Research Analysis Consulting LMC International Ltd Economic Consultants for Agricultural Commodity Markets and Downstream Applications Research Analysis Consulting

Intense Sweeteners: Market Update 13th February 2007 Nicholas Fereday LMC International

AGENDA Global Market Individual Sweetener Mkts: Market Drivers Growth Rates Global Demand Prices Individual Sweetener Mkts: Aspartame Sucralose (Splenda) Saccharin Neotame Natural Sweeteners

Global Market Summary Market size: 18 million metric tons (s.e.) Value: >$1bn Beverage industry is the largest mkt Main competitive factors: price competitiveness and technical/ functional properties (e.g. low calorie, etc.) Dynamic market Significant growth potential

Market Drivers Price competitiveness New sweeteners - SPLENDA Functionality (zero calories) Greater blending Greater use in non-diet applications Wizardry of food scientists Food trends - Atkins/low carbs Dia-besity epidemic (obestity and Type II diabetes)

A Convergence in Sweetener Growth Rates, 1992-2006 -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 1992 1995 1998 2001 2004 % Annual Growth HFS Sucrose Total Low Calorie

Growing Intense Sweetener Demand Since the 1990s the growth in overall demand for low calorie sweeteners has outstripped that of sugar and HFCS Low Calorie Sweeteners: 4%/year HFCS: 3%/year Sugar: 2%/year Growth rates have converged in last two years (post Atkins; HFCS exports to Mexico, etc.)

Conversion Table for Sweeteners Sweetness Intensity (Sugar Equivalent) Caloric Sweeteners Sucrose 1.00 HFCS 0.95 Glucose 0.70 Dextrose 0.85 Crystalline Fructose 1.30 Intense Sweeteners Saccharin 300 Cyclamates 30 Aspartame 200 Acesulfame - K Stevioside Sucralose 600 Neotame 8,000 Polyols Sorbitol Mannitol 0.60 Xylitol 0.90

Shares of the Global Sweetener Market, 2006

Key Market Players Sucralose: T&L with McNeil Aspartame: NutraSweet, Ajinomoto Acesulfame-K: Nutrinova & Sanhe Saccharin: Chinese, PMC in US Neotame: NutraSweet

Approved Sweeteners In US Sucralose Aspartame Saccharin Acesulfame-K Neotame

ASPARTAME

Aspartame: Key Developments Rationalisation in production Strong price competition Strong product competition - Splenda A short-lived resurgence in demand spurred by Low carb/Atkins food trends Aspartame continues to lose out in the trend towards blending sweeteners Lingering safety concerns that affected sales in 2005

Diet Share of US CSD Market, 1970-2006 0% 5% 10% 15% 20% 25% 30% 35% 40% 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

US Diet CSD Market Aspartame is the leading sweetener - sucralose is making some inroads Flat to negative growth over past two years - direct impact on aspartame sales Diet CSDs have an increasing share of a declining market

SUCRALOSE SPLENDA

Sucralose: Key Developments 2007 is not 2004 Atkins/low carbs kick started market Multiple capacity expansions Inspired marketing by McNeil - rapid growth Price premium

Sucralose: 2007 Tate has reduced sales forecasts - slower rate of uptake Splenda is a US phenomenon: 60% of table top mkt. <1/5 the size of aspartame market s.e. basis 4X as expensive as aspartame - Branded food additive

Sucralose: 2007 Post Atkins depression Generic production - on sale in US Lawsuits - both sides of the court New plant ready this year but… What will drive growth? International Expansion - Declining share of UK TT market Marketing constraints Slow growth in end use markets Superior functionality (stability, etc., ) will ensure it has a place in the market

SACCHARIN 125 Years Young

World Consumption of Saccharin, by Region

Saccharin Asia has about 60% of the market Prod & Cons dominated by China Strong growth in Europe: Growing popularity of blending within EU Rising demand in Eastern Europe In US, <50% of US intense sweetener market

Saccharin: Key Developments 250% anti-dumping duties on Chinese saccharin in the US market since 2003 Some trans-shipments possible Korean producers – major beneficiaries No change expected anytime soon The enduring appeal of saccharin and its expanding role in blending

NutraSweet’s Latest Sweetener NEOTAME NutraSweet’s Latest Sweetener

Neotame: Key Developments 8,000 times sweeter than sugar Approved in US, July 2002 Very rapid growth of sales Positioned as a sugar/HFCS substitute in caloric/intense blends so as not to cannibalize aspartame market. Under the radar. No branding, unlike NutraSweet & Splenda Phenylketonurics

Natural Sweeteners: The Holy Grail? Sucralose has generated a lot of interest in revisiting the potential of truly natural sweeteners Holy Grail – a natural sweetener that tastes like sugar but has no calories

Stevia / Stevioside Stevia is mainly grown in China but processed in other Asian countries such as Japan and Korea Market largely confined to China, Japan and Korea but expanding in US as food supplement Development held back by lack of regulatory approval One glycoside, Rebaudioside A, has an excellent taste profile if refined to a very pure form. But expensive.

Other Natural Sweeteners Often used as flavorings: Glycyrrhizin (from liquorice) Lo Han Guo (P&G involved) Thaumatin Natural sweeteners less sweet that sugar: Tagatose

Future Market Drivers Price competitiveness New sweeteners Functionality Greater blending Greater use in non-diet applications Wizardry of food scientists New Food trends? Dia-besity epidemic (obesity and Type II diabetes)