Exclusive Interview with Yang Le, Chairman of Jinhe Industrial: 50% of White Sugar Consumption will Be Transformed and Sugar Substitute Products Have Broad Market Prospects

News from Cailian Press (Nanjing, reporter: Zha Daokun and Jia Xiaoning): with the improvement of people’s living standards, more and more attention has been paid to healthy diet. Some unhealthy eating habits have already been aware of and the people are looking for changes. Sugar reduction has drawn attention especially.   

On July 15, the State Council officially released the Healthy China 2019-2030 development planning to encourage the whole society to “reduce oil, salt and sugar” and promote the construction of food nutrition standard system.

As a result, sugar reduction has once again been elevated to an important position, and it has also opened up an infinite industrial imagination for the sugar substitute food industry. According to the reporter of Cailian Press, Jinhe Industrial (002597.SZ), the global leader in fine chemical industry, has introduced a new sugar substitute product, “LeSweet”, and as a result, the company has become a hot company concerned in the sugar substitute product industry and also the focus of public attention at present.

It’s worth noting that, the company was a supplier of sweetener raw materials before, why does it develop new products from business end to consumer end, how is LeSweet positioned, how does the company make LeSweet more recognized by the market, and how big is the space in the future market? With these questions in mind, the reporter of Cailian Press made an exclusive interview with Yang Le, the chairman of Jinhe Industrial. He told the reporter of Cailian Press that sugar substitution will become a trend in the future regardless of the requirements of national policies or people’s demand for health. According to the requirements of national health planning, sugar substitute products will replace half of the use of white sugar in China in the next 10 years with a huge market.

Sugar Reduction Is Extremely Urgent

According to the Healthy China 2019-2030 development planning, reasonable diet actions are put forward to focus on encouraging the whole society to reduce salt, oil and sugar. It’s recommended that by 2030, per capita daily intake of salt should not be higher than 5g, per capita daily intake of edible oil for adults should not be higher than 25-30g, and per capita daily intake of added sugar should not be higher than 25g.

However, at present, the per capita intake in China is far higher than above standards. Ding Gangqiang, the director of National Institute for Nutrition and Health of Chinese Center for Disease Control and Prevention, said at the relevant press conference of National Health Commission on July 17 that 2012 survey showed that the per capita daily intake of salt in China was 10.5g and the intake of edible oil was 42.1g, and the per capita daily intake of added sugar (mainly sucrose) in China was about 30g recently, which were all higher than the recommended intake by the World Health Organization and the Chinese Dietary Guidelines.

As can be seen from the above document, it’s urgent for China to promote sugar reduction at present, which has also provided a market with unlimited imagination for sugar substitute products. According to the reporter of Cailian Press, Jinhe Industrial, the world largest producer of sweeteners such as sucralose, acesulfame and maltose, has introduced a new sugar substitute product—LeSweet.

According to the reporter of Cailian Press, LeSweet is a kind of compliance-type sugar substitute product, which is a compositional formulation combining a new-type artificial sweetener and natural nutritive sweetener. The main raw materials are erythritol, stevioside, sucralose, etc.

As to the reasons for the development of new products, Yang Le told the reporter of Cailian Press that sugar substitutes have been widely used in foreign markets. Small bags of sugar substitute products can be found everywhere in American restaurants and cafes. Different packaging colors correspond to different sweeteners, including xylitol, stevioside, aspartame, etc. The consumer education and awareness of sweeteners in the United States have already been very common now, and the consumer market of sugar substitutes in the United States is also relatively developed. However, there is almost no consumer market of sugar substitutes in China at present. Jinhe Industrial saw such a market opportunity and then founded the product LeSweet.

It’s worth noting that at present, the incidence rate of obesity and diabetes in China continues to rise, all of which are related to the high intake of sugar. According to incomplete statistics, there are more than 100 million diabetics in China at present. If sugar substitute products are used with no sugar and fat, there will be no calorie, and then diabetics can eat sugar at ease. In addition, the probability of diseases caused by excessive sugar intake by consumers will be greatly reduced. Therefore, the reduction of sugar intake and intake of healthier sugar products are important choices for the consumers at present.

Yang Le told the reporter of Cailian Press, “How can the 1.3 billion consumers in China have the convenience and right to freely choose sugar-free products in every consumption scene in daily life and obtain the healthiest sweetness? I think at first, the sugar substitute products such as LeSweet, etc. are needed, so that they can know more about sugar substitute products.”

In addition, Yang Le also introduced the reporter of Cailian Press that in order to make the consumers who lack knowledge of sugar substitute products accept LeSweet, the product has undergone more than 1,000 formula adjustments successively from version 1.0 to version 2.0. The version 2.0 LeSweet has achieved a sweetness ratio of 1:1 with sucrose, so that the users can obtain the same sweetness without changing the habit of adding sugar.” At present, the consumers of LeSweet are mostly concentrated in first-tier and second-tier cities, and female college students are the largest consumer group.”

Sugar Substitute Products Are in the Initial Stage

According to the reporter of Cailian Press, like LeSweet, there are also some sugar substitute products in China at present, but they are still in their infancy and there is no real leader in the industry.

