Tom Winn, sales and marketing manager at California-based distributor PhytoChem International Inc (which distributes sucralose from Chinese manufacturers UniSweet and Techno Food Ingredients) told FoodNavigator-USA: “We've seen prices fall 25% since their peak last year.
"For customers ordering small quantities we've seen prices down from $89 or so a kilo to the mid $70s, but for larger companies ordering 4-5,000 kilos, they are effectively able to name their price as the sucralose manufacturers are competing so heavily for those larger orders."
He added: "We don't believe that the market will stabilize for at least six months. The smaller players are going to be weeded out."
So what’s changed, and is this a temporary blip, or the start of a long-term trend?
UniSweet: The competition is very serious and some plants with small capacity or old technology will be closed
UniSweet (Unitech Sweet (Zibo), which is one of the top three players in Chinese sucralose production and has two plants in Zibo City and Linyi City with a combined capacity of more than 500 metric tons, told us that a lot of additional capacity had come on-stream in the past year.
Sales manager Jack Wang said: "Our total capacity of 540mt this year is about two times than that of last year."
Meanwhile, several firms had re-opened or re-located facilities that were previously shut/restricted owing to environmental and regulatory issues in China, he said.
Wang, who claims UniSweet's yields are superior to rival Chinese firms, said demand for sucralose "continues to increase month by month".
But he added: "The competition is very serious and some plants with small capacity or old technology will be closed."
Techno: The sucralose price has dropped quite a bit during the past six months
Peter Zou, marketing manager at Techno Food Ingredients - which manufactures sucralose in Yong’an, Fujian, China, and has warehouses in Baltimore and LA - told FoodNavigator-USA that the “sucralose price has dropped quite a bit during the past six months, which was not expected by many people in the business”.
He added: “This has been caused by the rapid increase of supply after the shortage of last year. A large part of the new supply comes from new manufacturers who have been drawn into this market from other chemical businesses.”
However, existing players also increased capacity, he said: “Not only did existing players increase production capacity, some of them even re-opened previously closed factories. Certainly this contributed to the oversupply situation.
“Since sucralose is such a palatable, safe and stable sweetener, it became so popular with the food, nutraceutical and pharmaceutical industries, that after several years of rapid market growth, it reached a overheat level last year.”
Sucralose is no longer a luxury ingredient used only by the big guys
However, supply and demand would get back in sync shortly, he predicted.
“We think the sucralose market is still in a growth period… [The issue of] supply [being] out of sync with demand will be temporary, and this will be digested by the expanding market.”
In the meantime, lower prices have had the effect of weeding out weaker players and encouraging more formulators to work with sucralose, he added: “We recognize that oversupply will drag down prices… but at the same time it is also playing a positive role in market development.
“Sucralose has become a popular sweetener that every food maker is able to afford, it is no longer a luxury ingredient used only by the big guys.
“The price decline has created more value for all its users, expanding the applications into new areas at lower costs… and gradually replacing some of the older sweeteners.”
Survival of the fittest
As for producers, he said: “The market will keep the most efficient manufacturers as survivors. Techno had forecast this situation last year, and invested heavily in renovating production technology, reducing costs and diversifying product lines. It helped Techno upgrade to a new level of productivity and efficiency.
“Techno’s new production line sets a good sample for minimizing pollution from operations, which means from raw material selection to final product packaging, we have every detail under the microscope to eliminate possible pollution causes.
“This has helped Techno avoid some of the pitfalls other sucralose producers experienced, such as over expanding production capacity without increasing efficiency or productivity.”
Tate & Lyle and the Chinese manufacturers have different market niches
Has the 2012 re-opening of Tate & Lyle’s sucralose production facility in Alabama had a bearing on the market prices coming out of China?
Not according to Zou: “I would say Tate & Lyle and the Chinese manufacturers have different market niches, and the potential market will provide enough room all the leading manufacturers to grow rationally.”
As for how Techno is doing, he said: “Techno is doing well and its market is growing steadily. Our biggest market is still North America, but we are also seeing strong growth from Asia, Europe and Latin America.
“The beverage industry is still the biggest user, but we are seeing more demand from the foods, bakery and dairy industries, not only from those in North America but also from Asia, Europe, even from Latin America where sugar is very dominant.”
We have never involved in any patent infringement legal case
Techno, which started sucralose production in 2004, was granted a US patent covering its production process in March 2011(No. 7,910,727) and has SQF 2000 level 3 certification for its facility with an “excellent” rating, said Zou.
“We have never involved in any patent infringement legal case.”
Approved in the US in the late 1990s, zero-calorie sweetener sucralose is around 600 times sweeter than sugar and is used in soft drinks, baked goods, ice cream, tabletop sweeteners, and other products. Unlike aspartame, it does not break down at high temperatures and can be used in baked goods.
While it is made from sugar, the sugar molecule is chemically modified via a multi-step process that selectively replaces three hydrogen-oxygen groups on the sugar molecule with three chlorine atoms to make sucralose, which is classed as an artificial sweetener.