3 Investments In Stevia/Sugar Blends To Mix In With Your Portfolio

Includes: SODA, STVF, UL
by: Henry Kawabe

There is little doubt that stevia continues to grow in favor as more people become aware of its many uses, and more countries around the globe continue to approve the sweet extract for both food and beverage products. The most recent country to approve stevia's use was Canada, giving its 9 million diabetics the ability to enjoy the much needed natural zero calorie sugar substitute. Interestingly though, the trend for stevia's future success seems to be more in stevia/sugar blends, which reduces the caloric counts to levels up to 50% without losing the sweet sugary flavor that the consumers demand. Many of the sugar companies now have sugar/stevia blends on market shelves, like Domino's sugar blend Domino Light, or Cargill's Truvia baking blend; and many manufacturers now have products containing stevia/sugar blends on grocers' shelves, like PepsiCo's (NYSE:PEP) Trop 50. Below are three companies that are adding stevia to their product lines or developing a better stevia product for the marketplace; and all three companies, along with respective investors, may find themselves benefiting from stevia in the future.

Unilever N.V. (NYSE:UN) and Unilever PLC. (NYSE:UL) combine to make up the giant consumer goods company based in the Netherlands and London. Unilever has extended its product line by adding stevia and stevia sugar blends to many of its beverage products as the company takes a serious approach to lowering the calorie content in its ready-to-drink beverages such as its Lipton brand teas. The company states that even though it has already reduced sugar levels in the teas, its goal is to continue to gradually lower the sugar levels by an additional 25% by the year 2020. It plans to achieve this by blending in zero calorie sugar substitutes, artificial sweeteners like aspartame, and natural sweeteners like stevia, while reducing, but not eliminating, the sugar. Unilever already uses a sugar/stevia blend in four of its low calorie varieties of 100% Natural Lipton iced teas, and has launched a sugar/stevia blend for its version of Lipton iced tea in Australia with 30% less sugar-and in Chile it launched its Feel Green iced tea also with 30% less sugar. Unilever continues to adjust its sugar levels in other products by using a sugar/stevia blend which now can now be found in its Knorr, Hellman's, and Amora lines in Europe, which feature a sugar/stevia blend ketchup touting 40% less sugar (though Hellman's version boasts 50% less sugar).

Unilever N.V. has a market cap of $109 billion and Unilever PLC has a $110 billion market cap. Though both companies have separate identities and separate ticker symbols, both companies act as one entity with mutual sharing of brands, technology, and equal dividends. The companies share in some of the most recognizable brands on shelves around the world. Each day roughly 2 billion people use one of Unilever's brands including Lipton teas, Dove soaps, Axe, Vaseline, Ben & Jerry's, Hellman's, and Knorr just to name a few. For the first six months of the year, the stocks seemed to be in the doldrums, hitting their 52-week lows of less than $31. However, in August the stocks began to strengthen, partly due to the Unilever North American sale of its P.F. Chang s Home Menu and Bertolli frozen meals in a deal worth $265 million, and the reorganizing of its United Kingdom activities. Unilever stocks have also been helped by its strong presence in the emerging markets, which are growing at a rate of 11.4%. In mid-December Credit Suisse upgraded shares of Unilever from an underperform to a neutral, while analysts at Zacks, in a research note to investors on October 30th 2012, reiterated a neutral rating on shares with a $38.00 price target. Separately UBS issued a buy rating and raised its target price from €30.00 to €32.00, or $42.23 per share. Unilever announced a quarterly interim dividend for Q3 2012 at $0.32 per share, payable to shareholders registered at close of business on November 9, 2012. It pleases me that Unilever has added stevia to its product line, and I think that it can only enhance its customer base. I look at the stock to have potential to move upward-not significantly, but enough to make it worth a long term hold.

SodaStream International Ltd (NASDAQ:SODA), based out of Israel, develops, manufactures, and markets its home beverage carbonation systems that allow consumers to instantly convert tap water into carbonated soft drinks and sparkling waters. For a small company that went public in November of 2010, its product appears to be catching on with the global consumer as it has posted double-digit sales gains for 13 straight quarters. The company is selling more than 10,000 soda machines a day and can be found in more than 60,000 stores in 45 countries, and appears to be growing as the company plans expansion in 2013 into India, Mexico, China, and Greece. There are solid reasons for the success of SodaStream, and the most important is the cost. The consumer can save a lot of money by using SodaStream: The exchangeable carbon dioxide canisters cost $15.00 and make the equivalent of 170- 12oz cans of soda; add in the syrup and the total cost is about $0.25 per glass. Another reason for the success of SodaStream is that the syrups have 66% less sugar, sodium, and calories than a typical carbonated beverage, and there's little waste since the bottles are reusable. In March 2012 SodaStream introduced 12 new lower calorie syrup flavors including pink grapefruit, peach-pear, orange, lemon-lime, cranberry-apple, all sweetened with stevia. According to Daniel Birnbaum, SodaStream's CEO, "Diet flavors sweetened naturally with stevia are another key milestone in our commitment to provide healthier alternatives to pre-packaged carbonated drinks. Consumers can now make a smarter beverage choice, not only for the environment and their wallet, but also for the wellness of their family. We remain committed to continue empowering consumers with better, more innovative products."

