Predatory Pricing Strikes Vitamin Supplements

No matter where we turn, it seems as if prices are going up.  Over the past five years, the price of eggs has risen 54% and the prices of navel oranges has risen 34%.  And what about the extreme change in gas prices nowadays?  Sometimes, prices are the result of uncontrollable forces, such as a shortage in oranges in Florida.  In more sinister cases, members of the industry manipulate economics so that prices are artificially inflated and reduced to best serve their bottom line, which is a practice known as predatory pricing. 

Lately, the supplement industry has been undergoing these rising costs which can be attributed to both the cost of fuel and environmental practices against the business practices of raw material suppliers in China, the place where most supplements originate.  A trend that appears to parallel the rising cost of fuel, the supplement industry has seen a great deal of price increases during the last year, which has lead to some serious vitamin sticker shock.  For example, the bulk cost of vitamin C has quadrupled since 2007, while vitamin B2 has increased 300% in the same period. 

Inflation is now the only culprit for these rising prices.  One main factor is the cost of oil, which has broken a great deal of records recently, with it consistently hovering around $100 a barrel.  As transportation prices are inevitably going up, that cost is passed along to different parts of the vitamin manufacturing industry, which ultimately affects the consumer.  Another factor is the dramatic price increase that has been seen in the cost of raw materials, especially those that originate in China. 

Quality also plays a critical role in the price hikes as well.  Some vitamins are more expensive than in the past because of a recently developed testing method that has found original supplements to be less pure than originally thought.  Since supplement makers only want the purest raw materials, they have shifter their buying and now have to pay more money for only the purest of materials.  The biggest factor in dietary supplements cost increases is China, which supplies more than 85% of the vitamin C that is consumed by habitants of the United States.  Although supplement providers were once scattered around the world, China has recently begun dominating the international market, which has led to the closing of many western production facilities. 

Chinese providers can easily beat its competitors’’ labor costs, which paves the way for these companies to dictate prices.  China also introduced an export tax, which was advertised as a necessity for healthy global competition, which led to another price increase in the raw materials.  Many industry experts believe that this tax is an artificial price hike, as China has no real competition at this time.  Because the Chinese prices are fluctuating so wildly, raw material suppliers are less willing to guarantee prices longer than two or three months.  

On the good side, consumers benefit from more affordable supplements when China drives prices down.  Supplement makers believe that prices will stay low for the next couple of years.  Meanwhile, domestic companies are feeling frustrated with the price hikes, as they are trying to absorb most of the higher costs in the hope that consumer loyalty will weather the market fluctuations.  The pinch will ultimately be felt until China lowers its prices or increases production.