In the face of current economic trends supplement consumers should brace for changes
Under the surface of the seemingly straightforward world of manufacturing and marketing your favourite whey protein powders lies a complex and volatile market that is affected by numerous economic factors, with complex financial instruments such as futures, exchange hedging and commodity trading at play.
You see, various dairy products, including whey, are traded as commodities on the open market. The two forms that are traded are Whey Protein Concentrate 80 (WPC80) and Whey Protein Concentrate 34 (WPC34). WPC80 is premium quality whey with a protein content of 80%, while WPC34 has a protein content of just 34%. Both are used to fortify a wide variety of manufactured foods with protein, in addition to their use in dietary and performance supplements.
As traded commodities, factors such as supply and demand and the exchange rate are intricately linked with the price of whey. So, when the world experiences economic turmoil on the scale it did at the end of August this year there are serious implications for us all.
One of the more important factors affecting consumers of whey protein products is the rand/dollar exchange rate. Having plumbed historic lows recently, which saw the rand touch levels above R14/$, it became inevitable that the price of whey, which is traded in dollars, would rise.
However, it is not all bad news, explains Mario van Biljon, co-founder of locally produced supplement brands SSN and Supashape. “Thankfully we’ve been sheltered from the potential of a massive spike in local prices due to the low price of milk powders.”
Van Biljon is referring to the current price per kilogram of whey protein, which is sitting near historically low levels last seen in 2010 due to a slump in global demand. In June 2015 the per-kilo price of WPC80 was around $5, while the price per kilo of WPC34 was just above $2. This is off a peak in March 2014, when a kilo of WPC80 cost around $9 and WPC34 was $4 per kilo.
“Unfortunately the relative strength of the dollar, which has steadily gained in value against the rand since the end of 2011, has mitigated much of the cost benefit of these low protein prices. While this has meant that prices haven’t gone down, it has balanced out the other input factors that could have seen prices rise sharply a lot sooner,” he explains.
And then the rand tanked in August, ending its losing streak 15% down against the greenback since the start of 2015. “Unfortunately that doesn’t bode well for consumers. Whether you buy fortified foods or supplements, we need to brace ourselves for a few changes,” continues Van Biljon.
Two forms of whey are traded as commodities on the open market:
- Whey Protein Concentrate 80 (WPC80) 80% protein content
- Whey Protein Concentrate 34 (WPC34) 34% protein content