Rebaudioside – A: Market Analysis

January 2010

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Table of Contents

1. Sweetener Industry Overview ........................................................ 3

1.2 Sweetener Market Breakup by Region ............................................ 6 2. Rebaudioside-A Market Description ................................................. 8

Rebaudioside-A Supply Chain Stages ............................................... 8 2.1 Market Drivers ...................................................................... 9

Obesity Driving the Demand of Rebaudioside-A ................................... 9 Natural & Healthy Products are the Preference of Consumers .................. 11 Rising Diabetes Cases ............................................................... 11 Global Artificial Sweeteners Market Potential .................................... 12 Growth in the confectionery market ............................................... 13

2.2 Key Trends ......................................................................... 14 Health concern & shift toward organic and natural food ......................... 14 Increasing urbanization ............................................................. 15

3. Company Profiles .................................................................... 17

3.1 GLG Life Tech Corporation ........................................................ 17 3.1.1 Company Overview ............................................................. 17 Growth through Strategic Alliances and Launching New Products ................. 19 3.2 PureCircle .......................................................................... 19

3.2.1 Business Description .......................................................... 19 3.2.2 Geographic Segment.......................................................... 19 3.2.3 Business Strategies ........................................................... 20

3.3 Tate & Lyle ......................................................................... 21 3.3.1 Business Description .......................................................... 21 3.3.2 Geographic Segment.......................................................... 21 3.3.3 Business Strategies ........................................................... 22

3.4 Danisco ............................................................................. 23 3.4.1 Business Description .......................................................... 23 3.4.2 Geographic Segment.......................................................... 23 3.4.3 Business Strategies ........................................................... 23

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1. Sweetener Industry Overview Sweetener market can be described as sugar substitute or low calorie sweetener. Artificial sweeteners are synthesized by chemical processes, which provide them with a higher degree of sweetness as compared to the other natural alternatives, and these qualities give it the name of high intensity sweeteners. HIS is used throughout the globe in different market as it is required in small volume as well as it has low calorie which is demanded by everyone in today’s world. The sweetener market is generally categorized into four main product segments: sugar (Sucrose), high fructose corn syrup (HFCS), high intensity sweetener (HIS) and other calorific sweeteners. Sugar/sucrose accounts for over 80% of the global sweetener market and leads the market in the sweetener segment. Figure 1.1: Global Sweetener Market Breakup (%): 2009E

83

1421

S ucrose HF C S & G lucose HIS O ther

Source: Company Reports

Though sugar and HFCS dominate the global sweetener market with high intensity sweeteners accounting for merely 2% of the global market, its share is slowly increasing following the rising demand for sweeteners that have reduced caloric content. High Intensity Sweeteners (HIS) are compounds with higher sweetness than that of sucrose. They are used in very low quantity and add fewer calories as compared to sugar. Health concerns and shifting consumer preferences as well as perception of safety is driving the demand of HIS across the globe. The market for HIS is mainly composed of artificial sweeteners which are chemically processed. The current percentage contribution of natural sweetener in HIS is relatively lower at around 4%, but it is projected to increase in the coming years

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following the rising demand for natural sweetener over artificial sweetener. Rebaudiosideaudioside-A (Rebaudioside-A), a stevia based extract falls in the natural sweetener segment, while the artificial sweeteners include aspartame, cyclamate, saccharin, sucralose, neotame, among others. Aspartame is one of the most widely used intense sweeteners in the food and beverage industry and accounts for the largest share (30%) of the HIS market. It is about 200 times sweeter than sugar but is not heat stable and therefore it is not suitable for baking or cooking. However, aspartame is found widely in diet colas and also finds application in some breakfast cereals, desserts and chewing gums. Figure 1.2: HIS Market by Product Segments (%): 2009E

15 18

25

741

30

C yclamate S accharin S ucralose Ace K S tevia Neotame Aspartame

Source: Company Reports Sucrose is the dominant product segment of sweetener market, mainly finds application in three sectors, including beverages, food and tabletop. The food sector accounts for the largest share at 50%, followed by tabletop at 30% and beverages at 20%. The contribution of sucrose in different sectors is outlined in the chart below. HIS is used in almost all the sectors including beverages, food, pharmaceuticals and tabletops. It is estimated that by the end of 2009, approximately 50% of HIS will be consumed by the beverages industry, while the remaining 50% will be divided among tabletop, pharma and food sectors. The pharmaceutical sector is expected to continue accounting for the lowest percentage of HIS (1%). Geographically, at the end of 2009, North America will continue to be the largest market for high intensity sweetener products and will account for 44% share of the total global market, followed by Europe (21%) and the Asia Pacific region (19%). Figure 1.3: Global HIS Market by Geographic Region (%): 2009E

