On a week when New York City approved the first large soda ban to promote healthy living, coffee stocks were trading higher following a series of encouraging developments. The simple truth is that consumers, companies, and even politicians are becoming more health conscious. They are going to greater lengths to ensure that the food and drinks we love are becoming healthier. Even fast-food company McDonald’s Corporation (NYSE:MCD) has gone extra lengths to ensure that it’s “trying” to promote healthy eating via posting calorie information, giving consumers healthy options such as apples and fruit, and providing consumers with low calorie menus. The changes being seen among even the unhealthiest of companies show that there is a lot of money to be made in healthy living and focusing on consumer health. It appears as though this will become a common trend in the coming months and into 2013 as companies embrace this change.
Green Mountain Coffee Roaster’s (NASDAQ:GMCR) new line of health drinks including coffee, tea, and fruit drinks has led to a 30% gain in its common shares since September 6th as the market responds to the likelihood of consumers choosing a healthier option. Already, it has been said that competitor Starbucks (NASDAQ:SBUX), among others, is also beefing up its product lines with healthier options that may provide an edge in this competitive space. Starbucks recently entered the energy drink market, but is trying the all-natural and healthy approach. The company is using green tea extract, fruit juice, and an up-and-coming all-natural sweetener called stevia, which is growing rapidly in sales and is sure to be a main component of drinks and food becoming healthier.
I can’t help but think that Green Mountain is following Starbucks’ lead in an attempt to create healthier products and capitalize on the sales potential. Over the last year we have seen companies such as The Coca-Cola Company (NYSE:KO), PepsiCo Inc. (NYSE:PEP), Monster Beverage Corp. (NASDAQ:MNST) Kraft Foods Inc.(NASDAQ:KFT), Starbucks and now Green Mountain Coffee Roasters adjusting ingredients to be enjoyable, yet healthier for consumers. Most of the ingredients that these companies are using have been in use for many years, but one in particular, stevia, the all-natural sweetener, is a wide open market, and a product that is reportedly up to 200-400x sweeter than sugar. At this time, many large companies are electing to utilize the zero calorie product, but at this point have not been involved in the production of stevia plants. This is allowing third-party suppliers (mostly in foreign countries) to capitalize by providing stevia for the large companies that must meet consumer demand in order to remain competitive.
Now that we see large companies in the beverage industry making a change to healthier and all-natural products, specifically stevia, how could investors play this market? Stevia may not sound interesting, but it is a rapidly growing market. It is estimated that the global stevia products industry could reach $10 billion by 2015, which is still relatively small compared to the near $60 billion sweetener market.
Truvia (found alone and in Coke products) is one of the most popular stevia products. Between 2009 and 2010 its sales jumped nearly 75%, representing large potential gains in this market in the right securities.
The expected growth, and growing interest from consumer goods companies is due in part to the benefits of stevia. Aside from being much sweeter than sugar, it is also safe for diabetics, doesn’t cause tooth decay, has zero calories and can be used in food preparation such as baking. As a result, it seems logical that companies and investors would want to capitalize on this fast-growing alternative to sugar.
There are a multitude of options and several companies that are attempting to capitalize in this space. Ingredion Inc. (NYSE:INGR) is a multi-billion dollar diversified company that is capitalizing on the growing market with its all-natural stevia product Enliten. However, this is a company that returned more than $6 billion in 2011, suggesting its return from the growth of stevia will likely be less than modest. To better illustrate growing interest in the right companies involved in stevia’s implementation, Louis Dreyfus Commodities LLC recently purchased Imperial Sugar Company, a company that had been active in its pursuit of the stevia market. However, Imperial Sugar’s product was slightly different, as it created a sugar and stevia blend called Stevia-cane. This product could be successful relatively quickly and is now a product that Dreyfus will attempt to develop.
The primary market for stevia in the U.S. is still in its developmental phase, yet North America holds a 30% market share in terms of sales. It is now set to explode globally and should result in large gains for companies with large-scale production capabilities. Stevia Corp. (PINK:STEV) is a small company, with little limited updates, that appears more focused on overseas stevia supply. S&W Seed Company (NASDAQ:SANW) recently entered into stevia production with its 118 acres in Chowchilla, California. What’s encouraging about SANW is that the land in which it’s using has already been harvested for stevia (85 acres last years), indicating that the land is already suitable for stevia production. SANW supplies the global leader in the production of high purity stevia products, PureCircle Limited (LON:PURE). The agreement will be in effect for five-years and is a good indication that PureCircle expects continued growth in the US. It also indicates that developing a high-quality supply chain is important to the company.
Stevia First Corp. (OTC:STVF) is an emerging company with good prospects and a solid presence in the future of the space. The fact that the company’s U.S. operations are located in the heart of California’s Central Valley, it has a significant amount of acreage, and recently entered into an exclusive and worldwide intellectual property license give the stock great upside. Whether or not the upside will materialize remains to be seen. The company has considerable land with 1,000 acres and is located in what some believe is some of the best agricultural land in America. The company plans to be the first vertically integrated stevia enterprise in the U.S. and has the location, the intellectual property and land to do such. Stevia First is focusing on bioengineering plants with the highest levels of REB A; the best tasting and sweetest component of stevia. The company is well positioned to become a full service manufacturer, distributer, and producer of stevia. Its newly obtained intellectual property (which catalyzed a 150% one-month gain) will allow the company to produce stevia through fermentation-based technologies. Its goal is to maximize the production of the sweetest components in stevia and avoid a portion of the 70% production costs included with stevia extract via extraction and purification. Armed with its new intellectual property, STVF will be able to produce stevia extract through its fermentation-based technology and convert low-cost plant materials into the best possible, and sweetest, product allowing for higher profit margins.
Stevia’s use is growing rapidly with an estimated 6,000 products including beverages, food, and medicines containing the sweetener. It is the fastest growing commodity in the alternative sweetening sector. With our renewed focus on healthy alternatives, it makes sense that the use and growth of stevia will continue at least in the immediate future. PureCircle is currently the leader of high purity stevia and supplies more than 90% of the U.S. market excluding the tabletop sweetener category. The company’s partnership with S&W Seed Company will not be large enough to supply the total demand with only 100 acres, especially if large companies such as GMCR, SBUX, and Kraft continue to expand on healthy alternatives and products. In my opinion, this presents opportunity for other companies such as Stevia First, which has more acreage and is closely located in California. It will be interesting to see how the market develops over the next few years as products such as Splenda and aspartame decline. I am curious to see if large-scale production will quickly migrate to the U.S. as other large companies follow the lead of companies such as Green Mountain and Starbucks. Naturally, as these changes occur, there will be many to benefit: companies selling healthier products, consumers living healthier, producers with innovative and market-leading potential creating a strong foothold in the budding space and investors fortunate enough to have made the right decisions.