Industry perspective
With the promotion of food and beverage factories driven by consumption upgrading, China's sugar substitute industry will usher in a new stage of development. In recent years, with the improvement of the level of economic development and the continuous enhancement of public health awareness, at the same time, with the support of government policies, beverage factories have launched sugar free drinks to meet the needs of consumers. Coca Cola's 2021 financial report shows that its sugar free and fiber + soda products have achieved 50% rapid growth; In the past two years, Yuanqi forest has successfully launched a series of sugar free carbonated bubble water with erythritol as the sweet source. It announced on October 26, 2021 that it plans to spend 5.5 billion yuan to complete the preliminary strategic layout of five self built factories. Nongnong Shanquan and other established beverage manufacturers actively transformed and pushed new products to seize the market. Compared with overseas countries, the market share of sugar substitute drinks in Japan has increased from 8% to 49% in the past three decades. At present, China's per capita GDP is close to Japan's per capita GDP in 1985, and residents' demand for food and beverage health will become more and more prominent. Referring to the development history of Japan's sugar free beverage industry, we believe that the penetration rate of sugar substitute drinks in China is expected to increase to 20% in the medium and short term and more than 40% in the long term, with a very broad growth space, Moreover, the current supply pattern of sugar substitutes in China is essentially higher than that in the Japanese market at that time.
The demand for sweeteners shows structural changes, and some products will stand out. Erythritol: at present, the global demand for erythritol is about 204000 tons, including about 88000 tons in China. After Yuanqi forest, nongnongshanquan, Master Kang and other well-known brands have launched low sugar and sugar free products containing erythritol. It is expected that the compound growth rate of erythritol will be 34.15% from 2021 to 2025, and the demand for erythritol in China will reach 285000 tons in 2025. The production barriers of erythritol are concentrated in many links, such as strain cultivation, fermentation medium formula, process flow control and so on. They jointly determine the conversion rate of the final product and affect the gross profit margin of the manufacturer. Alodonose: in 2019, FDA announced that alodonose would be excluded from the label of "added sugar" and "total sugar". Major enterprises introduced new products, and a large number of food and beverages with alodonose formula were born. It is expected that the application for d-glucocorticone as a new raw material in China will be accepted in August 2021. Sucralose: as a high-power sweetener, it is usually used together with low-power sweetener. It is an indispensable part. The global demand has increased by about 15% in the past three years, and the current global demand is about 14 Yihua Healthcare Co.Ltd(000150) 00 tons / year. Due to the strict requirements of production technology and environmental protection, from 2019 to 2021, many small enterprises with an annual capacity of Tus-Design Group Co.Ltd(300500) tons in China gradually cleared out. Driven by demand, the price of sucralose increased from 2 China Vanke Co.Ltd(000002) 20000 / ton in July 20192021 to 35 Tunghsu Azure Renewable Energy Co.Ltd(000040) 0000 / ton at present, and the profits of relevant enterprises will continue to rise.
Investment advice
Under the trend of consumption upgrading and benefiting from the continuous promotion of beverage manufacturers, we believe that Chinese sugar substitute enterprises will usher in development opportunities. It is suggested to focus on: Anhui Jinhe Industrial Co.Ltd(002597) (the company is in the leading position in the industry in sucralose, acesulfame, maltol and other products), Shandong Bailong Chuangyuan Bio-Tech Co.Ltd(605016) (the company actively arranges in the new sweetener alodonose products. At present, the main products are exported to the United States and successfully applied in overseas food and beverage factories) Ternary Biology (the company is the leading enterprise of erythritol, the cost has significant competitive advantages compared with its peers, and the sales volume has increased due to the growth of the industry), Baolingbao Biology Co.Ltd(002286) (the company is an old sweetener enterprise, with products such as erythritol and alodonose).
Risk tips
The industry competition pattern intensifies and the product price drops; The demand for sweeteners is lower than expected; Price fluctuation of raw materials; Policy risk.
