Bitter
battle in sweeteners
NutraSweet
Co. is launching an assault on the tabletop market
By
Mike Hughlett | Tribune staff reporter
August 11, 2007
http://www.chicagotribune.com/business/chi-sat_nutrasweet_0811aug11,0,1911143.story?page=2
NutraSweet
is one of the most recognized names in the artificial sweetener world, but for
years the Chicago-based company hasn't actually marketed a product under that
name. That's changing, and in a big way.
NutraSweet
Co., known primarily for imbuing diet pop with sugariness, this month launched
its first offensive into another big sugar-substitute market: tabletop sweeteners
-- the little packets that coffee and tea drinkers dump into their beverages.
It's
a bold gambit. The rough-and-tumble tabletop sweetener business is already highly
competitive -- just ask Chicago-based Merisant Worldwide Inc., NutraSweet's crosstown
rival. Merisant is the maker of Equal, a brand that has taken a beating from Splenda,
the faux sweetener trade's rising star.
Plus,
NutraSweet is rolling out a unique strategy: affixing its famous brand to sweeteners
made from different chemical compounds. That may not sound too radical, but sweetener
brands tend to be associated with the stuff they're made of, as well as the color
of their packaging.
Splenda
is made from sucralose and comes in yellow packets. Equal is composed of aspartame
and is packaged in blue -- and so on.
NutraSweet
launched an aspartame or "blue" sweetener earlier this month and has
plans for a "pink" saccharin-based product, and a "green"
natural-based sweetener. A "yellow" sucralose product could follow.
"That's
a whole new approach and it will be interesting to see how it works," said
Marcia Mogelonsky, a food industry analyst for Mintel International Group. But
she added, "The biggest challenge [NutraSweet] faces is Splenda."
When
Splenda was launched eight years ago by a subsidiary of Johnson & Johnson,
the business was dominated by aspartame and saccharin sweeteners. But by 2003,
Splenda led the market with a 38 percent share, compared with 24 percent for Equal,
according to Information Resources Inc.
Now,
Splenda's share is about 61 percent, while Equal and Sweet'n Low each have about
13 percent of the market.
Splenda's
rise has hurt Merisant: Its annual sales fell 16 percent between 2002 and 2006,
according to a federal securities filing.
Merisant
has long claimed that Splenda's success has been abetted by misleading advertising
that implies Splenda is healthier and more natural than its rivals. Merisant sued
Johnson & Johnson over the matter and came to a settlement -- which hasn't
been disclosed -- in the spring.
The
settlement was one of several big events in the sugar-substitute business this
year. Another: NutraSweet got back the rights to its brand name from Merisant.
Shared
history
The
two companies have a shared history.
Until
2000, both were part of Monsanto Co., which landed the sweetener siblings as part
of its 1985 acquisition of Skokie-based G.D. Searle & Co., where aspartame
was invented. Monsanto sold its tabletop business to one private-equity group,
and its aspartame production operation to another.
The
former is now Merisant, the latter NutraSweet, which employs around 400 and has
annual revenues of at least $100 million. Until this year the two companies continued
to have strong ties.
Merisant
was allowed to use the NutraSweet brand for one of its own tabletop sweeteners.
In return Merisant had to buy at least 200 tons of raw material annually from
NutraSweet, which has a big plant in Georgia. NutraSweet, one of the world's largest
aspartame-makers, was Merisant's sole supplier.
Last
year, though, Merisant opted to buy aspartame from several sources to cut costs
and reduce its dependency on just one supplier.
"The
benefits of the multisourcing strategy far outweighed the benefits of keeping
[the NutraSweet] brand," said Scott Bartlett, Merisant's vice president of
global supply.
NutraSweet
was a relatively minor brand for Merisant, a "value" product priced
roughly 40 percent less than Equal, Bartlett said. It had only a 1 percent share
of the tabletop market last year.
As
of July 1, the name formally migrated to NutraSweet Co., and its chief executive
Craig Petray used the term "ecstatic" to describe how he felt. "We've
been waiting for this for a while. We think it's a spectacular opportunity for
us."
Petray's
plans hinge on repositioning NutraSweet as a premium brand. Its taste, he said,
has been improved through a new recipe. Now the company plans an ambitious marketing
campaign -- Petray won't divulge its cost -- to capitalize on NutraSweet's name
and its trademark swirl logo.
The
name and the logo became famous in the 1980s after aspartame became the leading
sweetener in diet sodas. "People still equate NutraSweet with sweeteners,"
Petray said. "People still know the swirl."
The
new NutraSweet's packaging is dominated by a bold red swirl, a snappy departure,
Petray maintains, from the "medicine cabinet" look of other sweeteners.
Food
industry analysts agree the NutraSweet brand still has its luster, even though
it has been used for years primarily to sell a second-tier coffee sweetener.
"The
brand name is extremely strong," said Mintel's Mogelonsky. "The thing
is how [NutraSweet] delivers on taste and aftertaste."
That's
far from NutraSweet's only challenge. "The biggest challenge for them is
that they are not a consumer-products company," said Merisant's Bartlett.
"They are going to have to transform, which is not an easy thing to do."
That
transformation involves creating the capacity to manufacture and distribute sweeteners,
not just bulk ingredients. Petray says NutraSweet has tackled both issues through
a partnership with Domino Foods, a major sugar refiner and distributor. Domino
and NutraSweet will split both profits and costs stemming from the new product.
NutraSweet's
first sweetener is an aspartame product currently available in some Wal-Mart Supercenters,
mostly on the East Coast. A national rollout is slated for October. The company
plans to launch saccharin-based and natural sweeteners next year.
The
overall saccharin sweetener market "isn't really going anywhere," said
Mike Richardson, a food industry analyst at the Freedonia Group. But the natural
sweetener field, now only in a nascent stage, "has enormous potential,"
he said.
Health
fears
Fears
of health risks have long dogged artificial sweeteners. Hence a no-calorie sweetener
made from natural ingredients -- and one that tastes good -- could prove very
popular. Merisant already has a natural sweetener in the market, though like others
in its niche it is considerably more expensive than artificial sweeteners.
As
the price comes down, natural diet sweeteners will become more attractive to consumers,
Richardson said.
