Two domestic erythritol producers have contradicting erythritol sales performance in H1 2013

According to CCM’s latest newsletter, Sweeteners China News 1310, Two Chinese erythritol producers, namely Baolingbao Biology Co., Ltd. (Baolingbao, whose production capacity of erythritol is 4,000t/a in China) and Shandong Binzhou Sanyuan Biotechnology Co., Ltd. (Binzhou Sanyuan, production capacity of erythritol is 5,000t/a in 2013), showed contradicting performance in erythritol sales in H1 2013. It is worth mentioning that Baolingbao is a leading functional sugar producer in China having several functional sugar products, while the erythritol business of Binzhou Sanyuan's contributed the total revenue for the company.

Data from the 2013 semi-annual report of Baolingbao revealed that its erythritol business performed poorly in H1 2013. The gross profit of Baolingbao's erythritol reached as high as USD0.81 million in H1 2012, but it decreased by 71% YoY to USD0.23 million in H1 2013. Baolingbao expressed that the poor performance of its erythritol was mainly attributed to the negative effect of the RMB appreciation and the demand decrease from several foreign countries. The appreciation of RMB caused the lower RMB export price (relative to the fixed dollar price for erythritol), reducing the gross profit margin. The gross profit margin of the company's sugar alcohol business decreased to 7.66% in H1 2013 from 15.87% in H1 2012. Besides, Baolingbao also indicated that some political factors caused decreases in its export volume. For example, the export volume to Japan and Philippines decreased in H1 2013 compared to H1 2012, due to the political disputes between China and these two countries.

Baolingbao could not explain well the poorer sales performance of its erythritol in comparison to that of Binzhou Sanyuan's. According to the 2013 semi-annual report of Binzhou Sanyuan, the revenue of the company's erythritol increased to USD1.37 million in H1 2013, with a YoY up of 36.10%. Binzhou Sanyuan was honest to express that the RMB appreciation also brought negative effects on its product's export price in H1 2013 but the company focused on cost reduction and product quality. For example, the company actively established a cooperation with the well known Chinese research institutions to improve its R&D ability and hence its revenue growth. The year-on-year increase rate of erythritol's cost of sales in H1 2013 was just 16.93%, far lower than the one of its revenue at the same time. And the gross profit margin of erythritol of Binzhou Sanyuan also increased to 17.89% in H1 2013.

It is crucial that Baolingbao invest in the R&D in line with Binzhou Sanyuan. As a producer exclusively engaging in the production of erythritol, Binzhou Sanyuan devotes its energy to the research and sales of its erythritol. On the contrary, due to its diverse product range, Baolingbao cannot focus entirely on erythritol's sales. As a result, under the adverse conditions such as the RMB appreciation in H1 2013, Binzhou Sanyuan could depend on product's high quality to attract more downstream customers from overseas market, enjoying more profit compared to the same period of 2012.

 

For domestic erythritol producers, the objective conditions are the same. Subjective factors, such as more investment in quality improvement and market exploration, will become the determinants to obtain good performance, especially under the bad objective conditions. As an export-oriented industry, the export volume of China's erythritol decreased sharply, from over 2,800 tonnes in the first five months of 2012 to just about 1,900 tonnes in the same period of 2013. Under the negative export conditions, domestic erythritol producers should have a positive attitude to solve their problems.

Table of Contents of Sweeteners China News 1310:

H1 2013 still tough for domestic crystalline glucose industry

Starch sugar producers selling more corn starch threatens domestic corn starch industry

Functional oligosaccharide business of three oligosaccharide giants: challenges hidden behind good performance

Two domestic erythritol producers have contradicting erythritol sales performance in H1 2013

Guilin Layn turns loss into gain in H1 2013

PureCircle: sales performance good while suffering continous losses in FY2013

Export overview of some sweeteners and raw materials in China, August 2013

YoY growth rate of export volume of China's sucralose drops sharply in H1 2013

China's aspartame export not as optimistic as it showed under independent HS code

China's mannitol export: both volume and price increase in Jan. -Aug. 2013

International and domestic factors together impact China's sucrose price in Q4 2013

Ex-factory prices of sweeteners in China in September 2013

Wanfu Biotechnology continues to suffer losses in H1 2013

Zhaoqing Coruscate's starch syrup project starts to build in Sept. 2013

Guangxi government introduces policies to promote health development of its sucrose industry

Sweeteners China News, issued by CCM on 5^th every month, offers timely update and close follow-up of market and company dynamics based on China’s sweeteners industry. It also releases the latest information on raw material supply, price update, import & export analysis as well as consumption trend & competitiveness.

