1. The increasing occurrence of obesity, diabetes, and other health related issues globally have led to the emergence of several healthy trends in the food and beverage (F&B) sector in recent years. Consumers interest in healthy products has spurred innovation and led to the development of various healthy substitutes for ingredients currently being used by the food industry.The ingredients discussed in this white paper, namely stevia, potassium chloride, carotenoids, and soy products, are four important healthy ingredients that industry experts believe will have a huge impact on the food and beverage sector in the coming years. Just as obesity has many causes, it can be solved only if all sectors of society do their part to help. - Betsy D. Holden,Kraft Foods MARCH | 2011 Healthy Trends in the Food and Beverage Sector 1Copyright Beroe Inc, 2011. All Rights Reserved

2. Stevia In December 2008,the US Food and DrugAdministration (FDA) announced that Rebaudioside A (Reb A), a molecule extracted from the stevia leaf, was Generally Recognised as Safe (GRAS) for use as a general- purpose sweetener in foods. Industry experts viewed this announcement as a key turning point in the search for a natural alternative to sugar. The current trend of consumers moving away from products perceived as unhealthy and artificial ensured Reb As smooth introduction into the market as a general purpose sweetener by companies such as Cargill (supplier to Coca-Cola),Whole Earth Sweetener Company (a division of Merisant), and PepsiCo. In its Q3 2009 report, PepsiCo stated that it had benefited from the extraordinary growth at its zero-calorie stevia sweetened line extensions. In 2011 and 2012, industry experts believe that stevia and stevia-based sweeteners will move from niche market status into the mainstream. Sugar (and other sweeteners) is the second most important ingredient for the F&B industry after water, a USD 60 billion market. The global high intensity sweeteners (HIS) market size is USD 1.2 billion, of which stevia only has a 4% share (or USD 48 million). The stevia market is expected to reach a market size of USD 10 billion in a few years. Competing Products Stevia is expected to grow at a high rate due to the advantages it possesses compared to competing products. China supplies close to 75% of global stevia leaf production, followed by Paraguay. Cultivation area is concentrated in four Chinese provinces: Jiangsu, Anhui, Shandong, and Heilongjiang. PureCircle is the leading supplier of stevia extract. Stevia Applications Food and Beverage Sector:Stevias low calorie content makes its consumption suitable for diabetic individuals. Stevias good thermostability and its compatibility with frozen foods, added colors, and flavors, makes it ideal for a wide variety of food and beverage applications. Pharmaceutical Sector: Stevioside can be used as a sweetening agent in medicines, especially in diabetic medicines. It is compatible with most ingredients used in medicines and can used in oral liquids or chewable tablets. Oral Hygiene Sector: Research indicates that microbes that hinder oral hygiene, such as streptococcus mutans, pseudomonas aeruginos, and proteus vulgaris, do not thrive when non-nutritive stevia constituents are present. This fact, coupled with its sweet taste, makes stevia an ideal ingredient for mouthwashes and toothpastes. Demand for natural sweeteners in the US is being driven by concern over calories and obesity and the growing demand for natural products. - Zanna McFerson, Health and Nutrition Business Director at Cargill 2Copyright Beroe Inc, 2011. All Rights Reserved Product Sweetener Type Calories Comments Sugar (technically known as sucrose) Natural Due to the high amount of calories present in sugar and price volatility (which makes it difficult to plan sugar procurement), stevia is an ideal replacement for sugar. High- Fructose Corn Syrup (HFCS) Natural Despite being a natural substitute for sugar, studies have suggested that HFCS is contributing to obesity. In addition, the opposition to US subsidies for corn growers is a potential threat that could increase HFCS prices. Artificial High Intensity Sweeteners (HIS) Artificial Since HIS are artificial, there is a perception that these products are detrimental to health. Stevia Natural In addition to being a natural product, stevia does not possess calories. Furthermore, stevia is 200-300 times sweeter than sugar, which is helping it claim a larger share of the sweetener market. 