Artificial sweeteners market to change

25 May 2009 00:00 Source:ICIS Chemical Business

Lawsuits and new products are indicators that the tight-knit, closed-lipped sugar-free/low calorie/artificial sweetener industry will be in for a spell of turmoil

THE INDUSTRY prefers terms such as "sugar substitutes" or "low-calorie sweeteners," but the product colloquially referred to as artificial sweeteners, and officially known as non-nutritive high-intensity sweeteners, are currently used by more than half of the people in the US.

In 1991, about 101m Americans used low-calorie, sugar-free foods and beverages. By 2001, that had increased to 163m, and by 2007 194m, according to US-based market research firm Packaged Facts (PF), which also notes that about one-third of US adults are on a weight-loss diet.

Weight-loss efforts around the world pushed the global artificial sweeteners market to $3.1bn (€2.3bn), and PF predicts that the global market will grow to $3.2bn by 2012.

In October 2008, PF released its study "Trends in the US Market for Sugar, Sugar Substitutes and Sweeteners".

For almost a decade, the sugar-substitute market was considered in the thralls of choices between the "pink, blue or yellow package." That is, Sweet'N Low (saccharin; introduced commercially in 1957), Equal (aspartame) or Splenda.

Aspartame is also the main ingredient in NutraSweet, and was introduced in tabletop, or package form, in 1981, and then to carbonated beverages in 1983.

The last major shift in the industry was the introduction of Splenda. Approved by the US Food and Drug Administration (FDA) in 1999. Splenda is sucralose, developed jointly by US-based McNeil Nutritionals and UK-based Tate & Lyle (T&L). Sucralose was discovered by T&L researchers in 1976, and is now used in roughly 4,000 products.

Sucralose is 600 times sweeter than sugar, compared with saccharin's 300 and aspartame's 200 times sweetness.

Splenda reportedly accounts for about a quarter of T&L's profits. McNeil Nutritionals is a subsidiary of US-based pharmaceutical and consumer products firm Johnson & Johnson.

Five artificial sweeteners are approved by the FDA. In addition to saccharin, sucralose and aspartame, there is acesulfame potassium, also called Ace-K and marketed as Sunett and Sweet One, and neotame.

According to US-based market intelligence provider Information Resources Inc. (IRI), for the 52 weeks ended March 22, 2009, US sales of sugar substitutes were roughly $372m, with sales of Splenda sugar substitutes at about $217m. Sweet'N Low and Equal's sales were $48m and $37m, respectively.

"Patents for products and processes usually control competition for a limited number of years following introduction and approval of new sweeteners," says Elaine Lipson, author of the Packaged Facts report. "Market forces include the shifting costs of competing sweeteners, the introduction of new sweeteners, emerging information about health concerns such as diabetes and obesity, and shifting consumer preferences and perceptions of safety."

In addition to taste and caloric count, current market drivers, notes Lipson, include ingredient awareness and whether the product can be considered organic.

The percentage of US households identifying themselves as users of sugar substitutes/artificial sweeteners has varied little since 2004. In spring 2004, 42.8% of those surveyed identified themselves as users of sugar substitutes/artificial sweeteners. That percentage increased to 46.6% by spring 2007, but as of winter 2008, was holding at 45.8%.

BITTER SWEET

Although "sucralose/Splenda continues to own a majority of the artificial sweetener market," says Lipson, it may be losing ground. In 2004, 415 new products were introduced using sucralose in food, beverage or personal care. For the first nine months of 2008, only 165 new sucralose products were introduced.

Troubles began in late 2006, with poor sales, the company said, because Splenda tasted too much like sugar and therefore confused consumers who associate an "off" taste with non-sugar sweeteners. At the time, Diet 7 Up, the General Mills' breakfast cereals Trix and Coco Puffs, and a specially branded variety of Diet Coke all stopped using it.

In early 2007, US-based sweetener company Merisant, the maker of Equal, started a lawsuit against Splenda co-creator McNeil Nutritionals regarding advertising that stated Splenda was "made from sugar" and "natural".

Merisant argued that because sucralose is synthetically made by processing sugar with chlorine, Splenda cannot use those terms in its advertising. The case was later settled out of court, with McNeil stating that Splenda is not sugar.

