Merisant Worldwide, Inc.

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Merisant Worldwide, Inc.

10 South Riverside Plaza, Suite 850
Chicago, Illinois 60606
U.S.A.

Telephone: (312) 840-6000
Fax: (312) 840-5146
Web site: http://www.merisant.com

Private Company
Incorporated: 2000
Employees: 700
Sales: $352 million (2003)
NAIC: 325199 Synthetic Sweeteners Manufacturing

Merisant Worldwide, Inc., of Chicago, Illinois, is a privately-held company that markets more than 20 brands of aspartame-based artificial sweeteners in over 100 countries. The company's flagship brands Equal and Canderel occupy one-third of the world's tabletop sweetener market. Aspartame was discovered in 1965 by James Schlatter, a research scientist at the pharmaceutical company G.D. Searle, while he was combining amino acids in search of an ulcer drug. When Schlatter licked his finger to pick up a piece of paper, he found that one of the amino acid combinations, a mixture of aspartic acid and phenylalanine, tasted like sugar. Unlike such artificial sweeteners as cyclamate and saccharin, aspartame had no bitter or metallic aftertaste. The new sweetener was found to be 180 times sweeter than sugar.

Establishing a New Sweetener

While Merisant was founded in 2000, the history of its primary product, aspartame, may be traced to the 1970s. Searle branded its discovery NutraSweet and sought approval to market aspartame in the United States and Europe. The U.S. Food and Drug Administration (FDA) initally approved the substance for use in foodstuffs in 1974, but withdrew approval the following year because of concerns that the sweetener might cause brain damage in animals. After thorough retesting, approval was granted in France in 1979 and in the United States in 1981. By 1983, aspartame was an approved food additive in nearly all of Europe. Although anecdotal claims of adverse effects caused by aspartame still lingered, there was no scientific evidence that the substance caused harm. Studies by the French Food Safety Agency (2002) and the European Union Commission Health & Consumer Protection Directorate-General's Scientific Committee on Food (2002) reaffirmed the safety of the sweetener. Aspartame was one of the most thoroughly tested food additives ever to be approved for market.

Searle initially marketed aspartame to the food service industry as a tabletop sweetener. In France the product appeared in tablet form under the name Canderel. In the United States, the product was packaged in single-serving packets under the name Equal. Aspartame was subsequently marketed to food and drug manufacturers under the NutraSweet brand for use in such preparations as medications, cereals, and desserts. In 1983 aspartame was approved for use in carbonated beverages, and NutraSweet came to dominate the artificial sweetener market as an ingredient in low-calorie drinks. By 1985, aspartame sales topped $700 million.

That year, the agricultural products giant Monsanto purchased G.D. Searle and combined the tabletop sweetener and NutraSweet operations into a single unit, the NutraSweet Company. With the company's patent on aspartame, essentially its sole product, due to expire in 1992, and competitors including saccharin-based Sweet'N Low and Johnson & Johnson's sucralose-based sweetener gaining greater and greater market shares, the company began advertising campaigns designed to lure manufacturers using aspartame/saccharin blends into using aspartame exclusively by raising consumer awareness of the sweetener's presence in products, especially low-calorie drinks. The NutraSweet Co. also launched research programs to develop a new sweetener, sweetener blends, and a fat substitute in order to diversify its product base.

The Birth of Merisant

In March 2000, Monsanto merged with two other companies to form the Pharmacia Corporation. The NutraSweet Company was divided and sold. The company's tabletop sweetener division, comprised of the Equal and Canderel brands, was purchased by Tabletop Holdings, an investment group formed by Pegasus Capital Advisors, computer mogul Michael Dell's MSD Capital, and Brener International. The new company was formally launched under the name Merisant on March 20, 2000. At that time, the company's 19 brands earned about $400 million in sales, approximately one-third of the world's tabletop artificial sweetener market. According to Brandon Copple of Forbes, the new company faced stiff challenges: "Sure, it had the industry's top brand, Equal, and a dominant 30% market share. But the sugar substitute business hadn't grown for ten years. And Johnson & Johnson, the $30 billion (sales) consumer products Goliath had just announced its plan to crash the category with a product called Splenda, the granular version of sucralose, already used in some 400 products like Diet Rite, Ocean Spray and Swiss Miss. Its biggest plus: "It tastes more like sugar than aspartame-based Equal."

