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PureCircle sells 20 per cent to Olam and Wilmar

By Laura Crowley , 03-Jul-2008

Olam and Wilmar have entered a joint venture to acquire a 20 per cent stake in PureCircle in a partnership aimed at strengthening the supply chain and increasing sales of natural high-intensity stevia sweeteners.

The two Singapore-based companies, working together under the joint name Olam Wilmar Investment Holdings (OWIH), have invested a total of $106.2m (€66.9m) in the business move. They have also reached an understanding with Malaysian company PureCircle, which listed on AIM in London in December, for the development of a strategic partnership for future stevia development. This will focus on managing commercial scale stevia plantations and outgrower plantations, assisting in the development of crude extraction facilities to support the plantation activities, and developing a sales and marketing strategy. "We see tremendous growth potential for high-intensity natural sweeteners based on stevia," said Kuok Khoon Hong, chairman and CEO of Wilmar. "The successful development of plantations and marketing of high-intensity natural sweeteners would be key to exploiting this opportunity." PureCircle and stevia The global high-intensity sweetener (HIS) market is estimated to be worth $1bn, with an annual growth rate of about 4 per cent. However, artificial non-caloric sweeteners that currently dominate the HIS sector are losing popularity as consumers place increasing importance on natural alternatives for a healthier diet. Stevia sweeteners are seen by some as the ideal alternative because they are natural as well has having zero-calorie and low glycaemic index attributes. However, the product has not yet been approved for use in Europe as a food ingredient. In the US, stevia has been allowed in dietary supplements, but the race to get GRAS (generally recognised as safe) status as a sweetener has been competitive. Cargill, which developed its Truvia brand with Coca Cola (and for which PureCircle is a supplier) has yet to announce GRAS. Wisdom Natural Brands claims to have stolen a march on the ingredients giant and announced self-affirmed GRAS in June. Blue California has also said it is nearing GRAS. PureCircle produces a range of natural sweeteners internationally, with activities ranging from sourcing of dry stevia leaves to refining crude extracts and marketing them to food and beverage manufacturers worldwide. It also holds patents for processing stevia extracts into Rebaudioside-A (Reb-A), which is sourced from the Stevia rebaudiania bertoni plant and holds a purity level of up to 97 per cent. Earlier this year, PureCircle extended its agreement with Cargill to supply Truvia until mid 2010, and also made it into a non-exclusive contract. This helped the stevia producer take advantage of the sweetener's potential, following a growing interest in the sweetener after Cargill and Coca Cola announced last June that they were collaborating over the stevia Rebiana (high purity Reb-A). Commenting on the new deal with OWIH, managing director of PureCircle Magomet Malsagov said: "The first mover advantage that PureCircle currently has will be further strengthened by this strategic partnership. "On the two new strategic investors, Wilmar and Olam have each built a very strong and profitable business in their respective fields in the agricultural space. Their contribution will be the next critical success factor for bringing up our premium Rebaudioside and other natural sweetener products to their fullest potential." Stevia production The global production of stevia leaves is estimated at about 40,000 metric tonnes, of which 80 per cent is grown in China, according to OWIH. There is however the potential for a shortfall in production of stevia leaves to meet the demands. PureCircle's production is strongly focused on sustainability as it is currently based in Malaysia and China, where it operates a vertically integrated supply chain from plantation, primary production through to final product distribution. OWIH considers there to be high growth potential for companies who invest in stevia plantations and extraction capacities in locations such as Africa and South America where production conditions are more suitable with a more competitive cost of production. As a result, its strategic partnership with PureCircle covers the entire supply chain, from farm to factory.

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