About CCM

CCM is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals, CCM offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis, and Consultancy Service. 

For more information, please visit http://www.cnchemicals.com.

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Baolingbao competes with QHT by implementing low-price strategy on FOS sales

Baolingbao Biology Co., Ltd. (Baolingbao), a leading manufacturer of functional sugar in China that entered the domestic fructooligosaccharide (FOS) market in 2011. The company implemented low-price strategy to sell its FOS product, which can increase its product's competitiveness to compete with the one of Quantum Hi-Tech (China) Biological Co., Ltd. (QHT), a major FOS manufacturer in China, according to Sweetener China News issued by CCM in September.

As a new FOS manufacturer in China, Baolingbao tried its best to increase the sales volume of its FOS in recent two years (Note: Baolingbao invested USD24.35 million to establish its FOS project with a capacity of 10,000 t/a in 2009, and launched its FOS in Oct. 2010). Thanks to the low-price strategy, the sales volume of FOS of Baolingbao witnessed a sharp increase in recent two years, which brought more profit to the company. For example, the operating profit of its FOS business was USD0.97 million in H1 2013, increasing by 1355% compared with that in H1 2011.

Expressed by QHT, due to several factors, including low-price strategy of Baolingbao, the revenue of its FOS business showed a slight decline, from USD11.06 million in H1 2012 to USD10.81 million in H1 2013. But the company also indicated that it would rather keep the FOS price unchanged with high quality to attract new customers and retain old customers than adopt the low-price strategy. Based on this, the company tried its best to not decline the FOS price in H1 2013, which retained the gross profit margin at a relatively high level. The company believed that its idea was right. Under the impact of low-price strategy of Baolingbao, most of its downstream customers still chose to continue the cooperations with QHT. In addition, according to QHT, new customers such as Dumex, an international infants' and children's nutrition company, investigated QHT to show their willingness to cooperate.

Maybe the low-price strategy is a good way for a company to enjoy good sales performance in a short term, but it is not helpful to support the company's long-term development. And it is the same with the industry. Take Baolingbao for example. Despite the increase in their products' sales volume, the strategy also eroded the gross profit margin of FOS of Baolingbao. Data from the 2013 semi-annual report of the company showed that its functional oligosaccharide business which included FOS and isomalto-oligosaccharide (IMO), was just 24.69% in H1 2013, which was much lower than the one of QHT. The gross profit margin of FOS of QHT was as high as 46.29% in the same period. For domestic FOS manufacturers, it is believed that the correct method is to cultivate a larger downstream consumption market, to avoid reduction of their profit when confronted with the low-price strategy implemented by rivals. Actually, not only QHT but also Baolingbao showed their confidence in the good prospect of the domestic FOS industry. Because of the low consumption volume in domestic downstream industries and its health care effect, FOS will be added by more and more downstream enterprises in China to their products.

In H1 2013, the Chinese government has released a series of policies to strengthen the management on the quality standards of home-made dairy products, especially the home-made infant formula products, in order to strengthen the confidence of the Chinese public in home-made infant formula, as well as strengthen the competitiveness of home-made infant formula (for more information please refer to Sweeteners China News Vol.3 July Issue, p15, Strong management on infant formula may improve indirectly consumption of FOS in China). If the consumption volume of home-made infant formula continues to increase, it can bring more opportunities to domestic FOS producers.

It is suggested that domestic FOS manufacturers should grasp the opportunities to explore the domestic dairy industry, rather than snatch the existing market share from other FOS manufacturers in China.

