by Ashley Matheson
Whey protein concentrate (WPC) and whey protein isolate (WPI) can be a protein manufacturer’s best friend in a good market, and very challenging in a bad one. What constitutes a bad protein market? Short supply, high demand and higher pricing. The market on protein can change drastically and unpredictably from one quarter to the next.
Obviously, such a change can turn a product launch upside-down. Because the protein market is very competitive with tight margins, any significant change in price can wipe out margins for both the contract manufacturer and brand marketer. There can be some benefit to locking in pricing when the market is stable and price pressure is reduced.
WPI and WPC are the most economical dairy proteins; however, the same issues affect all types of dairy proteins. Among these are domestic demand, international requirements, pricing for fluid dairy milk and cheese, or ranching and livestock trends. Any of these issues can result in a 10-percent to 15-percent price swing on WPC or WPI, resulting in a significant change in retail pricing.
One difficult situation occurs when a product is developed in the lab and price is quoted, and then the market tightens and prices rise for protein ingredients. Most contract manufacturers then use current inventory to meet immediate purchase order (PO) requirements, and inform customers future PO’s will be impacted by the unstable market and higher cost of goods. Options at this point can include reformation or changes to packaging specifications to meet a certain price point, or raising prices on finished products as cost of goods increase. As the market stabilizes and prices decrease, the reverse is true and much easier to incorporate.
A positive market driver has been increasing positive press on the health benefits of WPC and WPI, particularly overseas, which is yielding traction in countries such as China and India. Increasing demand in those markets can significantly impact the global supplies. Further, the continued robust nature of the bodybuilding market for WPC and WPI products is also increasing market demand. Brand marketers in the space often roll out large-sized protein products that can dominate shelf space, and may even be positioned as loss leaders because of the competitive nature of that market.
At this point, the market for WPI and WPC is again on an upward trend with increased demand, higher prices and long lead times. Customers should be mindful and work closely with contract service providers to effectively manage production and ingredient pricing.
Ashley Matheson is in account sales with Protein Research , and is active with IFT and AACT.
