FMC to increase prices on back of market pressures
on the back of high energy and raw material costs, and the company
says it expects prices to continue rising.
The Philadelphia-based firm hopes to implement 5-10 percent price hikes across the full range of its primary products, including carrageenan, microcrystalline cellulose and alginates.
Prices for hydrocolloid blends such as konjac flour and locust bean gum are also expected to see similar rises.
The increases, which will affect both list pricing and contract pricing, will be applied as from November 1 2006, or the starting date of 2007 contracts.
"We work very hard from a manufacturing production standpoint to overcome year on year inflationary costs. But we haven't been able to fully overcome somewhat more extraordinary costs - such as higher energy and raw material costs," said FMC's global marketing director for food ingredients Eric Beatty.
But the company also said that regardless of these "extraordinary costs" , it also periodically needs to try to recover some of its continually increasing R&D expenditure.
"We have a very front-end customer approach, with labs, direct sales and application investments in all four of our major geographic regions. This costs more to keep up on a global basis year after year, and in order to be able to continue, we need to find a way for customers to help support the burden," Beatty told FoodNavigator-USA.com.
According to FMC, two of its critical raw materials - seaweed and pulp - have seen dramatic price increases in the past year. Pulp prices were up 19 percent compared to the previous year, said Beatty, while seaweed prices increased on average between 5 and 10 percent.
The company had tried to implement price hikes of similar levels last year, although these were ultimately only "partially successful" and remained on the low end of FMC's goal of 5-10 percent. And because the market environment this year has not changed significantly since last year, the company does not expect the implementation of its recent price increases to be any easier.
"But we are fairly certain that all other suppliers at this phase have been impacted by the same increases, they are not facing a set of different economic pressures," said Beatty, adding that FMC customers do not only look for a certain quality of product, but also for the full formulation and after sales support that the firm offers.
FMC also said it expects to see more increases next year.
"We are never going to go back to $20-$30 per barrel for oil (currently prices stand at around $70 per barrel). Governments won't loosen environmental impact laws, which are good laws, and continuing demand continues to raise raw material prices. In such an environment, more increases are expected next year," said Beatty,
And depending on the environment, mid-year increases for list pricing are also "very likely", he said.
The company also expects to continue passing on increases levied by freight carriers to customers who have delivered pricing.