Caravan Ingredients has announced price increases across its product range, becoming the latest in a string of ingredients makers to pass on increased costs to customers.
The firm said the action will affect its emulsifier and lactylate products.
The US-based firm, which is a subsidiary of the Dutch bakery ingredients group CSM, last week announced to customers that it is forced to increase prices due to the higher costs for commodity raw materials such as soy bean oil, palm oil, stearic acid and glycerin.
"The price increase was inevitable due to spiraling raw material costs. Given the current market conditions, a price increase of between 20 percent and 30 percent is expected, although the actual cost increases will vary by product based upon the market driven cost inputs," said Ian Trood, vice president of sales at Caravan Ingredients.
The higher prices will be effective November 1, 2007 for all products not covered by supply contracts, said the firm. The increases are specific to Caravan Ingredients, and not connected to CSM at a corporate level, said the parent company.
Nevertheless, the move was also reflected in another CSM operating company, Purac, which last month announced its own price hikes.
Purac said it would be increasing its prices for lactic acid, lactates, gluconic acid and gluconates. The company said that the increases would vary from between five and ten per cent depending upon product category. Around 95 percent of its ingredients will be affected by higher prices.
Purac produces most of its basic products by fermentation of carbohydrates obtained from sugar cane, sugar beet, corn and wheat. The company said that production costs have increased substantially due to higher costs for carbohydrates and energy.
These announcements form part of a general industry move to try to pass on higher costs to customers. With oil prices reaching around $80 per barrel and commodity pressures also causing the price of raw materials to rise, few commodity-based businesses have remained unaffected.
DSM, Jungbunzlauer, FMC Biopolymer and CP Kelco are amongst ingredients firms recently announcing price hikes, while some of the price pressures have also traveled down the line to consumers.
However, the implementation of price increases is not without its challenges. Like all sectors, ingredients firms find themselves squeezed between rising costs they can no longer sustain, and customers unwilling to pay more for their products.
Food and beverage manufacturers, often unwilling or unable to absorb the extra cost due to challenges of their own, may turn to alternative products for their formulation needs, as seen in the move by some companies towards dairy alternative ingredients after dairy prices shot up this year.
Another scenario, and one that ingredients makers are wary of, is that companies will look to cheaper Chinese production. Possibly the most striking example of this in recent years has been in the case of citric acid, where higher costs and Chinese competition has squeezed a number of Western citric acid firms right out of the picture, and has prevented re-investment in the industry.