The Zhitong Finance App learned that Huaan Securities released a research report stating that the development of global sweetener products is constantly being iteratively upgraded around “functionality” and “cost performance.” In the future, functional sugar substitutes with high added value will show a differentiated development trend: on the one hand, new sugar substitutes will gradually open up the market due to their irreplaceable “functionality”, and will show the characteristics of “small base and fast growth rate” as the domestic market gradually liberalizes; on the other hand, mature products will benefit from the trend of sugar reduction, and the “cost performance” advantage will become more prominent, and the market penetration rate will continue to increase, and still maintain high market demand. The process of the new functional sugar substitute market from 0-1 is expected to bring investment opportunities in the industrial chain.

The bank believes that new products, represented by alloxone sugar, will bring a considerable potential increase in demand after approval in China and Europe. At the same time, mature products using sorbitol and maltitol as sugar substitutes will continue to grow rapidly under the trend of sugar reduction due to the long development period.

The views of Huaan Securities are as follows:

Growth products have outstanding additional functionality, and improved penetration rates accelerate market expansion

Products with high functional added value in the early stages of commercialization include sorbitol, maltitol, and allodonose. Crystalline sorbitol is on the rise. The powder has unique tablet pressing properties. As downstream penetration increases, the market is expected to maintain a high growth rate of expansion. Crystallized maltitol has a concentrated flavor, making it the best solution for chocolate to reduce sugar, and the rise of downstream sugar-free dark recipes has boosted the volume of products. Allodonose is developing rapidly in the US market. Europe and China are already in the process of approval. Although there is a lot of production capacity under construction, it is expected that leading companies that have formed stable shipments will first enjoy domestic market dividends based on their industrial experience. At the same time, policy approval will also accelerate the establishment of domestic downstream brands. Demand for crystallized sorbitol, crystallized maltitol, and allodonose is expected to be 797,000 tons, 270,000 tons, and 66,000 tons respectively in 2026, and the CAGR will be 39.4%, 31.4%, and 40.7%, respectively.

The supply and demand for traditional mature products is gradually stabilizing, and cost reduction, efficiency and differentiated services have become the main directions

Functional sugar substitute products that have experienced a period of rapid development and are relatively mature in the domestic market mainly include erythritol, xylitol, etc. Among them, xylitol has experienced many years of competition and elimination, and has transformed from a high-value-added industry to a traditional industry. Leading companies stabilize their market share at low cost to bind major downstream customers to increase growth. Erythritol is experiencing a stage of intense competition with oversupply, but various stable brands have been formed downstream, and the penetration rate is still growing. It is expected that after the industry clears up, the market growth rate and pattern will gradually stabilize. Leading companies will increase their market share through cost advantages and strengthen their binding with major customers through differentiated services. Demand for erythritol and crystallized xylitol is expected to be 393,000 tons and 167,000 tons respectively in 2026, with CAGR of 22.9% and 6.3% respectively from 2021 to 2026.

Commercial high-potential products focus on safety and health, and may become mainstream in the next generation

Currently, functional sugar substitutes with good commercial prospects include sugar cane polyphenols, somatose protein, honey polyphenols, and edvanthin. Sugar cane polyphenols and honey polyphenols come from natural extracts. They are naturally safe and have a variety of health benefits. Soma sweet protein is a protein that is absorbed and broken down by the human body into amino acids, and does not cause blood sugar fluctuations. As restrictions on the raw material side are broken through, profit margins will gradually expand, and it may become the next new sugar generation. Edwin is a new generation of artificial sugar substitutes. It has outstanding performance and safety advantages, and may become the next mainstream high-ratio sugar ratio.

Investment advice:

Functional sugar substitutes mostly involve fermentation processes. The upstream mostly uses corn as a raw material. Related companies generally lay out various products and extend them upstream to increase cost reduction space and market share. The Zhoushan project of Huakang Co., Ltd. has achieved a multi-industrial chain layout. Based on the advantages of the original crystallized sorbitol and xylitol products, it broadens the product matrix and strengthens the advantages of the entire industry chain: Bailong Chuangyuan and Bowling Bao are leading aloxone sugar companies, and the opening up of domestic and European alloone sugar markets in the future will bring strong growth impetus. According to functional sugar substitute products, sorbitol and maltitol suggest focusing on Huakang Co., Ltd. (605077.SH), allodonose suggests focusing on Bailong Chuangyuan (605016.SH) and Jinhe Industrial (002597.SZ), and xeretol suggests focusing on Bowling Bao (002286.SZ) and Sanyuan Biotech (301206.SZ).

Risk warning: Market space estimation results are biased due to factors such as market development falling short of expectations; risk of changes in the development and application of new technology; risk of product safety and quality control; risk of large fluctuations in product prices.