Growing Energy
Food ingredients, however, remain Tate & Lyle's biggest slice of the cash pie, bringing in 80 percent of revenues. And Splenda was its first megasuccess. Sales last year totaled $254 million, and its profit margin was an impressive 48 percent. Although the patent on the formula has expired, Splenda is still protected by 35 other patents. Last May, the company sued a Chinese manufacturer and eight importers for patent infringement, and so far three defendants have settled out of court. Some artificial sweeteners have been hit by health scares. But many food-safety regulatory bodies have vetted sucralose. "The evidence is very robust that it poses no detrimental health risk," says Toni Steer, a nutritionist with Britain's Medical Research Council.
Tate & Lyle is also interested in probiotics, or foods that contain healthful bacteria; prebiotics, which stimulate the growth of natural disease-fighting bacteria in the gut; omega-3 oils, typically found in fatty fish, which may have health benefits; and dietary fiber. For example, CEO Ferguson says, there are clear fibers that could be added to bottled waters.
Last summer, it launched Tate & Lyle Ventures, a $45 million fund charged with backing innovations in functional foods and industrial biomaterials. So far, it's close to funding two out of the first 100 projects it has looked at. Tate & Lyle isn't alone in investing in food-and-health research. Many food companies, including the American Cargill and Switzerland's Nestlé, now have venture funds hunting for breakthrough foods.
Aficionados of unmolested foods may be wary of this trend, perhaps balking at the notion of putting fish oils in, say, granola. For example, the Whole Foods Market chain eschews overly processed foods and won't carry products sweetened with Splenda. But Steer cautions that it's a mistake to be "incredibly rigid about these things. We cannot shun functional foods that can help us have a more healthy diet." Modern lifestyles dictate that convenience and heat-and-eat foods are here to stay, she says, and "if we can improve them, why not?"
Tate & Lyle isn't abandoning sugar, however. For good reason: Analysts say that as the developing world's middle classes continue to grow, they're also likely to adopt the West's taste for sugary treats. And while the outlook for Tate & Lyle's sugar business in Europe is modest, that's mainly because of a change in the European Union's sugar price regime. Sales are still growing. Says Jeremy Batstone, an analyst at brokerage Charles Stanley & Co.: "I don't think Europe has got over its sugar addiction yet." Sweet words for a sugar company-even one that's betting on fatter profits from artificial sweeteners and more healthful foods.
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