In 2020, "Yuanqi Forest" brought erythritol to the fire, let everyone know the concept of "sugar substitute", and also made the performance of Ternary Biology and Bowling Bao soar.
However, natural sugar substitutes are like tornadoes, which come and go quickly, because the heat is too high, resulting in serious overcapacity of natural sugar substitutes, which makes many manufacturers involved in the whirlpool of price wars.
However, with the prevalence of the concept of healthy diet, the substitution of sugar substitutes for sucrose has become a trend, standing today, the most stable market in the sugar substitute industry is still the artificial sugar substitute market, of which sucralose has become the largest artificial sweetener variety in the amount of sucrose.
What makes sucralose stand out in the sugar substitute market?
At present, sweeteners are roughly divided into three categories: natural sweeteners, synthetic sweeteners, and sugar alcohol sweeteners, among which artificial sweeteners have developed rapidly in recent years because of their cost advantages.
Artificial sweeteners have undergone iterative development from saccharin→ cyclamate→ aspartame→ acesulfame potassium → sucralose, and continue to optimize in terms of taste and food safety.
Among them, sucralose, as a fifth-generation synthetic sweetener, has the advantages of pure taste and stable properties, and is the most stable of all powerful sweeteners, which can be stored for more than one year in beverages and at normal temperatures.
This advantage makes sucralose widely used in food and beverages, accounting for 29% of sugar-free beverages, followed by dairy products and baked goods.
What is the current situation of the sucralose market, and where are the investment opportunities?
Although sucralose is widely used in the field of food and beverage, its own production still has strong cyclical attributes.
In 2021, affected by the sharp rise in the prices of raw materials thionyl chloride and DMF and the recovery of domestic and foreign demand, the price of sucralose began to rise from August 2021, and the policy of dual control of energy consumption at the end of 2021 became stricter, the insufficient supply of raw materials and the decline in the operating rate of production enterprises pushed the price of sucralose to 480,000 yuan/ton.
In 2022, with the decline in raw material prices, weak demand and the impact of destocking at home and abroad, the price of sucralose will fall to the current historical low of 110,000 yuan/ton.
From the price point of view, the price of sucralose has been close to or down the cost line of domestic manufacturers, and the backward production capacity of the industry has gradually retreated, such as Nantong Changhai, Shandong Zhongyi, Jiekang, Jiangsu Jubang and other companies have withdrawn from the market, and the price of sucralose is expected to rebound from the bottom.
From the perspective of market distribution, in 2023, China's sucralose production will be 21,591 tons, domestic consumption will be 5,235 tons, and export volume will be 16,414 tons, with an export share of 76%.
The data shows that from January to February 2024, the export volume of sucralose was 3016 tons, a year-on-year increase of 41%, and global consumer demand is expected to be boosted under the expectation of market easing.
In the face of the expectation of replenishment, the head enterprises of sucralose have started a plan to expand their production capacity, and Kehong Biotechnology and Kangbao Biochemical have added 1,500 and 5,000 tons of new production capacity this year respectively, forming an oligopoly market for sucralose in China together with Jinhe Industry.
In addition, the production of sucralose is extremely difficult, requiring a total of 26 steps, and unexpected problems occur frequently in the production process, which makes the production line of most companies unable to reach the planned capacity, which also causes the oligopoly market pattern to continue in the future.
Among them, Jinhe Industry occupies 30% of the global production capacity with an annual production capacity of 9,500 tons, ranking first in the world, and the domestic market share has also reached 60%, and its customers include Wahaha, Mengniu, and Yili's beverage industry giants.
In 2023, affected by the decline in sucralose prices and high inventory, Jinhe Industrial's revenue will only be 5.311 billion yuan, a year-on-year decrease of 26.75%, and its net profit will be 704 million, a year-on-year decrease of 58.59%.
However, under the cyclical nature, Jinhe Industrial has also taken a series of measures to resist the risk of downward cycle.
First, the self-production of thionyl chloride, an important raw material, has been realized on the core product sucralose, and the thionyl chloride production line has been built since 2019, and the current production rate has reached 80,000 tons/year to achieve a stable supply of core raw materials.
In addition, in 2023, the company will complete the construction of the second phase of Dingyuan, including the main projects with an annual output of 600,000 tons of sulfuric acid, 60,000 tons of ion membrane caustic soda, 60,000 tons of ion membrane potash and 150,000 tons of hydrogen peroxide.
Because the refined production line for the production of sucralose can share auxiliary production equipment such as electricity, heat energy, and sewage treatment with the company's basic chemical production line, it can produce scale effects and further reduce production costs.
Second, through the technical transformation of new and old production lines, the production capacity has exceeded 10,000 tons, and the production efficiency has also been improved.
Because sucralose is a standard product, there is not much difference between the production of various companies, and whoever has a lower production cost and a larger scale will occupy a dominant position, and obviously Jinhe Industry has done it.
At present, the price-earnings ratio of Jinhe Industrial is 17.6, which is at a historical low, and the superimposed production capacity is about to end, and it is expected to enter a new round of upward cycle.
In the face of market recovery, where is the future market for sucralose?
At present, the sucralose market is dominated by the To B market, and the To C market still has a large space for development.
From the perspective of market demand, the mainland is the world's third largest sugar consumer, with an annual consumption of nearly 16 million tons/year, and sugar consumption is divided into industrial consumption and civil consumption, with industrial consumption accounting for 70% and civilian consumption accounting for 30%.
Civilian consumption mainly includes catering, mainly including new tea, coffee, and baking.
The market size of new tea and coffee is about 200 billion yuan, corresponding to about 16 billion cups of beverages, each cup contains 30g of sugar, so the demand for sugar in tea and beverages is 480,000 tons.
The market size of bakery products in mainland China is about 20 million tons, of which the products of manual bakery stores account for 73%, the market size of more than 14.6 million tons, the sugar addition of bakery products accounts for 23%, and the sugar consumption corresponding to manual bakeries is 3.3 million tons.
Then the consumption of sugar substitutes in catering is 3.78 million tons, and the market size is very considerable.
Under such market demand, Jinhe Industrial has launched the C-end flavoring brand "Aile Candy".
With the advantages of high sweetness and low cost, "Aile Candy" quickly reached cooperation with several tea and coffee brands such as Lele Tea and Seesaw Coffee, and opened flagship stores on Tmall and Jingdong, with considerable sales.
At the same time, because of the entry into the C-end channel, "Eletang" has certain consumer product attributes, so as to alleviate the risks brought by cyclicality.
And the distribution of C-end customers is more dispersed and even, and it will not be destroyed because of the cancellation of orders by several large customers, which greatly reduces the probability of black swan events, and it is easier for C-end to establish a brand to form a premium and establish a real moat.
At present, in addition to Jinhe Industry's "Aero Candy", there are also other compound sugar brands for the C-end on the market, such as Plavest D Sugar Life of Yunnan Lvhua Food, as well as zero-calorie sugar, enjoy sugar, etc., I believe that there will be more To C products launched in the future.
To sum up, after the production capacity clearance from 2021 to the present, the only companies with capacity competitiveness in the market are Jinhe Industry, Kangbao Biochemical and Kehong Biotechnology, among which Jinhe Industry occupies a dominant position with the world's largest production capacity.
At the same time, Jinhe Industry has consolidated its cost advantage through the integration of the upper and middle reaches, and developed C-end products to resist the risks brought about by the changes in the industry cycle.
The above analysis does not constitute specific trading advice, the stock market is risky, and investment should be cautious.
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