Starting from a fertilizer plant on the verge of bankruptcy and starting with traditional basic chemicals, Anhui Jinhe Industrial Co.Ltd(002597) has grown into a world leading enterprise in food additives.
In 2021, the sugar substitute industry will usher in an era of “capacity expansion”. As the world leader in sugar substitutes, Anhui Jinhe Industrial Co.Ltd(002597) project with an annual output of 5000 tons of sucralose has been put into operation. From the current situation, can low heat sugar substitute replace high heat sugar dominated by starch sugar, white granulated sugar and fructose syrup? Will sugar substitutes with rising prices in 2021 climb the “price peak” again? How will high power sweeteners and low power sweeteners work?
Recently, in the company’s office in Lai’an county, Chuzhou City, Anhui Province, the reporter of the column “every person · interview with the chairman” sat opposite Yang Le, the chairman of the “post-85” and listened to the Anhui Jinhe Industrial Co.Ltd(002597) helmsman talk about the development of the sugar substitute industry and his plan for the future of the enterprise.
neither “black” sugar nor “blow” sugar substitute
In modern dietary life, sugar has been an unavoidable link, and obesity, chronic diseases and metabolic diseases caused by excessive intake of sugar have become one of the main “killers” threatening human health in recent decades.
In June 2019, the State Council issued the opinions of the State Council on the implementation of healthy China action, and established the healthy China action Promotion Committee in July of that year to issue the healthy China action (2019-2030), advocating that the per capita daily intake of added sugar should not be higher than 25 grams.
However, even if people realize that excessive intake of sugar is harmful to health, the pleasure brought by eating sugar is not easy to be curbed. Driven by both “sweet” and “fat”, sweeteners (i.e. “sugar substitutes”) gradually set off an upsurge in beverages, snacks and other fields. Food and beverage enterprises also timely shouted slogans such as “0 sugar” and “low sugar”, which won the favor of consumers.
“I think sugar is really dispensable in the future. In the long history of human taste of sweetness, sugar only appears in a certain period, which does not mean that it will always occupy the mainstream position. Sugar substitutes may become one of the sweet providers for a long time in the future.” Yang Le said that in the era of great navigation, sugar cane was planted in North and South America, and a large amount of refined sugar was transported to Europe and entered the daily life of ordinary citizens. It has been decades since Chinese people generally ate sugar. Earlier, sweetness mainly came from maltose and maltose.
As a product of industrialization, the rise of food processing industry after World War II promoted the large-scale production of sugar and its application in the field of food and beverage. Shortly after that, sugar substitutes, which are sweeter and cheaper than sugar, also came out of the laboratory and began industrialization.
“The sweetness of sugar is not so high. It’s not possible to fill your mouth with two or three grams of sugar at a time, or at least 10 grams. I’m not ‘Black’ sugar, and I don’t ‘blow’ sugar substitutes, but Jinhe has a clear positioning for itself. Only when you need sweetness, we can provide a choice with less heat burden.” Yang Le said.
At present, sugar substitutes commonly used in the market include sucralose, Acer honey, sweet glycan, erythritol, etc., which are mainly used in beverages, preserves, preserved fruits, baked foods, etc. However, many foods also need the physical and chemical properties of sugar. If sugar is not added, there will be some relatively obvious differences in its structure and taste, resulting in some manufacturers being reluctant to take the initiative to replace sugar with sugar substitutes.
In addition, the saying that “sugar substitutes are harmful” is also widely spread in the market. Yang Le explained that there is indeed research literature pointing out that sugar substitutes were found to cause damage to mice in the experiment, but most of them are based on experiments in high concentration environments such as 10 times and 20 times. “From the perspective of the industry, as long as sugar substitutes are added in accordance with national standards, there is no significant evidence of the impact on the human body. Therefore, from the perspective of safety, the advantages of sugar substitutes far outweigh the disadvantages.”
According to the healthy China action (2019-2030), the daily intake of added sugar per capita is no more than 25g. If the sweetness of sucralose is 600 times that of sucrose, it is equivalent to 0.042g sucralose. According to the national food safety standard for the use of food additives (gb2760-2014), the maximum consumption of sucralose in beverages is 0.25g/kg, which can be converted into 6kg beverages, Taking a small bottle of Coca Cola 600ml / bottle, it is equivalent to 10 bottles of Coca Cola.
How many people can drink 10 bottles of Coca Cola a day?
“In fact, even sugar substitutes such as saccharin and cyclamate, whose use has decreased year by year, can still be legally used in the field of food additives in China, and many of them are produced by local small enterprises. What I know is that saccharin is still a relatively large market in terms of European taste habits.” Yang Le said.
