One of the world's two leading amino acid suppliers (the other being Ajinomoto), the Japanese-owned company supplies all 20 of the common L-amino acids for pharmaceutical and nutraceutical uses.
Director of sales and marketing Dietmar Bartschat, PhD, told sister site NutraIngredients.com that the decision to increase prices, after a long period of stability, has several root causes - including increasing production costs which are degrading margins.
It is no surprise that rising energy and petrochemical costs, which are blighting margins across all industries, are part of the equation.
L-amino acids are usually produced by fermentation, and raw materials include a carbon source (usually glucose from corn starch or sugar beet); bacteria; and solvents for the downstream process.
Increasing demand for amino acids also has a part to play: with a long reputation amongst its customers for supplying high quality product, Bartschat said the company "needs to ensure long availability at acceptable returns for the company".
Amino acids are increasingly being used in the manufacturing process of many pharmaceutical products - with around 20 per cent of the top-500 best selling drug products in the world using amino acids as pharmaceutical intermediates.
The latest estimate from consultants Frost and Sullivan valued the European amino acids market at US$1357.7m (€1063.8m) in 2005. The consultancy expects it to grow to around $1944.3m (€1523.4m) by 2012.
Bartschat said that reasons for the increasing demand are difficult to pinpoint, since the market is quite diversified. Amino acids are used in pharmaceutical drugs, as well functional foods, infant nutrition products and food supplements.
The pharmaceutical industry makes up the majority of Kyowa Hakko's European customer base, though the company also supplies ingredients to manufacturers of food supplements, and according to Frost and Sullivan it is the health sector that is likely to drive growth in the amino acid market.
Bartschat said that the company believed Kyowa Hakko's customers will be accepting of the price increase "if they ask us to keep up the quality and supply".
In general, however, Kwoya Hakko's prices are going in the opposite direction to those of Chinese competition. For instance, Frost and Sullivan said last year that Chinese price of Arginine was €8 to €10 per kilo, compared to €12 to €13 per kilo from European manufacturers.
Fellow leading amino acid supplier Ajinomoto only last month announced that it too was feeling the heat and had been forced to increase the price of its L-Arginine products due to increasing raw material and energy costs.
Faced with such price pressure, seen not just for pharmaceutical and food ingredients but for a whole spectrum of products, leaves Western suppliers to set themselves apart on the basis of quality and supply security.
While not wishing to expressly comment on competitors' activities, Bartschat said Kyowa Hakko has a 58-year track record in the market and its customers expect a certain degree of quality and stable availability of the product.
The company presently has four amino acid production plans: two in Japan, one in the US and one, opened just last year, in China.
The China facility is a joint venture with a Chinese firm. Indeed, forming joint ventures in Asia to distribute products manufactured in low-cost environments was one of the ways Frost and Sullivan said that Western suppliers may be able to better compete on price.
Bartschat said that China is an interesting future market, both because of increasing domestic demand and cheaper production costs.
While he could only comment directly on the company's European operations, it is likely that parallel increases will also been seen in the US and Asia.
"This is not an issue only affecting Europe."
