Sugar molasses is the main raw material for yeast extracts.
The extracts are derived from the Saccharomyuces cerevisiae yeast, grown on sugar substrates using an energy-intensive process.
However Antoine Baule, president of Bio Springer, one of the main yeast extract suppliers in Europe, told FoodNavigator.com that the cost of sugar molasses has increased by 10 per cent per year for the last three years.
Although the French firm has effected only moderate price increases over this period and absorbed the rest of the costs, it announced today that it can "no longer delay a necessarily price adjustment".
Consequently, its prices will go up by in excess of 10 per cent as of January 1 2008.
Part of the reason for the sugar molasses cost increase is the on-going sugar reform in Europe, which has sought to improve competitiveness and market-orientation of the EU sugar sector and guarantee its long term future.
Part of this is the imposition of quotas on sugar producers.
Bio Springer has various streams for its incoming sugar molasses which allow it to balance supplies, but Europe does figure as an important source.
Sugar reform is only part of the reason behind the current cost scenario, however.
Baule said that increased use of bioethanol is also putting pressure on sugar supplies available to the food ingredients industry.
In tandem with this, energy prices have skyrocketed in the last three years as a result of fossil fuel costs.
Baule said: "In the medium-term it is possible that the cost of substrates [sugar molasses] will continue increasing."
Against this backdrop, demand for yeast extracts is on the rise, he said.
This is due to growth in convenience foods, and in food manufacturers seeking out clean label savoury ingredients that carry better health connotations - such as allowing for less salt to be used, and substitutes for monosodium glutamate.
Bio Springer has recently made a serious of investments to increase its capacity and help meet demand, including new capabilities in Strasbourg, France, and measures to debottleneck and increase efficiency at its site in Masions-Alfont.
In July the company said it is planning to build a new yeast extract plant in Cedar Rapids, Iowa, USA, which is scheduled to begin operations in the first half of 2010.
Baule declined to reveal the company's present production capacity.
But he said the capacity increases stem from a desire to improve the service to its customers.
The company does not see a relation to costs as consequence of better supply-demand balance in the marketplace.
The market volume was said to be 100,000 MT in 2005, with a value of €1.17bn, and typically grows at three to five per cent each year.
Despite the present cost pressures, however, it seems that the yeast extract market is, for now, relieved of stress from Chinese suppliers offering lower cost material to the European market - a factor that has contributed to margin squeeze in other areas of the food ingredients industry.
Baule said that although he understands the Chinese market to be growing fast, characteristically the standards are more specific to the Chinese market, not the Western market.
"So far we don't see much competition," he said.
In the European market, other yeast extract producers include DSM Food Specialities, Bell Industries, and ABF-owned Ohly.