3. Price Analysis The price of a suitable sugar-equivalent (taking into account that stevia is 200-300 times sweeter than sugar) is projected to be in the range of 125-200 USD per kg.This price forecast is based on historical market prices of sugar and the expected price of sugar in the next few years. Assuming the current lower limit sugar equivalent price is constant for the next few years, stevia prices are projected to be comparable to sugar prices by 2015. However, stevia prices are expected to reach sugar price levels before 2015 because sugar prices (which are volatile) are expected to be higher than the lower limit sugar equivalent price in the coming years. Hence, the price of Reb A is likely to be competitive in the coming years, which makes it an attractive alternative for sugar. Cost Analysis Nearly three-fourths of the total market price of stevia is the profit margin. However, in order for stevia to deliver the same sweetness as sugar, it requires three times less land,water,labor,and total resources compared to sugar. The main reasons why stevia prices are expected to fall in the coming years are: 1. Mass production of stevia, which is expected to reduce the per unit cost 2. Greater demand and economies of scale, which can be leveraged 3. Improved quality and quantity of the stevia leaf supply 4. Introduction of major players in the stevia market, which will increase the pressure on farmers to reduce their profit margins and result in competitive pricing 5. Introduction of stevia leaf production in emerging countries, which could possibly lead to lower prices US Stevia Market The following developments have taken place in the US stevia market: 1. Coca-Cola, in partnership with Cargill, developed Truvia, a stevia-based sweetener. Coca-Colas beverage brands Sprite Green and Odwalla are sweetened with stevioside. 2. PepsiCo developed a stevia-based sweetener named Purevia in partnership with Whole Earth Sweetener Co. and is using it in its SoBe soft drinks brand. 3. Some of the other prominent companies that have launched either a stevia-based sweetener or a product containing a stevia-based sweetener are Lipton, Kraft Foods, Zevia LLC, and Wisdom Natural Brands (makers of SweetLeaf). Stevia is currently being used in niche products and has been met with widespread consumer acceptance. However, if stevia prices are comparable to sugar and HIS prices in the coming years,the mass production of stevia could drive the use of the sweetener in mainstream products. Supplier Analysis Current Suppliers Currently, the major suppliers of stevia that have a global reach are PureCircle and Cargill. Apart from these companies, there are many smaller suppliers, such as Blue California, GLG Life Tech Corporation, Daepyung Co., Sweet Green Fields, DIC Lifetec Co Ltd., Morita Kagaku Kogyo Company Ltd., and Sunwin Stevia International Co. Long-Term Outlook Industry experts expect stevia to be the sweetener of the future, especially since the consumer preference for 3Copyright Beroe Inc, 2011. All Rights Reserved 0 50 100 150 200 250 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 USD/kg RebA Forecast Prices vs. Sugar Equivalent Prices Reb A Forecast Prices Lower Limit Sugar Equivalent Price Upper Limit Sugar Equivalent Price 26% 74% Cost Analysis Input Costs (as a % of price) Profit Margin (as a % of price) 4. 4Copyright Beroe Inc, 2011. All Rights Reserved healthier products is increasing. Large companies, such as ADM, Tate & Lyle, Corn Products, and Bunge, are likely to enter the market, either through organic or inorganic growth. The introduction of these players is expected to increase competitiveness and create a mass market for stevia, which could lead to lower prices. Action Plan for Potential Stevia Users 1. Stevia can be used by various sectors, such as food and beverage,pharmaceutical,and consumer product goods. 2. Companies that are considering using stevia sweeteners in the short term and/or long term should understand and analyze various facets of the stevia market and its upstream and downstream impact. 3. It is necessary to track the stevia market, especially prices, on a periodic basis.The frequency of tracking should increase as stevia prices near sugar levels. 4. Opportunities in the market can be identified to determine if there are any long-term strategic relationships, either with stevia plant growers or stevia sweetener producers, that can be established which could be beneficial in the future.Alternatively, the pros and cons of internally producing stevia to meet the companys own requirements can be analyzed. 