As Sugar and HFCS Falls Out of Favor, Investing in Natural Zero ...

By?Leopold Epstein

The $56 billion dollar sweetener industry is under attack for America?s obesity epidemic. Though sugar and High Fructose Corn Syrup (HFCS) are not the single cause of our bulging waistlines, according to three new studies published Friday October 12th, in the New England Journal of Medicine, they are the major culprits. The studies, which represent the most rigorous effort yet to see if there is a link between sugar-sweetened beverages and obesity epidemic, have found that replacing sugary sodas with water or zero calorie beverages appear to reduce the weight gained by people who regularly consume sugary beverages. In an editorial accompanying the papers, Sonia Caprio, MD, of Yale University, agreed with the findings and supported policies to reduce intake of sugary drinks, ?Such interventions, if successful may also help prevent the development of type 2 diabetes and its complications in youth.? Dr. David Ludwig, director of the New Balance Foundation Obesity Prevention Center at Boston Children?s Hospital, who led one of the studies stated, ?I know of no other category of food whose elimination can produce weight loss in such a short period of time. The most effective single target for an intervention aimed at reducing obesity is sugar filled beverages.? A third study found a relationship between genetics, body mass index, and obesity risk appears to be magnified in adults who drink the most sugar-sweetened beverages.

If one consumed five 8-ounce diet sodas a week, as opposed to five 8-ounce sugary sodas, one can save 500 calories a week which comes to roughly a 10-pound weight loss in a year. It would sound as if one switches to diet sodas they would shed pounds while also lowering their risk of diabetes and heart disease. However, that hasn?t worked. A resent study at the University of Texas found that people who drank two or more diet sodas a day had a six-times-greater increase in waist circumference over a 10 year period than people who didn?t drink diet soda at all. Though scientist are not certain of the reason they do have a theory that calorie-free sweeteners interfere with signals to the brain that tell us when we are full. However another theory, if proven correct, might just change the way consumers and beverage companies choose their zero calorie sweeteners. The theory is that the non-nutritive sweeteners, also known as artificial sweeteners, used in diet drinks actually trigger sugar cravings the same way sugar does. If that is the case, however there are zero calorie natural sweeteners and low calorie natural sweeteners, like stevia?s compound Rebaudioside A (Reb A) and erythritol that does not prompt sugar cravings. If it turns out those artificial sweeteners do indeed trigger sugar carvings it could be a bonanza for the zero calorie natural sweetener or low calorie sweetener growers, manufactures, and suppliers who have been actively developing product.

Ingredion Inc. (NYSE:INGR), the $4.19 billion market cap corn refiners out of Westchester, Illinois, may have positioned itself as one of those producers when it further expanded its product line and introduced Enliten, a stevia based sweetener derived from a single?patented stevia strain.? The company claims that they have minimized the bitter, licorice tasting stevioside and maximized the sweet tasting Reb A, allowing for its superior consistency, quality, and taste. Enliten, which is produced in Balsa Nova, Brazil, is just one product that complements Ingredion?s large product portfolio, has also introduced another natural sweetener, a sugar alcohol product called Erysta. Sugar alcohol products have become popular as a sugar substitute because they provide a sweet taste that does not raise blood sugar to the degree that sucrose does because it converts to glucose more slowly and do not require much insulin to metabolize. However, many people report experiencing gas, bloating and diarrhea when consuming too much sugar alcohols.

Ingredion, which was once Corn Products International, has developed a diversified product line including starches, sweeteners, corn oils, beverages, pharmaceuticals, and more. The Company?s starch-based products include both industrial and food-grade starches. Its sweetener products include glucose corn syrups, high maltose corn syrups, high fructose corn syrup (HFCS), caramel color, dextrose, polyols, maltodextrins and glucose and corn syrup solids, and Reb A. Ingredion declared its third dividend increase in the last year and a half with a quarterly dividend of $0.26 per share, a 30 percent increase over the previous quarterly amount of $0.20 per share,?reflecting strong earnings growth. Ingredion is selling for just over $55 per share, up 11 percent year to date, and just three dollars shy of its 52 week high. Though not an exciting stock, it does have a decent dividend and a diversified product line, and would be a stable company to have in ones portfolio However, if the natural zero or low calorie sweetener market continues to rise this company might be more than just a stable company to have in ones portfolio. Ingredion will release its 2012 third-quarter financial results for the period ended September 30th, 2012, before the market opens on Thursday, October 25th, 2012.

