Dear Hydrocolleague:

Welcome to this week’s edition of Tidbits! Each week we bring you a mix of industry highlights, quick updates, and a few insights designed to spark new ideas. We’d love to hear from you. Send us topics you’d like to see covered in future issues.

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US Mid-Term Election - Trade Uncertainty

This part of these tidbits is written before the results of the US Mid-term elections are finalized. We will not make any prediction on the results. But it is very likely that, whatever the results of the election, trade uncertainty will continue for some time. Well past the end of Q4-2026 by which time many 2027 supply contracts will have been signed.

Uncertainty has a cost or, to put a positive spin on it, uncertainty can create opportunities. See "Premium Potential" below.

Premium Potential

During an interview with a hydrocolloid supplier, the subject of 'Domestic' vs 'Imported' material was raised. In these times of uncertainty a premium can be expected for a domestic source. No customs duties, special tariffs, anti-dumping, forced labor compliance, volatile shipping costs etc. Easier audit by the buyer. More reliable and faster delivery, are also part of the attraction of a domestically produced hydrocolloid.

So what is the premium potential for domestic vs imported? One estimate for a low-volume hydrocolloid was no more than 5-10%. The answer, however, is far from being that simple. Western xanthan, for example, can carry a premium of 60-80% over non-Western grades depending on the region where it is purchased. Guar gum from Mexico obtains a much smaller premium in the US, even though it is produced 'next door' compared to sources ten thousand miles away. Lastly, there is the fact that many hydrocolloids are simply not produced in the US or EU.

In any case, even if a premium is paid for a hydrocolloid, its cost impact on the finished product is small whereas it's functional impact far outweighs its cost. The tidbit below presents an example of cost impact.

Cost Impact of Hydrocolloids

Hydrocolloids are functionally critical to food formulations even if their cost in use is often very small. Take ice cream, for example.

In the US, a liter of premium ice cream costs roughly $8-10/L

Assume 3 traditional stabilizers are used: carrageenan (refined), guar, and locust bean gum.

Use level of 
Carrageenan - 0.01% (Price $18.11/kg for RC. Source IMR Quarterly Review of Hydrocolloids

Guar - 0.1% (Price $2.53/kg for 5k cP)

LBG - 0.1% (Price $13.09/kg Ice-cream grade)

Carrageenan cost = $0.0018

Guar cost = $0.0025

LBG cost = $0.013

Total = $0.017 Stabilizer cost

Assume 100% overrun and stabilizer cost is no more than $0.008

If one assumes a 100% overrun, the cost of the stabilizer in 1 liter of ice cream is no more than $0.008 .

Hard to fathom why the high level of competition in hydrocolloid supply. If one has a good supplier with a hydrocolloid that's approved...... To fathom is a journey :).

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DSeisun@hydrocolloid.com | +1-858-217- 5024

NZalesny@hydrocolloid.com | +1-619-871-1415

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