Tate & Lyle's monopoly of the sucralose market could face its first serious challenge following the entry of a new player able to produce industrial quantities of the sweetener without infringing Tate & Lyle's vast suite of patents.
Alkem - one of India's leading pharmaceutical companies - has struck a strategic partnership with a European application specialist called Fusion Nutraceuticals to launch sucralose under the SucraPlus brand in the EU. The move follows a multi-million pound investment in a modern manufacturing plant in Mandva in Gujarat.
Fusion chief executive Shane Delaney said: "We're coming to the market with a product that will be very competitively priced, without infringing any of Tate & Lyle's intellectual property (IP)."
While production costs were cheaper in India, the plant was operating to European standards and accreditations, said Delaney, who has worked in the food sector since the mid-1980s.
The EU market for sucralose in 2008 was worth around $65M, which equated to about 325t of sucralose, he said. "In terms of our capacity, we can produce hundreds of tonnes, so we can bid for a large slice of the market."
Tate & Lyle currently has a virtual monopoly on sucralose, which it manufactures at plants in Singapore and Alabama. However, many buyers wanted to see new legitimate entrants to the market, said Delaney. "There is room for more than one player. No one wants to put all their eggs in one basket."
While Tate & Lyle has admitted that it has taken longer than originally anticipated to bring new products containing sucralose to market, it is still a major profit driver for the company, generating £66M operating profit from sales of £148M (just 4.3% of group turnover). Tate & Lyle's pre-tax profits last year were £244M. The firm also cited a 30% increase in new product launches over the previous year.
With many retailers turning against aspartame, there were still huge untapped opportunities in drinks, claimed Delaney. "There is big potential in beverages and confectionery, particularly gum and hardboiled sweets." Sucralose also had technical advantages over aspartame, which is sensitive to heat, he said.
Historically, companies that have tried to take on Tate & Lyle have had mixed fortunes, with several being sued for patent infringement. However, defending its IP has proved costly for Tate & Lyle, which spent £6M this year and £3M last year on legal action against rivals.
A Tate & Lyle spokeswoman said: "Alkem's plant is based on first-generation technology; ours use third generation technology."