5

44

919

21

North America L atin America Asia P acific E urope

Source: Company Report The US and European markets are likely to register growth at a continuous rate in the future because of the rising consumer awareness about obesity and other health related problems; dietary trends; usage of low carbohydrate foods and organic foods. Figure 1.4: Sucrose Consumption by Different Industries (%): (2009E)

2030

50

B everage T abletopF ood

Source: Company Reports HFCS is derived from the wet milling of corn. It is found in numerous foods and beverages. It is composed of either 42% (HFCS-42) or 55% (HFCS-55) fructose, with the remaining sugars being primarily glucose and higher sugars. Demand for HFCS is driven by demand for products that use syrups as inputs. For HFCS-55, the major use is in the beverage industry. Users of HFCS-42 include the beverage industry, processed food manufacturers, cereal and bakery producers, multiple-use food manufacturers, the dairy and the confectionery industry.

Figure 1.5: HFCS Consumption by Various Industries (%): (2009E)

6

69

31

B everage F ood

Source: Company Reports Growth in the above sectors has typically accounted for growing sales of HFCS-55 and HFCS-42. However, shifts in the dietary trends and availability of healthier sweeteners in the market are set to have a negative effect on the demand for the segment’s products; theRebaudiosidey, adversely affecting the future revenue growth of the segment. Health concerns like diabetes and obesity as well as shifting consumer preferences and perception of safety are also driving the demand of artificial sweeteners. Furthermore, it has also been witnessed that the demand for this ingredient is rising at a noticeable rate among consumers, as it enables them to enjoy sweet flavored foods and drinks without the fear of increasing their blood sugar levels. 1.2 Sweetener Market Breakup by Region In terms of consumption, sucrose, as the dominant sweetener product segment, is mainly concentrated in regions like Asia Pacific, and Middle East. For 2009, the rest of the world segment is expected to account for approximately 73% of the total global sucrose market, as compared to the 7% of North American and 19.6% of the European market. In 2009, the total sucrose market is estimated at 161 million tonnes, of which around 118 million tonnes is anticipated to be sold in regions other than the US and Europe.

Figure 1.6: Global Sucrose Market: Geographical Segmentation (%): 2009E

7

7.019.6

73.4

North America Europe Rest of the world

Source: Company Reports The HFCS market is estimated to be approximately 9 million tonnes in 2009 with North America as the dominant market, in terms of consumption. At the end of 2009, North America is projected to account for around 84.8% of the global market share, followed by Europe with 7.6%, and Rest of the World with 7.6%. The geographical segmentation of HFCS for 2009 is outlined in the chart below.

Figure 1.7: Global HFCS Market: Geographical Segmentation (%): 2009E

84.8

7.67.6

North America Europe Rest of the world

Source: Company Reports The global market for other calorific sweetener market in 2009 is estimated to be approximately 7 million tonnes. Europe is projected to account for around 405 tonnes or 40% of this market in 2009. During the same period, North America, the second largest market, would account for 27% while the Rest of the World is likely to account for the remaining 33% share of the global market.

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2. Rebaudioside-A Market Description Rebaudioside-A is a new natural sweetener which is extracted from the leaves of Stevia plant and it is gradually capturing a significant share of the worldwide sweeteners market. Stevia plant is a cultivated shrub that grows in sub-tropical regions of the world like China, Kenya and Paraguay. Rebaudioside-A is 200 times sweeter than sugar. It combines the functional advantages of other intense sweeteners along with the benefit of naturalness. The major specialties of Rebaudioside-A include its intense sweetness, zero calorie content, safe for consumption by diabetics and heat and ph-resistance. The US Food and Drug Authority gave approved the marketing of Rebaudioside-A in December 2008. The approval allows the product to be marketed freely both as an ingredient in foods and soft drinks, as well as a tabletop sweetener in the US market, which is also the largest market in the world for intense sweeteners. Moreover, Rebaudioside-A has also secured approval in other developed markets like Australia and New Zealand, and is expected to get the approval from the EU by end of 2009. Rebaudioside-A Supply Chain Stages The Rebaudioside-A supply chain is configured around three stages: leaf cultivation and harvesting, stevioside extraction and the refining of Rebaudioside-A. Leaf Cultivation & Harvesting The stevia plant is indigenous to Paraguay and currently grown throughout South America and Asia. The majority of its global commercial production at present, around 80-90%, is represented by China. However, the stevia plant is now cultivated in over 20 countries worldwide, including Brazil, Israel, and Uruguay. The basic requirements to cultivate stevia plants, which need little water, are a warm climate and large temperature variations throughout the day. Extraction After harvesting, stevia leaves are dried and then subjected to an extraction process which commences with the dried leaves being steeped in hot water in order to unlock the plant’s natural sweeteners. It involves extracting stevia glycosides from leaves. Following is the process of concentrating glycosides in an absorption resin and drying it to a powder which has 90% Stevia Glycoside content. It requires 3Kg of stevia extract for extracting 1Kg of Rebaudioside-A, and 15Kg of leaves for extracting 1Kg of stevia extract. Refining of Rebaudioside-A In refining, the white powder is re-dissolved into a solution and Rebaudioside-A is crystallized or separated from the other stevia glycosides. The separation process is a

