04-22-2007, 04:53 AM
| Darkhorse |
Rank: Light Heavyweight
Experience: 7-10 Years
Join Date: Mar 2005
Here's another letter about the whey increases. This one's a little more descriptive than the BN bullshit:
Portions of Letter from Champion to distributors: |
If you have not yet heard, the supplement industry is being hit with a significant price increase for whey protein. Prices have soared to record levels within a matter of weeks with the industry-wide price increasing over 42% since last December. This was caused by the ongoing high demand for milk products in China and drought conditions in New Zealand. We at Champion are sensitive to how this may impact your customers. While we must pass on the increased costs, we have developed a new product, Pure Whey Fusion, as an alternative to offset the price increase the consumer may feel at the retail level. Pure Whey Fusion is still high in the same quality protein but is combined with 10g of complex carbohydrates meeting the recommendation from a recent nutritional study.
What caused this increase?
Similar to the way fuel prices rise when a barrel of crude oil goes up, whey protein pricing is directly related to the “supply versus demand” of milk. While the actual price is determined by an index posted weekly through the Chicago Board of Trade, it is driven by the worldwide demand for milk. Over the past several months there have been and continues to be a steady rise in demand for milk products in China and, to a lesser degree, other countries. The demand was further increased by the low milk production in New Zealand brought on by the drought conditions and higher animal feed costs. Meeting this demand with US milk market prices increased. With whey protein purchase contracts expiring, most companies are being hit with greater than 40% price increases.
Most importantly, Champion will not be effected by the shortage this demand has caused. We have entered into contracts with our suppliers to ensure the same high quality whey protein is available to meet our customer demands. Champion is proud of its reputation of offering high quality ingredients in its products and will not use substitutes. This is an important statement to make in a market where many companies will have to buy what they can, where ever they can.
Will prices be higher in the future?
That is uncertain at this point. We live in a global economy and are impacted by the demands and weather conditions through out the world. However, we are ready to react quickly if or when prices do come down.
What is Champion doing about the price increase?
Champion, like other companies that manufacture products containing whey protein, is forced to raise prices to cover the higher cost. Historically protein prices have climbed 20% between 2004 and December 2006 of which we have been able to absorb the bulk of through manufacturing efficiencies and other cost savings. Unfortunately, this increase is so large we cannot avoid a price increase. We are introducing our new Pure Whey Fusion as an alternative product at essentially the same price point as our popular Pure Whey 5lb.
The amount of the price increase is in proportion of the amount of whey protein that is in the product. We have not inflated prices to capture more margins. Prices were raised to a minimum level to only cover the increase in material costs. Products affected are (in ABC's store):
Pure Whey Fusion is being introduced as an alternative to the new higher priced 5lb Pure Whey. With the 5lb Pure Whey price increase rising over 25% we wanted to offer a similar product close to its old price for the price sensitive consumer. Pure Whey Fusion, offered in the same 5lb container, is still high in protein but is combined with 10g of complex carbohydrates, and is largely based on new research surrounding Nutrient Timing. This product is not only value priced, but is backed by recent studies that shows the importance using carbohydrates with protein before, during and after training.
Pure Whey Fusion tastes great, mixes great and will offer you a product that will still be affordable to even the most value minded consumer.
Unfortunately, we are facing the same problem every other supplement company faces today and have no other option but to raise prices in the short term.
Thank you for your understanding and continued support.