Tate & Lyle swallow bitter sucralose pill

The gradual chipping away at Tate & Lyle’s monopoly of the global sucralose market is continuing apace with news that another rival is considering expanding its production capacity for the high intensity sweetener.

BioPlus Life Sciences, which operates a small 60t/year plant in Hosur, near Bangalore, is considering commissioning a second, larger plant if the sweeteners market continues to grow, revealed chief operating officer Paul Stanton.

While Tate & Lyle still dominates the market, City analysts predict it will not be able to sustain its 40% profit margins on sucralose for long as Chinese and Indian firms muscle in on the action - with producers including Niutang and JK Sucralose recently announcing plans to increase capacity.

“Clearly we do not have the scale of Tate & Lyle, but we do have a very efficient manufacturing process and the cost of production will drop as we scale up”, said Stanton.

While the demand for high intensity sweeteners continued to grow as manufacturers sought to reduce/replace sugar, it had nevertheless taken longer than anticipated for the sucralose market to develop, he admitted. “It’s been a slow burn. With any new product you have to build trial and awareness.”

While sweeteners derived from the stevia plant had generated a lot of publicity, they would sit alongside - rather than replace - sucralose, predicted Stanton.

While some growth was coming from firms under pressure to replace aspartame in existing products with something perceived to be more ‘natural’, the biggest opportunity was in new products, he said.

BioPlus, which is partly owned by the family behind Pharmed Medicare, is just starting to market its Solo-branded sucralose in Europe, said Stanton. “We are looking for a partner to assist with sales and distribution as historically we have been focused on manufacturing, research and development, not managing the customer interface.”

According to Leatherhead Food Research, sucralose had a 19% share of the $1.23bn global high intensity sweeteners market in 2007. This put it behind aspartame at 52%, but ahead of Ace-K at 11%, cyclamate at 10%, saccharin at 7% and stevia at 1%. However, stevia has gained substantial ground over the last two years, so 2009 figures are likely to be very different.

Tate & Lyle, which is mothballing its US plant and concentrating its sucralose production at Singapore, said it has seen “strong volume growth” for its Splenda-branded sucralose in the first half of 2009.

While sales volumes of sucralose grew in the double-digits in the first half at Tate & Lyle, sales value growth was in the single digits, reflecting lower selling prices. However, operating margins were “somewhat above” previous expectations following a scientific breakthrough that has increased yields, said the firm.