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physical one and therefore does not require Rebaudioside-A to undergo any modifications. 2.1 Market Drivers Obesity Driving the Demand of Rebaudioside-A Obesity is one of the major health problem faced by the global population and is found in, both among adults as well as children in the developed as well as developing countries. Increasing consumption of fast food, diet colas, genetic disorder cases, etc. has further aggravated the scale of obese people globally. Figure 2.1: Global Obesity Forecast of World Population (Billion): (2005 – 2015E)

1.6

2.3

0.40.7

0

1

2

3

2005 2015F

O verweight O bese

Source: World Health Organization (WHO)

As the graph above shows, the global population of overweight adults is expected to increase to around 2.3 billion by 2015 and more than 700 million of them are projected to suffer due to the problems related to obesity. The present statistics have increased the apprehensions of experts around the world, as increase in obesity will lead to increased health problems, particularly strokes and other heart diseases. Therefore, the majority of beverages and food (confectionary) companies are making use of HIS sweeteners (low calorie) and replacing sugar with high calorie content to sustain their sales growth in a market which is highly influenced by consumer preferences. In addition, rising health awareness has further motivated customers to look for products with same sweet taste but low calorie content. Technological advancements have brought several major changes in the lifestyles of people throughout the world. Growing consumer awareness about the food they eat has resulted in an increased consumption of more energy-dense, nutrient-poor foods with high levels of sugar and saturated fats, combined with reduced physical activity. All these trends are increasing the incidence of obesity in different parts of the world.

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The rising index of people with obesity across the globe has motivated several health experts as well as non-profit organizations and governments to promote healthy eating habits among the people. Few of the most preferred fast food items, instant snacks, colas, diet drinks are found to contain a large amount of sugar; therefore, many educational institutions as well as health experts are adopting promotional measures which seek to reduce the intake of such products. Likewise, many companies operating in the food & beverage sector are also taking up solutions which are likely to help enhance their product image in market and offer healthy solutions to their consumers. A major step taken by these companies in this direction is to use natural sweeteners instead of high calorie sweeteners. Therefore, the leading players of the beverage market like Coca-Cola, PepsiCo and Cargill have all recognized the potential advantages of stevia extract, Rebaudioside-A over the other sweetener alternatives, and have committed significant resources toward the promotion of products that incorporate stevia. In addition, the rising awareness among people about the usage of natural products has made consumers more active in looking for the nutritional value of a product. Therefore, food (confectionary) & beverage companies worldwide are trying to take advantage of these trends by providing the consumers low sugar calorie food items. The table below outlines an estimated route of the demand for natural sweetener Rebaudioside-A in the beverage market in 2019. Table 2.1 : Rebaudioside-A Beverage Potential (2019F)

Beverage Annual Volume Production

(Liters Billion) Rebaudioside-A Required (Tonnes)

Base Mid Best

USA Calorific CSD

39 4576 8009 11441

ROW Calorific 92 8150 13583 19017

USA Diet CSD 15 1166 1944 2721

Global Fruit Juice

23 7500 12500 17500

Global Functional Soft Drinks

80 2625 4375 6125

Source: PureCircle Estimates Note: Rebaudioside-A demand in three different scenarios: Base Scenario, Mid Scenario & Best Scenario Note: CSD- Carbonated Soft Drink; ROW- Rest of the World The Rebaudioside-A potential demand in the food market for 2019 has been outlined in the table below.

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Table 2.2: Rebaudioside-A Food Potential (2019F)

Food Annual Volume Production

(Million Tones) Rebaudioside-A Required

(Tonnes)

Base Mid Best

Ice Cream 16 2400 4000 5600

Sugar Confectionery 5 750 1125 1500

Chocolate Confectionery

15 750 1313 1875

Sweet Biscuits 8 188 328 469

Yoghurt 13 780 1300 1820

Table-top sugar/Sweetener

NA 656 875 1094

Source: PureCircle Estimates Note: Rebaudioside-A demand in three different scenarios: Base Scenario, Mid Scenario & Best Scenario Natural & Healthy Products are the Preference of Consumers The past few years have registered a potential growth in the demand and sales of natural and organic products, mainly because they do not have side-effects and are composed of low calorie content. Consumer awareness about the advantages of natural and organic sweeteners is also increasing at the same time, which is further fueling the growth of natural sweeteners. Promotional campaigns that aim to educate people about health related issues, particularly the consequences of chronic consumption of artificial food chemical additives, including the non-nutritive sweeteners like aspartame, sucralose etc., and the prevalence of diabetes and other diseases related to heart, have made significant contribution in shifting consumer interest towards natural substitute for sweetness. In the meanwhile, artificial sweeteners are also faced with certain challenges because they are made from chemical processes. As a result, the natural and organic foods segment has registered a faster growth in the recent years, making it one of the fastest growing categories in the packaged foods industry, with similar momentum expected going forward. Stevia extract, Rebaudioside-A possess all the attractive characteristics as it is 100% naturally derived, with zero calories and a favorable safety profile compared with other non-nutritive sweeteners. All these reasons are driving the demand of Rebaudioside-A. Rising Diabetes Cases

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Increasing number of people with diabetes is another important growth driver of the HIS market including Rebaudioside-A market as diabetic patients prefer to consume sweeteners with less calories and high sweet taste. Figure 2.2: Global Diabetes Forecast of World Population (Million): (2008 – 2030E)

260280 285 295 305 310 315 325

355390

438

0

100

200

300

400

500

2008 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2020F 2025F 2030F

Mill

ion

Source: International Diabetes Federation Obesity is inter-related to diabetes as the increase in obesity leads to a simultaneous rise in the number of cases of diabetes. Growth in the number of diabetic patients has resulted in an increase in the demand for diet sugars; thus raising the usage of natural sweeteners and artificial sweeteners with low sugar content. The data above covers the people of the age group from 20 years to 79 years. It has been estimated that the total number of people with diabetes will increase from 260 million in 2008 to around 438 million in 2030. This rise in the figures of diabetic cases will eventually drive the demand for low calorie and less sugar content sweeteners globally. Global Artificial Sweeteners Market Potential Improving living standards and increasing health awareness has made people refocus their interests from high calorie sugar diet to low calorie sugar diet. With the changing consumer needs, the demand of high intensity sweeteners is also increasing. Figure 2.3: Global Artificial Sweeteners Growth (2007A – 2015E)

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5.5 5.8 6.0 6.3 6.67.0

7.47.8

8.2

0

1

2

3

4

5

6

7

8

9

2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E

US$ Biliion

Source: Company Reports The US is the largest market for HIS, which is expected to witness an annual increase of 4% in the demand for alternative sweeteners, with an approximate annual growth of 3% in terms of volumes. In addition to the US and other developed economies, improving income levels and lifestyle has also made people in the emerging economies more conscious about health related issues. Due to the increasing demand for sweeteners which are artificially produced and have low sugar calorie content, the growth of global artificial sweetener market is estimated to reach US$8.2 billion by 2015. Figure 2.3 outlines the projected growth. Growth in the confectionery market Sweetener represents a key ingredient of almost all products offered by the confectionery market and its maximum contribution goes to chocolates which account for the largest segment of the overall confectionery market. The global market value of chocolate was estimated to be approximately US$91 billion in 2008. It grew by 24% in 2008 as compared to a CAGR of 15% during the period 2003-2008. Figure 2.4: Global Chocolate Value: Geographical Segmentation (%): (2008)

