Cost still an issue for Reb A, claims Rabobank

07-Sep-2009 - Last updated on 08-Sep-2009 at 15:07 GMT

Related tags High-fructose corn syrup

Cost issues remain for stevia-derived sweetener Reb A although annual sales are likely to reach $700m over the next five years, according to a new report on the US stevia market from Rabobank.

There has been a surge in interest in Reb A from food and beverage manufacturers since the Food and Drug Administration (FDA) issued letters of no objection that the sweetener is generally recognized as safe (GRAS) at 95 percent purity and above in December last year. Although stevia-derived sweeteners have been in use in many countries for centuries, high purity Reb A has garnered particular attention in recent years due to its taste profile, which is similar to sucrose.

In this latest report on the state of the US stevia market, Rabobank said that Reb A is well-positioned to become a mainstream sweetener, and that in five years’ time it could achieve sales of $333m – if it attains five percent of the high intensity sweetener (HIS) market – or up to $1.4bn, if it takes 15 percent of the HIS market, as well as five percent of the high fructose corn syrup market. Rabobank said its expectations fall “somewhere in the middle”, with annual sales of about $700m in five years’ time.

However, it highlights that price is still a major barrier to growth.

“As Reb A is still in a nascent stage, production, extraction and refining capacity is still being established and lacks critical mass,” the report said. “As a result, the price of Reb A is high compared to other caloric and noncaloric sweeteners.”

It adds that few suppliers of Reb A reveal exact pricing information, but estimates that the sweetener is selling for about $300 a kilogram. As it is around 200 times sweeter than sugar, that is about $1.50/kg on a sugar-equivalent basis. The report says that soft drink companies buy sugar at about $0.75/kg and that sugar is about ten percent more expensive that high fructose corn syrup (HFCS), the most widely used sweetener in the US beverage industry.

Sugar equivalency

Economies of scale could help deal with this problem, according to major Reb A suppliers. PureCircle said in May that it plans to make the sweetener available at sugar equivalent prices. Then in August, Blue California, the third and latest company to attain a non-objection letter from the FDA regarding its Good & Sweet Reb A ingredient, said that it is able to offer sugar-competitive prices.

Both companies have emphasized that the sugar equivalent price would only be available for very large-scale orders.

“While HFCS is under increasing consumer scrutiny, it continues to be the main sweetener used in beverage formulations, while sugar is used only in niche beverages, mainly due to cost,” the report said. “While bringing Reb A down to sugar equivalent levels would be a significant improvement, it will not fully resolve the concerns regarding costs.”