Genki Forest supplier goes public in Shenzhen at $2.8 billion valuation

Business & Technology

There’s a lot of money in sugar-free sweeteners, and Sanyuan Biology is making it.

Shandong Sanyuan Biology location in Binzhou Industrial Park, Shandong Province
Sanyuan Biologys factory in Binzhou Industrial Park, Shandong Province. Image via Shandong Sanyuan Biology.

Genki Forest is a sparkling zero-calorie soda company whose beverages can be found in every convenience store and supermarket of China’s major cities, as profiled by SupChina last year.

In a testament to its success and to global demand for sugar-free sweeteners, the supplier of its zero-calorie sweetener went public on the Shenzhen Stock Exchange yesterday valued at $2.8 billion.

  • Genki’s supplier, Shandong Sanyuan Biology, sells a sweetener called erythritol, a type of sugar alcohol that occurs naturally in foods like grapes, mushrooms, and pears. It tastes like sugar but has only about 6% of the calories.
  • Sanyuan Biology is run by 71-year-old Niè Zàijiàn 聂在建. A former director of a printing and dye factory, Nie took a business trip to Japan in the 2000s and discovered erythritol. Upon his return, he founded Sanyuan Biology in 2007 and built the zero-calorie sugar industry in China from scratch.
  • The company has enjoyed a meteoric rise since clinching the deal with Genki Forest: In 2019, Nie’s company produced 55% of the domestic erythritol market and 33% of global production, making it the largest erythritol producer in the world.

The context: Erythritol is commercially produced by fermentation from a sugar derived from corn, called dextrose. Japan approved erythritol for use in foods in 1990, followed by the World Health Organization (WHO) in 1999.

  • Shandong is the center of China’s corn production. Because of this, three of the world’s top five erythritol producers are in Shandong — Sanyuan Biology, Texas Bowling Green, and Zhucheng Dongxiao Biology. Thanks to Genki Forest, erythritol is now one of the most popular sweeteners in China today.
  • Most of the erythritol produced by Sanyuan Biology goes overseas. In 2015, its main customers included Saraya, a healthy snack food company in Japan, and HFMH, a major ice cream and table sugar company in the United States.
  • This market has made Sanyuan a public company even before Genki Forest, which was reported in November to be in talks for an IPO valued at a whopping $15 billion.

The takeaway: Genki Forest has transformed the beverage industry in China, forcing brands such as Nongfu Springs, Wang Laoji, Coke, Pepsi, and Hey Tea to launch their own sugar-free beverages one after another. As competitors rush in, Sanyuan Biology is reaping the rewards.