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With consumers' pursuit of a balance between sweetness and health, the domestic sugar substitute industry has developed rapidly in recent years, with a market size of 1.8 billion yuan in 2023. From 2018 to date, my country's sugar substitute industry has experienced a development process from explosive growth to periodic overcapacity, and then to natural sugar substitutes gradually becoming the mainstream of the market.

Focusing on the development of the sugar substitute industry, the "Beijing News 2024 Sugar Substitute Industry Report" presents industry opportunities and challenges from the dimensions of market size, category changes, industry bottlenecks, and development trends. Among them, the report analyzes the comprehensive strength rankings of major sugar substitute listed companies from the aspects of listed company performance, growth, health, market value, and social recognition. From high to low, they are Jinhe Industrial, Huakang Shares, Bailong Chuangyuan, Rhine Bio, Bowling, and Sanyuan Bio. The top-ranked companies generally have good performance and company growth; the bottom-ranked companies generally have poor performance, and the comprehensive scores of some companies are dragged down by growth or health indicators.

Market size

1. The domestic sugar substitute market size reached 1.8 billion yuan

In recent years, sugar substitutes such as erythritol, aspartame, and sucralose have been widely used in the food industry, and the industry has risen rapidly. According to data from Zhiyanzhan Industry Research Institute, the scale of my country's sugar substitute market will reach 1.8 billion yuan in 2023. According to the Qianzhan Industry Research Institute, the scale of my country's sugar substitute market will exceed 3.3 billion yuan in 2028.

Industry development is inseparable from market drive. With the increase in consumer demand for healthy diets, reducing sugar intake has become a consensus. The "Healthy China Action (2019-2030)" advocates that the average daily intake of added sugar per person should not exceed 25 grams by 2030. According to data from iResearch, 44% of respondents said they would pay more attention to controlling sugar and fat. According to the 2024 survey data from the China Science and Technology Information Exchange Center for Food and Health, 60% of consumers are more confident with sugar substitutes.

2. Investment and financing accelerated, with three listed companies born in two years

In 2018, starting with Yuanqi Forest's sugar-free sparkling water, the sugar-free beverage market emerged as a new force, driving the rapid expansion of the upstream sugar substitute industry. Today, the application of sugar substitutes has expanded to baking, candy, ice cream and other fields. Tianyancha data shows that from 2017 to 2020, the number of sugar substitute-related companies in my country has grown rapidly, with the highest growth rate in 2019, reaching 14.64%.

At the same time, sugar substitute companies took advantage of the industry's popularity to start a "gold rush", with active financing and expansion. According to incomplete statistics from the Beijing News reporter, from January 2018 to June 2024, a total of 9 companies carried out 11 capital actions such as financing and private placement. Sanyuan Bio, Huakang Shares, and Bailong Chuangyuan were listed one after another, and non-industry capital such as Fengyuan Pharmaceutical and Yasheng Group entered the market. As people become more familiar with sugar substitutes, the entire industry is developing in the direction of diversification, personalization, functionality, and scale, and the product structure is becoming increasingly perfect.

This report analyzed the performance, growth, health, market value, social recognition and other dimensions of listed companies and concluded that Jinhe Industrial ranked first in the comprehensive strength of domestic listed sugar substitute companies (82.91 points), followed by Huakang Co., Ltd. (69.17 points), Bailong Chuangyuan (62.78 points), Rhine Bio (56.39 points), Bowling (51.81 points), and Sanyuan Bio (46.4 points).

The top-ranked Jinhe Industrial Co., Ltd. leads other companies in terms of revenue and net profit. It is also the only sugar substitute listed company with a revenue of more than 5 billion yuan. Its business scope is more diversified and it has better risk resistance. The well-known companies Baolingbao and Sanyuan Bio ranked lower, mainly due to the overcapacity of erythritol, the intensified competition in the sub-sectors, which led to a decline in performance, and the decline in investor confidence, which led to a lower market value of the company.

Judging from indicators such as performance growth rate, business diversification, R&D strength, production strength, and domestic and foreign market development capabilities, Huakang Pharmaceutical and Rhine Bio have good growth potential. In 2023, Jinhe Industrial's R&D investment was 235 million yuan, and Huakang Pharmaceutical's related investment was 124 million yuan, which was higher than other companies. In terms of market development capabilities, the growth rate of revenue in foreign markets of Huakang Pharmaceutical, Rhine Bio, and Bailong Chuangyuan has accelerated in the past three years. In terms of production strength, Huakang Pharmaceutical's 300,000 tons/year production capacity is much higher than other companies, followed by Sanyuan Bio and Baolingbao with production capacities of 145,000 tons/year and 60,000 tons/year, respectively.

