Trends the starch industry will face in 2023

Across the world, the demand for starch for food and feed is growing every year due to the many applications of starch and its plant-based heritage. The future in the market is looking bright.

But it’s been no bed of roses. The global pandemic sent supply chains tumbling and prices soaring while the war in Ukraine has rendered everything from energy to packaging an expensive acquaintance. Adding to that, the 2022 summer drought in most areas of Central and Southern Europe has piled pressure on suppliers.

According to the European Commission, drought has reduced the potato yields in 2022 by around 8 percent compared to 2021, and more extreme weather conditions in Central and Southern Europe will worsen the growth conditions.

– We are seeing pressure on the market at the moment because many starch providers in central Europe have had a challenging harvest, says Hugo Nielsen, CCO, at KMC and continues:

– High prices on wheat and corn have created increased incentives for farmers to shift crops, challenging the supply of starch on the global market. This creates an ongoing battle for capacity. At the same time, all farmers are struggling with high prices due to inflation and the energy crisis, says Hugo Nielsen.

What trends can we expect?

In the coming years, three specific trends will be important to act upon for players in the starch industry.

– There is a structural change underway. I believe we will see constant pressure on supply in the coming years and there will be high demand for predictability in the market, says Hugo Nielsen.

Hugo Nielsen predicts the following trends to look out for in 2023:

Although the consumption of meat is set to rise due to the growing global population, there is a clear tendency that the use of plant-based ingredients is growing rapidly in Western countries. Especially the young generation orient themselves toward new types of meals and principles, and climate responsibility is one of the main reasons.

– The starch industry has the upper hand in this regard. There is ample opportunity for developing food ingredients that can replace animal ingredients. For example, plant-based cheese alternatives are seeing significant growth at the moment, says Hugo Nielsen.

However, the plant-based movement also requires more transparency and quality assurance from suppliers. In just a few years, these elements will be essential to stay afloat in the market.

– I expect that the entire supply chain will require greater transparency about ingredients and climate footprint. In the future, all companies will be held accountable for the CO2 emissions of any product. Therefore, plant-based ingredients with high traceability and quality assurance will become even more important, says Hugo Nielsen.

The food ingredient markets have suffered a pandemic, a supply chain crisis, and now also the consequences of the war in Ukraine. A perfect storm, one might think, where not only energy prices are affected, but also packaging, spices, and various other important factors.

Therefore, according to Hugo Nielsen, one of the most important USPs going forward is the ability to offer security in supply.

– The crises are creating a desire for balance in supply. In a world of turmoil it is essential for customers to secure the amount of starch they need, says Hugo Nielsen and continues:

– Creating security in supply requires that you have control over your primary production with high continuity in quality and delivery. In addition, you need to control all factors in the value chain that support safe delivery. At KMC, for example, we have control over the whole supply chain from planting the potato to selling the finished ingredient.

3. Inflation creates new consumer patterns
Inflation has hit double digits in many areas, and consumers are migrating to discount products. According to McKinsey research, 60 percent of consumers changed grocery brands in 2022. Of these, 65 percent switched to lower-cost or private-label when buying frozen foods, snacks, and confectionery.

This development affects all areas of society. According to Innova, consumers today are more likely to say that cost and value for money have become more important when buying food and drinks.

These findings imply that all players in the market should consider stretching their resources when tapping into new consumer patterns.

– To counter the rising prices, it is imperative that our resources last longer and that we understand how to use its components in order for nothing to go to waste, says Hugo Nielsen and gives an example:

– One kilo of Casein is usually good for four kilos of cheese, but by replacing some of the milk Casein with potato starch, you will be able to stretch your resources and produce ten kilos of cheese while maintaining all the original features.

What’s next?

The structural changes in the starch market have ramifications for all market players. As one of Europe’s biggest starch producers, KMC has taken several steps to approach and adapt to the new market structures.

Over the years, KMC has invested intensively in logistics, R&D, product development, and three state-of-the-art factories. KMC has also taken measures to ensure a stable energy supply by investing in additional energy sources.

Want to know more about KMC's approach to the market?