Health drive whets drink industry's thirst for sugar alternative

Giving up sugar for Lent will be a thing of the past if food and drinks producers have their way. The battle to produce a natural sweetener with all the taste of sugar but none of the calories is hotting up.

At its centre is a small leafy shrub native to Paraguay long used as a flavouring by the region's Guarani Indians. But stevia, as the bush is known, has only recently developed into a serious challenger to artificial sweeteners.

Consumers are becoming more health-conscious and demanding natural products. At the same time, a growing global obesity problem has given sugar a bad name. Food and drinks manufacturers are looking to stevia and other innovative low-calorie natural sweeteners as the potential solution - so long as they can be made to taste as good as sugar.

"Trying to find a low-calorie alternative to sugar has been the holy grail of the industry for a long time," says Charlie Mills, an analyst at Credit Suisse. "But now that sugar is getting an increasingly bad press across the globe, the trend by manufacturers towards seeking sweetener alternatives is getting stronger and the anxiety to find a solution more acute."

The $70bn global sweetener market is dominated by sugar, which accounts for $60bn. Of the remainder, $7bn is high fructose corn syrup and $3bn artificial and high-intensity sweeteners, of which stevia is estimated to have annual sales of $200m.

Nowhere is the industry's anxiety about the dominance of sugar more acute than in the carbonated drinks market. Regular, full-sugar cola volumes have been falling in the US in the past decade, reflecting people's health worries. Increasingly, governments are slapping taxes on fizzy drinks to discourage consumption in the fight against obesity.

The industry's response has been to promote zero or low calorie alternatives. But sales of diet colas are also in decline in the face of consumer worries about artificial sweeteners, such as aspartame, even though it has been declared safe by regulators such as the European Food Safety Authority.

"Once an ingredient gets a bad name, it can be difficult to overcome," says John Madden, head of ingredients at Euromonitor, the market research group. "Some consumers have concerns about artificial, high-intensity sweeteners, which is why there is a lot of interest in something that can be regarded as natural, such as stevia."

A kilo of stevia commands a price tag similar to other, illegal, white powders from South America. But because it is 300 times sweeter than sugar, this "high-intensity" property makes it cheaper than sugar for manufacturers, based on equivalent sweetness measures rather than weight.

Stevia is going mainstream. There were 2,274 new food and beverage products launched with the plant leaf extract last year, up from just 636 in 2011, according to Mintel, the market research company. These included carbonated drinks, ketchup, cereals, chocolate and sweets.

PureCircle, the London Aim-quoted company that was founded in 2001, has more than 70 per cent of the market for the high-purity stevia that makes its way into food. The company has yet to turn an annual profit but despite this has a market value of a little less than £900m, underscoring the growth hopes that are riding on stevia.

Kraft, the US foods group that is being taken over by Heinz, said a few months ago that it intends to replace sucralose artificial sweetener with stevia in its Roarin' Waters line of flavoured waters.

Stevia has one big drawback, however. It has a bitter aftertaste that is masked in lemon/lime drinks such as Sprite, but which has to be mixed with sugar to taste acceptable in other beverages.

It is the reason why Indra Nooyi, chief executive of PepsiCo, declared that "Stevia, unfortunately, doesn't work well in colas". That was two years ago and since then stevia producers, which also include the UK's Tate & Lyle and Cargill, the US agricultural group, have claimed some success in reducing the astringent taste by isolating the best-tasting molecules from the stevia leaf.

These improvements led Pepsi to launch Pepsi True (known as Pepsi Next internationally) last October, following the release of Coca-Cola Life. Both use stevia, mixed with sugar, in what have been dubbed "green colas" because of their packaging. The products can be marketed as all-natural but lower-calorie than a regular cola.

The activity around stevia is encouraging investment in the development of other natural sweeteners, such as China's monkfruit, known in its domestic market as luo han guo. Like stevia, it is about 300 times sweeter than sugar.

BioVittoria, the New Zealand-based company that is commercialising monkfruit's production, has received approval from the US Food and Drug Administration for its Fruit-Sweetness branded monk fruit concentrate, but has yet to get the green light in Europe.

Also in development is the sweet protein brazzein, found in the fruit of the climbing plant native to west Africa. US-based Natur Research aims to commercialise brazzein under the brand name Cweet, but awaits regulatory approval.

Tate & Lyle, which has suffered from a sharp decline in the profitability of sucralose, last month announced it had developed a new sweetener called Dolcia Prima, from corn-derived allulose, which it described, carefully, as "a low-calorie sugar that exists in nature".

Martin Deboo, an analyst at Jefferies, says: "Allulose looks promising. It reportedly emulates the taste of sugar, is 70 per cent as sweet but has only 10 per cent of the calories. But it will have to face the challenge of whether it's perceived as natural or not."

Alternatives to refined sugar are also on the rise. Analysts believe that many of these will remain niche because of cost - coconut sugar, for example, is labour-intensive because it involves people climbing trees and cutting blossoms.

But as David Turner, a food and drinks analyst at Mintel, says: "People are turning to alternative sugars - coconut sugar, apple sugar or agave - because they seem healthier, even if they are still 100 per cent sugar."

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