The fruit and vegetable juice industry is BIG: It’s a $20 billion market, and now (just like sodas) it’s coming under attack for its excessive amount of sugar. As sugary sodas were receiving the bulk of the blame for the obesity epidemic, obesity expert, Robert Lustig, who penned the book “Fat Chance: The Bitter Truth About Sugar,” was espousing that the high sugar content in commercial fruit juices were as sugar-laden as soda. Over the past 30 years consumption of fructose – the sugar in juice – has more than doubled as parents, looking for a healthy alternative to sweetened drinks, gave their children more and more juice to quench their thirst.
JUICE IS AS MUCH A CULPRIT IN THE OBESITY EPIDEMIC AS SUGARY SODAS
Mr. Lustig states that it doesn’t matter whether the sugars are from fruit juice, smoothies or soft drinks, liquid fructose sugar is dangerous for one’s health, and it is overloading the liver and creating issues such as obesity, which leads to heart disease, diabetes, and other medical issues. The problem with fruit juice is the fiber has been removed, and the fiber forms a protective layer that acts as a barrier to the intestine slowing the absorption of sugar, giving the liver a chance to catch up. In sodas, fruit juices, and smoothies, the barrier is gone, which leads to the liver being overloaded.
Eight ounces of orange juice contains 24 grams of sugar, only two grams less than found in the equivalent amount of Coke. An eight-ounce glass of apple juice contains 26 grams of sugar, the same amount of sugar found in the equivalent amount of Coke. An even more frightening comparison is these juices have the equivalent in sugar to a little more than two Krispy Kreme Doughnuts (NYSE:KKD) glazed doughnuts, which have 10 grams of sugar per doughnut.
STEVIA BLENDS IN NEW JUICE PRODUCTS
While I’m not suggesting skipping the juices and eating the doughnuts, clearly fruit juices are no better than sodas in terms of sugar, even though the sugar comes naturally in the product, and has clearly added to the obesity epidemic. And that’s why companies like PepsiCo, Inc. (NYSE:PEP)’s Tropicana with its Trop50, that boasts 50% less sugar than regular juice, may be ahead of its time seeing that juices have come under the same scrutiny as sodas as one of the major culprits in the obesity epidemic.
To give the customer a healthier product, U.S. fast causal restaurants like Panera Bread Co (NASDAQ:PNRA) have added stevia to sweeten some of it teas. The Company’s 2013 Featured Summer Menu includes a tropical Hibiscus Iced Tea with natural pineapple and lychee flavor and sweetened with stevia. Jamba, Inc. (NASDAQ:JMBA) has also added stevia in three new energy drinks, touting only 90 calories per serving. Jamba Juice also added stevia to help sweeten its take-home Smoothie Kits in an effort to lower the sugar and calorie count.
COMING SOON: BETTER TASTING STEVIA
While it is imperative to our health to cut down on sugar, I foresee that stevia in juices will have two obstacles to overcome before it will be truly embraced, and that is the flavor profile and the cost. While some complex beverages, such as Starbucks Corporation (NASDAQ:SBUX) refreshers found on grocery shelves, can mask the bitter aftertaste found in today’s stevia products, most juice blends seem to have too delicate of a flavor to overpower the bitterness. The stevia extract used in most products comes from rebaudioside A (Reb A), the sweetest and most abundant of the steviol glycosides found in the stevia leaf. However, there are other steviol glycosides, like Reb D and Reb X, that have been found to have a better sweetener profile that may blend more effectively than Reb A in juices. The problem is that both of these glycosides are found in trace amounts in the leaves, which makes extracting the glycosides far more costly.
While successful distributors like PureCircle Limited (LON:PURE), the largest producer and marketer of stevia products, have their growers now breed stevia plants with higher amounts of Reb D and Reb X, growing enough stevia plants to extract the glycosides is going to require an investment in more fields, more plants, more water, and more equipment and labor. Then add in the additional expense of producing the extract, and the cost continues to rise. The problem with the additional cost is that, according to Mintel’s juice report, three-fifths of all juice drink buyers look for low price when shopping, suggesting that any price increases might turn a buyer to a less expensive brand that would probably have a higher sugar content.
FERMENTATION PROCESS: THE FUTURE FOR STEVIA?
