Author: Zhitiqiao Tony
Edit: Zhitiqiao Chloe
From ancient times to the present, human beings have never given up on the pursuit of "sweet" taste, from the birth of the first generation of artificial sweetener saccharin in 1879 to the later aspartame, sweet samirid, sucralose, etc., people's love for sweetness has never stopped. At present, with the continuous increase of people's health awareness and the emergence of sugar research that is constantly questioned, "sugar control" has become the mainstream trend in the market and a hot spot for consumers. Natural sweeteners based on stevia, erythritol, monk fruit, and allulose have attracted market attention, and many downstream product formulations have also added these ingredients, including food, beverages, snacks, nutritional supplements and so on.
Image source: Qiantu Network
01 Erythritol, sugar substitute market "dark horse"
The epidemic has disrupted the supply chain and surged consumer demand for sugar substitutes, and statistics released by Sullivan show that from 2020 to 2024, the global market demand for erythritol will continue to grow, with an average annual growth rate of 22.12%. But this growth has also led to a very tight supply of erythritol and sugar substitutes such as allulose. Some companies point out that the two feedstocks are currently in short supply, with longer lead times and higher prices, although major producers say they are working to increase capacity and support supply demand in the market.
Erythritol is a tetracarbonitol that naturally exists in a variety of foods (grapes, pears, watermelons, etc.), which can be prepared by microbial fermentation method and chemical synthesis method, and is currently used in commercial production by microbial fermentation method. Erythritol is produced by glucose fermentation, and the upstream raw materials mainly include glucose and corn starch sugar and corn used to produce glucose, as well as ammonium salts, yeast extracts and other excipients.
As a natural sweetener, erythritol has excellent characteristics such as zero calorie, zero sugar, high tolerance, good physical properties, and anti-caries. Erythritol is a white crystalline, odorless raw material that can be quickly dissolved in water to form a transparent, low-viscosity, colorless solution. At the same time, erythritol does not provide calories because it has little change in the human body and does not participate in the metabolism of sugars after entering the human body.
It is also a tooth-friendly raw material, which is not used by oral bacteria and inhibits the growth of oral bacteria, thereby protecting the teeth. The early market heat of erythritol was not very high, and it often appeared as a raw material for stevia compounds. Currently, it can be applied alone or compounded with high-strength sweeteners such as stevia and monk fruit, and has been widely used in many end-product formulations. For example, low-sugar ice cream brand Halo Top, confectionery brand Lily's Chocolate, bakery products, antioxidant beverage brand Bai, table sweetener brand Truvia and Pyure.
Speaking of erythritol, it is impossible not to mention the "Yuanqi Forest", I don't know whether the Yuanqi Forest has red erythritol, or erythritol has achieved the Yuanqi Forest, in short, the current market heat of the Yuanqi Forest and Erythritol has been red and purple. The yuanqi forest sparkling water products with the main theme of "0 sugar, 0 fat, 0 calories" have been on fire overnight, and erythritol is the main selling point of this product. The market popularity of Yuanqi Forest has also driven the development of the erythritol industry chain behind it into the fast lane.
Looking ahead, the future of erythritol has potential because it plays an important role in lowering sugar.
02 Erythritol, an unprecedented "shortage" in North America
With the global market's attention to sugar substitute natural sweetener raw materials, erythritol is currently in very tight supply. There is an unprecedented shortage of erythritol throughout North America, with costs and delivery times increasing. Icon Foods CEO Thom King said these things all look temporary, but it may not be until the second quarter of 2022 that there will be significant stabilization. The company primarily provides sweeteners that are widely used in packaged foods and beverages, including erythritol, stevia, monk fruit, allulose and other raw materials.
The overall market environment is more complex, the global demand for erythritol continues to grow, especially in North America, the main reasons are the following:
1. Driven by consumer demand for sugar reduction. When consumers buy products today, sugar content has become a very important factor in purchasing decisions. From the perspective of the global market environment, the growth rate of sugar-free/low-sugar products has been increasing in the past two years, and some countries and regions have begun to tax sugar-sweet soft drinks, and the entire market environment is not so "favorable" for the development of the sugar industry.
Not only foreign consumers pay attention to low-sugar products, but domestic consumers are even more crazy. According to the Nielsen report, 41% of Chinese consumers want snacks with less sugar. Obviously, low-sugar/sugar-free has become a new way for ordinary consumers to deliver a healthy lifestyle, and the popularity of categories such as meal replacement, light food, and nutrition bars in the domestic market also verifies this.
2. The impact of the global pandemic on supply chains. After the COVID-19 epidemic, the supply chain was seriously disrupted, and the entire logistics was also bottlenecked, resulting in a very tight market supply, and the construction of the local supply chain was very important. In the North American market, Cargill and Iriam are some of the more important local suppliers, and they have adjusted their strategies from multiple perspectives to meet the needs of the market. Cargill said it has made great progress in optimizing existing production facilities and is developing additional plans to meet growing domestic and international demand. Yi Ruian said that when this happens, it not only provides customers with various solutions, but also has a business continuity plan.
Not only raw material manufacturers have made strategic adjustments, but brand owners are no exception. Pyure Brands, a brand in the natural sweetener market, said that while it also faced the challenge of raw material shortages, its early manufacturing partnership with key erythritol producers for decades laid the foundation for its continued supply. The company offers a range of organic sweeteners, baking blends and other products with stevia and erythritol as the main ingredients. Hershey also says that predictable demand for raw materials can be met by establishing contacts with suppliers with whom it has long-term relationships.
3. There is a shortage of raw materials in the upstream industrial chain of erythritol. The market shortage of erythritol is related to the supply of corn glucose in the market, and mainly lies in the supply and demand of corn in the upstream industry. Between January 2020 and 2021, U.S. corn exports to China grew exponentially, reaching a record high of 60 million bushels (about 1.524 million tonnes) in December. China's huge import demand is due to domestic supply shortages, the pig herd was hit by African swine fever in 2018, while the demand for feed in its recovering pig herd is increasing, and Chinese buyers have been snapping up corn to drive up corn prices.
From January 2021 to February 2021, China imported the amount of U.S. corn (in million bushels) Source: VisualCapitalist.Com
4. China erythritol market is out of stock. This is a very important reason, as the main supply market of global erythritol, China's domestic erythritol is currently in short supply, which is mainly due to the start-up beverage brand Yuanqi Forest, the dark horse driven, the current domestic market erythritol has become a standard raw material for low-sugar / sugar-free drinks.
Sanyuan Bio, Bowling Treasure and Zhucheng Dongxiao are the main suppliers of erythritol in China and the world, and are currently willing to increase production capacity.
Zhitiqiao learned from Bowling Bao that the company has just completed the expansion project of 13,000 tons of erythritol and has been put into production; the price of erythritol is still at a high level compared with previous years, and with the arrival of the beverage off-season in the second half of the year, the supply and demand of erythritol will reach a balance. However, sugar-free, sugar-reducing healthy consumption will become a long-term trend, in order to cope with a new round of erythritol application climax next year, Bowling Bao's non-public issuance of A-share stock plan, intends to raise 700 million funds for the annual output of 30,000 tons of erythritol crystal project, etc., according to expectations, a year later the project is completed, Bowling's erythritol production capacity will exceed 60,000 tons.
It is understood that Fengyuan Pharmaceutical also announced in mid-2019 that it intends to invest 288 million yuan to build a project with an annual output of 30,000 tons of erythritol and 0.5 million tons of glutamine, and the construction period is expected to be one year, due to the impact of the epidemic, the construction of the project has not met expectations, but the construction of the project is accelerating.
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