A British Company, PureCircle Limited (LSE:PURE), a stevia processor, last month announced it entered into two agreements with The Coca-Cola Company (NYSE:KO), one for investigation and development of stevia products as a commercially viable food product, and the other, which is contingent of the first, for a supply line of the actual product delivered to Coca-Cola. Though PureCircle does not expect an immediate impact on revenue or earnings it is expecting the agreements to have a positive long term impact. ?n August PureCircle announced it received a Notice of Allowance from the U.S. Patent and Trademark Office for its patent application for a new high yield variety of stevia, grown by PureCircle in several global markets, including Paraguay and Kenya. Reb A accounts for 40% of Pure Circle?s revenue for 2012 as opposed to 90% in 2009. One reason is that Pure Circle has added proprietary new ingredients to its pipeline, including their natural flavor and sweetness enhancers called PureCircle Flavors, designed to work by combining sugar or HFCS, and stevia along with PureCircle Flavors?to deliver a range of better tasting, low cost, natural product formulations, with reduced calories.? 2012 fiscal revenue was off 15 percent to $45.4 million, and had an operating loss of $15.2 million.? In 2011 saleand revenue fell for a net loss of $3.7?million, and sales dropped 12 Percent to $55.3 million, compared with a $1.2 million profit in 2010.? Though the future of natural sweeteners is on an upswing, PureCircle needs to rise along with them.? Perhaps its new agreements with Coco Cola with help the company?s revenue rise.

Another company that is worth a look is Stevia First ?Corp. (OCT:STVF) a development stage stevia production and manufacturing company with a goal to be the first field to dinner table stevia company in the U.S., developing seeds and tissue high in Reb A.?Their goal is to crossbreed high grade stevia seeds and seedlings to produce disease-resistant plants with leaves that have a higher content of Reb A. They also recently announced a licensing agreement with Vineland Research and Innovation Centre, out of Ontario Canada, for its fermentation-based production methods that make it possible to convert the low-cost plant material into sweet steviol glycosides through controlled fermentation methods. If this process does indeed work on a large scale it would diminish the need to actually grow the entire stevia plant to remove the sweet extract. This process should guarantee a constant supply line of consistent product and would save up to 70% of the costs of extracting Reb A from the current method.

What Stevia First is attempting is produce quality stevia with two different methods, one, the old fashion way, by planting their product on its 1000 acre of land it leased in California?s Central Valley, and two with its fermentation process, which is also scheduled to be developed on the acreage.? What this could accomplish is that Stevia First could grow the plants for market and generate sales and income while it is developing the fermentation method and strengthening its base. Investors seemed positive with the possibilities of the fermentation method when it was announced as the stock rose from mid $0.20s to the mid -$0.70?s. In the past week trading has slowed and there has been a sell off and the stock is hovering just under $0.55 per share. Volume shifts and volatility should be expected on news or lack of news with a development stage company, and this nano cap company with a market cap of $28.8 million is no different. These companies move on news, good or bad, and chances are the next press release from the company will move the stock in one direction or another. Chances are if the company begins to plant and harvest stevia crops or begins development on their fermentation process look for the stock to swing upward.? The upside potential appears to outweigh the downside, with the war on sugary beverages, the change in attitudes of the consumer wanting a healthier alternative to artificial sweeteners, and the fermentation method that Stevia First licensed, makes Stevia First a company that has the potential to see its stock test its 52 week high. But caution is warranted as with any development company; expect more peaks and valleys as the company continues to grow.

Disclosure: Long KO, INGR, STVF

Source: http://marketplayground.com/2012/10/15/as-sugar-and-hfcs-falls-out-of-favor-investing-in-natural-zero-calorie-sweeteners-may-produce-healthier-profits-ko-ingr-stvf/

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