China Securities Co.,Ltd.: From "sugar-reduction narrative" to "supply clearing" opportunities in functional sugars and sugar substitutes lie in individual varieties

China Securities Co.,Ltd. released a research report stating that opportunities in the functional sugars and sugar substitutes industry lie more in the supply landscape and cyclical position of individual varieties. For high-intensity sweeteners, look at the competitive landscapeacesulfame potassium is controlled by two leading players with pricing power, while sucralose is still bottoming out in a second dip; for bulk sweeteners, look at capacity clearingerythritol capacity exceeds demand by nearly double, and although allulose has been approved, it is "well-received but not well-sold" due to the lack of a liquid form; for prebiotics and dietary fiber, look at product structureHMOs grow fastest, and resistant dextrin has the strongest profitability. China Securities Co.,Ltd.'s main views are as follows: I. Industry Framework and A-Share Map The industry is divided into three major segments by sweetness and functional attributes: 7 types of high-intensity sweeteners, 9 types of bulk sweeteners, and 8 types of prebiotics and soluble dietary fiber, with growth increasing in that order. The domestic regulatory system classifies the same "sugar" into four regulatory categories: GB2760 food additives, GB14880 nutritional fortifiers, new food raw materials, and ordinary foods. The four categories determine which scenarios a product can be used in, the maximum addition levels, and labeling requirements. Policy, consumption, and supply factors jointly drive the industry from "zero-calorie substitution" toward "functional upgrading." The business purity of the 7 A-share companies varies greatly: Shandong Bailong Chuangyuan Bio-Tech and Shandong Sanyuan Biotechnology have related revenue shares of 97.51% and 96.37%, respectively; Anhui Jinhe Industrial's food additives account for only 44.48%; Nantong Acetic Acid Chemical mainly produces preservatives and strictly speaking does not belong to the sweetener track. II. High-Intensity Sweeteners: Synthetics Look at the Cycle, Naturals Look at Upgrading The 7 varieties diverge between synthetic and natural. On the synthetic side: Jinhe accounts for about 37% of sucralose, and with new capacity in 2026 combined with weak demand, prices are bottoming out for a second time; acesulfame potassium is held about 95% combined by Jinhe and Nantong Acetic Acid Chemical, making it the variety with the best landscape, but Nantong Acetic Acid Chemical's capacity utilization rate is only 57.9%; aspartame is suppressed by the IARC 2B rating, and cyclamate is affected by the U.S. ban in 1969, with both heading into decline; neotame is led by Jinhe and is a small variety with demand of only about 3,000 tonnes. On the natural side: steviol glycosides have a global CAGR of 8-10%, and Rheinhardt's RM2 has obtained FDA GRAS and is under review for domestic filing; monk fruit extract is monopolized by Rheinhardt with about 60% share and has the highest raw material barrier. III. Bulk Sweeteners: Erythritol Clearing Slowly, Allulose Growing Rapidly The 9 varieties fall into three tiers: commodity sugar alcohols such as sorbitol, maltitol, and xylitol are mature with no excess profit; erythritol has nominal capacity of 300,000-350,000 tonnes against demand of only about 150,000 tonnes, with prices falling to the cost line of about RMB10,000/tonne; U.S. anti-dumping and countervailing investigations (Sanyuan's combined tax rate of 93.58%) and the EU's anti-dumping duty of about 156.7% are accelerating the clearing, but it will still take 2-3 years; D-allulose was approved in July 2025, with a price of RMB16,000-17,000/tonne, a 60% premium over erythritol, but it lacks a liquid form, requires labeling of unsuitable populations, and fermented products have a lingering bitter taste, making it difficult to replicate erythritol's rally in the short term. At the company level, Sanyuan's sugar alcohol gross margin recovered to 19.07%, and Huakang's crystalline sugar alcohols contributed 84% of gross profit with 47% of revenue. Risk Analysis 1. Allulose volume ramp-up falls short of expectations. 2. Erythritol clearing is slower than expected. 3. Sucralose prices continue to decline. 4. Trade barriers escalate. 5. Customer concentration risk. 6. Raw material and exchange rate fluctuations. 7. Data caliber risk.