Exclusive Interview with the Chairman | Yang Le of Jinhe Industrial: Writing “National Sweet Plan” with Sugar-free

Source: Shanghai Securities News

Sidney Mintz, the “father of anthropology of food”, pointed out in his book Sweetness and Power: The Place of Sugar in Modern History published in 1985 that sucrose is a “double-dealer”: on the one hand, it’s an excellent calorie provider; on the other hand, it’s easy to induce various diseases due to excessive consumption caused by its addiction.

  

When people realized the harm of sugar, sugar substitute products came into being. In sweetener field, Jinhe Industrial is the leader all over the world in production capacity: with the annual output of 12,000t acesulfame, it is the absolute leader in the world. With the annual output of 3,000t sucralose, it ranks the 2nd in the world. Besides, it plans to invest in the 2nd-phase 5,000t project. If the production capacity can be reached successfully, it will become the first in the industry.

  

Yang Le, chairman of Jinhe Industrial, who just took over the heavy burden from his father a few months ago, signs his WeChat with the words “there will be no change in vicissitudes, infatuation, years and true love”, which is also an epitome of the development process of Jinhe Industrial: this global leader in sweetener field with a market value of over RMB 10 billion has undergone strategic adjustments and self-transformations for several times.

  

  “Happiness” is boundless in Blue Ocean

  

Last week, the senior vice president of Coca-Cola Headquarters just came here, hoping to consolidate our cooperative relationship further.” Speaking of this issue, Yang Le was very proud. Jinhe Industrial is the sweetener supplier of Coca-Cola. As long as you once drank Coke Zero or Coke Light of Coca-Cola, you have enjoyed the sugar-free sweet life created by Jinhe for you.

  

oca-Cola said in its semi-annual report which was just released that, thanks to its sugar-free products, the company realized double-digit sales growth worldwide again, and realized a net income of USD 10 billion in the 2nd quarter with an year-on-year growth of 6%.

  

From the perspective of manufacturer, the improvement of sweetener formula optimizes the taste and the cost of adding sweetener is also about 5% of sucrose on the premise of producing the same sweetness, so it has obvious cost advantage compared with sucrose. Take Coke as an example. The sugar content per 100ml is about 9g, and a 500ml bottle of Coke contains 45g sugar. Calculating based on the price of RMB 5.4 per kilogram of sucrose, the cost of adding sucrose to a 500ml bottle of Coke sold at a price of RMB 3 is about RMB 0.24, and the cost of sucrose accounts for 8% of the retail price. If sucralose is used as the sweet source, it only costs RMB 0.015, accounting for 0.5% of the retail price of Coke. Therefore, the sucralose has a significant cost advantage.

  

In 2012, when Yang Le returned to China after studying in the United States, there were few sugar-free and low-sugar products on the shelves of food and beverages in China, and there was also no sweetness seasoning available for replacing the sugar in coffee shops. 7 years have passed and the less-sugar awareness of domestic consumers is gradually increasing.

  

Coke is nicknamed ‘Happy Water for Fat Homebody’ on the Internet because traditional carbonated beverages have high sugar content, and the dopamine secreted under the stimulation of sucrose makes people happy and also makes people fat. Nowadays, many people who are slimming and keeping fit will list Coke as ‘forbidden product’. Sugar can be rejected, but who will reject dopamine?” Yang Le said with a smile. The consumers who still struggle to choose whole sugar, half sugar or one-third sugar for a cup of milk tea are exactly the Blue Ocean discovered by Jinhe.

  

Under the dual drive of the increase in consumer demand for low sugar intake and cost reduction of beverage and food manufacturers, the sweeteners will further replace sucrose and high fructose corn syrup. New-type sweeteners such as acesulfame and sucralose, which are competitive products of Jinhe Industrial, are expected to replace traditional sweeteners such as saccharin, sodium cyclamate, etc. step by step by virtue of their advantages of safety, being closer to sucrose in taste, etc. The subdivided industry has broad development prospects.

  

  “Sweetness” Enters Every Household

  

Yang Le hopes that Jinhe Industrial can move to the scene from the backstage to get closer to consumers. “Jinhe, a raw material supplier that was only engaged in food additives previously, has now crossed the intermediate link and entered the retail market to face the consumer end directly.”

  

LeSweet, a sweetness seasoning brand independently hatched by Jinhe Industrial, was launched on e-commerce platforms such as Taobao and JD.com in early July, which was featured by the concept of “0% sugar, 0% fat and 0% calorie”.

  

“Bring the sugar substitute products that do not bring “fat homebody” burden but only happiness to customers.” Yang Le introduced. The company has specially adjusted the product formula in consideration of the usage scenario of LeSweet and the use inertia of users: after thousands of the experiments by R&D team, the company compounds and uses the top raw materials at home and abroad, including erythritol, stevioside, sucralose, resistant dextrin, etc., and finally the sweetness ratio of LeSweet products and white sugar is 1:1, the taste is infinitely close to white granulated sugar, and there is no peculiar smell of traditional sugar substitute products. Such design has simplified the difficulty for users to iterate the sweet seasoning. The amount of white sugar used for stir-frying and baking in the past is the amount of LeSweet used now.

