It would be an understatement to say that PureCircle faced significant challenges over the past year from a business standpoint. The scale of these financial issues indicates that the root problems were entrenched. Recent financial reports reveal that these difficulties date back several years. Although it remains unclear whether any criminal activity was involved, the investigation into these matters resulted in the resignation of the company’s CEO, CFO, and several board members. As Board Chairman Cheim noted in his remarks, the departure of former CEO Magomet Malsagov was particularly detrimental to the company. Malsagov, who founded PureCircle and pioneered the use of stevia as a sweetener, left a significant impact. However, Cheim emphasized that changes were imperative.
“We identified a culture within the organization that prioritized ‘making the numbers’ over doing things properly,” he stated. “The operating management has always been deeply committed to the business and clearly wanted it to succeed. Yet, there was also pressure to meet loan covenants to satisfy our lenders. Consequently, proper accounting controls were bypassed, leading to inappropriate transactions being recorded.”
Peter Lai Hock Meng, the new CEO, mentioned in the report that the issues arose from changes in the products PureCircle had introduced in recent years. Due to innovations, the company reduced production of some older products, resulting in improper inventory recording on the balance sheet. Additionally, price pressures in an increasingly competitive market further strained the company’s finances. However, PureCircle seems to be on a path to recovery. About a month ago, experienced financial manager and veteran Meng took the helm as CEO, while new CFO Jimmy Lim Kian Thong, who joined the company in February, brought extensive operational accounting experience from his previous role as CEO and executive director of Asia-based Haitong International Securities.
PureCircle is significantly delayed in its financial reporting—the results released this week pertain to a period that ended nine months ago. Nevertheless, Lim’s early March note outlined the new financial and auditing controls being implemented to ensure accuracy in the company’s finances. Despite the backlog, it remains challenging to assess any improvements in sales or earnings.
Meng indicated in the financial report that PureCircle is refocusing on large-scale expansion and innovation. The company is well-positioned for both, as it is already a leader in the stevia market, which Super Market Research valued at nearly $480 million globally in 2018, with expectations for an 8.5% compound annual growth rate through 2024.
PureCircle has consistently led the way in innovation and marketing for stevia. In 2017, the company introduced the StarLeaf variety of the stevia plant, which contains 20 times more sugar-like Rebaudioside M. They also developed a chemical process to convert more glycosides from the stevia plant into Reb M and are currently engaged in legal battles to protect their patent. In December, PureCircle unveiled its new Sigma Syrup, a concentrated Reb M blend designed to address common solubility issues.
In the financial report, Meng highlighted that PureCircle is exploring the creation of protein, fiber, and antioxidant ingredients from stevia leaves, aiming to reduce waste while aligning with consumer trends favoring nutritious plant-based ingredients. The company is also investigating the use of stevia for sodium reduction and masking undesirable flavors in various food and beverage products.
Additionally, PureCircle has worked diligently to educate consumers that modern stevia no longer carries the bitter aftertaste it used to have. Last summer, the company offered stevia-sweetened ice cream from trucks around the Chicago area. This kind of marketing initiative, along with ongoing innovations, could enhance public perception of stevia. While recovery will not be straightforward, the array of new ideas and developments, including the introduction of calcium citrate capsules as a potential new product line, makes a turnaround appear increasingly feasible.