In response, Yang Le told the reporter of Cailian Press that there was no secret about similar products in the industry, “From the point of view of production, it is to use a single generation of sugar products to carry out configuration in proportion. Therefore, the enterprise only needs to research the formula, and then buy raw materials to invite other enterprises to carry out production and processing, and finally the products can become its own sugar substitute brands.”

In Yang Le’s view, the whole sugar substitute retail industry is basically blank at present. Some foreign sugar substitute retail products can only be found on e-commerce platforms and cannot directly enter the domestic market. There are several other manufacturers that produce similar products in China, but they are not large in scale and have a big gap with Jinhe Industrial in strength.

According to the annual report, the operating income of Jinhe Industrial in 2018 was RMB 4.132 billion, including the profit of RMB 911 million attributable to the shareholders of the listed companies, and net profit after deducting non-recurring profit and loss of RMB 847 million. According to the performance forecast for the first half year of 2019, Jinhe Industrial is expected to make a profit of RMB 390 million-420 million.

With a professional R&D team and deep financial support from the listed company, LeSweet is expected to become an explorer of the industry. However, with the gradual expansion of the market in the future, it’s inevitable that more and more enterprises will enter the sugar substitute market to compete for the market share.

In response, Yang Le told the reporter of Cailian Press that LeSweet is finally positioned as a high-end seasoning product in the consumer-end market. Since it is in the consumer-end market, it’s impossible to have only one company to do it. “Industrial competition of many enterprises and survival of the fittest are conducive to the development of the entire industry. However, for potential competitors in the future industry, we are confident because the enterprises entering the industry now are small enterprises with general overall strength and it is difficult for them to guarantee their products. But we have the strength in this field now. In the future, there will be more powerful enterprises entering this industry, but we have already run for a long distance on this track, so for our future competitors, we are still confident.”

In Yang Le’s view, the future competitors are likely to be seasoning enterprises. First of all, sugar enterprises cannot self-destruct to carry out R&D and sale of sugar substitute products. However, sugar substitute manufacturers are more oriented to business-end enterprise customers, and are unlikely to enter consumer end since they’re trapped in production pressure and customer groups. “According to the current situation, it’s expected that there may be some seasoning enterprises with considerable strength in the future, especially the listed companies, which will enter the sugar substitute field. They have capital advantages and consumption channel advantages. The sugar substitute market will be gradually expanded in the future and seasoning enterprises are likely to rush in the market to take a share of the spoils.”

The Market Has Great Potential in the Future

According to the national planning, sugar substitute industry will undoubtedly face a huge market in the future, which has also brought opportunities to sugar substitute products.

So how big is the potential market for sugar substitutes? In response, Yang Le carried out calculation for the reporter of Cailian Press. According to relevant requirements of national policies, before 2030, the domestic per capita daily intake of white sugar will not exceed 25g, but the current per capita daily intake is 50g-60g. If the policies become stricter in due course and the people are not willing to change the sugar intake rules, the consumption of white sugar should be shifted to sugar substitute consumption.

“If per capita daily intake of white sugar drops from 50g to 25g, half of the white sugar market will be replaced by sugar substitutes. Calculating based on the current consumption in China, the consumption of sugar substitutes at that time will be equivalent to the current consumption of 10 million tons of white sugar per year. Therefore, this market has great potential.” Yang Le told the reporter of Cailian Press, “At present, LeSweet is rushing to sugar substitute market, and as long as it can take up 10% of the market share of white sugar substitutes in the future, it will be a very good result.”

It’s worth noting that although the state should increase the efforts to reduce sugar, people have been accustomed to the use of white sugar. How the consumers can be made to transfer from white sugar to sugar substitute products is the most realistic problem confronted by sugar substitute product production enterprises, including Jinhe Industrial.

In response, Yang Le told the reporter of Cailian Press that as a consumer-end product, LeSweet will probably be used to cook food such as braised fish in brown sauce, braised pork in brown sauce, etc. at more time, in addition to being directly added to tea or coffee. But for ordinary consumers, how to use sugar substitute proportionally is a problem. Therefore, the sweetness ratio of version 2.0 LeSweet and white sugar is 1:1, which has considered the consumers’ consumption habits.

In order to change the consumer’s cognition, the sales staff of Jinhe Industrial have also thought of many methods, especially offline promotion. In the future, LeSweet will appear on the dining tables of five-star hotels as a consumption choice together with sugar products, with exquisite packaging and playing a role of brand promotion. Secondly, the company will strengthen the cooperation with domestic top-quality coffee and tea channels such as Luckin, Naixue, Mellower, Seesaw, etc.

“Our current consumer groups are mainly young people who like to try new things and have higher consumption preferences. With the improvement of our education for consumers and the maturity of young people who have used our products in the past, sugar substitute products will become popular in the future. If we do this, as a consumer-end brand, LeSweet will have succeeded and it also means that the sugar substitute industry has succeeded.” Yang Le told the reporter of Cailian Press.