However, even as a person in the sugar substitute industry, Yang Le still suggested that everyone should control the taste a little less: “if you don’t want to eat sweet, eat less. If you really want to eat sweet, drinking sugar free drinks is certainly better than sugar. Sugar substitute is only used as an auxiliary sugar reduction and a more scientific and non side effect means.”
the sugar substitute industry will still be in short supply in the short term
With the popularity of Yuanqi forest and other brands in the market, “shovel sellers” behind sugar free drinks such as Anhui Jinhe Industrial Co.Ltd(002597) have attracted more attention from the capital market. On the secondary market, Anhui Jinhe Industrial Co.Ltd(002597) share price began to rise from the low point of 28.08 yuan / share in August 2021, and reached the historical high of 54.19 yuan / share in early December 2021. In the face of higher attention, Yang Le told reporters that we should still focus on the company’s business and do a good job in operation.
According to the recently released performance forecast for 2021, Anhui Jinhe Industrial Co.Ltd(002597) is expected to have a net profit attributable to the parent company of RMB 930 million ~ 1.15 billion, with a year-on-year increase of 29.43% ~ 60.05%.
Anhui Jinhe Industrial Co.Ltd(002597) explain that the reason for the performance growth is the continuous optimization of product costs, the continuous release of production capacity, and the higher product cost performance, which has promoted the growth of the downstream demand of the company’s sweetener products. At the same time, affected by the rapid rise of bulk chemical raw materials, the company raised the sales price of food additives such as sweeteners and spices by different ranges in combination with the market situation.
Thanks to the effective control of the epidemic in China and the increase in the demand for bulk chemicals, the average sales price of Anhui Jinhe Industrial Co.Ltd(002597) some bulk chemical products increased over the same period of last year in 2021. According to Baichuan information, from August 1, 2021 to December 31, 2021, the quotation of sucralose reached 480000 yuan / ton, with an increase of 134.15% during the period; Ansaimi offered to 95000 yuan / ton, an increase of 53.23% during the period.
“The rise in the price of sugar substitutes is due to the increase in costs, the poor delivery caused by the epidemic, and the relatively sharp increase in demand.” According to Yang Le’s analysis, affected by the “dual control of energy consumption” in the second half of 2021, Anhui Jinhe Industrial Co.Ltd(002597) the prices of steam and electricity required for production soared, the price of production raw material sulfoxide chloride rose from more than 1000 yuan to more than 4000 yuan per ton, and the price of DMF rose from more than 8000 yuan to 16500 yuan per ton.
According to some industry research reports, Anhui Jinhe Industrial Co.Ltd(002597) the new project with an annual output of 5000 tons of sucralose was put into operation, and the production capacity of 40000 tons / year of sulfoxide chloride phase II was put into operation this year. The capacity load was gradually full and effectively released, which further promoted the growth of the demand for sucralose in the downstream market and was conducive to reducing the cost fluctuation caused by the company’s purchased raw materials.
Anhui Jinhe Industrial Co.Ltd(002597) said on the investor interaction platform on February 8 that according to the industry practice, the company’s food additive products generally complete the signing of the second elderly association contracts for some end customers and some key customers from October of the current year to February of the next year. As the downstream of sweetener products are mainly food and beverage industries, the characteristics of downstream industries lead to small periodic fluctuations of food additive products. From the research situation of the company, the price fluctuation of sweetener products is greatly affected by the supply and demand environment and supply and demand structure. Under the general trend of global sugar reduction and low saccharification, with the promotion of government policies and the enhancement of people’s health awareness, the market demand for health sweeteners is maintaining rapid growth. As the world’s leading manufacturer of Acer honey and sucralose sweeteners, the company is full of confidence in the downstream demand.
Yang Le judged that in the short term, the sugar substitute industry is still in short supply, and sugar substitute prices such as sucralose will also remain at a high level. “This is already a high price point, but the supply and demand structure at this stage can still support this price level. Now the overall profit space of the industry is relatively rich. I hope you can make long-term money and have a relatively reasonable industry pattern.”
However, even if the price of sucralose soars, Yang Le believes that its cost performance is still nearly 10 times that of sucrose, and there is a possibility of price decline in the future, and the cost performance will be further improved. The cost performance of erythritol is not as good as that of white granulated sugar. Its application will lead to an increase in the cost of food and beverage enterprises. Therefore, Anhui Jinhe Industrial Co.Ltd(002597) although it has technical reserves, it will not be produced.
