By Sven Olson
Stevia First Corporation (OTC:STVF) is an early stage start up business, which will focus on large-scale production of stevia. A few small-scale growers currently produce Stevia in the United States, but industrial scale production is necessary in order to take full advantage of the booming demand for the zero calorie sweetener. Operations will be located in California’s Central Valley, one of the most productive agricultural areas in the world, and the company has leased 1000 acres of land as a base for operations. Construction of a new office and laboratory building is in progress.
Stevia is a plant that originated in Paraguay, and for many years South Americans have used raw stevia leaf as a sweetening agent. The leaf contains several sweet-tasting compounds known as steviol glycosides, and the purest extract from the leaf, known as Reb A, can be up to 400 times sweeter than the equivalent weight of sugar. The plant is superior to sugar as a sweetening agent because it has the advantages of being a zero calorie product as well as having a low-glycemic index. Studies have shown that, unlike sugar, it does not affect levels of glucose or insulin in the blood. The use of Reb A sweetener for food products was the subject of a GRAS (Generally Recognized as Safe) notice from the FDA in 2008. In 2011, the European Food Safety Agency also approved the use of the sweetener for food products. The World Health Organization (WHO) expects stevia-based extracts to replace up to 30% of other sweeteners in the estimated $58 billion global sweetener market. This translates into a market opportunity for stevia in excess of $10 billion.
Earlier this year, The Coca-Cola Company (NYSE:KO) announced that it was incorporating a combination sweetener based on stevia along with sugar for its Sprite and Nestea brands sold in France. Coca-Cola has used the stevia-based sweetener in over 30 products in 7 countries, but this is the first time it is being used in a major brand. The company is currently using Truvia, a stevia-derived sweetener, in its Odwalla juice line, along with its new drink, Sprite Green. PepsiCo, Inc. (NYSE:PEP) currently uses stevia in its Sobe Lifewater line and in its new Tropicana Orange Juice line, Trop50, which boasts 50% less calories and sugar than regular orange juice. PepsiCo also sells several other drinks with PureVia, another stevia-based sweetener. SodaStream International (NASDAQ:SODA) has also recently announced that it will launch a new line of flavors using stevia sweeteners. New product launches based on stevia increased by 200% from mid-2009 to mid-2010, spread over 35 countries.
It is clear that there is huge growth potential in the stevia market, but can Stevia First cash in on all this potential? Stevia First is an early stage company with some tangible assets and intellectual property on its balance sheet. The company is off to a good start by acquiring land in one of the best growing areas in the world, and has put together a professional and experienced management team. It has also devised a game-changing business plan to partner with farmers, agricultural entrepreneurs, and equipment manufacturers in a win-win situation. The company is well positioned to cash in on the coming stevia boom and looks more promising than other pure early-stage startup businesses.
I will look at two other companies that have jumped onto the stevia bandwagon. Stevia Corporation (PINK:STEV) has succeeded in protecting a clean image with lots of promotions and strong public relations. The company has been able to drum up interest as a new first- stage company based on its plan to hit the sweetener market with Vietnamese stevia. Experts say that despite being native to South America, Southeast Asia provides near-perfect growing conditions for the plant. The company currently holds no tangible assets or intellectual property, but does have a cash balance as of the end of June of around $350,000. Liabilities of around $485,000 include $350,000 in convertible notes.
Stevia Corporation has recently announced two partnerships with companies based in Singapore. The first partnership is with the Singaporean Gujarat State Petronet Limited (NYSE:GSPL), which will provide farm management operations for a fee of $20,000 per month. The second partnership is with Agro Genesis Pte. Ltd., (AGPL). Agro Genesis will receive a fee of $275,000 Singapore dollars for services rendered, with additional expenses of $274,000 possible. The company is working to establish a production base in Southeast Asia by providing farm management services through contracts with farmers in Vietnam and Indonesia.
Sunwin Stevia International, Inc. (PINK:SUWN) is a Chinese company that describes itself as one of the top global producers of high-quality stevia extracts, including Rebaudioside A 98. The company also produces traditional Chinese medical products. It says that it has built an integrated global company with sourcing and production capabilities to service consumers throughout the world. The CEO, Ms. Dongdong Lin, says, “This is the right time and place for stevia to become the sweetener of choice.” Strong distribution relationships have been established by the company in Europe and North America.
In December 2011, Sunwin established an agreement to supply stevia extracts to Domino Foods and its affiliates for use in low calorie sweeteners that it has recently developed for distribution. In May 2011, Sunwin International, Domino Foods, and Wild Flavors announced a joint agreement to partner in an effort to focus on introducing a wide range of all natural, low calorie, and no calorie sweetening solutions that contain Sunwin stevia. This supply agreement was concluded to enable Sunwin to provide a wide range of its FDA GRAS affirmed stevia extracts to Domino Foods for use in products such as “Domino Lite”, an exciting new lower calorie blend of sugar and stevia now available in the U.S. In addition, Domino Foods will offer Sunwin stevia to its well-established network of clients based in Iselin, New Jersey. Domino Foods is currently the largest marketer of refined sugar in the U.S. and is responsible for the sales, marketing, and logistics for the output of American Sugar Refining, C&H Sugar Company, and Okeelanta Corporation, a subsidiary of Florida Crystals Corporation.
Sunwin recently announced operating results for the second quarter and first six months of 2012. Total revenue for the second quarter increased 55% to $3.6 million on a year-on-year basis (39% to $6.4 million for the first six months). Total operating expenses reached $1.4 million ($2.8 million for the first six months). Net losses for the first six months amounted to $1.7 million. Despite the hype of the Domino Foods agreement, the company’s operations are small and growing very slowly.
Most of the information that I have used to research all three companies, other than the financials of Sunwin, comes in the form of press releases from the companies themselves. Stevia Corporation is in the very early planning stage and there is nothing tangible other than business plans on which to base an investment decision. In the case of Sunwin, the financials are unimpressive and the company has a long way to go and a lot to prove before I would consider it investment worthy. I would avoid an investment in the case of Stevia Corporation and Sunwin at this point in time. But Stevia First has already made some important moves and looks more promising than the other two companies, and I believe that it should be closely watched to take advantage of buying opportunities if there are more favorable developments.