Food

China Erythritol Factory Dominates the World’s Sugar-Free Drinks

In 2020, five sugar factories in Shandong, China, produced 95% of the world's erythritol. The most important part of the sugar-free drink you drink comes from here.

This article was originally written by the Chinese media Outside the five rings (五环外) and translated by PandaYoo.com after it was licensed. Copyright belongs to the original author and it is forbidden to reprint without permission.

Author | Fan Tangtang
Editor | Che Moumou

Shandong: the birth of a Sugar King

In three words, let both men and women spend twice as much money for me. Tang Binsen, the founder of Genki Forest, is obviously a male CEO who is well versed in human nature. “Zero sugar, zero-calorie, zero fat”, just print these three words on the package, let everyone gladly choose the sparkling water on the shelf with a price of 5.50 yuan( about $1).

During the Singles Day promotion festival last year, Genki Forest directly overtook Coca-Cola and Pepsi to become the No. 1 carbonated drink sales list of Tmall and JD.com.

All this, in addition to Tang Binsen’s miraculous marketing campaigns, but also thanks to the great hero hidden in the bubble water-sugar substitute.

Despite the addition of only one word, sugar substitutes get rid of the biggest side effect of sugar: calories.

In contemporary society, everyone who has not given up his life is either losing weight or claiming to be losing weight. For a person who loses weight, sugar is quite a playboy. You know it’s not good for you to be with him, but you crave his sweetness and can’t quit him.

“Sugar substitute” is the perfect lover of your dreams, which not only allows you to enjoy a sweet relationship, but also does not run the risk of “accidentally getting fat”.

And the great hero behind this “sugar substitute” is not only the savior of countless people who lose weight, but also the road to financial freedom for Shandong entrepreneurs.

The most important sugar substitute in Genki Forest’s drinks is erythritol. By 2020, 95% of erythritol in the world is supplied by five factories, three of which are in Shandong: Binzhou Sanyuan Biotechnology Co., Ltd. (滨州三元生物), Dezhou Baolingbao(德州保龄宝) and Zhucheng Dongxiao(诸城东晓), respectively.

It can be said that Shandong province is a veritable sweet city in China (and no calories).

Shandong, the largest erythritol factory in the world

On the highway from Jinan to Yucheng, billboards on both sides of the road mark the city’s footnotes in a variety of colors: functional sugar.

This little-known small city, named after the ancient Chinese legend of Dayu’s flood control, was once again awarded the only title of “functional Sugar City in China” last year.

Sugar City Square in Yucheng, Shandong Province

The biological industry of Yucheng started in the 1990s. Liu Zongli, who worked as a technician in a cotton factory for many years in 1996, was appointed director of the first oil absorbent sheets factory in Yucheng. Because of the depression of the cotton market, there are only two ways for the new factory director: transform or go bankrupt.

At that time, an R & D achievement of the eighth five-year Plan of the Chinese Academy of Sciences, “oligosaccharides”, made the young factory director have an idea and chose to join this sweet business without hesitation. At the beginning of the second year, after more than a year’s conquest by researchers, China’s first oligosaccharide production line was completed and put into production. In October of the same year, Baolingbao Biological Development Co., Ltd. was established.

Despite it was still China in the 1990s, Director Liu had already mastered the concept of health marketing in the beverage market. In the second year of its establishment, the company and Robust, a well-known food brand at that time, launched a beverage with oligosaccharides as an additive and became very popular. This beverage has a fashionable name with the characteristics of the times: “Health Express”(健康快车).

“Health Express”(健康快车)

Since then, the development of Bao Lingbao has entered the fast lane, the company has partnered with Wa Haha, Xi Zhilang, Mengniu, Yili and other leading food brands in China, and became the only supplier of fructose syrup to Coca-Cola in China in 2004.

Today, Yucheng, a small city, in addition to the listed company Baolingbao, there are a number of functional sugar leading enterprises, such as Shandong Longli(山东龙力) and Shandong Futian(山东福田). The functional sugar sales here account for 75% of the country’s sales.

Zhang Anmin, secretary of the Yucheng Municipal CPC Committee, said proudly: “Yucheng’s functional sugar was invented at the same time as the two most advanced countries in the world: the United States and Japan.”

When Bao Lingbao launched its first popular oligosaccharide drink, the Health Express, Nie Zaijian had just registered a printing and dyeing factory in Binzhou, more than 200 kilometers from Yucheng. Until 2007, he faced the same problem that Liu Zongli faced at that time: how to escape from the home textile industry where the market has been saturated?

This time, his choice was also “fake sugar”.

During an inspection tour in Japan, Nie Zaijian came into contact with erythritol at the dinner table. The sweetness of this sugar substitute is not high, the important thing is that after entering the human body, it does not participate in sugar metabolism. Most of it is excreted out of the body with urine, with no heat and blood sugar changes, and even people with diabetes can eat it in moderation.

So he set his sights on this expensive sugar substitute. In 2009, he acquired Shandong Tianluyuan Biological Engineering Co., Ltd., which was on the verge of bankruptcy, and began to build a production line.

Schematic diagram of erythritol and compound sugar, source: Sanyuan prospectus

“Printing and dyeing are about how much the water temperature should be heated and how to adjust the pigments. When it comes to making sugar, it is to add what kind of fungus is added, how high the temperature is, and how long it takes to ferment to get the most sugar alcohol. The principle is very similar, but not quite the same.” Nie Zaijian describes the processing technology of erythritol in this way.