44

12

24

79 4

Western E urope E astern E urope North America

L atin America Asia Africa&Middle E ast

14

Source: Company Reports The chart above outlines the region-wise segmentation of the global chocolate market. Western Europe accounted for the largest share, around 44% of the global chocolate market at the end of 2008, followed by North America with 24% and Eastern Europe with 12%. The share of Africa and Middle East is among the lowest, as they collectively held only 4% of the global chocolate market. In 2008, the per capita consumption of chocolate in the UK and the US was 10.3 kilograms and 5.5 kilograms, respectively. Therefore, a growth in demand for chocolate will eventually result in increased demand for high intensity sweeteners as well. The shift towards natural and low sugar food products will help drive the growth of HIS segment over other sweetener products, in the future. In addition to the region-wise consumption of chocolate, it has been noticed that chocolate and other confectionary items consumption as per different age groups also varies. Table 2.3 shows the growth of confectionery consumption in different age groups. The consumption of confectionery is projected to be greater in the aging population category i.e., 40-59 age groups, than the 13-39 age groups, by 2013. Table 2.3: Percent of Population Consuming Confectionery Product (2006 & 2013) Age Group(Years) 2006 2013 13-17 9.8 8.9 18-25 18.1 14.0 26-32 17.2 13.8 33-39 18.6 16.1 40-49 20.2 25.9 50-59 16.1 21.3

Source: Company Reports Confectionery consumption in the age group of 40-49 years old is estimated to grow from 20.2% in 2006 to 25.9% in 2013, growing at a CAGR of 3.61%, while the age group of 50-59 years is projected to consume confectionary products at a CAGR of 4.29% during the mentioned period. This increase in consumption by aging population is expected to drive the growth of HIS market, as this segment of population would need products that are low in sugar content as well as calories, the Rebaudioside generating a need for natural sweeteners. 2.2 Key Trends Health concern & shift toward organic and natural food Health-related issues have been cited as a major driver behind the growth of certain industries and the trend has noticed to be driving other sub-trends like weight management, fitness and product safety. Demand for high intensity sweeteners is high among consumer for these sweeteners are low in calorie and have potential to

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fight problems related to obesity, weight and diabetes. In addition, the fact that artificial sweeteners do not have side effects has further fuelled their demand. It is estimated that the organic & natural food industry will grow at a CAGR of around 6.9% globally from 2009 onwards and the US, which is the largest consumer of organic & natural products, is expected to be the leading growth driver. Around 36 million people of the total US population expressed their interest in natural and organic food in 2008, and this demography is expected to increase in the near future following the rising health problems. For instance, as outlined in the table below, the natural & organic food sales have increased to US$35 billion in 2008, from the earlier US$13 billion in 2000. A growth in sales is on account of the growing demand for organic food among the US people. Increasing urbanization Urban population has increased at an alarming rate over the past three decades and by the end of 2008, over half of the global population was living in cities. This rise in urbanization, especially in the emerging economies of Asia and Africa, is attributed to varied geographical, cultural and economic factors. The major reasons behind the shift of rural population to urban areas are the better access to education and health facilities, wider employment opportunities and higher incomes. Figure 2.5: Urban Population by Geography (%): (2004-2008)

79 74

39

75

35

48

79

75

38

76

37

4879

71

42

77

38

49

0

20

40

60

80

100

NorthAmerica

E urope As ia L atinAmerica/

C aribbean

Africa World

2004 2006 2008

Source: United Nations Population Division The phenomenon of urbanization leads to a heightened awareness among city dwellers regarding their diet and health. The similar reason is held responsible for the increasing popularity of artificial sweeteners among consumers as they require

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sweeteners that are similar in taste as that of sugar yet have low calorie content. These features of artificial sweeteners attract the consumer, which is increasing the demand and consumption of artificial sweeteners worldwide. 2.3 Key issue Costly compared to Sugar & Other Artificial Sweeteners When compared with other artificial sweeteners, the cost of Rebaudioside-A remains fairly high. In the market for standalone tabletop sweeteners, it is estimated that an individual packet of sweetener of current high purity Rebaudioside-A based sweeteners costs roughly 2–4 times higher as compared to other alternatives like sucralose or aspartame. Figure 2.6: Average Sweetener Price Relative to Sugar (%) (2009E)

100

200

8060

0

50

100

150

200

250

S ugar R eb-A HF C S -55 S ucralose

Source: Company Reports The above figure shows the price comparison of different sweeteners relative to sugar. Among the natural and artificial sweeteners, Rebaudioside-A is the most expensive and costs around twice the price of sugar. This difference in cost may be attributed to Rebaudioside-A’s cost of production, of which approximately 70-80% is due to labor intensive sourcing of raw leaf material. Moreover, the overall production cost is also quite high due to operational inefficiencies. In addition, limited number of players in the market for Rebaudioside-A is another important factor for its high price. Further, the growth of Rebaudioside-A is also limited to specific areas, which restricts the production and hence makes it more expensive. Rebaudioside-A requires warm climate with large temperature variations. This requirement cannot be fulfilled by countries which are located in colder areas which restrict its growth to limited countries and for instance, if any natural calamity occurs in these countries, it will pose a major challenge on Rebaudioside-A’s production. For e.g. Rebaudioside-A’s maximum production takes place in China which accounts for approximately 90%