In September 2008, T&L's lawsuit against Chinese manufacturers of sucralose was thrown out of court, enabling Guangdong Food Industry Institute/L&P Food Ingredient Company to distribute their sugar substitutes in North America.

Then in April, the US International Trade Commission upheld an earlier ruling that found that Heartland Sweeteners did not infringe on T&L's sucralose patents. Heart-land produces the Nevella sweetener, and with Ganeden Biotech has developed a probiotic sweetener, Nevella with Probiotics, which is being promoted as boosting the immune system and promoting digestive health.

HERE COMES STEVIA

Also in April, US-based beverage giants PepsiCo and Coca-Cola indicated they were looking to abandon Splenda for a sweetener they have more invested in: rebaudiosides A (Reb-A), developed from stevia.

Stevia is the name of the plant, and stevioside is the sweetener, but stevia has come to refer to the sweetener as well. The stevia plant also contains the sweeteners Reb-A, B, C, D and E; dulcoside A; and steviolbioside. Stevia is approximately 200 times as sweet as sugar.

"We're testing stevia and Reb-A in a variety of products, but it absolutely comes down to taste," said Joe Tripodi, chief marketing officer for Coca-Cola, .

Like saccharine and every other processed sweetener since, though, there are varying and conflicting reports as to the health benefits of stevia, but it has been popular in Japan (where it has been tested rigorously) since the 1970s. The FDA approved Reb-A as a general-purpose sweetener in December 2008.

It was in 2005 that Coca-Cola and US-based agriculture and food giant Cargill began work on a derivative of stevia. The companies are now marketing their stevia sweetener as Truvia. Coca-Cola is initially using Truvia in two of its Odwalla juice drinks and in the new Sprite Green.

PepsiCo's stevia sweetener is being marketed as PureVia, and like Truvia, the marketing is hyping it as being natural. "This is a potential game-changer among zero-calorie sweeteners," said Lou Imbrogno, PepsiCo's senior vice president of Pepsi Worldwide Technical Operations, at a press conference in July 2008. PepsiCo's partner in PureVia is the Whole Earth Sweetener Company (WES), a subsidiary of Merisant.

PepsiCo is using stevia in its Sobe Lifewater drinks and in a new line of Tropicana orange juice, Trop50.

"Stevia is a wild card in the sweetener marketplace," says Lipson, because it dovetails perfectly with the industry's search for natural low- or no-calorie sweeteners that are publicly regarded as "safer" than those that are made via complicated chemical processes:

"After the stevia leaves are milled, a freshwater brewing method is used to unlock the natural sweeteners," said Sergio Machado, director of research and development for WES, in March at a press conference. "This extract is then purified further until a very high purity Reb-A is obtained."

Lipson notes: "Stevia products are poised to make a splash in the market."

Even McNeil Nutritionals is getting in on the act. In March, the codeveloper of Splenda has launched Sun Crystals All-Natural Sweetener, which combines stevia with pure cane sugar. The company is making sure to disseminate information about the product's natural status.

In January, NutraSweet said it was not worried about stevia. At the time, Bill DeFer, NutraSweet's president, said: "We're not expecting a lot of impact on our business. The global demand for aspartame continues to increase."

Meanwhile, the company is working on its own NutraSweet Natural with stevia.

US RETAIL SALES OF ARTIFICIAL SWEETENERS/SUGAR SUBSTITUTES, 2003-2007, $/M

Category 2003 2004 2005 2006 2007 2003–2007 change
All sugar substitutes 316.20 353.7 357.2 366.5 371.4 17.50%
Splenda (sucralose) 119.4 178.1 198.6 218.6 226.7 89.80%
Equal (aspartame) 80.1 67.6 57.8 51 46 -42.60%
Sweet'N Low (saccharin) 56.1 53.2 50.3 49.5 49 -12.60%
NutraSweet (aspartame) 7.6 6.6 4.9 3.6 1.5 -93.40%
Sweetleaf Stevia (stevia) 0.8 1.1 1.8 2.4 3.1 287.50%
 SOURCE: PACKAGED FACTS/IRI

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By Ivan Lerner