Table of Contents of Sweeteners China News 1309:

HFCS and corn starch expected to get listed as futures in China

Operating rate of China's starch sugar industry is at low level in July -Aug. 2013

Profitability of China's acesulfame-K producers is at low level

Zhaoqing Coruscate cooperates with SCUT on research on starch sugar

Luzhou Bio-chem suffers net loss in H1 2013

China Starch: proportion of starch sugar in total revenue continues to increase in H1 2013

GLG: revenue of stevia sweetener business witnesses dramatic decrease in Q2 2013

Net profit of JK Sucralose sees sharp increase in H1 2013

Export overview of some sweeteners and raw materials in China, July 2013

Shanxi exports more cyclamate though national export volume decreases in Jan. -July 2013

Export volume of China's saccharin increases by 3.33% YoY in Jan. -July 2013

Overall condition of domestic sucrose industry not as good as it seems

Baolingbao competes with QHT by implementing low-price strategy on FOS sales

Ex-factory prices of sweeteners in China in August 2013

Changzhou Guanghui plans to balance production and sales of aspartame in next five years

Chenguang Biotech: stevia sweetener project expected to come into use in H2 2013

CSA announces plan to prevent unreasonable expansion of raw sugar processing capacity

Shandong Futaste obtains certificate on low-carbon xylitol

Sucrose revenue of COFCO Tunhe accounts for large proportion while contributes little

Sweeteners China News, issued by CCM on 5^th every month, offers timely update and close follow-up of market and company dynamics based on China’s sweeteners industry. It also releases the latest information on raw material supply, price update, import & export analysis as well as consumption trend & competitiveness.

About CCM

CCM is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals, CCM offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis, and Consultancy Service. 

For more information, please visit http://www.cnchemicals.com.

Guangzhou CCM Information Science & Technology Co., Ltd.
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Tel: 86-20-37616606

Email: econtact@cnchemicals.com

Baolingbao Prepares to Open Online Shop of IMO End Product

According to CCM International's investigation on 22 June 2012 to Baolingbao Biology Co., Ltd. (Baolingbao), the largest isomalto-oligosaccharide (IMO) producer in China, the company is preparing to open an online shop on tmall.com, one main large business-to-consumer (B2C) e-commerce platform belonging to Alibaba Group in China, which aims at promoting its brand and an end product of IMO, also a health care product called "Shuang Qi Run Sheng" (SQRS). However, Baolingbao expressed that the specific launch date and the price have not been determined, according to CCM’s July issue of Sweeteners China News.

It is predicted that this online shop on tmall.com may help the selling and popularity of Baolingbao's SQRS in the future. According to Baolingbao, the company's opening an online shop on tmall.com is to help the brand promotion of SQRS, which may attract customers to buy the company's products in entity selling shops, while traditional sales channels will still be dominant , such as drug stores and supermarkets. Additionally, Baolingbao's gross margin of IMO decreased obviously from 2008 to 2010, so the SQRS may become a potential new profit growth point for the company's IMO.

 

In fact, Baolingbao has put efforts to promote its SQRS in the past few years. For example, Baolingbao opened an online shop on taobao.com, the largest consumer-to-consumer (C2C) e-commerce platform in China also belonging to Alibaba Group, to promote its brand and IMO in 2009. However, since the company hasn't received the end product selling license in China until 2012, it did not sell SQRS before 2012. 

There are two key reasons attracting Baolingbao to open online shop to sell its product on tmall.com.

 

Firstly, as the Internet has developed fast and online shopping has been accepted by more and more Chinese people over the past few years, Baolingbao hopes to promote its end product of IMO through online shop as a marketing strategy. In fact, according to China Internet Network Information Center (CINIC), the number of Chinese Internet users reached about 513 million by the end of 2011, and about 56 million were new users this year. Besides, in line with Alibaba Group, tmall.com has ever attracted 55 million daily visits before. And because of such a large number of Internet users in China, the company chooses network media for marketing.

 

Secondly, the rapid growth of Chinese e-commerce transactions also attracts Baolingbao to open this online shop. The company expressed that it is exploring various sales channels for its end product of IMO in China, and Internet sale may become a new important sales channel for the product in the future. As a matter of fact, with the improved living standards and the transformation of consumption pattern of Chinese people, more and more Chinese people prefer shopping online. Moreover, Chinese e-commerce has enjoyed a rapid growth over the past few years. For example, Chinese e-commerce transactions reached about USD943.3 billion in 2011, increasing by 28.8% over 2010, according to CCID Consulting Co., Ltd., a consulting company in China.