There is another process of extracting these sweet glycosides in the stevia leaves; it’s called a fermentation-based method, and this process, once operational, will be able to produce a variety of quality stevia and at a reduced cost. The fermentation-based process utilizes a microorganism growth medium such as yeast or bacteria to convert low-cost carbohydrate feedstock to create steviol glycosides that are, as some call it, “nature identical”—or molecularly the same—as glycosides that are obtained by extracting through leaf production. Today there are two companies that are separately developing the stevia fermentation-based process: the giant food processer and developer, Cargill, and a small development-stage agricultural biotechnology company, Stevia First Corp (OTCMKTS:STVF).
Stevia’s fermentation process centers on an enzyme called steviol synthetase, the starting point for all glycosides, and there are more than 30 of them. Stevia First licenses the enzyme steviol synthetase from agricultural research firm Vineland Research and Innovation Centre of Canada where its scientists discovered that particular enzyme in 2007. According to Robert Brooke, CEO of Stevia First, by using the enzyme with the fermentation process, “You can produce the same, identical steviol glycosides that are found in nature.” But Mr. Brooke continues to explain why the fermentation process (which takes places in closed vessels using the enzyme, yeast, and low-cost sustainable carbohydrate feedstock as starting material) may well be the future of stevia production: “You can think of brewing beer or wine in which you have large vessels that are completely contained. So you can work on something in the lab at a 1-liter scale, and then you can quickly move up to 10 liters, 100 liters, and then 10,000 liters or more. And you can do it with pretty good reliability, meaning that if production works at 1 liter, it’s going to work at 100 and 10,000 liters.”
STEVIA EXTRACT VIA FERMENTATION IS JUST AROUND THE CORNER
This process is no dream down the line. Cargill has a lot invested in the future of stevia, as it is partnered with The Coca-Cola Company (NYSE:KO) in developing Truvia, the dominant brand of stevia product on the market, controlling roughly 60% of the table top stevia segment. Truvia is also used in all of Cargill and The Coca-Cola Company (NYSE:KO)’s stevia products. And both companies continue to test new Truvia blended products including reduced sugar juices and Coca-Cola’s new Coke Life.
Cargill obtained its fermentation process earlier this year by partnering with the much smaller Swiss company, Evolva Holding SA (SWX:EVE), which has been developing its fermentation process and had already reached pilot scale on the process when the deal was struck. Cargill and Evolva expect the fermentation process to be in production by 2015. Stevia First has been developing its fermentation process over the past year and has also reached pilot scale, with full production expected in a few years. Both Evolva and Stevia First are small companies. Evolva is a $189 million market cap company, and it saw its stock climb 15% shortly after the announced partnership with Cargill. Stevia First is a $19.8 million market cap company in California’s breadbasket, the Central Valley. The company is still in the development stage so it does not at this point sell any stevia on the market. The company focus strictly on developing its fermentation process and developing new breeds of stevia plants and expects to have product on the market at a later date.
CONCLUSION
Clearly the consumer would like to have a natural sugar free substitute, which has helped to drive the stevia companies, like PureCircle, in the past. But cost savings is also a major issue with the consumer, so I believe the future of the bulk of stevia may well go companies that produce the product via a fermentation process, which puts Cargill, Coca-Cola, Evolva, and Stevia First in great positions to be leaders in the field. And while I am a believer in the future of The Coca-Cola Company (NYSE:KO) and its stock, I do not look to Coca-Cola for a pure stevia play; the company is just too large.
Here’s where, as an investor, it becomes interesting: Evolva has witnessed its stock jump over 15% since its announcement with Cargill. PepsiCo, Inc. (NYSE:PEP) and other large bottlers will not sit by if Cargill’s fermentation method produces a better tasting stevia at a lower price — because it would give Cargill and Coca-Cola too big of an advantage in the diet juice and soft drink business.
Stevia First is the only other company that is actively developing the fermentation-based method, and the firm controls the patent on the enzyme steviol synthetase. To me it is quite conceivable that one of these larger bottlers or food manufacturers could swoop in and either partner up as Cargill did with Evolva, or outright buy Stevia First for its fermentation method in order to compete in the diet arena with The Coca-Cola Company (NYSE:KO) and Cargill. And I believe as the fermentation process gets closer to full-scale production, whether it’s with Evolva or Stevia First, the value of the process will increase, and if that happens I would look for Stevia First’s value to increase too.
Disclosure: none
