Stricter government regulations enforced in recent years and increasing consumer emphasis on healthier lifestyle choices have driven food and beverage companies to pursue ways to reduce sugar content in their products. Given the myriad functionalities of sucrose beyond its sweetness, sugar reduction remains an elusive and difficult goal to attain, with no single "best-in-class" option to satisfy all needs. To this end, developers have turned to multiple sugar reduction technologies, as outlined in the 2018 edition of our analysis of innovation in sugar reduction.
At Lux, we've been closely covering the sugar reduction space and in this blog we focus on the key developments over the past two years and outline some of the notable efforts from developers as well as opportunities related to alternative sweeteners. Based on the recent events outlined in Figure 1 below, three categories of alternative sweetener technologies stand out:
Figure 1: Timeline of notable events in the sugar reduction space since 2018
Fermentation-derived stevia takes center stage
- A bulk of the events in the past two years mark efforts from companies resorting to synbio and fermentation methods to scale up production of next-generation Reb M stevia. DSM and Cargill's Avansya joint venture started commercial-scale Reb M production in December 2019. Likewise, Amyris initially launched its fermentation-derived Reb M sweetener, Purecane, in the U.S. In April 2020, following regulatory approval, Amyris was looking to expand to other countries like Canada and Brazil. In November 2019, Manus Bio opened a commercial fermentation facility in Augusta, Georgia, with its first product being stevia-based sweetener. While Amyris' commercialization through a B2C route provides the company a head start compared to other players, going forward, Reb M producers need to target the B2B market for widespread adoption.
Rare sugars are gaining momentum
- Despite being a promising class of alternative sweeteners, the adoption of rare sugars like allulose is hindered due to limited supply and high cost-in-use. In 2018, Ingredion partnered with Japanese company Matsutani, providing the much-needed impetus to take rare sugars to the next level. In November 2019, Ingredion set up a commercial manufacturing facility in Mexico to produce allulose. Coincidentally, in 2019, the FDA also issued a statement that allulose will be excluded from total and added sugars on U.S. Nutrition Facts labels, signaling a major potential boost for allulose. Meanwhile, Bonumose targets other rare sugars, including tagatose, as the company continues to file patent applications. Although allulose has garnered the most commercial interest, companies should also consider exploring academic research partnerships focused on fermentation routes to produce rare sugars.
Physical modification of sucrose offers promise, but consumer preferences ultimately matter
- Given the high similarity to sucrose's taste profile and low regulatory hurdles, physical modifications of sucrose emerged as a promising category from our analysis. On this front, Israeli startup DouxMatok raised $22 million in a Series B funding round to scale up production; the company hoped to produce initial commercial quantities of its modified sugar in Q4 2019. As of June 2020, the company has not publicly announced progress on this commercialization goal. Another key player in this category is Nestlé, with its patented hollow crystal technology. In 2018, the company launched "Milkybar Wowsomes," the first confectionary product using its amorphous sugar technology, in the U.K. However, in February 2020, within two years of its launch, the company discontinued the product owing to poor demand reflected by weak sales. As Nestlé turns to other sugar reduction options, DouxMatok stands a good chance of striking key partnerships, provided that it successfully completes its commercialization milestone.
Opportunities in the space
Going forward, developers will continue to scale up production of the above-mentioned sugar reduction-related products and ingredients. In particular, fermentation-derived sweeteners are likely to grow in the coming years, and clients should closely monitor efforts from companies like DSM, Cargill, and Amyris, as well as startups like Manus Bio. With scaling up, the costs of these alternative sweetener ingredients will come closer to that of sucrose on an end-application basis, making them lucrative options to consider.
Despite reformulation- and functionality-related challenges, sugar reduction will continue to be an important topic for food and beverage CPGs to address. Companies must continually revisit and revise their sugar reduction strategies – be they in-house R&D or external technology partnership approaches. As consumer preferences continue to evolve and technologies continue to improve, those most agile in their strategies will be best positioned to capitalize on new capabilities that align with shifting market needs.