If data drives sweetener decisions, what about consumer sentiment?
The sweetener debate rages on, including high fructose corn syrup versus sucrose, or table sugar, and consumer sentiment about caloric and non-caloric sweeteners overall. The corn and sugar industries recently took this battle to the courtroom in a legal spat over marketing, which the two industries recently settled.
But sweetener manufacturer decisions come down to more than just consumer sentiment, with economic data, particularly return on investment and ingredient and operational costs, to take into account.
The economics behind the sweetener decision
Whether they’re creating a new product or reformulating a current one, food and beverage manufacturers are often faced with choosing a sweetener. Martin Concannon, founder and managing director of Lafayette Associates and a Corn Naturally research analyst, recommends that companies look at the data concerning a particular product and then decide which sweetener would work best in terms of production, financials, and marketing.
According to the Corn Refiners Association, companies deciding to switch from HFCS to granulated sugar or other sweeteners, such as liquid sugar, honey, or sugar alcohols, face a number of additional investments that could drive up costs. Formulary costs, for example, could increase by between 50% to 85%. Equipment costs could jump significantly as well, such as purchasing a pneumatic system for conveying sugar from storage to the production floor, which can cost a company upwards of $4 million.
However, in 2013, HFCS manufacturers like Archer Daniels Midland and Cargill, found themselves slashing last year’s prices for corn syrup due to low commodity prices for sucrose, which made it a more competitive option for food and beverage manufacturers. ADM had told its customers that prices were expected to decline by about 10% from their level at that time, and Reuters reported a similar drop for Cargill.
That said, to see a "seismic shift" in the use of HFCS versus sucrose, sugar would have to consistently maintain its low price, according to Reuters.
A recent report entitled "How HFCS Continues to Deliver Economic Value for Food and Beverage Manufacturers," sponsored by the Corn Refiners Association, found that between 2000 and 2014, HFCS prices were equivalent or below prices for sucrose more than 80% of the time, and for nearly half the time, HFCS prices were at least 20% cheaper than sucrose. During that time, businesses saved on average about $1.1 billion annually by using HFCS instead of sucrose.
Since the summer of 2014, parity between HFCS-55 and sucrose has been fairly consistent, and HFCS-42 has had prices just under beet sugar, according to the report.
Consumer sentiment vs. purchasing behaviors
Consumer sentiment, particularly among health-conscious consumers, has in recent years gone against most sweeteners. But consumers have specifically called for the removal of HFCS, which appears in not just soda and other traditionally sweet products, but also ketchup, pasta sauce, and cereal.
Recently, a new study linked sugar consumption to conditions like metabolic syndrome, diabetes, and heart disease in children. Sugar and high fructose corn syrup have been tied to a number of health issues, including insulin resistance that can lead to diabetes and heart disease, tooth decay, and obesity. Artificial sweeteners, though lower in calories, have had their fair share of backlash as well, having been linked to weight gain and upsetting the balance of gut-healthy microbes, which can also lead to glucose intolerance and Type 2 diabetes.
However, Concannon has found in his research that this consumer sentiment tends to be vocalized by a minority of consumers, about one-third of the U.S. population. And, while this segment of the population may be vocal about a variety of ingredients they don’t want in their food, a majority of these consumers buy their fair share of foods containing those ingredients anyway, about 80% to 90% of what the typical consumer would purchase.
"While there is an effort to avoid sugar by many households, it ranks lower on ‘major effort to avoid,’ similar to sodium," Matt Wilson, manager of global consumer insights at General Mills, said at the American Sugar Alliance’s 32nd annual International Sweetener Symposium in August. "Sugar is a matter of moderation rather than a deal breaker."
When it comes down to it, Concannon says, consumers are much more concerned with taste, price, and total amount of sugar, with type of sweetener used falling further down the list. This could be key advice for manufacturers that are on the fence about the type of sweetener to use in a product.
However, consumer sentiment still matters for food companies as the consumer health trend grows, and sugar is a frequent target.
In its Food 2020 study, Ketchum identified this vocal health-centric group of consumers as Food e-Vangelists and has since insisted that companies listen up, saying "Consumers have the control and they are just beginning to exercise their power. Time will only intensify their scrutiny. No company, no brand, no ingredient or process can escape their pressures. It’s just a matter of time."
Making the switch — sometimes back and forth
Companies have found that despite the outcry for "healthier" sweeteners, the switch from HFCS to sucrose or other sweeteners may not be worth it, and companies even change back.
ConAgra switched out HFCS for sugar in Hunt’s ketchup in 2010, but customers complained about the change in flavor. The company then began producing both varieties to appease a wider range of consumer tastes.
"It seemed like this was something consumers wanted, but once we did it, demand just wasn't there," Lanie Friedman, Hunt's spokeswoman, told Reuters.
Pre-merger, Kraft was another company that flip-flopped between HFCS and sucrose for Capri Sun. After switching from HFCS to sucrose, Kraft raised prices of Capri Sun twice, but when sales volumes decreased, the company reduced prices, according to the HFCS report. Not long after, Capri Sun switched back to HFCS, only to announce a planned switch to sucrose yet again in February 2015.
PepsiCo switched between different sources of artificial sweeteners for Diet Pepsi due to consumers’ safety concerns about aspartame. The switch from aspartame to sucralose was met with backlash from consumers who took to social media to lament the change in taste.
The company’s diet soda sales saw a 6.6% decline in the U.S. in the four weeks ended Sept. 19, when the reformulated Diet Pepsi was being introduced nationwide, according to Morgan Stanley, citing Nielsen data. However, a Pepsi spokesperson told Business Insider that consumers enjoyed the taste and responded favorably to the aspartame-free formula in 75% of internal tests, and the company feels confident that consumers will come around to it.
Though sales for caloric sweeteners, including HFCS and sucrose, are on the decline, with sales falling 12% from 2000 to 2010, consumers are still far from losing their sweet tooth.