Sucralose Rockets to Top as New Sweetener Star

24 January 2005 00:01  [Source: ICB Americas]

Fast-paced changes on the consumer end of the sweeteners market have caused some major shifts in the role of high-intensity sweeteners. Among the most noticeable of these changes is the rise of a relative newcomer, sucralose, to the top of the food chain as the most-sought-after type of high-intensity sweetener, outpacing demand for both aspartame and the older, more well-established saccharin.

These sweeteners are best known by their trademark names, which have become common household brands: Sweet’N Low (saccharin), NutraSweet (aspartame) and Splenda (sucralose). The widespread popularity of Splenda, however, is based primarily on the marketing leverage given to sucralose, as it is derived directly from sugar, a natural ingredient, and is, therefore, perceived as safer than its synthetic counterparts.

US sales of Splenda in 2004, as of December 26, exceeded $172 million, according to Chicago, Ill.-based Information Resources Inc. (IRI), a market data provider. Sales of Equal totalled almost $64 million, and sales of Sweet’N Low were $52 million. Meanwhile, sales of the NutraSweet brand aspartame were roughly $6.5 million.

Demand for sucralose has grown so intense in recent years that leading sucralose manufacturer UK-based Tate & Lyle PLC is expanding manufacturing capacity. Last November the company announced a plant expansion in Singapore, where it will construct a new £97 million ($182 million) manufacturing facility, expected to be completed in January 2007.

US consumption of sucralose is expected to grow at an average annual rate of 9.1 percent from 2002 to 2007, based primarily on its use in beverages, tabletop sweeteners and food, according to Menlo Park, Calif.-based SRI Consulting. This growth outpaces both aspartame and saccharin with 1.8 percent and 2.0 percent average annual growth, respectively, in the same period.

Predictably, sucralose demand has far exceeded supply, as evidenced by Tate & Lyle’s scramble to augment its lone sucralose manufacturing plant in McIntosh, Ala., with the new Singapore plant. As of September 2003, when it was still under the ownership of McNeil Nutritionals, the McIntosh facility had an annual sucralose capacity of 500 metric tons, according to SRI.

Upon purchasing the facility from McNeil Nutritionals for $134 million in February 2004, Tate & Lyle immediately began upgrading capacity at the site with two expansions, collectively worth around $75 million, announced during the summer. Upon final completion of the projects by April 2006, the McIntosh facility will have more than doubled its current annual capacity, pegging it somewhere around the 1,000 metric ton level.

The additional upgrade in Singa-pore will further strengthen Tate & Lyle’s manufacturing arm. “Once fully operational, the Singapore plant will have a capacity two-thirds of that at the expanded Alabama facility,” the company says.

Capacity for sucralose has been understandably low. It is a newer product in the high-intensity sweetener market, approved by the Food and Drug Administration (FDA) only in 1998. Historically, production of the compound has been relatively small, amounting only to about 300 metric tons in 2003, compared to the 4,000 metric ton output of saccharin and the 4,000 to 5,000 metric ton output of aspartame at that time, according to SRI. Meanwhile, consumption of sucralose in the US market tripled between 1998 and 2000, states the consultancy.

The construction of a plant in Singapore not only gives Tate & Lyle increased production, but also strategically positions the company in that portion of the world market. “The success of McNeil Nutritionals’ Splenda brand tabletop products has further increased demand. The new plant will broaden our manufacturing base and help facilitate improved access to the Asian and European markets,” says Iain Ferguson, Tate & Lyle’s chief executive. “Sucralose has enjoyed success in Japan since the first products were launched there in 1999, and we aim to replicate this success across the region.”

Additionally, the European Union only recently granted sucralose approval in February 2004, with the approval becoming final in all member states in February 2005. Two years later, Tate & Lyle will have tripled its sucralose manufacturing output and expects to achieve the growth needed to meet growing demand.

Meanwhile, aspartame, the previously reigning sweetener champion after its introduction into the market, is battling competition from sucralose. The concern for aspartame producers is not so much in the demand and supply arena, but more so in waning interest as consumers turn to sucralose, purported to be the safer product on the market.

Merisant Company, a leading producer of aspartame, has been actively seeking to revive its Equal Sweetener brand name, which has been flagging recently. The company has noted that the 22 year-old brand name hasn’t grown “significantly” in years. However, Merisant, a relatively newer company formed in 2000, has been pushing forward optimistically to revive the Equal brand.

Under the new leadership of recently appointed CEO Paul R. Block, Merisant is showing it will continue to fight to hold its ground. Mr. Block was appointed CEO last November.

From 2001 to 2002, Equal’s overall volume in the US grew nearly 7 percent, a positive turnaround from the declining growth trends seen under previous ownership, notes Merisant. The Equal franchise continues to experience positive growth, says the company.

However, SRI’s projected growth rates of 9.1 percent for sucralose and 1.8 percent for aspartame in the 2002 to 2007 period illustrates a tough discrepancy in how all aspartame producers will need to meet future challenges in market growth.

The NutraSweet Company, the world’s leading aspartame producer which primarily sells to food and beverage industries, has itself faced recent problems with its product on the manufacturing side. In mid-2003, the company had to idle one of its two aspartame manufacturing units at its Augusta, Ga., site while at the same time it formed a long-term contract with Korea-based Daesang Corp. to supply aspartame to NutraSweet.

The company has instead decided to follow through with its newer product, neotame, which was approved by the FDA in 2002. Neotame, a synthetic sweetener, can be 7,000 to 13,000 times sweeter than sugar depending on its food application, says the FDA.

NutraSweet, a unit of J.?W. Childs Equity Partners II LP since it was acquired in 2000, is planning new growth around neotame rather than aspartame. The compound is approved for use as a general-purpose sweetener.

Meanwhile, Merisant, whose Equal brand is second only to Splenda, is not giving up quietly. Last month Merisant filed false advertising claims against McNeil Nutritionals. Published re-ports say that Merisant accuses McNeil Nutritionals of putting out misleading claims that Splenda is made from sugar and therefore tastes like sugar, allegedly implying the product is natural. However, Merisant notes, the product is made through a complexchemical process.

Set apart from the competitive war is PMC Specialties Group Inc., the leading manufacturer of saccharin and its salts. As of September 2003, PMC led the pack in terms of production output with an annual capacity of 13,000 metric tons, says SRI. In the US, saccharin output has remained relatively stable at or around 4,000 metric tons since 2000. Saccharin’s well-known name on the market, Sweet’N Low, falls third in line behind Splenda and Equal according to IRI’s 2004 sales data.

As the brands battle it out for dominance in the high-intensity sweeteners market, factors such as consumer choice, customer needs and a trend toward sweetener blends, will make significant impacts, notes SRI. “US consumer attitudes toward diet beverages in particular and diet food in general is continually changing. Consumer focus has shifted subtly from just reducing caloric intake from sweeteners to a more comprehensive weight management system,” states the consultancy. “The opportunity for beverage companies, in particular, may be to develop a new category of beverage using high-intensity sweeteners and positioning the products as healthy, rather than diet.”

The continuing shift toward sweetener blends provides new opportunities for the expanding palette of high-intensity sweeteners. Use of these blends has grown recently in food and beverages. “[This] has proved popular with consumers,” SRI says. Further, with the approval of neotame, US food manufacturers have one more stable high-intensity sweetener in their arsenal for use in food applications.

ICIS Copyright © Reed Business Information 2009

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