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of the total Rebaudioside-A production, so if some calamity like flood, pest attack occurs, it will affect the global Rebaudioside-A production, theRebaudiosidey, further increasing the price. Nevertheless, although, the cost of Rebaudioside-A as compared to other artificial sweeteners is quite high, at present, with improved production technology as well as new plantation techniques, the cost in the future can be brought down. Moreover, if the above mentioned issues are overcome and the operating efficiency of the companies improves, the cost of production of Rebaudioside-A would automatically decrease and will provide a good opportunity for its growth. 3. Company Profiles 3.1 GLG Life Tech Corporation 3.1.1 Company Overview GLG Life Tech Corporation specializes in the production of stevia. The company’s operations are fully vertically integrated and include the research and development of high purity stevia plant strains as well as the agricultural and industrial production of stevia extracts. GLG utilizes innovation and proprietary and advanced technology, to providing stevia sweetening systems to food and beverage companies throughout the world. The Company sells its stevia extract to Cargill, Incorporated (Cargill), an international provider of food, agricultural and risk management products and services. Cargill further refines the Company's stevia extract to rebaudioside A 97% purity for use in its natural, zero-calorie sweetener brand, TRUVIA. The Company's processing facilities have a combined annual throughput of 41,000 metric tons of stevia leaf, which is grown through contracts with over 200,000 farmers. 3.1.2 Geographical Segments About 89% of the company’s revenue comes from North America and the rest 11% comes from China. Figure 3.1: Revenue by Geographic Segment: FY09

18

89%

11%

North America C hina

Source: Company Reports Note: Fiscal year ends 31 Dec 2009 3.1.3 Business Strategies Expanding in High Growth Regions GLG Life Tech Ltd. signed a definitive agreement in South America and a binding memorandum of understanding (MOU) in Australia, two key global markets, for the distribution and marketing of its stevia extract products. GLG is collaborating with sugar refiner in Australia, Sugar Australia, and Essentia Stevia, in these two separate alliances. GLG and Sugar Australia are working together across markets in Australia, New Zealand, Singapore and the Pacific Islands. In addition, GLG has also signed an agreement with Essentia Stevia for the distribution and marketing of GLG's high quality stevia extracts in 18 countries throughout Latin America. Essentia Stevia will market GLG's entire portfolio of stevia-based sweetening systems including the Company's premier Rebaudioside A line Rebpure RA97, Rebsweet RA80 and AnySweet RA60 as well as GLG's newly launched Sweet SuccessSM line of proprietary blends. On May 2010, GLG Life Tech Ltd. announced it has signed a memorandum of understanding (MOU) with Global AgriSystem Private Limited, a Katra Group company (Katra) regarding the introduction of GLG's stevia products in India. The MOU confirms the interests of both parties to jointly pursue the promotion of stevia products as a healthy sweetener alternative for food and beverage manufacturers and consumers in India. Vertical Integration Strategy GLG Life Tech pursued a strategy of vertical integration to achieve certain objectives. The company focuses on developing and controlling the highest quality seeds, seedlings and leaf supply in the industry and achieving low cost production (seed and seedling technology and extraction processing). The company further maintains ability to innovate across all key components of the supply chain to further reduce costs and improve quality.