Measured by indicators such as debt ratio, cash flow, regulatory penalties, and litigation disputes, Bailong Chuangyuan, Sanyuan Biotechnology, and Huakang Shares ranked in the top three in terms of health. Among them, Bailong Chuangyuan has not received any regulatory penalties in the past three years, and only reported one litigation dispute. Jinhe Industrial, which ranks first in comprehensive strength, has been involved in as many as 39 litigation disputes in the past three years.

Measured in terms of brand value, awards won, and participation in important industry events, Jinhe Industrial scores high in social recognition. In addition to participating in the drafting of many industry standards, it is also the sugar substitute company with the highest brand value in the "2024 China Brand Value Evaluation Information" of the China Brand Development Promotion Association.

【Category Change】

"Sugar substitutes" usually refer to sweeteners that replace sucrose, fructose, glucose, etc. to provide sweetness. According to the source, they can be divided into artificial sweeteners and natural sweeteners, the latter of which can be divided into sugar alcohol sweeteners and plant extract sweeteners. Common artificial sweeteners include acesulfame potassium, aspartame, etc., and natural sweeteners include erythritol, steviol glycosides, etc.

1. Artificial sweeteners have a 145-year history

New products have been constantly appearing in the history of artificial sweeteners, the earliest of which can be traced back to the discovery of saccharin in 1879. Cyclamate was born in 1937. Aspartame was born in 1965 and is widely used in the food and beverage industry due to its better taste and stability.

Since then, acesulfame potassium (1967), sucralose (1976), and neotame (1993) have been launched one after another, with acesulfame potassium and sucralose developing the fastest and gradually replacing other artificial sweeteners. Neotame is a high-intensity sweetener, 30-60 times sweeter than aspartame, and is currently in the early stages of the market.

2. Erythritol becomes the mainstream in the domestic market

The development of domestic sugar substitutes began in the 1950s, with sodium saccharin being the most widely used at first. Since the 1980s, the focus of sugar substitute research and application has shifted to aspartame. Since the 1990s, my country's production capacity of xylitol and aspartame products has risen rapidly, and the market size of saccharin has gradually shrunk. Entering the 21st century, the sugar substitute industry has ushered in a diversified development pattern, with artificial and natural sugar substitutes coexisting, and new sugar substitutes such as sucralose and erythritol entering the market.

Since 2018, driven by the trend of sugar-free beverages, erythritol has rapidly become popular, and in 2023 it will account for nearly 80% of the domestic sugar substitute market.

【Industry bottleneck】

1. Erythritol has a temporary overcapacity

The "byproduct" of the overheated sugar-free economy is overcapacity in the sugar substitute industry, especially erythritol. With the rise of sugar-free beverages, the demand for erythritol increased by more than 100% in 2019 and 2020. In 2021, driven by factors such as a substantial increase in market demand and good profit levels, erythritol companies such as Sanyuan Bio, Zhucheng Dongxiao, and Baolingbao have expanded their production capacity, and many non-industry capitals have also begun to cross-border layout.

In the second half of 2022, there will be overcapacity in erythritol. According to incomplete statistics, by the end of May 2023, my country's erythritol production capacity has reached 380,000 tons/year, while the global total demand for erythritol in 2022 is only 173,000 tons.

Data shows that Sanyuan Bio's erythritol production capacity will reach 135,000 tons in 2023. Baolingbao's current production capacity is 30,000 tons/year, and with the new project that is about to be put into production, its erythritol production capacity will exceed 60,000 tons/year.

2. Intensified competition, halved profits

One direct impact of overcapacity is the intensification of industry competition. Sanyuan Bio said that due to insufficient accumulation of technology and channels, the product quality of many new companies is difficult to be recognized by customers, and they can only compete for market share by offering low prices, which has led to a rapid escalation of competition in the entire industry and also brought the risk of "bad money driving out good money".

In the second half of 2022, sugar substitute companies started a price war, coupled with a large number of low-priced trial products, which led to a continuous decline in erythritol prices, squeezing the profit margins of companies. In 2021, the highest price of erythritol reached 30,000 to 40,000 yuan per ton, and in the first half of 2023, the price once dropped to 9,500 yuan per ton.

In 2023, among the seven A-share listed sugar substitute companies, Huakang Co., Ltd., Chenguang Biotechnology, and Bailong Chuangyuan saw an increase in both revenue and net profit; Jinhe Industrial, Bowling, and Sanyuan Biotechnology saw a decrease in both revenue and net profit, while Rhine Biotechnology saw an increase in revenue but not profit, and the net profit of these four companies fell by more than 50%. In terms of specific business performance, the sales revenue of erythritol of Sanyuan Biotechnology and Bowling decreased by 29.03% and 41.79% respectively; Chenguang Biotechnology's revenue mostly came from businesses other than sugar substitutes.

