PureCircle says it is one step closer to establishing its high-purity stevia as a “mass volume, mainstream ingredient” after signing a joint development and supply agreement with soft drinks giant Coca-Cola.
Under the joint development agreement, PureCircle and Coke (which uses stevia in sugar-reduced products including Sprite and Nestea in France and Fanta in China) will jointly investigate and develop “a stevia sweetener product as a commercially viable food ingredient”.
The second deal - which is contingent upon the success of the first - establishes that PureCircle will supply certain stevia products to Coca-Cola for a five-year period, said PureCircle.
“The agreement establishes a framework pursuant to which The Coca-Cola Company shall, based on its requirements, purchase the Products from The Company [PureCircle] at prices to be agreed between the parties, subject to pre-agreed pricing parameters, for a 5-year period.”
No immediate impact on revenues, earnings
It added: “We do not expect either agreement to have a significant impact on the Company's short term revenues or earnings. Barring any unforeseen circumstances, it is expected that they may have a positive impact beyond that.”
PureCircle was not able to comment further before we went to press, but sent FoodNavigator-USA a statement adding: “As the world’s leading producer of high purity stevia ingredients, we remain focused on providing the highest quality products to the world’s leading food and beverage companies.
“These new agreements support our mission to establish PureCircle’s high purity stevia as a mass volume, mainstream ingredient.”
Reb A contributed 40% of PureCircle’s revenues in 2012
PureCircle, which has seen overall sales slide as it waits for beverage customers to wind down inventories, has however posted strong growth in sales of its new blends of steviol glycosides (Alpha and SG95) along with new natural flavors.
Speaking after unveiling the firm’s full-year results earlier this month, chairman Paul Selway-Swift also stressed that steviol glycoside Rebaudioside A is no longer the only game in town, with Reb A accounting for just 40% of revenues in 2012 vs 90% in 2009.
He added: “Volume increases were led by sales of the portfolio of proprietary new ingredients introduced over the past eighteen months… Reb A contributed just 40% of revenues in 2012. This portfolio of ingredients will help the Group have a well balanced mix of sales going forward.”
We’ve made huge progress, it’s just not showing up in our figures yet…
PureCircle posted a 15% drop in fiscal 2012 revenues to $45.4m and a $15.2m operating loss.
However, the sales dip was “principally due to the continued impact of inventory at beverage global key accounts” added Selway-Swift, while 2012 was the “first year in the company's history with no pre-committed ‘Take or Pay’ sales [committed volumes via contract]."
Large scale adoption will be apparent in 2013 and 2014
Meanwhile, encouraging growth in usage suggested “large scale adoption will be apparent during calendar years 2013 and 2014”, he predicted, citing Datamonitor figures.
“Up to August 2012 food and beverage product launches with high purity stevia are running at a rate of 1,000 new launches for calendar 2012, a 65% increase over 2011.”
Although carbonated soft drinks are the biggest market for stevia, there had also been new launches in confectionery, ketchups and dairy, he said.
And while the USA still accounts for 40% of sales, sales to Europe, China, Mexico and Brazil were growing much faster, he said.
Meanwhile, regulatory approvals from India, Canada, Thailand, South Africa and Canada - expected before the end of June 2013 - would “provide a further 1.6bn new consumers with access to high purity stevia”.
Sales will accelerate when the beverage makers replenish inventories
Chief executive Magomet Malsagov said beverage orders remained “inconsistent”, adding: “We do not expect to see material beverage global key account sales as they continue to wind down inventories.
“Sales will accelerate further when the beverage global key accounts need to replenish their inventories, which itself is linked to the timing and scale of their carbonated soft drink launches.”
But longer-term, the prospects for PureCircle were very promising, he said, noting that higher prices and tightening supplies of sugar and high fructose corn syrup “can only help the future development of mass volume demand” for its products.
Investing for the long-term
Investing in new product development, and shoring up/diversifying supplies by growing stevia in Kenya, Paraguay and USA as well as China would pay off in the long-run, he said.
“Longer term we remain confident that stevia will emerge as a major global industry. Our business model is designed for a mass volume natural sweetener market.
“The investments have been made and we are ready to prosper as sales volumes increase. Reviewing the food and beverage products launched into market that are using high purity stevia, it is clear that PureCircle and our partners continue to secure the major share of market.”