PureCircle has forged an exclusive supply agreement with an undisclosed Korean company to supply its commodity Sweta sweetener on an exclusive basis - a deal it expects to deliver good growth prospects for its stevia-based portfolio.
PureCircle, which listed on AIM last week, is at the forefront of development of a new zero calorie, low glycaemic sweetener from the Stevia rebaudiania bertoni plant. 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, and believes itself to be the world's only commercial supplier.
Sweta is actually a co-product of Reb-A, as it derived from molecules from stevia leaves that are left over from Reb-A production. It is treated further to produce a much sweeter taste.
A spokesperson for PureCircle told FoodNavigator.com that the company has been supplying Sweta for some time, and it has proved popular in markets including South East Asia, South America and Russia.
The South Korean market, where stevia-based high-intensity sweeteners have been used since the 1980s, is said to strategically important for Sweta, and to offer significant growth prospects.
"The technological capability of PureCircle to convert residue into co-product that can successfully compete with commoditized sweeteners is an important competitive advantage of the company," said managing director Magomet Malsagov.
"We believe that this exclusive agreement will augur well for the long term development of PureCircle's products whilst helping it to maintain its first mover advantage globally."
The new agreement, which comes into affect on January 1 2008, will run for two years. The Korean company has agreed to buy at least 150 metric tones of Sweta in the first year, and 250 metric tones the following year.
These quantities mean that PureCircle is set to see revenues of at least US$8.5m over the contract period.
In fact, stevia-derived ingredients can already be used in foods in some South East Asian, North Asian and South American countries, as well as Russia, Japan and Israel, but regulatory approval is pending in the major markets of the US and Europe.
In May Coco-Cola and Cargill announced that they are launching a new calorie-free natural sweetener called Rebiana - that is, high purity Reb-A. PureCircle has a supply agreement in place with Cargill until mid-2008, and discussions over an extension are in the final stages.
At present, stevia is approved only for use as a dietary supplement in the US, Canada, and a handful of other countries.
The US green-light, together with Australia and New Zealand and Europe, will enable Rebiana to hit the market with a splash - and initial contracts could call for the speedy supply of more than 2000 metric tonnes.
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.
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 next year, however, it expects to increase this to 3000 tonnes per annum.
To fund this, PureCircle floated on the AIM this week. PureCircle made its initial public offering on Tuesday, 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.