Ingredion acquires controlling stake in stevia supplier PureCircle

By Elaine Watson

- Last updated on GMT

Picture credit: Ingredion
Picture credit: Ingredion

Related tags Stevia Purecircle Ingredion

Global ingredients giant Ingredion has struck a deal to acquire a controlling (75%) stake in stevia supplier PureCircle, which has been going through a period of extreme turbulence in recent months, prompting the suspension of its shares and the installation of a new management team.

The move was announced just over a week after PureCircle belatedly published results​ for the year to June 30, 2019, which revealed a significant ($79.7m) net loss, ​with bosses exploring a variety of options to shore up company finances including an infusion of equity, ​full debt refinancing, or sale and leaseback of the refinery plant facilities.

The deal has been approved by the boards of both companies and is expected to close during the second half of 2020, subject to approval by PureCircle’s shareholders and receipt of the required regulatory approvals.

Ingredion​ - which recently extended an agreement with SweeGen​ under which it may continue to sell SweeGen's Bestevia Reb M and D sweeteners as a non-exclusive ​distributor partner - said that “PureCircle is an industry-recognized innovator.”

“By combining our capabilities in product formulation, along with our experienced sales team, we will expand and complement our portfolio of stevia solutions to a growing and broader customer base,” ​added Ingredion CEO Jim Zallie.     

PureCircle CEO Peter Lai Hock Meng said the deal would enable PureCircle to increase its market penetration and operating efficiencies: “By leveraging Ingredion's global client base we will be able to take our great-tasting, high quality, non-GMO stevia ingredients to a larger, more diverse client base.  

“The offer gives our shareholders an opportunity for the certainty of cash today, or the option to remain invested in PureCircle going forwards."

"The acquisition of PureCircle by Ingredion will make a positive impact to the stevia and flavor industry. We welcome this new development as Ingredion may continue to sell SweeGen's Bestevia Rebs M and D as a non-exclusive distribution partner."

Luca Giannone, VP sales and marketing, SweeGen

PureCircle CEO: ‘Revenue will be depressed across all regions as a result of the COVID-19 outbreak’

In a trading update also issued this morning, Lai noted that PureCircle’s net debt was $93.4m and that the company's performance in the two months to February 29 had “been unexpectedly sluggish with overall sales declination of approximately 4.6% compared to the 2018 prior period, in part due to overall market competition.

“While customers continue to place new sales orders, management foresee that revenue will be depressed across all regions as a result of the COVID-19 outbreak.​”

In the first half of the year (July to Dec, 2019), sales declined 6% to $46.8m, in part due to discontinuation of a distribution agreement. This was partly offset by increased  sales from “breakthrough products and blends​,” he added.

‘Aggressively shifting the product portfolio’

He also noted that the stevia ingredients business has become more competitive in recent years, denting prices for Reb A, the most prevalent sweet-tasting glycoside in the stevia leaf.

However, he said, PureCircle anticipated this trend and has been “aggressively shifting the product portfolio, including flavor solutions and blends, to taste-advantaged, exclusive ingredients based on​ [the better-tasting, but more scarce glycoside] Reb M.

“In addition, the company exclusively developed a new stevia variety making this product more scalable, efficient and cost effective for customers. These advances continue to be protected by the company's expansive patent portfolio and intellectual property library.”

As for COVID-19 impacts, he said, PureCircle’s refinery in Malaysia restarted production in early April after a brief closure beginning March 18, while production at its stevia extraction plant in China is running as usual.

“The group continues to have sufficient inventories at hand that should mitigate any further disruptions.”

PureCircle sues Almendra for patent infringement

The deal was announced three days after PureCircle - which has been granted over 200 stevia-related patents with 300+ applied for patents pending - accused rival stevia maker Almendra (Almendra Americas LLC and Almendra (Thailand) Company Limited) of infringing its U.S. Patent No. 10,398,160 ('Glucosylated steviol glycoside as a flavor modifier' - issued September 2019).

In a complaint* filed in Georgia on April 6, PureCircle alleged that Almendra's Steviarome products (which contain short-chain glycosylated steviol glycosides) infringe its patent.

Almendra: we do not agree with the allegations in the complaint

Almendra has responded with a statement noting that PureCircle’s complaint "has not been served on either of our corporate entities yet. As such, no action is formally required by Almendra at this time."

But it added: "Having said that, we do not agree with the allegations in the complaint and, if it is properly served, we intend to vigorously defend ourselves in any such lawsuit. Almendra believes that it does not infringe any valid claim of the patent, and that the patent claims are invalid and unenforceable.  

"Almendra will continue to provide uninterrupted supply of its Steviarome® and other products and looks forward to eventually resolving this dispute with PureCircle so that it may continue to focus its full attention on timely servicing its customers."

*The case is PURECIRCLE USA INC. and PURECIRCLE SDN BHD v ALMENDRA AMERICAS LLC and ALMENDRA (THAILAND) COMPANY LIMITED. Case # 1:20-cv-01462, filed April 6 in the US District Court for the Northern District of Georgia, Atlanta Division.

Picture: istockphoto-HandmadePictures

Dato' Robert Cheim, who was appointed chairman at PureCircle in February, said PureCircle had “proven that it is able to produce ​​[the best-tasting steviol glycosides] Reb M ​​[extracted from the leaf] and bio Reb M ​​[produced via an enzymatic conversion process that still begins with stevia leaf extracts] at scale.​​

"These new sweeteners can now be found in an increasing number of food and beverage products and our sales pipeline is showing increasing market acceptance of Reb M and bio Reb M. 

“In full year 2020, about 25% of our leaf grown in China will be of a variety developed by us that has some 40% more steviol glycosides than previous stevia varieties. This hardy variety grows well and promises significant unit cost reductions for our products going forwards. In full year 2021, we are planning so that nearly all of the leaf grown for PureCircle by its contracted farmers will be of this new, highly productive variety.”

He also cited recent innovations including a proprietary stevia product (Sigma Syrup), claimed to deliver superior taste and solubility; and PCS-3028, a new proprietary stevia leaf sweetener claimed to increase stevia solubility by a factor of 10.  

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