The reporter noted that the sugar free beverage represented by Yuanqi forest adopts the sweetener composed of erythritol, stevioside and sucralose. According to public information, the sweetness of erythritol is equivalent to 60% ~ 70% of sucrose, but the price has soared since 2021. The market price on December 9, 2021 is about 23000 yuan / ton.
Yang Le explained that it is mainly erythritol, a kind of sugar substitute, which has a relatively fuller taste, and consumers are willing to pay. “If erythritol can achieve a lower cost than sucrose, it must be the easiest sugar substitute to promote. Now it is still a little difficult. In the future, it should be a compound sweetener similar to ‘sucralose + erythritol’, which can not only reduce the price, but also maintain a better taste.”
the supply chain of sugar and sugar substitutes will be reshaped
In the future, the application scenario of sugar substitutes will not be limited to sugar free drinks. At present, Zhejiang Huakang Pharmaceutical Co.Ltd(605077) (605077, SH;) The brand “Hegan” at the C-end under the banner has begun to sell through e-commerce channels. In the flagship store of Hegan Jingdong, a 180g0 fat sucrose free sugar substitute product of Hegan xylitol has accumulated more than 50000 comments. According to the product introduction, this product can be used for cooking, braised, soup and other purposes to replace white granulated sugar.
Yang Le also told reporters that although the zero calorie sugar brand “love sweet” is not within the system of listed companies, it has expanded its business at the b-end and C-end in recent years. “Consumer ‘education’ is a long-term thing. We are looking for a more reasonable way to reduce the cost of consumer ‘education’ and trust, especially in catering.”.
In Yang Le’s view, some customers have a preconceived illusion about the high cost of zero calorie sugar and whether consumers accept it. They think that the product price may make consumers hesitate, but in fact, consumers still understand and recognize zero calorie sugar products, because it can be clearly seen from the beverage end that this is the same wave of consumers. “I think sugar substitutes will grow into an industry of at least 100 billion in the future.”
Yang Le said that as the Chinese gradually shift the eating environment of three meals a day from family to social division of labor, the degree of division of labor and industrialization of the whole food industry, including the catering industry, will gradually improve. Combined with the demand for sweetness, the non necessity of sugar and the requirements for health, the product formula and product structure of the whole food industry will be reshaped.
“From the upstream raw material side, it will lead to the decline of sugar and the rise of sugar substitutes; from the application service of the intermediate link, it will lead to the growth of various sugar reduction solutions and application services; to the end consumer goods, either old enterprises launch new sugar reduction products, or new enterprises take advantage of the trend of sugar reduction and rise through the outlet of innovation.” Yang Le said that eventually, from upstream to downstream, the entire food and beverage industry and the supply chain of sugar and sugar substitutes will be reshaped.
Specific to the sugar substitute industry, Yang Le believes that it will continue to develop in a standardized and orderly direction. For example, on food labels, consumers’ cognition and requirements for labels such as “zero added sugar”, “zero sucrose” and “Zero sugar” will be very detailed and specific in the future. “In the next 10-20 years, Chinese people’s eating habits will focus on less sugar, salt and oil, and the dietary structure will turn to the direction of high nutrition and low calories such as high dietary fiber and high protein.”
In the industry, the reporter learned from Coca Cola’s financial reports over the years that the proportion of low sugar / sugar free products in its beverage product series increased from 25% in 2010 to 45% in 2019, the sales volume of low card / zero card products reached nearly 30%, and 18 of the 20 best-selling brands have been low sugar or sugar free formulas.
During this period, China’s sugar free beverage market developed rapidly, and the market scale increased more than 7 times from 2014 to 2021. Take Yuanqi forest as an example. According to the data of dolphin society, its sales revenue in 2020 was 2.7 billion yuan, a year-on-year increase of 309%. The 2021 China sugar free beverage market trend insight report points out that the market scale of sugar free beverage will reach 117.8 billion yuan in 2020, and the market scale is expected to double in the next five years.
In the face of the industry prospect that the demand for sugar substitutes has increased by more than 10% annually, Anhui Jinhe Industrial Co.Ltd(002597) has not stopped and is exploring new sugar substitutes. According to Yang Le, at present, the most promising is alodonose. The sweetness of the sugar substitute is about 70% of sucrose, and the market price is about 40000 yuan / ton. Most importantly, alodonose can produce Maillard reaction, which can replace the sugar used in baked foods.
“In April this year, Jinhe will put into operation a pilot test line of about 1500 tons of alodonose. Because China has not yet approved its use, it is mainly exported to foreign countries.” Yang Le said.
