A producer of speciality starches, National Starch is feeling the impact of rising tapioca, crude oil, chemical and freight costs.
Prices for tapioca starch, a bland starch found mainly in the modified form and used in desserts and pie fillings, have soared by 27 per cent in the past four months.
"We don't see any change in this trend in the near future. The prolonged drought in Thailand has severely affected root crops like tapioca," warned Boonmee Wattanaruangrong, secretary general of the Thai tapioca starch association.
We want to support our customers in these tough times but simply can't absorb these costs any longer, commented Alan Bradley, divisional vice president, National Starch Food Innovation, Asia Pacific.
Reassuring customers, Bradley said that "as the largest modified starch producer in Thailand" the firm has strong supply chain means to guarantee supply of tapioca starch .
The increases will apply from 1 April 2005 and cover all tapioca based modified food starches.
Growth in the global starch market is limp. Market analysts SK Patil and Associates estimate that total use of starch will hit 70 million tons by 2010 on annual (global) growth of 2.2 per cent. Growth in the US at 0.65 per cent, the EU at 0.2 per cent and Japan at 0.18 per cent will be very slight, while for the rest of the world the market rise is pitched at 2.25 per cent.
Last month ICI reported that National Starch had contributed £202 million ($387.85 million) in operating profit to the £439 million ($843.08 million) total for the group, that includes flavours and fragrance firm Quest. John McAdam, ICI's chief executive, said that the growth in starch sales in 2004 reflected the firm's strategy to 're-focus the business on added-value food starches.'
In a move reflected across the food ingredients industry, National Starch is hooking onto 'value-added' products to drive profit growth through higher prices in the starch market, forecast in Europe to reach €2.1 billion ($2.82 billion) by 2006.
In 2003 the food and beverage industry represented about a quarter of turnover for National Starch, that in addition to food starches includes adhesives, electronic materials and healthcare products.