Perfectly sweet?

Sit down with most consumers for five minutes and explain why they would be better off sprinkling xylitol instead of sugar on their cereal, and they're converted, says Edward Baylis. "The problem is, you never get five minutes - in a supermarket, you get a couple of seconds to convince people to try a new product, and changing buying behaviour is difficult, because we are creatures of habit."

Nevertheless, just months after packing in the day job at PriceWaterHouseCoopers (PWC) to launch Healthy by Nature - a business devoted to selling xylitol under the Perfect Sweet brand, Baylis and business partner Danny Reeds had secured a string of supermarket listings.

Baylis, an Oxford graduate who joined PWC's food mergers and acquisitions team after university, first became interested in xylitol in 2004 when his team were looking at whether Japanese confectionery giant Lotte should consider a move into the European chewing gum market. While Lotte's chances of denting Wrigley's European market share appeared pretty slim, its xylitol-based chewing gum got Baylis, a self-confessed health freak, thinking.

"Xylitol ticked all the right boxes," he says. It's a naturally occurring sweetener found in a host of fruits and vegetables but with a lower glycaemic index (GI) than fructose (fruit sugar), which means it doesn't put stress on the pancreas to produce large amounts of insulin to keep blood sugars down. It's also metabolised differently and is less likely to be stored as fat. It looks and tastes like sugar and can be used as a 1:1 replacement with 40% fewer calories. It can also withstand high temperatures used in baking and pasteurisation. "The only thing you can't use xylitol for is bread, because yeast can't feed on it," he says. "Oh, and if you held a blow torch to it, it would crystalise, but it wouldn't brown!"

And the benefits of this particular sugar alcohol (polyol) don't stop there, claims Anthony Haynes, a high-profile Harley Street nutritionist and big xylitol fan. "Bacteria in the mouth do not ferment xylitol, so they cannot produce the acids that cause tooth decay," he says. "Because a lot of ear and nose infections start with bacteria in the mouth, studies have also observed fewer infections in subjects using xylitol." Most exciting of all, research has also demonstrated that xylitol can actively promote dental health by remineralising the tooth surface. It has also been shown to increase calcium absorption in the bones, although the mechanism for achieving this is not yet understood, he says.

Convinced that they had hit on a business opportunity, Baylis and Reeds started to do some serious research, and found that while xylitol was used in some baking mixes, sugar-free confectionery (Smint), gum (Orbit Professional) and even rations for the US military, it hadn't set the world on fire, despite its well documented health benefits. There are several reasons for this, he suggests, chiefly that it is more expensive than other bulk sweeteners such as sorbital and isomalt.

Another reason could be that anyone can extract xylitol from fruits or trees and sell it, making it less of a potential moneyspinner than a patented product like Splenda sucralose, claims Baylis. However, given its superb functionality it should have taken the market by storm, he says. "We started sounding out some food brokers and got an incredible response, it was a question of hitting the right buttons at the right time - low-calorie, natural, low-GI and so on." By December 2005, they had struck a deal with UK broker Product Chain and secured listings for 225g packs of Perfect Sweet in Tesco, Waitrose, Sainsbury, Holland & Barrett and Waitrose - not bad for a first attempt, he admits. "We originally thought this would be a slow burn, something we'd maybe sell online first before seeing if we could get into a few health food shops."

Perfect Sweet is manufactured and packaged by US firm The Sweet Life, which has plants in China, Canada and South America that extract xylitol from sweetcorn husks using carbon and nickel as catalysts, says Baylis, who has the rights to distribute Perfect Sweet in several other European markets.

"We're now talking to manufacturers looking to buy Perfect Sweet in bulk to use in healthier cakes and other products. The huge opportunity in my view, however, is cereal bars, which are killing each other on price at the moment. This could provide a real point of difference."

One category that is currently off limits, however, is soft drinks. Under the European Sweeteners Directive, polyols are approved for use in desserts, cereals, jams, fruit preparations, confectionery, sauces and supplements, but not drinks, owing to their laxative effects."The thinking goes that children could potentially consume enough soft drinks in a day to take them over the amount of polyols needed to cause a laxative effect," says Baylis. "All polyols are grouped together in this classification despite varying laxative effects [sorbitol's laxative effect is 10 times stronger than xylitol's]. We are working to get this changed."

Another UK-based entrepreneur convinced there is a real business opportunity in xylitol is James Baring, who is currently in talks with a potential partner to commercialise technology enabling the extraction of xylitol from spent brewers' grain. This could potentially slash the cost of production, he says. "It's the price that has held many people back. Using our technique, it's a whole different ball game."

The majority of xylitol production processes use birch chips as raw materials, but supply is scarce and prices are rising, he claims. "Spent grain is, by contrast, abundant and relatively cheap." The by-products of his process, which was developed in Russia, can also be sold into the market as animal feed rather than disposed of as waste, maximising returns.

Perhaps the most exciting development in this area, however, comes from across the pond, from a start-up called Dynamic Food Ingredients (DFI), a spin-off business from Purdue University in Indiana.

DFI is currently looking for a partner to commercialise an innovative new process that converts glucose from starch into xylitol using electrolytic technology. Chief technology officer Jonathan Stapley claims this process could bring down the price of xylitol "dramatically". He says: "Price and supply are what has kept this market back. If you had a manufacturer that wanted to use xylitol in a national roll-out in the US, that could take up the entire world supply!"

He adds: "Standard methods are inefficient and use harsh chemicals. Our conversion efficiencies are high, so we can accommodate production rates far exceeding those of other technologies. Some of the raw materials the main manufacturers use are also in short supply, unlike starch, which is pretty ubiquitous."

The market for polyols is growing at around 3%, compared to the 8% growth in high intensity sweeteners. However, growing awareness of the multiple benefits of xylitol should drive its use in a wider range of applications, particularly if the dental health category broadens beyond sugar-free confectionery to other products, claims Danisco Sweeteners technical and scientific affairs manager Christos Zacharis. "Xylitol works well with fruit flavours in confectionery, but it also works in cakes and other products."

If consumers worry about their teeth when they eat sweets, why not in other 'sweet' products, he points out. "This is where xylitol has a real USP [unique selling point]." However, before dental health benefits are pushed on packaging, we need to know where such claims would sit under the new European Nutrition and Health Claims Regulation, he says.

"They probably could be pursued as new claims under the 'fast track' process, but it's not clear whether the industry would try and pursue a generic claim for xylitol, or manufacturers would try and make proprietary claims about specific products using different grades of xylitol. Either way, I think you will see a lot more activity on the xylitol front in 2007!" FM