By Nesha Zalesny

Does anyone else feel like the pandemic has been like dropping a rock into a pond? There was the initial shock of the actual pandemic; but the ripple effects of that rock to the smooth surface of the water keep impacting the world. To most industries, the ripple effects on the supply chain have been tsunami-like. The food and beverage industry has been especially affected. Prior to 2020, most ingredients were available and lead times were reasonable. The current situation is not nearly as optimal. The pandemic exposed a lot of vulnerability within many industries, but the food industry was perhaps one of the most visible. In many regions, grocery store shelves have sat empty for long periods. Within the food hydrocolloid business, buyers and suppliers alike have all faced little to no availability of many ingredients. Among the hardest hit, carob bean gum, starch and xanthan gum. In fact, few hydrocolloids remain as available as they were pre-pandemic.

Carob Bean Gum Crisis

Carob bean gum, used extensively in the beverage and dairy industries, has recently faced a major crisis. This incredibly useful hydrocolloid, also known as locust bean gum (LBG), is used extensively in foods. In ice cream, it helps control ice crystal formation, slow melting characteristics and provide a creamy mouthfeel. It is considered an essential ingredient in many dairy formulations. In plant-based milks and beverages, it provides a creamy mouthfeel more similar to full-fat dairy milk. Consumer concerns about climate change, animal welfare and their own health has led to incredible growth for plant-based milks. According to the Good Food Institute, retail sales of these beverages have experienced double digit growth in the US for the past four years. US sales in 2020 were estimated at $2.5 billion and accounted for 15% of the fluid-milk sold. West European sales of plant-based beverages were $3.5 billion in 2020 which was an increase of 15% over the prior year.

An examination of the label of most plant-based milks reveals two nearly ubiquitous ingredients; gellan gum and carob/locust bean gum. Carob bean gum is a natural ingredient derived from carob trees that grow in coastal regions along the Mediterranean. Morocco, Spain, Portugal, Italy and Turkey have thriving carob industries. Prior to 2018, the seeds used to produce carob bean gum averaged between €2/kg and €3/kg. IMR International estimates the carob bean gum industry is growing at a rate of 3.3%. Demand for carob bean gum far outpaced the industry’s ability to supply. Seed prices went from
€2/kg to €25/kg in the course of a year. To remain profitable, suppliers had to increase the price of carob been gum. In the first quarter of 2021, the price reached as high as
€100/kg. During the height of the crisis, very few suppliers were offering contracts and buyers were forced to spot purchase, at spot purchase prices.

A further ripple in the supply crisis, a batch of carob bean gum sold in Europe was found to be contaminated with Ethylene Oxide (EtO). The legal limit for EtO in Europe is 0.1 mg/kg. This resulted in an European Union (EU) rapid alert (RASFF) to be issued. Unfortunately, the contaminated carob bean gum was used in a very popular ice cream texturising and stabilising blend used by several European ice cream manufacturers, all of whom had to issue their own alerts and/or recalls to consumers.

Understandably, manufacturers started looking for ways to reduce or eliminate carob bean gum in their formulations. A major hydrocolloid supplier has developed a differentiated gellan gum that they claim stabilises protein and provides mouthfeel. In essence replacing the gellan and carob gum blends usually found in these products. Guar manufacturers have created modified guar products that more closely resemble the performance of carob bean gum. Guar modification can be done by either a physical process or by enzymatically treating guar gum. These remain a low-cost option for formulators looking for alternatives. The reformulation efforts, while slow are beginning to be felt. There is some controversy over the regulatory status of enzymatically modified products in the EU. These efforts, along with reformulating, has had an impact on the carob bean gum market. Some buyers have reported a drop in demand by as much as 75% of normal.

Stiff Starch Situation

One of the hardest hit texturisers in the food industry is also one of the most universal. Starch can be manufactured from a wide variety of raw ingredients from corn, potato and wheat to rice and tapioca. Starch is comprised of long chains of glucose molecules which plants create to store energy. It is used throughout the food industry for mouthfeel and thickening. It is unique in that it is a bulk thickener, meaning that use levels for starch average 2–4% in most applications (most other hydrocolloids are well below 1% with some exceptions such as gum acacia and gelatin). Starch is also very widely used in a multitude of industrial applications, such as paper, textiles construction and even oilfield. Prior to the pandemic, buyers of starch in food and/or non-food applications rarely, if ever, experienced shortages, and the average price for food starch was under €1.00/kg, although some specialty grades could be found at €2.00–3.00/kg.