SodaStream, with a market cap of $878.41 million, has had an excellent run-up of 33% YTD. In February the stock hit a high of $48.13 shortly after announcing its partnership with Kraft Foods (KRFT) to add Crystal Light and Country Time Lemonade to its SodaStream line; and in July it announced the addition of Kraft's Kool-Aid brand as well. In November the company announced it entered into a licensing agreement with the Campbell Soup Company (NYSE:CPB) to add V8 Splash and V8 V-Fusion brands for the SodaStream line. According to I/B/E/S Estimates, analysts are expecting the company to report revenue of $415 million and net income of $48 million for fiscal 2012, an increase of roughly 46% over 2011, which saw revenue of $289.0 million. Currently Zacks has a neutral rating on SodaStream, but it added that the company has bright prospects going forward: "Solid demand, expanding strategic partnerships like with Kraft Foods Group, Inc., enhanced marketing activities, regular product innovations, accretive acquisitions and successful strategic investments will drive the stock going forward." Zacks also added that the analysts could not rule out an upgrade in the near term. I agree with Zacks assessment and I see SodaStream as more than a novelty or fad that will eventually end up buried in the cupboard. I think SodaStream, like its new stevia based syrups, is here to stay and I think the stock has good potential to continue to grow.

STEVIA FIRST CORP (OTCQB:STVF), a small development-phase agricultural biotechnology company out of Yuba City, California, is one of the few companies that plans to actually grow stevia in the U.S. However, the company appears to be taking a more calculated approach in developing its business. Today's stevia plants, though far superior than strains just a few years ago, are still in early stages of development, and growers and producers are working diligently to create better tasting and more consistent plants while still rushing its product to market to meet market demands. Stevia First has a different approach as the company appears to have realized that the demand for stevia will continue to grow globally. Even though it could plant stevia today on an industrial scale on its leased 1000 acres in California's central valley, the company believes that the best business approach is to develop a product that is superior to other stevia products on the market, which will then result in a future competitive edge. Interestingly, not only does Stevia First plan to develop a superior product, it just may be able to do so at a much lower cost than its competitors. The stevia leaves themself actually contain a small amount of the sweet steviol glycosides, and 70% of the leaf production costs are eaten up in growing the plant, then removing and purifying the steviol glycosides to make the sweet rebaudioside A extract. To address this, Stevia First has licensed a fermentation process from Vineland Research and Innovation Centre of Ontario, Canada that would eliminate such costly leaf production. The process will dramatically cut the costs of the production and purifying process and will spell a major competitive edge if proven so. Agriculture and Agri-Food Canada scientists working with Vineland Research were able to map the biochemical pathways of the steviol glycosides, which gave them the knowledge of the characteristics of these pathways enabling them to modify the steviol glycosides and have a controlled end product. Doing this, they were able to convert low-cost plant materials into sweet steviol glycosides, diminishing or perhaps bypassing the need for growing the entire stevia plant. Thus, if Stevia First is correct it will be able to produce a super high- grade stevia that would be consistent from batch to batch, and at a much lower cost than its competitors.

Stevia First Corp is a nano-cap early stage development-phase company with a market cap of $17.23 million, and at this time it has no sales or earnings; and its stock, as with most developmental companies, moves in high percentages up or down depending on news or lack of news. What it has that may set it apart from other small developing companies is a promising fermentation technology focused one of the hottest commodities on the market today, stevia. If Stevia First can develop the fermentation process on an industrial scale there is a good chance that this company will have a solid chance of successfully bringing its product to market, and perhaps become one of the leaders in stevia production and sales. And if that begins to happen, I would expect one of the larger producers or food manufacturers to look at Stevia First as a possible acquisition. Stevia First closed on Wednesday, January 2nd at $0.345 per share. It has seen its stock skyrocket to $3.28 per share early in 2012 on positive news, only to find it come back down to earth. I think that Stevia First Corp's stock has, at this time, a good entry price, and I look for the company to grow and the stock to rise in 2013.

Stevia continues to grow, and with good reason. 10% of the world's population is now obese, and 350 million people suffer from diabetes. I think that as more people recognize how cutting down on sugars will lower their risk of becoming obese or diabetic, and that stevia can play a major role in lowering their sugar consumption, companies like Unilever, Soda Stream, and Stevia First can find their profits climbing as the people switch to consuming healthier and less sugar-laced products. I think the sugar/stevia blend is the perfect mix for both consumers and investors to see their health and profits rise. The companies offered here appear to have good current-level entries for various levels of risk. But I caution: Nano-cap stocks, like Stevia First, can be volatile. They offer huge upside potential and corresponding downside risks. Interested investors are advised to perform additional research to determine which, if any, of these fit their long-term goals.

Disclosure: I am long OTCQB:STVF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.