We need to look at new uses for vitamins in the areas of new beverages and health products. R&D will continue to be key; we will need to work at coming up with better products using existing raw materials. These will have to meet the taste test as well as specific criteria in texture and endurance."
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Vince Wong
Technical Service Supervisor
National Starch Specialties
“Emphasize service and quality”
 “Prices of our key raw ingredients have gone up several times already over the last few years so increasing costs is part of something we have to tackle all the time. We pass the cost to our customers at times, but service and quality is the most important aspect. Companies at this time will have to put this as their first and foremost priority.”
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Jeffrey Billington
General Manager for Asia Silesia
“No.1: Non-carbonated beverages and China”
 “More of our customers have turned to non-dairy creamers since the prices of milk went up. Because of this, we have seen an increase in demand for our fresh milk flavored powders, which are added to boost the lack of taste in non-dairy creamers. We see good growth for our ingredients in the market for non-carbonated beverages. China is the fastest growing, especially for ready-to-drink teas like floral flavors and those with a healthy twist.”
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Simone Bouman
Market Development Manager
Purac Asia Pacific
“New applications and markets”
 “Purac’s strategy continues to be focused on preservation, flavoring and fortification. We are looking to tap on new markets and develop applications based on the use of lactic acid, our core product. Purac is already well known for its lactic acid applications. Our Puracal product works through a calcium formulation that improves the color and texture of potato chips through the reduction of acrylamide levels. Acrylamide has been found to be related to cancer according to studies conducted in Europe. There are already legislations pertaining to acrylamide levels in food in Europe and South Korea. Last year, the potato quality was lower than average. This meant that sugar levels were high, which increases browning in chips. There were definitely new opportunities for us there. This has also led us to look at new applications particularly in sweet potato chips.”
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Giles Bovill
Senior Business and Group Marketing Manager
RC Treatt
“Maintain margins and stock levels”
 “As a flavor ingredients business, we are not immune to rising raw materials costs. Prices of fruits have gone higher. High oil prices also mean that prices of petroleum-derived chemicals are up which raises the costs of essential oils. Also, transportation of goods is now costlier. These are all round huge inflationary pressures. We need to maintain our margins so part of the cost may be passed on to customers. But we also hold huge stock levels; our annual turnover is about $18 million worth of stock. We are working closely with customers to achieve a win-win situation. Tastes have definitely evolved in China to become more ‘globalised’. But demand here is more for stronger flavors rather than subtle tastes.”
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On ways to keep competitive
• Innovation and R&D
• Customer-focused services
• Value-added services like customized research
• Venture into new applications and product lines based on existing ingredients
• Bulk purchase and high stock volumes
• Tap into new and niche markets
• Pass part of costs to customers
On trends in China
• Good growth potential in the dairy market
• Local manufacturers are moving away from simply being low-cost to having value-add qualities like product differentiation
• One of the fastest growing markets for non-carbonated beverages
• Consumer tastes are evolving and will continue to develop
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