  

“We hope to be the first person to eat crabs in the domestic market, and not only sell healthy and safe sugar substitute products, but also expand users to lower classes and open up the market. We must also do a good job in consumer education related to sugar reduction so that the citizens have the right to choose “healthy sweetness.”

  

On July 15, 2019, the State Council released the Healthy China 2019-2030 development planning to encourage the whole society to “reduce salt, oil and sugar” and promote the construction of food nutrition standard system. In the opinion of Yang Le, with the guidance of relevant national policies, the sugar substitute retail industry has great potential.

  

According to the requirements of the Guideline: Sugar Intake for Adults and Children issued by the World Health Organization in 2015, the free sugar intake for adults and children should be reduced to less than 10% of the total energy, preferably less than 5%, which is about 25g per day after the conversion. At present, the per capita daily intake of white sugar in China is 50g-60g, far exceeding this standard.

  

In addition to the ordinary people who choose sugar substitute products in order to achieve the less-sugar index, the rigid demand of some diabetics for sweet food will also be satisfied. According to the data released by the United Nations World Health Organization at the end of 2018, there are about 110 million adult diabetics in China. On the user evaluation message board for online sale of LeSweet, many people say that they are diabetics or some people in their families are diabetics, and LeSweet makes them regain the sweet taste.

  

“Creating” a Broad World

  

He, also called millet, begins to grow in February and matures in August. It is in the four seasons and gains both yin and yang. Jinhe Industrial has been “fertilizing”, evolving and surpassing itself for a greater harvest.

  

In November 2017, the company signed the Framework Agreement on Jinhe Industrial Circular Economy Industrial Park Project with the Government of Dingyuan County in Chuzhou City to build a circular economy industrial park in Dingyuan Salt Chemical Industrial Park. At present, the cogeneration project with the annual output of 10,000t furfural, 40,000t thionyl chloride and 30MW biomass pyroelectricity has been completed in advance and entered the debugging stage. The production capacity will be further released before the end of the year. Later, the company will continuously build the project with the annual output of 10,000 furfural and its downstream product projects, and introduce 2 new spice varieties—furanone and galaxolide. The first EIA publicity has been carried out so far. After the projects are put into operation, sucralose and maltol of the company will form an upstream and downstream integrated industry chain, which will reduce the costs further. From the perspective of sucralose alone, the company will save more than 20% of the costs compared with its peers after further realizing the integration of industry chain on the basis of the original production technology and technological advantages.

  

The production of chemical products requires using acid and alkaline, and will generate hazardous wastes such as sodium chloride, etc. further. Sodium chloride, also known as waste salt, can only be used to fill mines generally. Jinhe Industrial can make the best use of the waste after purification by virtue of the optimization on industry chain and can also sell it to chemical fertilizer plants to create benefits. Although the supporting equipment costs a lot in the early stage, Yang Le indicates that the vision of the company is to produce “environmentally friendly and circular economy”.

  

For all the scenery, you should open your eyes to look at it. For the future development of the enterprise, Yang Le has its own plan—“first imitate and then catch up to become a leader. These three steps all require self-transformation.” And innovation is the key.

  

“I went to Japan in May and visited some chemical and material enterprises. One of them, UBE Industries, impressed me the most. It was a coal-mining enterprise at the earliest, then developed coal chemical engineering, extended its industry chain, produced bulk chemical raw materials, continuously carried out R&D and deepening, and upgraded the production of fine chemical products. Now it goes further and its revenues are mainly from electronic materials, including semiconductors and new energy electric alkali liquor.” Yang Le said. Jinhe started with chemical fertilizer and then “developed both fertilizer and chemical”, and grew steadily for a period. Around 2009, it concentrated on chemical industry, emphasized the coordinated development of basic chemical industry and fine chemical industry, and “left out the chemical fertilizer”. Benefiting from the strategic adjustment of improving the product structure, the company’s net profit attributable to its parent company increased from RMB 136 million in 2012 to RMB 910 million in 2018. “In the future, Jinhe Industrial will intensively cultivate the fine chemical industry, further deepen the basic chemical industry chain and increase the added value of products.”

  

In 2011, Jinhe Industrial increased its capital to Huaertai Chemical with RMB 270 million in cash. In May 2017, in order to reduce the proportion of basic chemical business, the company transferred 55% of the equity of Huaertai Chemical by RMB 340 million. The divestment of Huaertai has demonstrated the company’s determination to transform to fine chemical industry.

  

Yang Le told his R&D team, “I will take control of any risk and bear any responsibility. A small testing equipment imported from Japan values RMB 2 million. Though it’s expensive, just buy it! There may be an experiment that will not achieve any result for 3 years. It doesn’t matter, just do it!”

  

  “Everyone want flowers and applause! But for the sake of a longer-term future, I’m willing to expect and trust.” Yang Le said with his eyes full of firmness.