Differentiation helps reverse vitamin price slide for DSM

The vitamin market is a mature one, and since the acquisition of Roche Vitamins in 2003 DSM has increasingly focused on value-added products that it alone can offer. This has led to much innovation, particularly in functional food ingredients like Teavigo green ea extract and Fabuless to boost satiety. One factor that has had a serious effect on vitamin prices has been increased competition from China. This has caused some companies to throw in the towel, as they were not able to remain profitable when faced with such stiff competition. In vitamin C, this has left DSM as the only producer still operating in the West, at its plant in Dalry, Scotland. In March this year the company unveiled its differentiation strategy, drawing attention to the superior quality and traceability of vitamin C when compared with product from China. Gareth Barker, head of global marketing, human nutrition and health, told NutraIngredients.com at the time that Quali-C is not simply an ingredient branding exercise. It is an exercise in building awareness that opting for the cheaper material of uncertain provenance could have catastrophic consequences for a manufacturer and its brand further down the line. It now appears that the higher pricing DSM has been able to justify through the branding has yielded results, and that its customers are well-prepared to pay more for the assurances DSM can offer. DSM does not discuss pricing specifics. "The downward pricing trend in some of the main vitamins was reversed, supported by the differentiation strategy,"​ said the company in its results statement. In Food Specialities, however, sales and operating profits were said to have declined as a result of the latter stages of phasing out phytase tolling, and higher innovation costs. Special products (benzoic acid and benzaldehyde) showed a profit due to higher sales and volumes. The nutrition cluster as a whole, which comprises DSM Food Specialities and DSM Nutritional Products, reported a seven percent increase in sales for the third quarter (ended September 30m) to €639m. Operating profit (EBIT) took a dive, however, to €68m, from €79m for the same period of last year. A large part of this was the phasing out of contracts relating to Roche Vitamins, which DSM acquired in 2003. This had an impact of around €10m, said the company. The nutrition cluster results are set against a good backdrop for the company as a whole in Q3. Net sales were up 4 per cent to €2.19bn, and operating profit (EBITDA) was up one per cent to €321m.