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PureCircle secures sweet new deal for stevia

By Jess Halliday , 07-Jan-2008

PureCircle has secured an extension to its agreement with Cargill to supply its stevia-derived Reb-A until mid-2010, helping to ensure availability for what is tipped to be the next big thing in sweeteners.

The Malaysian company, which listed on the UK's AIM in December, already had an agreement with Cargill to supply Rebaudioside-A (Reb-A) from the Stevia rebaudiania bertoni plant to Cargill alone until mid-2008.. It holds the proprietary process technology for the extraction of Rebaudiosid-A (Reb-A), which comes at purity levels of up to 97 per cent. Since it emerged in June 2007 that Cargill and Coca Cola are collaborating over a new stevia to be called Rebiana, which is currently pending regulatory approval for stevia's use as a sweetener, there has been considerable industry interest in what is described as an all-natural, zero-calorie, high-intensity sweetener. PureCircle is positioning to take advantage of the potential, not least since the new contract obligated Cargill to purchase a "significant" (but undisclosed) volume of its Reb-A. What it more, the non-exclusive basis of the new contract means PureCircle can also supply other companies moving in on the opportunities that will open up once regulatory approval comes through. It says it already has agreements in place with other food and beverage companies, which will come into effect from July 1 2008. PureCircle managing director Magomet Malsagov said that the company has had a longstanding relationship with Cargill throughout the development of Reb-A over the last few years. "[This] demonstrates their confidence in the market for this remarkable product." Cargill is also understood to have a supply agreement in place with GLG Life Tech Corp. PureCircle made its initial public offering on the AIM on December 11, placing 14,285,714 ordinary shares at US$3.50 per share. At the placing price, the company's entire issued share capital was valued at approximately US$456m. It is planning to use funds raised to expand production capacity three-fold over the next two years, since it predicts that initial contracts following regulatory approval as a sweetener could call for the speedy supply of more than 2000 metric tonnes. At present, global annual consumption of sugar and all other sweeteners is estimated to be in the region of 150m tonnes. PureCircle says its Reb-A accounts for just 0.2 per cent of this volume (0.3m tonnes). The company owns a 55 per cent stake in a subsidiary called Ganzhou Julong, which is involved in large-scale stevia plantation and production of crude extracts. PureCircle believes its capacity for crude stevia extraction is the largest in the world - currently 1000 tonnes of crude extract are produced per annum. By the end of this year, however, it expects to increase this to 3000 tonnes per annum. The company's production is currently based in Malaysia and China, where it operates a vertically integrated supply chain from plantation, primary production through to final product distribution. This control of the supply chain is said to be crucial in ensuring supply, cost and quality, and in meeting individual specifications of client companies.

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