Splenda Hopes Turn Sour for Tate & Lyle

By Robert Lea, Evening Standard, London

Jan. 23–Sugar giant Tate & Lyle was caned by the market today after issuing a shock profit warning and admitting it had over-promised and under-delivered on the take-up of its zero-calorie sweetener Splenda.

Just five weeks after a previous market update at which there was no hint of its troubles, Tate & Lyle said the US fizzy drinks industry, led by Coca-Cola, Pepsico and Britain’s Cadbury Schweppes, had failed to embrace Splenda as had been hoped.

Tate & Lyle shares crashed 112p to 608p as house broker Citigroup cut next year’s profits forecast by 20 percent.

In a trading update, Tate & Lyle admitted it will miss by a mile its self-imposed forecast sales for Splenda. Sales and profits from Splenda were supposed to fizz this year and Tate & Lyle had put a target of 30 percent growth on it and its so-called value-added products.

However, the company was forced to admit that in the year to the end of March profits from Splenda, which make up more than a fifth of Tate & Lyle’s earnings, will be only marginally better than last year’s £68 million and overall group profits would fail to meet analysts’ consensus forecasts of £347 million.

Chief executive Iain Ferguson conceded Tate & Lyle investors had been let down. “I plead guilty to being too bullish in terms of the speed of uptake here,” he said.

The company blamed “a slower-than-anticipated acceleration of [Splenda] uptake from major customers”, adding: “Volumes to the US carbonated soft drink sector have not met our expectations this year.”

While some analysts fear Splenda’s problems in the fizzy drinks industry may be part of a wider story in which health-conscious families are weaning their children off colas and lemonades and pushing them towards juices and water-based drinks, Ferguson argued Coke and Pepsi are simply taking longer than expected to reformlate their recipes to include Splenda.

A new brand, Coca-Cola Sweetened with Splenda, was launched in the US last year but consumers were confused by the launch of its no-calorie brand Coke Zero. Pepsi has also failed fully to promote its new Splenda-sweetened brand, One.

BOSSES SWOOP FOR CHEAP STOCK

While Tate & Lyle was hitting a sour note with investors, chief executive Iain Ferguson and his No.2, Stanley Musesengwa, were enjoying the sweet side of the company’s share price collapse. They spent £100,000 each on Tate & Lyle shares at 60834p — a tidy saving, as at last night’s closing price of 720p the shares would have cost them £118,280 each. Ferguson, 50, has led Tate & Lyle since joining from Unilever in 2003. Musesengwa, 53, joined Tate & Lyle nearly 30 years ago became chief operating officer when Ferguson arrived.

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