Link at bottom of story.
Mon Dec 13, 2010 3:44pm EST
* PepsiCo is "very close" to sweetener breakthrough
* Says key is sweeteners plus flavor modifiers
* Dr Pepper Snapple also experimenting (Adds comments from Dr Pepper CEO, links to stories, byline)
By Martinne Geller
NEW YORK, Dec 13 (Reuters) - PepsiCo Inc (PEP.N) is "very close" to launching new products that use a mix of sweeteners and flavor modifiers to make low-calorie drinks taste better than ever, its chief executive said on Monday.
"We want to be out there with a product that is outstanding, not one that is just good," said Pepsi CEO Indra Nooyi at a conference hosted by Beverage Digest.
"We are very close," she said, referring to a line-up of products that she declined to identify.
Nooyi said a breakthrough would involve not only sweeteners, but ingredients to balance the impact of those sweeteners. This includes making "one teaspoon of sugar taste like four" or cutting short the taste of a sweetener's flavor, thereby preventing an aftertaste.
Doug Tough, chief executive of International Flavors & Fragrances Inc (IFF.N), said flavor enhancers are "in a word -- extremely important" to the industry now.
PepsiCo already sells Trop 50, a lower-calorie version of Tropicana juice, and a zero-calorie SoBe Lifewater drink, made with a natural zero-calorie sweetener.
Good-tasting, natural, low-calorie sweeteners are seen as a holy grail for the soft drink industry, especially as it comes under fire by critics who say sweetened drinks contribute to the growing obesity epidemic in the United States.
Dr Pepper Snapple Group Inc (DPS.N) is also experimenting with low-calorie sweeteners and modifiers.
The company's chief executive, Larry Young, said that it was easy to go 90 percent toward creating a great-tasting low-calorie product, but that the final 10 percent of the way was very difficult.
He also stressed that Dr Pepper would not sacrifice taste.
In August, PepsiCo signed a four-year deal with Senomyx Inc (SNMX.O) for the development of sweeteners. Coca-Cola signed a similar deal with Chromocell Corp earlier this week. [ID:nSGE67G0GD] [ID:nN1091728] (Reporting by Martinne Geller, editing by Dave Zimmerman)
S2383 (the sucralose enhancer) has GRAS status for unspecified "beverages"...I have not seen any info one way or the other about carbonated beverages specifically.
S6973 (the current GRAS sucrose enhancer) cannot be used in carbonated beverages, but the next generation S9632 can be.
I too have greatly increased my holdings very recently after mostly selling in 2011, most recently in October. Working on my first public research report related to SNMX today in fact.
It appeared to me KO wanted exclusivity on a sweet enhancer from SNMX, and perhaps Firmenrich already owned that sweet enhancer licensing ability through SNMX. This Chromocell company has given KO total exclusivity over everything, and KO essentially owns them if Chromocell ever gets anything to sell. PEP is smart if they have found a sweet enhancer or a salt enhancer that works for them -- even if they have to license the sweet stuff from a SNMX licensee. Time to market with a drink or snack that tastes identically as sugar or salt is the name of the game. Seems like KO has taken a big risk with no product close, and PEP's CEO says they are close to intro of something with SNMX enhancer technology.
I am skeptical as to what Pepsi considers “close”. The sucrose enhancer has not yet gotten GRAS approval for liquid beverages, and the Fructose enhancer has not been submitted for GRAS yet (please correct me if I am wrong with Fructose but I don’t think I am). The approval process for anything newly submitted would be 18+ months. So I don’t see this happening for a while with Fructose enhancers at least. Sucrose could come faster since this has been in the pipeline. Salt is way off. SNMX has not even mentioned a viable candidate for submitting for GRAS approval.
<Well I guess this is her first ever missed expectation. Does anyone have expectations that we will see a Pepsi product on the market with a SNMX ingredient during 2012?>
No way. It's not that I doubt the progress of the collaboration, it's just that the sweetner enhancers they're working on ("next generation" sucrose, fructose) likely won't even receive GRAS approval in 2012, much less be worked into Pepsi products.
As you say, these processes take a long time, and that's understandable given the sensitivities of food and beverage manufacturers at rolling out new products with these new types of enhancers. It's not to say that it won't happen, it's just that the process is complicated and time-consuming.
I have no position in SNMX right now. I'm looking to get back in eventually, and these prices are pretty cheap. However, I want to see what they have to say in the 4th quarter conference call first. In addition to the S6973 sucrose enhancer progress, I want to know about any possible commercialization partners for the bitter blockers (which have already received GRAS approval). Senomyx has several enhancers currently in products for sale (e.g. savory, sucralose), and yet commercialization revenues are still pretty minimal. How is this going to change in the future, and when?
"YOU WILL see it in 2011. She is a VERY smart lady, and does not miss set expectations."
Well I guess this is her first ever missed expectation. Does anyone have expectations that we will see a Pepsi product on the market with a SNMX ingredient during 2012?
I got out of this stock almost completely a while ago for the reason I mentioned in my comment above over a year ago. The SNMX development process and the end product reformulations, consumer testing, etc. take a very very long time. I thought there were better opportunities for my money and didn't see significant commercial revenue in 2011.
That said, I am back in with 25,000 shares over the past two days. My reasoning:
1) At this price it was getting too attractive for me to pass up.
2) Commercial revenues are very low, but YOY comparisons are certainly showing promise.
3) In Q2 and Q3 we are going to start to see numbers from Fermenich sales of S6973. And since commercial revenues are reported one quarter in arrears, SNMX should start to have more predictable guidance.
Seems like overall this is a good time to get back into something I have a strong long term belief in.