HFCS to Sugar Switch – What does this really mean?

Andy Briscoe, President and CEO, Sugar Association

By Andy Briscoe, President & CEO, The Sugar Association

There is an old saying, what goes around comes around. In the 1980s total sugar deliveries slid from 10.5 M tons to under 8 M tons in 6 years. Beverages making the switch from sugar to high fructose corn syrup (HFCS) were in full swing. After taking action to implement an industry-wide, national sugar promotion program in 1986, sugar deliveries began a slow climb back up averaging a 1.9% growth over the next 10 years. In 2000 and 2001, sugar deliveries were just above 10 M tons.

However, with the increase in other competitive sweeteners, primarily artificials, sugar deliveries again drifted downward to around 9.75 M tons in 2003. Then the “natural” movement kicked in and helped move sugar deliveries back up to 10.1 M tons in 2006 and ultimately back to a high in 2008 of 10.5 M tons again … after 28 years.

Now the two leading sweeteners, of the 28 presently used in foods and beverages in the U.S., are sugar and HFCS. In 2008, sugar once again took the dominant position as the sweetener of choice with 38.8% market share. HFCS slid to 31.1%. Artificial sweeteners have an 18.0% share. For the purpose of this article, I’d like to focus on the change that has been underway for a few years – the movement by industrial manufacturers and consumers away from HFCS toward all natural sugar.

At the Sugar Association Board meeting in April 2003, Association staff provided a literature review of numerous published studies in which concerns with high levels of fructose were reported. Very little science had directly compared sugar and HFCS. However, what science was available highlights three health concerns with high, free-fructose concentrations:

1. It could contribute to an increase in triglycerides (blood fat);
2. Influence appetite control hormones leading to overeating; and
3. It contributes to malabsorption in the body. Since then, internal and external literature reviews reinforce these initial findings.

Even today, we continue to find limited science directly comparing sugar and HFCS. Yet, the media has picked up on the concerns over fructose, and this has ultimately led to consumer perceptions that HFCS is not healthy and certainly not natural. This negative consumer perception has been a key driver in getting major food and beverage manufacturers to choose sugar as their sweetener of choice.

The first official company to go public with the switch from HFCS back to sugar was Seattle-based Jones Soda in December 2006. As reported in the Wall Street Journal, “The move by Jones, which churns out Blue Bubble and Twisted Lime sodas, along with an energy drink … aims to capitalize on the bad publicity surrounding high-fructose corn syrup, which some scientists have linked to rising U.S. obesity rates.”

Sweetened sodas with sugar instead of HFCS “truly differentiates Jones and provides the consumer with a healthier alternative,” Peter van Stolk, the company’s president & chief executive said in announcing the switch. Next Ocean Spray moved back to sugar and in the last 3 years, over 100 products now profess “NO HIGH FRUCTOSE CORN SYRUP” or “NO HFCS” on the front of their packaging … as a marketing tool to capture customers’ attention.

Now several additional beverages have made the jump – Hansens Natural Soda, Snapple, and SoBe Lifewater, for example. Recently, as you know, Pepsi has been testing consumer support of Pepsi Throwback and Mountain Dew Throwback as well as the Pepsi Natural product. As of June 20, Pepsi has begun the process of deciding its next steps with sugar-based products based on test results of the Throwback campaigns. Announced in June 2009, the latest company to take action is Starbucks removing all HFCS from their food product line.

U.S. sugar deliveries to the beverage sector have gone from 228,000 tons in 2006 to 340,000 tons in 2008, a growth of 112,000 tons (49.1% growth). Over the last 7 years (2004-2009), HFCS deliveries have decreased 631,000 tons (-12.7%) while sugar deliveries have increased 996,000 tons (+10.4%).

Will it continue?

In 2004, when consumers were asked about sweeteners they recognized, HFCS was not among the top 6 mentioned. By 2008, consumer familiarity with HFCS had climbed to as high as 88%. Up to 63% of consumers said, if a product contained HFCS, they were less likely to purchase that product … which would support the continued movement away from HFCS.

The ethanol boom of 2008 also put upward pressure on the price of HFCS. It is now priced at $32.95 per 100-wt (Milling & Baking News 6/8/09). White sugar is priced at $34.25 per 100-wt., or a difference of $1.30 per 100-wt ($0.0011 per can). So for an individual 12 oz. beverage, the difference is minimal. This drive for renewable fuels is not going away, so we would have to assume the higher price of HFCS would support a continuance of the HFCS to sugar movement.

The Corn Refiners Association, which represents HFCS processors, is now investing $20M – $30M to improve the image of their product. After a year, they continue to fight an uphill battle. HFCS deliveries continue to decline having fallen another 57,000 tons (-2.8%) in the first three months of 2009. So the challenges continue for HFCS.

Bottom line, change will continue to occur in the sweetener marketplace. The trend for food and beverage makers to switch from HFCS to sugar seems to be continuing. However, USDA’s WASDE June report projects a substantial drop in sugar deliveries (-525,000 tons) in 2010, which was attributed to high sugar prices and the resultant move back to HFCS by some food manufacturers.

A Pepsi decision to maintain their Throwback products or Pepsi Natural would be a strong boost to the 3-year old movement from HFCS to sugar. So keep an eye on what Pepsi does after June 20 as a sign of what may or may not come next. And keep an eye on WASDE delivery reports to see how 2010 deliveries are projected in the coming months. Also keep an eye on the prices of sugar and HFCS. Interestingly, price has not been the driver in the recent switches. Taste and consumer preference rule the day. And if that’s the case, it would seem the trend from HFCS to sugar will continue.

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