Food concepts help vitamin industry growth

Vitamins supplements continue to enjoy good growth in most markets, due to the popularity of new food concepts and volume growth in sports nutrition, but price levels have fallen for most vitamins because of the market entry of Chinese companies, according to a new report on the global vitamins market.

The impact of this has been considerable, with the demise of companies in the west, and the recent acquisition of the Roche vitamins unit by DSM. But new opportunities in Asia mean that supplement manufacturers can expect an end to falling vitamin prices over the next few years.

A new report estimates that the global market value of vitamins will reach $2.3 billion (€2.03bn) by 2007 - considerably lower than the $2.7 billion 1999, but rising at an average annual growth rate (AAGR) of just under 1 per cent.

In past years, the market entry of Chinese competitors has triggered downward price spirals in vitamins and the build up of large over-capacities by traditional western producers - major developments that are quite unusual for fine chemicals, suggests the report by BCC Communications​.

The highly competitive field has eroded marketing and product concepts such as customer focus and service, and the production of value-added products, it continues. Small margins have diminished profits, minimising R&D, which in the past was very intensive, and companies are now focused on streamlining production and lowering costs. All of this may result in a much greater emphasis on fermentation, which offers a higher potential for low cost production, suggests BCC. It may work to the disadvantage of many producers expert only in chemical synthesis, and to the advantage of company experts in the fermentative production of fine chemicals.

The strong price pressure has triggered a series of changes in the industry. Most prominent in the past three years were the take-over of the Takeda vitamin business by BASF, the break-up of Rhone-Poulenc and the formation of a new vitamin and feed ingredient company, Adisseo, and the divestment of the Roche vitamin division to DSM.

And the increasing importance of Chinese vitamin producers has led many companies to build joint ventures with Chinese vitamin manufacturers. BASF has joined up with North-East general for the production of vitamin C and Roche with Sunve for vitamins C, E, A and B6.

Roche/DSM has however managed to hold onto its leading 27 per cent share in the global vitamin business, followed by BASF with 21 per cent. Chinese producers as a whole hold another 24 per cent, but this share is split among many individual, small companies, reports BCC.

The report also highlights the lack of technological innovation in the production of vitamins, with the exception of vitamin B2. This vitamin in the past was mostly produced by chemical synthesis and now it is almost exclusively manufactured by fermentation. But take-up of fermentation has not been as strong as expected, despite its potential for major improvements in efficiency with increased productivity of strains through mutations. Cost cutting at chemical plants have clear limitations on the other hand.

Within applications, feed remains the most important outlet for vitamins, with a share of almost 50 per cent, followed by the supplement industry with 22 per cent and the food segment with 17 per cent. Cosmetic applications account for another 11 per cent of total sales, and the value of true pharmaceutical and technical applications is marginal. Vitamins E, C and A are still the leading vitamins, which account for more than 65 per cent of total sales in 2002.

For most vitamins, prices will not fall much further, while consumption, especially in feed and food might increase, the report outlines. China and other Asian countries are identified as the main growth areas for the next five years until 2007, lifting the total market value for vitamins in 2007 slightly higher than in 2002 at $2.3 billion.

But preoccupations with prices will be somewhat in the background as the industry concentrates on consolidation of their business rather than major expansions, with all eyes watching how DSM integrates its new Roche vitamins unit. Furthermore, since DSM is known mainly as a fermentation company, this technology could become more prominent in the production of vitamins than it is today, suggests the report.

The Global Market for Vitamins in Food, Feed, Pharma and Cosmetics​ will be published in August, priced at $4250.