 

It's worth noting that many sweetener producers, including GLG Life Tech Corporation, Xiwang Sugar Holdings Company Limited and Shandong Futaste Technology Group Co., Ltd., etc., have opened online shops for their end products of non-calorie sweeteners in China during the past few years. It is observed that Chinese sweetener producers are tend to increasingly focus on the end products with high gross margin and diversify their sales channels, such as network marketing. For example, GLG Life Tech Corporation has opened an online shop on taobao.com to promote its tabletop sweeteners (zero-calorie one containing stevia sweetener only and low-calorie one containing stevia sweetener and sucrose) and other products in Jan. 2012.

Source: Sweeteners China News 1207

http://www.cnchemicals.com/Newsletter/NewsletterDetail_190.html

Content of Sweeteners China News 1207:

China imported 254,046 tonnes of sucrose in May 2012

Industrial standard for L-arabinose launched

National HFCS summit forum to held in Beijing

JK Sucralose held meeting on implementation of Food Safety Law

Changzhou Niutang awarded as advanced enterprise in Jiangsu

China's import volume of corn increases by seventyfold in Jan.-May 2012

Tight supply of domestic sucralose in June 2012

Erythritol industry develops smoothly in H1 2012

Government launched 12th Five-Year Plan for National Food Safety Standard

Domestic crystallized glucose performs poorly in H1 2012

… …

If you are interested in CCM International’s July issue of Sweeteners China News, please do not hesitate to contact us by +86-20-37616606, or email us at econtact@cnchemicals.com.

Sweeteners China News is a monthly newsletter published by CCM International Limited. Based on China market, CCM offers timely update and close follow up of China’s various kind of sweeteners market dynamics, analyze the market data and trends, Major columns include market dynamic, company dynamic, raw material supply, price update, import & export analysis, Consumption Trend & Competitiveness.

About CCM

CCM is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals. CCM offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis all through its new proprietary product ValoTracer.

For more information, please visit http://www.cnchemicals.com.

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Tel: 86-20-37616606

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Source: http://www.cnchemicals.com/PressRoom/PressRoomDetail_w_1130.html

Erythritol industry in China to Keep Growing in the Future

Erythritol industry in China will keep on developing in the future, according to CCM’s Sweeterner China News.

Baolingbao Biology Co., Ltd. (Baolingbao), a leading Chinese producer of starch-based products and food ingredients, has been expanding its erythritol capacity, and the total capacity will reach 4,000t/a by the end of August 2011.

Baolingbao believes that the erythritol industry will develop well in the future and the demand for erythritol will also increase. Moreover, since the overseas consumption is more than the domestic one now, with the increasing overseas demand for erythritol, the domestic erythritol industry will keep on developing.

There were mainly five active erythritol producers in China by the end of 2010, with total capacity and output of 18,500t/a and 4,780 tonnes in 2010 respectively. The average operating rate of them is 25.84%, about 11% less than that of 2009. From 2006 to 2010, the capacity of erythritol had grown rapidly, while the growth of output had fallen behind. Besides, there were four producers, namely Zibo Zhongshi Green Biotech Co., Ltd., Shandong Futaste Pharmaceutical Co., Ltd., Shandong Binzhou Sanyuan Biotechnology Co., Ltd., O'Laughlin Industries Co., Ltd., using glucose to produce erythritol in order to improve the production efficiency, while Baolingbao uses corn starch in its erythritol production, which is with lower cost compared with that of using glucose.

Moreover, in 2010, among the five main active erythritol producers, four are concentrated in Shandong Province; only one is located in Tianjin City. Because erythritol is a kind of sugar alcohol and the sugar alcohol industry develops well in Shandong, most of the erythritol producers choose to be located in Shandong.

All in all, it can be predicted that the erythritol industry in China will keep on developing in the future based on the facts above.

For more information about Sweeterner China News, please feel free to contact us at econtact@cnchemicals.com

 (Guangzhou China, September 27, 2011)

About CCM

CCM is dedicated to market research in China, Asia-Pacific Rim and global market. With a staff of more than 150 dedicated highly-educated professionals. CCM offers Market Data, Analysis, Reports, Newsletters, Buyer-Trader Information, Import/Export Analysis all through its new proprietary product ValoTracer.

CCM International Ltd.
Guangzhou CCM Information Science & Technology Co., Ltd.
17th Floor, Huihua Commercial & Trade Mansion, No.80 Xianlie Zhong Road, Guangzhou 510070, China