• The Chinese sweetener consumption continues to increase with the growth of population and economy.
  • But the increase of sugar consumption is limited due to the HFCS substitution.
  • Sugar consumption also faces the threat from the rapid growth of imported foods. 

The Spread between Sugar and HFCS

  • The spread between sugar and HFCS (High Fructose Starch Sugar) has risen from 1000 to 1500yuan/ton level since mid-Jan.
  • It’s not as large as the spread in 2017 but still enough to incentivize some HFCS substitution.
  • We therefore believe the HFCS substitution would continue in 2019, in the past this has been responsible for stagnant sugar consumption growth.  

HFCS Production & Exports

  • HFCS production increased by 660kmt from 2018 while the exports reduced by about 244kmt.
  • Price remained stable despite the increase in supply indicating the increasing domestic demand for HFCS and the switch from sugar.
  • Despite this we do expect sugar consumption to have a small increase because the substitution could be smaller than past years and production increases in the food and beverage industry. 

Industrial Consumption Increases  

  • The increase of production of food and beverage industry brings the growth of sugar demand.
  • The fastest grower in 2018 was carbonated drinks with an increase rate of 8.14%.
  • However, the beneficiary was HFCS which can easily be substituted for sugar in carbonated drinks.
  • For the other products, the change of sugar consumption generally offset each other.
  • Sweetener consumption may continue to increase in 2019 and we expect sugar to take a share this time.
  • Therefore the 2019 sugar consumption estimate is 15.3mmt, up from 2018’s 15mmt. 

Threat from Imported Foods  

  • Another threat would be Chinese growing preference to imported foods.
  • The trade value ofnimported foods in 2018 increased by 20.8% year on year.
  • And according to Alibaba, Chinese biggest e-commerce enterprise, the online trade value and the number of consumers of imported foods also rose significantly, especially for the leisure foods sector.
  • This is definitely a competitor to the local foods in the future and therefore a competitor to domestic sugar consumption.