Stevia First Corp. (STVF) Looks to Disrupt Flavor Industry
WHITEFISH, MT / ACCESSWIRE / July 13, 2015 / The global market for sugar and sweeteners totaled about $77.5 billion in 2012 and is projected to grow at a 4.6% compound rate to $97.2 billion by 2017, according to BCC Research. While sugar holds a commanding 85% of that market, sugar substitutes account for a growing $6 billion worth of the market and are growing at a much more rapid pace, driven by consumer demand for healthier alternatives to sugar that are lower in calories.
Splenda (sucralose), the leading player in the sugar substitute market, fell from 61% of the market in 2007 to 45.5% of the market in 2010, while Truvia and Stevia accounted for a growing 13.8% of the market in 2010. Natural sweeteners like Stevia have been growing in popularity due to the mixed perceptions that consumers have of artificial sweeteners like aspartame - which some have perceived to be tied to cancer.
In this article, we'll take a look at Stevia First and how it's well positioned to capitalize on the industry's rapid growth over the coming years.
Growing Appetites
The sweetener industry has been quickly evolving over the past several years, as companies like Coca-Cola Company (NYSE:KO) and PepsiCo Inc. (NYSE:PEP) struggle to meet consumer demands for great tasting and low-calorie beverages. According to Beverage Digest, the non-alcoholic beverage market was worth over $1 trillion in 2013 with soft drinks accounting for the largest portion of the market at $374 billion - or 40 billion unit cases sold each year.
There are many different sweetener companies targeting the space. Senomyx Inc. (SNMX), developer of a technology that alters flavor characteristics to enhance sweetness, was generally recognized as safe as an ingredient by the Flavor and Extract Manufacturers Association's ("FEMA") expert panel in May of 2014 and has since been included in various Pepsi products following a deal between the two companies.
Sensient Technologies Corporation (NYSE:SXT), a manufacturer of colors, flavors, and fragrances, has also been active in the space by providing flavoring to food and beverage companies like Coca-Cola and Pepsi. Similar to Senomyx, the company develops chemical sweeteners designed to reduce the number of calories relative to sugar and improve the flavor profile relative to other artificial sweeteners like aspartame.
Acquisitions & Partnerships
A growing number of acquisitions and partnerships have underscored the growing importance of non-sugar sweeteners over the past decade. Archer Daniels Midland Company (NYSE:ADM) acquired WILD Flavors GmbH back in October of 2014 for about $3 billion; DSM (NYSE:DSM) acquired Martek Biosciences Corp. back in 2010 for over $1 billion; and, Tate & Lyle plc (OTC:TATYY) partnered with BioVittoria for exclusive access to its monk fruit sweetener in 2011.
While companies like Pepsi and Coca-Cola are looking to change up their beverages, specialty food and beverage companies are looking to add flavor technologies to their portfolios to enhance long-term shareholder value. These companies realize that the sweetener industry is about to change in a big way and are seeking ways to get ahead of the curve by acquiring leading technologies within the growing market.
Stevia's Big Advantage
Stevia has been used for centuries in Paraguay and Brazil as a sweetener and has been sold in Japan for about 40 years, but it was only cleared as a food additive in 2008 in the U.S. and 2011 in the European Union. Between 2008 and 2012, there was a 400% increase in new Stevia-based products; Coca-Cola even reformatted its recipe for Sprite in the U.K., achieving a 30% reduction in calories with fewer artificial ingredients.
When it comes to other non-beverage applications, Stevia has proven to be very stable at high temperatures, which could give it an edge over other artificial sweeteners like saccharin when it comes to cooking. Hard candies and other sugary products represent an ideal market for these types of dynamics, since they are often cooked at very high temperatures. Most of these markets have very few alternatives when it comes to sugar substitutes.
The World Health Organization has estimated that stevia could eventually replace 20% to 30% of all dietary sweeteners - a market estimated at $77.5 billion in 2012 according to BCC Research. This growth is driven largely by a public health backlash against sugar-loaded foods and beverages combined with the volatility of sugar prices, which have risen from 10 cents to 60 cents per pound over the last 10 years.
Addressing Supply Concerns
Stevia is produced by steeping dried leaves from the plant, like a tea, and then separating or purifying the best tasting sweet compounds, known as steviol glycosides. Since these concentrates are some 300 times sweeter than sugar, less is required in order to achieve the same level of sweetness when it comes to soft drinks. Still, demand for the plant has been rapidly growing over the past several years as beverage companies seek alternatives.
The biggest issue in the stevia opportunity is that current production isn't adequate to keep prices low in the event that a major brand like Monster Beverage Corp. (NASDAQ:MNST), Dr. Pepper Snapple (NYSE:DPS), PepsiCo, Inc., or Coca-Cola switch over to stevia with one of their major brand products. Even now, the price of Stevia is significantly higher than many other artificial sweeteners due to the lack of crop acreage dedicated to its production. Only a few public companies are targeting this opportunity so far, including Stevia First and Evolva (SWX:EVE).
Stevia First is looking to add an enzyme bioprocessing step to the production process in order to reclaim parts of the Stevia plant that are traditionally discarded as a byproduct. By doing so, the company claims that it's able to gather 2-3x more Stevia from the same amount of leaf or acreage, which could help expand the industry overnight. The company is also actively partnered with a significant Stevia producer giving the Company immediate access to more than 1,000 metric tons of production capacity annually.
Evolva is taking a biotechnology approach by using fermentation to produce nature-identical stevia products. Fermentation and hybrid approaches as pursued by Stevia First may offer a number of other benefits, including a more natural ability to offer greater customization of flavor components when it comes to Reb D and Reb M, which taste more sugar-like than existing products. Due to not being derived from the Stevia leaf, Evolva products may face greater difficulties in consumer acceptance, but the company has already partnered with Cargill Inc. to manufacture and commercialize its Stevia sweetener products.
Looking Ahead
Stevia First offers a compelling alternative to many other small-cap plays with exposure to the Stevia industry, including Sunwin Stevia International Inc. (SUWN) and S&W Seed Co. (SANW). While the company is smaller than many of its larger private competitors in the space, it's growing capacity and innovative technology could make a real impact in an industry set to replace sugar and help curb obesity and diabetes.
Investors may also appreciate that CEO Robert Brooke has extensive experience as a buy-side analyst and founder of a cancer drug development firm that grew to be worth several hundred million dollars. With this experience in both the capital markets and biotech industry, Mr. Brooke has assembled a growing team of experienced professionals and PhD scientists, and plans to expand from Stevia into other functional products related to metabolic health in the future.
For more information, visit the company's landing page at http://stevia.growthcircle.com/.
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SOURCE: Emerging Growth LLC
