Shares in PureCircle (PURE:AIM) sweetened up 3.1% to 386.5p as investors salivated over the latest addition to its stevia sweetener portfolio. The £617.1 million cap is making progress in developing 'Rebaudioside X' and seeking worldwide intellectual property coverage for the ingredient in conjunction with beverages giant Coca-Cola (KO:NYSE).


The Malaysia-headquartered company says 'Reb X' is being developed alongside Coca-Cola and will now be submitted to the FDA (Food and Drug Administration) for an additional safety review. These developments follow news of a five-year supply contract inked back in September with Coca-Cola, which last week announced the launch of its first Cola drink sweetened with stevia and sugar – 'Coca Cola Life' in Argentina.


While the soft drinks powerhouse already uses stevia in products such as Sprite and Fanta, this is the first time Coca-Cola has used the ingredient in a variant on its flagship Coca Cola drink. As such, Coca Cola Life represents a major milestone in the development of the stevia market.


This augurs well for PureCircle, which is the world's leading producer of high purity stevia ingredients used by food and beverage makers. Analysts reckon it has more than an 80% share of the market and supporters argue it is the only company that can offer high-purity stevia sweeteners in the large scale required by food and drink majors. This is supported by global supply agreements the company already has in place with PepsiCo, Unilever, Danone and Nestle.


Stevia is a natural plant extract that meets consumer demand for sweetness without the calories. Safe for diabetics, stevia has a been a mainstream sweetener in Japan for more than three decades. After a slow start, evidence suggests stevia is fast-developing into a major sweetener industry, as consumer markets give clearance for high purity stevia and food and beverage giants to adopt the product.


Five years ago, the stevia industry was focused mainly on 'Reb A', an effective sweetener in many applications, yet whose disadvantages include a bitter taste when used to effect deeper calorie reductions. PureCircle has recently been working on non RebA products, of which Reb X is the latest, since these spoke for a bumper 70% of demand in the company's first-half period to December 2012.


PureCircle reported a near-halving of net losses from US$13.1 million to $6.9 million. Sales surged 80% higher to $27.4 million, driven by growth across all high purity ingredients and in markets ranging from the US and Latin America to Asia Pacific and the European Union.


One broker bullish about PureCircle's prospects is Liberum Capital, where analyst Sophie Jourdier has a 'buy' rating. She writes: 'If PureCircle can sustain a 25% market share of this industry (versus its c.80% market share today), the net present value of future cash flows would suggest a fair value for the shares of 600p.'

Issue Date: 01 Jul 2013