Tate & Lyle says it predicts a substantial deterioration in sucralose pricing owing to a glut of unsold Chinese sucralose which has forced it to reduce pricing in recently renewed contracts.
The firm, which is the global market leader in sucralose with manufacturing plants in Singapore and the US, envisages that pricing for full-year 2015 will fall by an average of 15%.
It also announced a new alliance with McNeil Nutritionals, which ends the annual payments it receives from McNeil based on the sale of Splenda sucralose table top products.
CEO Javed Ahmed said the focus for the renewed partnership will be the "development and growth of the global market for Sucralose and the SPLENDA Brand.
He added: "These payments [from McNeil to Tate & Lyle] are not a feature of the new alliance and accordingly, the final such payment will be received in respect of the year ending 31 March 2014 and is expected to amount to approximately $11m."
Analyst: US food manufacturers are becoming increasingly comfortable with using Chinese sucralose in their products
UK-based analyst Damian McNeela from Panmure Gordon, said: “Given that Chinese generic sucralose is likely to continue its penetration of the market, we assume low double digit price declines and lower margins for high intensity sweeteners over the forecast period.
“There is clearly a great deal of uncertainty surrounding the profit progression of sucralose and the clear lack of visibility with regard to the competitive issues is concerning. Additionally the fact that US food manufacturers are becoming increasingly comfortable with using Chinese sucralose in their products could create additional headwinds for the business.”