Dive Brief:
- Major food corporations stinging from consumer backlash against sugary foods and beverages, as well as sugar taxes like those in France and Mexico, should look to the tobacco industry for guidance, according to Bloomberg Gadfly.
- Once public enemy No. 1, in the last five years tobacco companies have offered a 101% return to investors, according to Bloomberg Intelligence’s Global Tobacco Product Manufacturing Index. Strengths are the results of mergers and acquisitions, investments in alternative products such as e-cigarettes, and stabilizing volumes of cigarette sales.
- While taxes and regulations hurt sales of tobacco, companies were able to take control of pricing, a move food companies may want to consider.
Dive Insight:
The tobacco industry’s road to recovery from stricter regulations, taxes, and a 25-year, $200 billion industry settlement with 46 states, may offer insights into how ingredient manufacturers might overcome the pain of sugar taxes and negative consumer perceptions.
The tobacco industry has raised EBITDA margins to 27.7%, as opposed to 19.4% for Bloomberg’s Alcoholic Beverages group. Tobacco companies are paying out 63.7% of earnings in dividends.
When it comes to added sugars, manufacturers are working to be transparent and are reformulating products, particularly in light of the most recent Dietary Guidelines for Americans, which states no more than 10% of daily calories should come from added sugars.
Cane sugar, in moderation, is gaining in popularity as an ingredient alternative to sugar and sugar substitutes, according to The New York Times. Edy’s/Dreyer’s has reformulated its slow churned ice cream products to include fewer ingredients and cane sugar in place of high fructose corn syrup.
PepsiCo is using flavor booster Sweetmyx S617, developed by Senomyx, in its reformulated products where sugar content and high fructose corn syrup have been reduced. Sensient has introduced a natural functional flavoring ingredient to reduce sugar content in beverages.
The challenge for manufacturers is to find a happy medium as sugars are not just added for sweetness but for functional properties and food safety properties, such as bulking agents, balancing out acidity, and preventing the growth of microorganisms. "Ultimately you have to have a palatable and safe product that maintains the properties people are accustomed to," Dr. Courtney Gaine of the Sugar Association told Food Dive.