In an exclusive interview with FoodNavigator.com the president of Pharmed Medicare says his company has developed an alternative patent-pending process, reviewed by legal counsel in USA, Asia and Europe, which will put the firm into direct competition with the UK ingredient giant.
With plans for a 1,000 metric tonnes per year plant dedicated to the production of sucralose already afoot, Pharmed clearly believes that the days of a sucralose market monopoly are over.
"We believe that the combination of our patent portfolio with the existing Tate & Lyle portfolio will pose a significant challenge to any third commercially viable non-patent infringing manufacturer," said Pharmed president Sundeep Aurora.
The sweeteners market is very attractive. Sectoral growth is pitched at about 8.3 per cent year on year until 2008, far out-pacing food industry growth currently pegged at around three to four per cent. And with consumers increasingly turning towards sugar-free and low-calorie products, food makers are increasingly on the lookout for cheap sugar alternatives.
Such demand has been highly lucrative for Tate & Lyle. Sales of sucralose, a sugar-derivative that is 600 times sweeter, helped the company to record a first-half profit increase of 59 per cent.
But such over-reliance could be very damaging.
"Within three years of generic competition to sucralose, its price will decline by 30 per cent, Tate & Lyle will lose 30 per cent share in the market and its earnings margins will drop from 48 per cent to 10 per cent," warned market analyst Morgan Stanley in a report published last month.
Tate & Lyle filed the original product sucralose patent in 1976. This recently expired, opening the product up to competitors, though the company remains confident in the strength of its process patents.
The UK-based company will therefore be very concerned if Pharmed's claims are true. When sweetener NutraSweet was exposed to competition, aspartame margins fell by 80 per cent.
"We started looking at sucralose in 2000," said Aurora. "This new process is the culmination of five years of dedicated scientific research and engineering involving leading international scientific institutions and over 80 scientists."
The issue, said Aurora, was how to develop an economical, industrial scale method of production that was also non-patent infringing. Indeed, it is clear that patents have been the central concern of Pharmed.
"Tate & Lyle has exceptionally good quality patents," he said. "The process patents have been the problem for company looking to replicate the production.
"Tate & Lyle has always said that to replicate the process on a large scale is very difficult, and they are absolutely right. Making sucralose is not something that is easily transferable from the lab."
Pharmed was therefore forced to go back to the drawing board in order to develop its own non-patent infringing process.
"We started working from scratch," said Aurora. "This has not been easy - carbohydrate chemistry is highly complex and prone to sensitive reactions. And sugar easily degrades."
These factors, on top of the issue of patent infringement avoidance, meant that Pharmed had to be innovative.
"When we realised that one method was not going to work, we had to just rethink the whole process and look at every possible angle. We have had our fair share of difficulties, but I think what we've done is really mind blowing - breaking the sucralose monopoly goes far beyond our expectations."
The firm's ambition is ultimately to match Tate & Lyle's global sucralose capacity. Aurora said that Pharmed is now looking to hold discussions with customers on long-term supply partnerships for non-table top use, and he is confident that his company has a solid enough reputation upon which to base its claims.
"We have operations in 30-odd countries and are fairly well known on the pharma and nutraceutical side," said Aurora. "We are one of the largest producers of glucosamine, and this is our main area of expertise."
FoodNavigator has not seen the patents, and cannot attest to either the quality or patent viability of Pharmed's sucralose. But if Aurora's claims are accurate, then sucralose could well have reached its 'NutraSweet moment'.