5. Identifying the best practices and sourcing models adopted by industry peers for stevia procurement can be useful to stevia buyers. Potassium Chloride In April 2010, the Institute of Medicine Report on Salt 2010 instructed the food industry to reduce the sodium content in its products. The report recommended mandatory national standards for permissible sodium levels. Subsequently,the 17 major US cheese companies (such as Cargill, Chr Hansen, Kraft Foods, etc.) pledged to reduce the sodium content in cheese and increase consumer awareness on the benefits of less sodium in food products. In addition, in 2010, a number of major firms, including Kraft Foods, Heinz, and Unilever, were named among the signatories of the National Salt Reduction Initiative, a program launched to cut the level of salt in US packaged and restaurant foods by 25% over five years. Potassium chloride has been identified as the closest alternative to salt (sodium chloride). Although it has an undesirable metallic aftertaste, masking agents and blockers can be used to hide the bitter taste.An increase in potassium intake, coupled with a decrease in sodium intake, provides vast health benefits. An estimated 77% of total dietary sodium is contributed by the food processing sector. Hence, the use of potassium chloride is expected to increase in the coming years in place of sodium chloride. Tracking and analyzing the potassium chloride market is imperative for the effective replacement of salt in the food industry. Carotenoids Carotenoids are chemicals with nutritive properties that exist in plant and animal pigments.They are used to color food products. Growing consumer conscious- ness about better health and nutritional intake has led to an increase in the size of the natural carotenoids market, as natural carotenoids offer health benefits, unlike synthetic carotenoids.The global carotenoid market is expected to grow to USD 1.2 billion by 2015. 77% 12% 6% 5% Relative Amounts of Dietary Sodium in the American Diet Food Processing Naturally Occuring At the Table During Cooking OTHER HEALTHY TRENDS IN THE FOOD AND BEVERAGE SECTOR 5. Disclaimer : Strictly no photocopying or redistribution is allowed without prior written consent from Beroe Inc. The information contained in this publication was derived from carefully selected sources.Any opinions expressed reflect the current judgment of the author and are subject to change without notice. Beroe Inc accepts no responsibility for any liability arising from use of this document or its contents. For more information, please contact info@beroe-inc.com. Author: Pratap Premnath Palagiri | Senior Research Analyst at Beroe Inc Source: PureCircle, Stanpack Pharma, bluecal-ingredients, USDA, nutraingredients 5Copyright Beroe Inc, 2011. All Rights Reserved Natural carotenoids are expected to substitute syn- thetic carotenoids. Animal feed is the largest user of carotenoids; however, due to the increasing demand for natural products and natural ingredients, carotenoids are expected to be used largely by food segments. Lutein, lycopene, beta-carotene, astaxanthin, and can- taxanthin are the major types of natural carotenoids. Beta-carotenoids hold 32% of the carotenoid market. The United States and Europe account for the major share of sales in the carotenoid market. With the ris- ing demand for carotenoids, however, Asian countries like China, India, Japan, and Malaysia are expected to enter the carotenoids market and cut into the share of US and European producers. Soy Products Due to its high protein content, soya bean has been a major ingredient used by the processed food sector. The demand for soy products is increasing day by day due to the growing health consciousness of consum- ers. Soy products could be consumed as a substitute for existing products. For example, tofu may be used as a substitute for meat, and soy milk can be used as a substitute for cow or buffalo milk.Various second- ary products can be derived from these products, like soy coffee/tea, soy ice cream, soy sauce, etc. All of these products are witnessing an increase in demand as consumers are aware of the health benefits that soy products offer. Soybean prices can be used as a base for soy products prices. US average soybean farm prices are expected to remain between 9.20-9.25 USD per bushel over the next 10 years. Due to the modest increase projected for the US soybean supply in the next 10 years (less than or equal to 7% per year) and competition from South American nations, such as Brazil, that offer soybean at low prices, the forecasted prices for US soybean are low. Companies that procure soybean products should take into account the volatility of soybean prices, supply- demand fluctuations, and the most favorable regions for soybean procurement.