JK Sucralose: We agree with Tate & Lyle, the behavior of some sucralose manufacturers is ‘suicidal’
Speaking on Tate & Lyle’s second quarter earnings call, CEO Javed Ahmed said he was struggling to see “how we or frankly anyone else can make any money” at some of the prices being quoted in the market, adding: “The current behavior in the market doesn't strike us as very economically rational.”
And JK Sucralose, which told us earlier this year that smaller players in China were “eager to sell off inventory at very low prices or even below cost price to win volumes”, says things have only gotten worse since.
We are in this for the long-haul
Stella WU, global marketing director at JK Sucralose, told FoodNavigator-USA this week: “JK has a similar opinion to Tate & Lyle. The behavior of some competitors in the market is suicidal, but at JK Sucralose, we choose to follow a healthy and rational [approach to pricing and] competition and our customers choose to partner with us on a long-term sustainable basis.
“In order to fulfill the needs and demands of customer, reliable sucralose enterprises will need to continuously improve and develop themselves.
“Such enterprises should have continuous innovation ability, continuous improvement on efficiency and capacity, a continuous focus on quality, vertical integration to produce the raw material, and continuous attention to cooperate responsibility and sustainability (employee benefits, environmental controls, social responsibility). And overall, they will need to have the financial ability to support all of the above.”
But on the plus side, she said: “Sucralose is a very promising sweetener due to its good features, so the market interest will increase.”
We have said before, and we say it again, the market is unsustainable at today’s prices
Up until relatively recently, sucralose was a key profit driver at Tate & Lyle. But as the Chinese have added production capacity, it has seen its margins dwindle, despite the fact it has “some of the most efficient assets in the business", CEO Javed Ahmed told analysts last month.
Asked whether "with margins having gone from about 40% to 7%, what confidence can we have that the prices aren't going to continue to decline and this isn't going to be a major loss making business?", he said:
“We choose to stay away from the kind of volume where we cannot see how we - or frankly anyone else for that matter - can make any money. And if somebody wants to go after that volume and just have a loss-making enterprise, they can be our guest. But we will choose to compete very rationally.”
Chinese manufacturer Niutang Chemical agreed that sucralose pricing was not realistic, adding that it was simply a matter of time before some smaller, less efficient, players in China exited the category.
Nancy Hughes, vice president sales and marketing, Niutang US, told us: "We have said before, and we say it again, the market is unsustainable at today’s prices."
You are competing with a Corrupt Marketeer…China.
Posted by Mark D Rustad,