Mode Three: Farmers + Planting Base + Government/Cooperative + Sweetener producer
Some large-scale stevia sweetener producers, such as GLG Life Tech and Pure Circle Co., Ltd, have their own planting bases. They signed long-term contracts with local government or cooperatives, and established a planting base.
This kind of planting base could not be simply defined as government-owned or privately-owned. In China, the government owns the land, and farmers have rights to use the land. It's better be described as a cooperation form between farmers, cooperatives and sweetener producers. In the planting base, producers supply seedlings to farmers and send employees to supply technology support during the planting season. Then, farmers grow stevia bushes and sell stevia dry leaves to producers. The government and cooperative works as a coordinator or middle man to handle the whole sourcing business.
Key influencing factors of the stevia sweetener industry in China:
Drivers
- Increasing global demand from downstream industries
In recent years, stevia sweetener has been approved to be used in more and more countries, such as in the US (2008), in the EU (2011). This progress will continue as expected in 2013. The opening indicates a potential market for stevia sweetener. Meanwhile, stevia products launched in the food and beverage market in the world increased from 276 in 2009 to 1,800 in 2012 with a CAGR of 58.0%. It's expected to grow further in the coming years. Additionally, as a natural and zero calorie sweetener, it meets customers' demand for healthier products.
- Upward awareness of stevia sweetener
The awareness of stevia sweetener went up in the past years in main countries. For example, the awareness in the US, one of the largest stevia sweetener markets in the world, increased to 62.0% in 2011 from 46.0% in 2010. It will keep improving in the future.
- Improving production technology
Currently, the overall production technology of stevia sweetener in China is lagging with a large consumption of raw materials. Some large scale producers, like GLG, PureCircle, have improved the manufacturing process to some extent. The production technology will continue to innovate in order to make the products competitive.
- Enlarged application of stevia sweetener in China
Currently, stevia sweetener can only be applied in seven kinds of food in China, less than other synthetic sweeteners. The application scope of stevia sweetener has been expanded to ten kinds of food according to the Use Standards of Food Additives, which was under opinion solicitation during March 2013. And as a natural and safe food additive, stevia sweetener is expected to be expanding continuously in more application fields in the food industry in China.
Barriers
- Unstable supply of stevia dry leaves
As the key raw material for stevia sweetener production, the supply of stevia dry leaves witnessed a dramatical decrease during 2010 and 2012. Its output declined from 73,800 tonnes in 2010 to 20,374 tonnes in 2012, down by almost 72.4% over 2010. It's estimated that the supply will keep on dropping in 2013 and modestly grow during 2014-2017.
- Intense competition
In 2012, there were 30 active stevia sweetener producers in China with an oversupply of stevia sweeteners. Although some producers had to quit the market in the past years, the intense competition in stevia industry will not change a lot in a short time.
- Substitutes
Currently, there are some substitutes to stevia sweetener in the sweeteners industry with a price lower than stevia sweetener, such as aspartame and sucralose, whose average ex-works price was about USD16,200/t and USD96,000/t in 2012 respectively. While the average ex-works price of Reb A 95% stevia sweetener is about USD130,800 in 2012. And they are widely used by downstream industries since a long time. It will take them some time to convert to stevia sweetener.
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