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Growth through Strategic Alliances and Launching New Products GLG focuses on expanding its business by making strategic alliances with other companies. On May 1, 2008, GLG announced the signing of a strategic alliance and long-term renewable supply agreement (the “Strategic Alliance and Supply Agreement”) with Cargill. In addition GLC signed a memorandum of understanding (MOU) with Grupo Azucarero Mexico (GAM) relating to the distribution and marketing of its stevia extract products on June 04, 2010. The Company is currently working on new products for a variety applications. These products will utilize stevia based formulations and will include such products as tabletop sweeteners and wholesale products for the global food and beverage industry. These products will be developed for several markets including but not limited to Japan, Korea, China, and the United States in 2010. 3.2 PureCircle 3.2.1 Business Description PureCircle is one of the leading suppliers of natural high intensity sweeteners worldwide. The company is primarily engaged in the development and production of natural food ingredients which are supplied to the global food & beverage industry. It develops natural products based on plant extraction, including a zero-calorie sugar alternative derived from the South American Stevia plant. Under a global collaboration with Swiss fragrance and flavor firm Firmenich, PureCircle is marketing its high-intensity Rebaudioside A sweetener substitute to consumer food and drink manufacturers in the US, Europe, Australia, and other parts of the world. Originally based in Malaysia, the company operates through offices in the US, Switzerland, Australia, Russia, Paraguay and China. It mainly functions through three segments: investment holdings, natural sweetener, and sales and marketing. Its subsidiaries include PureCircle Sdn. Bhd., which is engaged in the production and distribution of natural sweeteners; PureCircle (Jiangxi) Co. Ltd., which is engaged in the manufacturing, marketing and sale of stevioside and stevia products; PureCircle S.A., which sells and markets natural sweeteners, and Finlays PureCircle Limited, which is engaged in the development of stevia plant. On October 21, 2008, the Company incorporated PureCircle South America Sociedad Anonima (PCSAm). 3.2.2 Geographic Segment PureCircle is also present in several leading markets globally including Malaysia, the US, and the People’s Republic of China among others. Malaysia is the largest contributor to the company’s revenues, accounting for approximately 72.7% as of fiscal 2009. Malaysia has registered a growth of 185% YOY in fiscal 2009 as compared to fiscal 2008. The next major contributor is the US, which accounted for approximately 21% of the revenue in FY09, while the revenues of the China segment

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decreased by approximately 15.5% in FY09 as compared to FY08. In the chart below the contribution by various countries has been outlined. Figure 3.2: Revenue by Geographic Segment (US$ Million): FY09

12.4

43.4

3.80.09

US A Malaysia P R C O ther C ountries

Source: Company Report Note: PRC-The People’s Republic of China 3.2.3 Business Strategies Since the past few years, the company’s operations are based on its strategies: Encouraging Natural & Healthy Consumption The company participates in the global drive of adopting healthier diets through the supply of natural food and ingredients to the food and beverage industry. It is the leading producer and distributor of Rebaudioside A, which is a natural high intensity sweetener. The product provides consumers various health benefits including zero or no calories and a low glycemic index, making it suitable for consumption by health conscious consumers and also by diabetics. With the introduction healthy substitutes like Rebaudioside A, the company hopes to strengthen its global foothold and expand its customer base. Contributing to the Growth of Rural Farming Communities The company’s main focus is on the natural sweetener segment; therefore, by investing in the growth and development of the rural farming community, PureCircle will be able to increase its focus on the production of Stevia plant. This move will help further boost the revenue of the natural sweetener business segment.

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Stevia is an attractive crop for rural farming communities given its easy cultivation and attractive economic returns. In addition to it, the land can be returned to growing staple crops outside of the Stevia growing season, like rice, providing farmers with an additional source of food and income. Therefore, cultivating Stevia could help provide a real economic boost to rural farming communities. By promoting and educating the farmers regarding the benefits of Stevia production, the company hopes to have at its disposal a regular supply of raw materials, theRebaudiosidey facing no limitations in production and supply of Rebaudioside-A. Environmental Contribution The products by PureCircle are mainly based on natural ingredients and are strictly controlled in terms of ownership of the supply chain from cultivation through distribution. The company does not use genetically modified plants in the production of its range of sweeteners. Moreover, the company’s continued focus on environmental development will help it in improving its stakeholder’s value. Continually Looking to Get the Best Out of Nature The company is pioneering the extraction of natural goodness from plants, as part of which, the company is making heavy investments in innovative technology, plantations and a fully integrated vertical supply chain. PureCircle has launched its natural high intensity sweeteners product based on highly purified extracts of stevia in the market. In the present scenario, consumers have shown high concern about their health, and prefer low calorie and natural products. Therefore, by concentrating on the extraction of natural product and using various innovative technologies, the company is trying to focus on the need of its customers. 3.3 Tate & Lyle 3.3.1 Business Description Tate & Lyle manufactures renewable food and industrial ingredients in Europe, the Americas, and Southeast Asia. The company produces all its ingredients from renewable crops, predominantly corn and sugar cane with the use of innovative technology for its food, beverage and industrial customers. The company’s products include food starches, industrial starches, corn sweeteners, sugars and syrups, SPLENDA sucralose, molasses, PROMITOR dietary fibres, acidulants, biogums, and bio-ethanol, as well as Bio-PDO, an ingredient that is used to replace glycols made from petrochemicals in cosmetics, liquid detergents, and industrial applications. 3.3.2 Geographic Segment The company covers four major geographies which include: the UK, Americas, other European countries and Rest of the World. The Americas segment accounts for the largest share of the company’s revenue. It accounted for more than 50% of the revenue in FY09.

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Figure 3.3: Revenue by Geographic Segment (US$ Billion): (FY09)

1.21.16

3.15

0.49

United K ingdom O ther E uropean C ountires Americas R est of the World

Source: Company Report Revenues from the UK and the other European countries segment collectively represented around 40% in FY09. 3.3.3 Business Strategies Research & Development Taking its market reach further, the company has been following the strategy of facilitating its research and development operations and increasing the investments they require with each passing year. The current target of Tate & Lyle is to spend around 4-5% of value added turnover on the R&D activities. As of the year ended 31 March 2009, the company had spent EUR28 million (US$39.87 million) and aims to do the same in the coming years as well to meet the changing demands of the customers. Moreover, the company has also invested in various research partnerships including its alliance with King’s College London and St. Thomas Hospitals. The company has partnered with the latter to undertake research into gastrointestinal health and other medical conditions like obesity, diabetes and other cardiovascular disorders, which would enable it to make requirement specific products. Investment in Blending & Specialty Businesses To tap the high potential of the food ingredients market in certain geographies, the company has invested in blending and specialty ingredients businesses. These businesses open up new avenues for selling ingredients through their relationships with small and medium-sized customers and their expertise in specific areas such as the dairy industry, gums and custom formulations. Primarily based in North America, Germany, Italy and South Africa, these businesses source ingredients and use them to develop solutions for customers. Their specialist knowledge supplements the company’s existing in-house R&D capability.

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3.4 Danisco 3.4.1 Business Description Danisco is one of the leading companies in the food ingredients, enzymes and bio-based solutions market. Established in 1989 and based in Denmark, the company is mainly involved in the designing and delivering of bio-based ingredients that meet market demand for healthier and safer products. The products manufactured by Danisco find application in a wide range of industries globally, including bakery, dairy and beverages, animal feed, laundry detergents and bioethanol. Danisco operates a huge product portfolio which includes ingredients like antimicrobials, antioxidants, betaine, colors, cultures, emulsifiers, enzymes, fermentation media, fibers, flavors and fragrances, health and nutrition ingredients, hydrocolloids, seed, specialty carbohydrates, structured lipids, sugars, sweeteners and tailored blends. 3.4.2 Geographic Segment The company is present in different geographic regions including Denmark, Europe, North America, Latin America, Asia Pacific and Rest of the World. Europe is the major revenue contributor among all, accounting for approximately 36% in FY09. The Latin American region contributed approximately 29% in the company’s total revenue. Figure 7.5 shows the revenue for the entire geographical segment for FY09. Figure 3.4: Revenue by Geographic Segment (US$ Million): (FY09)

44.1

875.7

714.6

248.4

407.5

137.9

0

300

600

900

1200

Denmark E urope NorthAmerica

L atinAmerica

Asia-P acific

R est ofthe World

US

$ M

illio

n

Source: Company Report 3.4.3 Business Strategies Acquisitions

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The company continues to strengthen its position through bolt-on acquisitions within food ingredients and animal feed segment. Danisco acquired ABF’s emulsifier business, Abitec and Beijing ferment, a Chinese biotech niche player active in cultures. The Agtech acquisition leveraged its animal nutrition offering, while the integration of Emulsifiers’ Abitec acquisition progressed well. The company signed a strategic partnership with Taiwan-based firm Mingtai, the second largest manufacturer of microcrystalline cellulose (MCC) in the world, in February 2009 to develop MCC-based solutions for the global food industry. These acquisitive efforts will help the company in value creation and becoming the preferred provider of bio-based ingredients and solutions globally. Innovation Strategy For the period 2008-2009, the company developed a cross organizational innovation strategy in an effort to create value by selecting and investing in right opportunities to deliver right solutions first time, on time and every time. The main objective behind the implementation of this strategy is to enable the company to respond more efficiently and effectively. For the coming years, the company will be focusing strengthening and broaden its health & nutrition portfolio. To materialize this plan, the company will make increased investments in its research efforts into new applications and the development of new products. In addition, it also considers acquisitions as a potential route to expand its business.