We should know that the original product of erythritol is corn, and as the main producing area of corn, Shandong undoubtedly has the natural advantage of doing sugar substitute business. Xiwang Group(西王集团), the largest corn starch sugar processing enterprise in China, is right located in Binzhou, Shandong Province.

But in the first few years, because the product conversion rate is too low, Sanyuan has been in a state of loss and can only rely on the home textile business to support the other business.

Until the last two years, the concept of sugar substitutes became popular, and erythritol became one of the most popular sugar substitutes. With the technological advantages accumulated over the years, the annual output of Sanyuan in 2020 has exceeded 100000 tons, and the gross profit margin has reached 42.16%.

Today, Nie Zaijian no longer needs to work hard to find demands: there are too many orders now.

“Now all the customers who come to our door, no matter how big the brand is, we can only promise half of the quantity they ask for.”

The road to success of these two companies is the epitome of countless sweetener factories in Shandong. When the traditional industry encountered challenges, they found another way to take a chance, and finally ushered in their own tuyere era.

Today, China is the world’s largest producer and exporter of synthetic sweeteners, while Shandong is undoubtedly China’s “fake sugar province”.

Iteration and evolution of sugar substitute

More than 100 years ago, chemist Constantine Fahlberg once had a big fight with the cook while having dinner at home. He thought the bread that day was too sweet, while the cook believed in his cooking and insisted that his sugar was just right.

Fahlberg was angry to find that the water was sweet, and when he sensed that something was wrong, he licked his finger again, only to find that he was sweet, too. The chemist immediately rushed back to the laboratory as if he had discovered a new world.

Then he did a strange thing: he tasted all the test tubes and instruments in the laboratory.

This is how the lucky Fahlberg discovered “saccharin”, that is, the first generation of sugar substitute. At that time, sugar production was not high and very expensive, yet many royal aristocrats developed diabetes because of excessive intake. There is no doubt that Fahlberg made a fortune with the invention of saccharin.

But since its invention, saccharin has been controversial and even banned for a time. But the market for sweeteners opened by saccharin began to grow. People are constantly looking for something that can perfectly replace the taste of sugar without bringing calories or side effects.

Coke has a nickname in China as “happy water for fat homebody “, while Diet Coke is called “not-that-happy water”. Despite it is also sweet, there is always a difference in feeling.

The sugar substitute used in Diet Coke is aspartame, an artificial sweetener. The latest research shows that this artificial sweetener may change intestinal flora and cause glucose intolerance.

Erythritol, which is widely used in various sugar-free drinks, is a more high-quality natural sweetener.

It is mainly produced in large quantities by microbial fermentation with starchy raw materials such as wheat or corn. Erythritol has relatively low sweetness, cool entrance, pure taste and no aftertaste.

Some sugar substituted beverages are popular in China. via Binzhou Sanyuan’s public prospectus

But the only disadvantage of erythritol is that it is expensive.

The cost and price of erythritol is about 20 yuan(about $3) per kilogram, its sweetness is only 70% of that of sucrose, while the sweetness of aspartame is 200 times that of sucrose, which means the cost of sugar substitute formula is almost negligible.

“Who is willing to spend so much money on such thing?” Nie Zaijian once thought that erythritol could only find customers overseas, and it was only used in medical products such as diabetes drugs on a small scale at home.

Unexpectedly, the new forms of consumption enterprises that have been hot in the Chinese market in the past two years have become the savior of Nie Zaijian.

Today, domestic income accounts for nearly 30% of Sanyuan`s total revenue. From 2017 to 2020, the compound growth rate of income of Sanyuan reached 86.35%, while the compound growth rate of net profit reached 92.72%.

And Bao Lingbao’s income soared in the first two quarters of 2020 because of the hot sales of Genki Forest.

Erythritol consumption by market (crimson is China, orange is USA, pink is Europe)

Tang Binsen, the founder of Genki Forest, once said directly: “We are the only beverage maker in China. The water in the bottle is more expensive than the bottle.”

Fortunately, today’s consumers are willing to pay for the price.

“Made in China” is no longer synonymous with cheapness. Young consumers are more willing to trust and encourage Chinese brands. Even it is just a kind of soft drink, they are still willing to pay for better taste and healthier “sugar”.

This has also contributed to the prosperity of Shandong Sugar substitute Factory.

When supply chain factories encounter new consumption

Once upon a time, eating sugar was a luxury because sugar was expensive, and diabetes was called a disease of wealth. Now, however, ordinary people are trying to find ways to eat healthier and burden-free “sugar”.

The explosion of Genki Forest is not due to the power of marketing, nor simply a new kind of “stupid tax”.

China’s young consumers are no longer satisfied with the most basic demand of “as long as they can use it, as long as they can eat it”. What they need is a brand with more quality and personality. They are no longer infatuated with the foreign names of products, but more attractive to “made in China”.

Behind the rise of domestic goods is the power of Chinese brands. The simple word “zero calorie sugar” is a demonstration of the formula “Chinese contract manufacturing industry chain + domestic consumption consciousness”.

China is not only a big corn planting country, but also a big corn processing country, but the corn processing industry has been in a tragic situation of overcapacity, insufficient operating rate and low profits for a long time. Now, these sugar factories in Shandong can seize new downstream opportunities and do deep processing industry chain, which can also promote their own industrial upgrading.

Yes, the “sugar substitute” factories in Shandong are making a fortune. On the other hand, we hope that more and more Chinese factories will be able to produce good goods and make a lot of money in the future.

Leave a Reply

%d bloggers like this: