September 22, 2005

Sucralose

It seems Wal-Mart has been selling Splenda -- repackaged as Altern since August. The maker of Splenda, Tate & Lyle, realized that Wal-Mart's product, supplied by an as yet unknown third party, came from its own Alabama factory. This is only a problem because the third party probably doesn't have the right to resell to Wal-Mart. Uh, oh:

Analysts pointed out that the big worry was that if Wal-Mart, the world's largest retailer, could source non-Tate sucralose regardless of any legal challenges to that source based on Tate's patents, then food and drink makers would be able to buy cheaper sucralose.

Wal-Mart started to test market its own-label version of sucralose, called Altern, in early August in two of its U.S. stores, priced at a 30 percent discount to the Splenda brand sucralose sold by Tate & Lyle and McNeil.

Tate immediately launched an enquiry and identified the sucralose as coming from its Alabama plant, the only factory in the world that produces the sweetener.

Tate is responsible for sales of the Splenda brand to food and drink makers, while McNeil controls sales to retailers.

The Telegraph had previously reported:
Oh sugar! What's that appearing on the shelves at the mighty Wal-Mart? Why, it's Altern - Splenda by any other name, but it tastes just as sweet. It is only three quarters of the price as well, so Tate & Lyle is experiencing a nasty sugar rush about the whole thing.

No one is really sure where Altern has come from. It is sucralose, which is exactly what Splenda is, but the product is so hedged about with patents that Tate & Lyle believes no one else can get anywhere near it. Either Wal-Mart has been buying the stuff from a manufacturer somewhere in China, or it has been sold it by someone who Tate & Lyle or partner McNeil has supplied.

It was supposed to be a China link, to avoid patent rights, but...:
"It's very easy to produce in a laboratory but very hard to manufacture," she said, adding that she was very confident in the company's patent protection. "We've patented every process around Splenda," she said.

"There are seven rings of protection around it." These "rings" include the brand's strong image as well as its patents. She added that Wal-Mart, which could not be reached for comment yesterday, had removed Altern from its shelves.

Goldman Sachs, however, believes that the commoditising of Splenda is only a matter of time. Wal-Mart's Altern, which was priced at 24pc below Splenda, must either have come from a manufacturer other than Tate & Lyle or McNeil or must have been supplied by an intermediary who had received the product from Tate & Lyle or McNeil. Either way, the consequences for the company are alarming.

According to a research note from the investment bank, it has established contact with "a number of Chinese manufacturers that do not appear to be affiliated with Tate & Lyle and are willing to offer commercial quantities of sucralose, albeit on a modest scale".

What were Wal-Mart vendors thinking??? Perhaps they were told that a new way of producing sucralose had been devised, since it's the process, not the substance, under patent:
The analysts also pointed out that the matter and composition patents for the substance have already expired - and generic manufacturers may be able to make use of the expiry of two patents, one in 2006 and one in 2009.

Posted by Kevin on September, 22 2005 at 01:52 PM