For the starch industry, one of the first ripples began in the second quarter of 2020. Starch buyers first started reporting not being able to purchase their usual starch. The ripple gained momentum when a weather pattern caused a freeze in Texas which further reduced availability of some of the ingredients used to produce modified starches. Drought in Europe and the war in Ukraine have diminished the availability of many of the traditional starch raw materials, such as waxy maize and wheat. For most of 2022, modified starches have been difficult if not impossible to get. Most buyers have found themselves put on allocation, and very few are getting all the material they need.

Putting further pressure on an already tight starch market, demand for paper grade starch for the packaging industry is also growing. According to emarket, ecommerce sales grew 25% in 2021. While growth slowed to 9.7% in 2022 ecommerce remains a fast-growing market. Imagine the paper packaging required to ship the number of groceries and packages ordered during the pandemic. Demand for paper grade starch is higher than it has been in several years.

As a result, food companies are scrambling to find alternatives to their usual starches. Formulators are having to switch from traditional waxy maize-based modified starch to more available native starches or alternative starches, such as tapioca. Tapioca starch is a great choice for many applications. However, it is manufactured primarily in Thailand and historically costs nearly double that of waxy maize starch. There is also an increase in shipping costs. Because so many end users are having to find alternative starches, demand for tapioca is increasing. A higher demand will likely force an increase in the price. Other users are looking for alternative manufacturers. Qualifying new starches and new manufacturers takes time and adds expense of the finished product.  

Xanthan Gum Challenges

Xanthan gum is another widely used texturising hydrocolloid. Since its introduction to the food market in the late 1960s, food formulators have used it to add thickness to dressings and sauces, improve aeration in baked goods and stabilise foams in whipped products. Xanthan gum was largely patent protected until the early 1990s. When it went off-patent, many new manufacturers began producing it, including a few European and several Chinese companies. From the mid 1990s, Western buyers enjoyed low priced xanthan gum. This was largely due to lots of competition from manufacturers. Chinese producers were especially competitive. Chinese produced xanthan gum can cost less than half the price of Western produced. Subsequently, Chinese manufacturers have grown rapidly. Unfortunately, there is now a mismatch in the geographical location of capacity and demand. Much xanthan gum capacity is in China, and most of the demand is in the West.

Conditions in China have been very rocky for all industries including xanthan gum. Chinese energy prices increased significantly in 2021. When energy prices first increased, manufacturers were monitored not only for total usage, but also the intensity of energy usage. Production plants that generally ran three shifts a day, six to seven days a week, were suddenly reduced to running two shifts a day, five days a week. In addition, shipping between China and Europe or the US ground to nearly a halt during the pandemic. On top of this, Chinese manufacturers were forced to shut down, if any worker tested positive for COVID. An added problem occurred when some Chinese produced xanthan gum was found to have excess levels of EtO. The EU has added testing requirements for any Chinese manufactured xanthan gum imported into Europe. This adds time, compliance complexity, and cost to any xanthan gum shipment from China. All these factors have resulted in a deficit in the availability of xanthan gum that Western producers cannot completely cover. Chinese xanthan production accounts for 60–70% of world production. Consequently, the average price of xanthan gum has increased over 200% in the past year and there is no immediate end in sight for these upward price pressures.

What to Expect in 2023

Other hydrocolloids, than those mentioned above, have faced their own challenges. Two back-to-back super typhoons in the Philippines reduced seaweed availability for producing carrageenan. The lack of paper packaging material has made harvesting lemons difficult, so the price of lemon peel for pectin production has increased. Shipping by both sea and land has seen massive price fluctuations. New regulations such as the Uygur Forced Labor Prevention Act (UFLPA) in the US are creating waves. Buyers and suppliers alike are facing very rough waters in the coming year.

The decrease in demand for carob bean gum has meant that prices are starting to correct and availability is improving. This may be a bright spot for buyers of LBG that will continue to use it. Unfortunately, for starch and xanthan gum buyers things aren’t likely to improve. For starch, the addition of capacity to keep up with current demand is unlikely given the looming recession which has caused a reluctance to launch big capital investment projects. Chinese xanthan gum manufacturers are coming back, but progress is slow. It is very unlikely that prices for these very useful hydrocolloids will return to pre-pandemic levels anytime soon.