The export trade of some sugar substitute companies has also been subject to overseas anti-dumping investigations. In November 2023, the European Commission decided to launch an anti-dumping investigation on erythritol products originating from China. On July 19, 2024, the European Commission announced a preliminary ruling that Bowling’s related erythritol products were subject to a provisional anti-dumping duty of 31.9%, and other related Chinese companies were subject to anti-dumping duties ranging from 76.9% to 235.6%.

As demand picks up, the overcapacity of erythritol has eased. In the fourth quarter of 2023, the operating income of Rhine Bio's natural sugar substitute business was 380 million yuan, driving positive growth in performance. In the first quarter of 2024, Sanyuan Bio and Baolingbao achieved net profits of 24.2477 million yuan and 23.17 million yuan, respectively, up 210.54% and 35.89%, respectively. At present, the market price of erythritol in Shandong has rebounded to around 13,000 yuan/ton.

Analysts believe that although the sugar substitute industry still has overcapacity in the short term, the market mechanism will force some companies to shut down or switch to other products. As excess capacity is gradually cleared, the erythritol market is expected to gradually restore a relatively stable supply and demand pattern, and product prices will tend to be reasonable.

【development trend】

1. Many companies increase investment in allulose

While erythritol is facing overcapacity, the new generation of natural sweetener, allulose, has become the focus of the industry.

Allulose is a rare monosaccharide in nature. It has 70% of the sweetness of sucrose, but its calories are only 0.3% of sucrose of the same quality. Its taste is closer to sucrose, so it is called "rare sugar". In 2011, the United States determined that allulose can be widely used in food. According to FMI research data, the global allulose market size will be US$237 million in 2023, with a compound annual growth rate of 7.7%. The market size is expected to reach US$423 million in 2030.

This new sugar substitute has also attracted the attention of domestic companies. Sanyuan Bio plans to expand its allulose production capacity to 20,000 tons in 2024. Baolingbao currently has 7,000 tons of allulose production capacity and plans to build another 30,000 tons of production capacity. Huakang Bio's target allulose production capacity is 40,000 tons. Bailong Innovation Park currently has 4,167 tons of allulose production capacity and has added a new annual production capacity of 15,000 tons of crystalline sugar (including allulose) project.

At present, allulose has not been approved as a new food ingredient in my country, and domestic allulose is mostly used for export. In May 2023, the National Health Commission approved the application of "D-allulose-3-epimerase" as a new enzyme preparation for the food industry. Bowling said that this move is expected to speed up the approval process of allulose as a new food ingredient, and it is expected that it is likely to be approved in 2024.

2. The potential of new sugar substitutes is promising

Judging from the trend of sugar substitutes, natural sugar substitutes extracted from plants have been popular in the market in the past two years, such as stevioside, monk fruit sugar, etc. Representative companies include Rhine Bio and Chenguang Bio.

As for artificial sweeteners, Chenguang Bio believes that due to the increasing concern about the health risks of saccharin, sodium cyclamate and aspartame, some parts of Europe and the United States have begun to ban or restrict their use as food additives. As consumers' health awareness increases, natural and new sweeteners will gradually replace traditional sweeteners.

Qianzhan Industry Research Institute believes that sucralose has been welcomed by the market in recent years and is expected to have certain development potential in the future. Neotame is currently less used, but has great development space due to its high sweetness.

Conclusion

From the explosive growth of the industry in 2018 to the current overcapacity of erythritol and intensified competition, consumers' demands for sugar-free products continue to increase, prompting the sugar substitute industry to continue to innovate. New sugar substitutes such as allulose and steviol glycosides have become new bargaining chips for the industry.

Looking ahead, the sugar substitute market is showing a clear trend of diversification and personalization. While companies are keenly capturing market trends and increasing R&D and innovation, they must also improve product quality, ensure the safety and stability of sugar substitute products, and achieve sustainable development of the sugar substitute industry while winning the trust of consumers.

(Data sources: Tianyancha, listed company announcements, Aige Agriculture, Shangpu Consulting, Zhiyan Consulting, CNKI, Zhiyanzhan Industry Research Institute, "Scientific Consensus on Food Sweeteners (2022)", etc.)

Produced by Beijing News Food News Department

Produced by Tu Chonghang

Editor Liao Ailing

Interviewed by Liu Huan and Wang Siyang

Coordinating Editor: Guo Tie

Map by Lu Zixiong

Proofread by Liu Baoqing