- Architecture of Trade
Following the publication of the article "Worldwide trade: growth has slowed" on 3 April 2018, we have received the following comments from one of our readers from California:
I just wanted to thank you for your excellent article, “Worldwide trade: growth has slowed”. The article provided tremendous insight.
I have myself been tracking this “Brix Effect” within the NAFTA market. It has had a very significant impact on the processing tomato industry within NAFTA. I believe that one of the early key drivers was the move by large ketchup manufacturers towards “ultra-high” viscosity tomato paste in the effort to be able to reduce required tomato solids in their finished product while maintaining the required finished product viscosity. H.J. Heinz was the leader in this area.
When I first entered the processing tomato industry (back in the mid 1980s) the conventional wisdom was to utilize the highest possible concentration of tomato paste in order to save on transportation costs. For HB paste in the NAFTA market the standard product was 31% NTSS Paste. However, with the advent of new tomato varieties and better refining and evaporating technologies, a new “Super Hot Break” high viscosity paste become more available. Today, the standard product used by Heinz is a 26% NTSS Super Hot Break type of paste. The “trick” is that these large ketchup manufacturers have been able to substitute on a one to one basis the 26% Paste for the 31% Paste. They have thus been able to reduce the amount of tomato solids in their product by about 13% … without loss of finished product viscosity.
In the last 15 years we have seen manufacturers of other products (such as pasta sauce and pizza sauce) move in this same direction. These manufacturers have tended to gravitate around a 28% NTSS high viscosity type tomato paste. Again, with a one to one substitution rate these “viscosity conscious” producers are able to reduce the tomato solids content in their products by about 9%.
We believe that within the U.S. market, domestic consumption of primary tomato solids has been flat to declining over the past several years. However we feel (but do not have the data to support) that the consumption of finished products containing tomato solids has been increasing at a rate in line with population growth. The difference between the two is the “Brix Effect” you have now brought to light.
This shift towards lower brix / higher viscosity paste has had a negative impact on the financial performance of the California Processing Tomato Industry. During this period when volumes were shifting towards lower brix paste, our industry continued to price product on an equivalent NTSS or equivalent Brix basis. As domestic customers were now able to use less tomato solids to meet their finished product requirements, paste revenues from domestic sales declined. Virtually all of the added value created by the development of Ultra High Viscosity paste was captured by the downstream manufacturers of finished products. The primary processors producing industrial tomato paste saw no benefits and it fact saw their revenues and margins from domestic sales contract. California exacerbated the oversupply situation in the industry by creating a product that allowed demand for tomato solids to decrease. This in turn forced California processers to become even more aggressive in competing for markets outside of NAFTA in order to maintain the large volumes required to support California’s large processing tomato infrastructure..
This “Brix Effect” you have highlighted has been very harmful to California’s processing tomato industry. Hopefully it does not spread to other major processing regions. Or, at least, primary processors should be aware of this effect and stop pricing paste on an equivalent Brix basis.
As an aside, I have seen a similar pattern (although on a much smaller scale) in trade flows of finished goods paste from Italy to Northern and Western Africa. Many Southern Italian processors who compete in these African markets are now utilizing a lower Brix CB paste product that has a coarser finish and lower Bostwick than is usual for cold break paste. They use this low Bostwick cold break paste to blend with traditional CB 36/38 Brix product to arrive at a final product that has the desired final viscosity but has reduced total tomato solids.
And of course we have our Chinese friends. I am not sure how to estimate the true Brix level of products coming out of China to the African markets.
Anyway, I just wanted to share some of the above ideas with you and sincerely thank you for bringing this “Brix Effect” to the attention of our industry. I believe this is a very important issue and needs to be discussed.
Again, thank you for your great work.
(The original article is here)
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