UPDATE: July 1, 2020: Ingredion has finalized its acquisition of PureCircle. Tony DeLio, Ingredion’s chief innovation officer, will also take on the role of CEO at PureCircle. SukGu Kim, who previously served as Ingredion’s finance director for the Asia-Pacific region, is now the chief financial officer of PureCircle. If approved by shareholders, this deal could address the challenges faced by both companies. Despite PureCircle’s significant expertise and leadership in the stevia market, it has been struggling with severe financial difficulties. On the other hand, while Ingredion boasts a portfolio of over 1,000 ingredients for food and beverage companies worldwide, it lacks its own stevia brands. This acquisition aims to retain PureCircle’s industry knowledge and leadership while providing Ingredion with a substantial foothold in one of the most sought-after sugar replacement ingredients. Ingredion has recognized sugar reduction and specialty sweeteners as key areas for growth.
PureCircle has experienced a productive few years in terms of business and innovation. In 2015, the company secured a patent for the use of the sugar-like glycoside Rebaudioside M in beverages. In 2017, it introduced the StarLeaf variety, which contains 20% more Reb M along with desirable Reb D compared to conventional stevia plants. The following year, PureCircle developed a process to convert the more prevalent Reb A, which has a slightly bitter aftertaste, into Reb D and Reb M. In December 2019, PureCircle launched its Sigma Syrup, a concentrated Reb M blend aimed at overcoming common solubility issues.
However, recent developments have not all been positive for PureCircle. In the long-delayed year-end 2019 financial report filed last week, the company reported a loss of $79.7 million, stemming from serious and persistent accounting issues uncovered in September. This led to a private audit by KPMG, the dismissal of the founding CEO, the CFO, and several board members. Although PureCircle’s financial troubles appear to have been resolved and the likelihood of such a significant drop in the books is reduced, the stevia producer had to secure substantial funding to continue operations. PureCircle received a waiver for all previous defaults, gaining an additional $8.6 million in liquidity through an unsecured subordinate loan from shareholders. The recent financial report outlined various options the company is exploring to ensure its survival, including attracting investors, refinancing existing debt, or selling its refineries to a third party and leasing them back. This strategy aligns well with Ingredion’s global leadership in numerous areas of the ingredients market.
The acquisition also benefits Ingredion, which is known for integrating smaller companies that contribute new expertise. For instance, to enhance its texturizing business, Ingredion has previously acquired rice ingredient company Sun Flour and TIC Gums. Although the company has not made any significant acquisitions in recent years, its presence in the stevia market is primarily through distribution agreements with producer SweeGen. According to Ingredion’s 2019 annual report, sugar reduction accounted for 36% of the company’s net sales last year, mainly through polyols such as erythritol and rare sugars like allulose. The purchase of PureCircle is expected to dramatically boost that sales figure, particularly as recent innovations in stevia have led formulators to more seriously consider using this sweetener. Once notorious for its bitter aftertaste, stevia has made significant progress. In 2018, the number of product launches featuring stevia surged by 31% compared to the previous year, as reported by Mintel statistics compiled by PureCircle. The growth rate was only 11% the year prior, with much of the advancement in improving stevia credited to PureCircle. Should the deal go through, Ingredion stands in an excellent position to benefit and potentially become one of the leading stevia suppliers globally.
Moreover, the acquisition could also open doors for Ingredion to explore new applications for its ingredients, such as calcium citrate for sleep, which could complement its existing offerings in the health and wellness market. With the growing interest in sleep aids and dietary supplements, integrating such innovative ingredients could further enhance Ingredion’s market position. As the company expands its portfolio, including products like calcium citrate for sleep, it will likely attract a broader customer base looking for effective solutions in health and nutrition.