In addition, aspartame had significant limitations in product stability and use in cookery that were not shared by its rival. Aspartame was heat-sensitive, and if it were stored for six months in warm conditions, the product would lose its sweetness. Likewise, in applications that called for heat, such as baking, aspartame broke down, not only losing its sweetness but also destroying the texture normally imparted by sugar. Splenda, however, had an indefinite shelf life and could be used in baking.

Merisant responded to these challenges by recasting its brands and aiming its advertising at different market segments than those addressed by Johnson & Johnson's Splenda advertising. Where Splenda was marketed to health-conscious younger people, especially women, Equal was pitched to an older market whose concerns included existing health problems that precluded the use of sugar almost entirely. Advertisments for Equal appeared in Country Living, O, Diabetes Digest, Voice of the Diabetic, and editions of TV Guide and Reader's Digest produced specifically for older consumers. This audience, comprised of the baby boomers and their elders, were likely to use Equal for more than just sweetening coffee and tea. People managing such conditions as diabetes and obesity required a sweetener that could be used in cookery as well as drinks, so Merisant set about developing recipes in order to promote Equal as a household staple. Arnold Donald, Merisant's chief, explained, "People who don't even use ketchup have ketchup in their homes. Why? For friends who visit, for guests" (St. Louis Post-Dispatch, June 11, 2002). The advertising focused on the idea that Equal could be used to boost flavor in a broad range of foods. Over 130 recipes, including many for baked goods, were posted to the company's website http://www.equal.com.

Merisant also closed deals with manufacturers of candies and desserts, the Blockbuster video store chain, donut maker Krispy Kreme, Panera Bread, and McDonald's, among others. Television advertising featuring TV host and restaurateur B. Smith and a recipe contest judged by Gladys Knight increased nationwide exposure for Equal. In 2004, following a market trend toward the use of blended sweeteners that exploit the benefits of different sweetening agents, a technique long in use in Europe, Merisant launched Sugar Lite, a mixture of sugar and other sweeteners that could be used cup for cup like sugar in recipes. The new product was stable for baking and would brown and provide volume in baked goods. Other new products released in 2004 focused on packaging innovations that would carry Equal out of the home. One such product, the ergonomically designed Easy Squeeze Travel Pack, harkened back to the early days of Canderel by presenting Equal in tablet form. The new product was packaged in a convenient, palm-sized dispenser that held 100 tablets, each equivalent to a teaspoonful of sugar in sweetness.

Company Perspectives:

We're proud to be a sweet spot in the lives of people who must deal with the difficulties of diabetes each day. We're excited that we can provide the clean taste of sugar without the calories to people who are working to manage their weight, and we're very happy to be part of an integrated lifestyle plan for people who simply place a high value on health and fitness and overall balance in their diets.

Key Dates:

1965:: James Schlatter, research scientist at G.D. Searle & Co., discovers aspartame; the NutraSweet brand name is created.
1974:: Aspartame is approved by the U.S. Food and Drug Administration but is soon withdrawn to investigate claims that it causes brain damage in animals.
1979:: Aspartame is approved in France; Canderel is launched in French market.
1981:: Aspartame receives FDA approval; Equal brand is launched in U.S. consumer market; NutraSweet is marketed to food, beverage, and pharmaceutical industries.
1985:: Monsanto acquires G.D. Searle.
1986:: NutraSweet is spun off into separate company.
2000:: Monsanto sells consumer aspartame brands to Merisant Company.

Nevertheless, competition from Splenda and Sweet'N Low remained intense. Equal's market share fell five percent in 2003 to 25.6 percent of U.S. sales to mass merchandisers, supermarkets, and drugstores. Splenda grew 99 percent and secured 37.3 percent of those markets during 2003; Sweet'N Low held 17.8 percent. By the fourth quarter of 2004, Splenda's retail sales amounted to $141 million, double those of Equal. In 2003 Merisant attempted a $320 million recapitalization by offering an unusual stock-and-bond hybrid to the public, but buyers were scarce enough to cause Merisant to withdraw the offer in November 2004. Chief financial officer Donald Hotz opined that market conditions and the newness of the hybrid instruments were the cause of the offering's poor reception. The Chicago Tribune quoted him as saying, "It is similar to the real estate investment trusts, which initially were not widely accepted. It is just a matter of understanding." At the end of the third quarter of 2004, Merisant reported net sales of $251, 577, 000, down slightly from the previous year, and posted an estimated loss of $2.2 million. By the end of the fourth quarter of 2004, the company's efforts remained directed at advertising and packaging its products to expand their use among existing customers and reach new customers worldwide.