The Sweet Four: Fortess acquires S2G, taking xylitol to demo scale; Cargill begins commercial production of Evolva’s stevia

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In the United States, NCAA basketball teams are proceeding from the Sweet Sixteen to the Final Four; we have a mash-up today in the advanced bioeconomy where the Sweet Four have emerged, as Cargill, Evolva, S2G and Fortress Global have big news to share relating to scaling some of the more critical sweetener technologies.

Cargill takes Evolva’s stevia tech to scaled production

From Minnesota, we hear from the travel-starved but relentlessly innovating Cargill that they have officially started producing EverSweet,  a zero-calorie, next-generation sweetener made with two of the best tasting sweet compounds found in the stevia leaf, Reb M and Reb D. This is a technology developed with Evolva, and we last looked at it in Sweet and Getting Sweeter, here.

In addition to hitting this new production milestone, Cargill and Evolva (SIX: EVE) reached a new agreement for the EverSweet sweetener, which replaces the existing agreements, and adds certain additional high intensity sweeteners.

Since the stevia plant produces only trace amounts of Reb M and Reb D, fermentation allows for large quantities of these most sought-after sweet compounds to be commercially produced in a more sustainable way. Cargill’s use of this fermentation process offers the flexibility to expand rapidly and cost-effectively as the demand for the EverSweet sweetener grows. The product will be sold to food and beverage companies looking to satisfy consumers’ desire for healthier food choices and a zero-calorie sweetener without sacrificing great taste.

Fortress acquires S2G, taking xylitol to scale

From British Columbia news has arrived that Fortress Global will acquire S2G Biochemicals for a purchase price of $2.5 million payable by the issuance of 666,652 common shares of Fortress Global at a deemed price of $3.75 per Fortress Global share.

Upon completion of the transaction, Fortress Global, through a newly formed special purpose company, intends to commission the construction of a demonstration plant to produce xylitol at its Fortress Specialty Cellulose Mill, utilizing proprietary process technologies, know-how and expertise developed by S2G and Mondelēz International, Inc.  The construction, commissioning and optimization of the demonstration plant is budgeted at approximately $33 million. It is anticipated that Fortress Global will provide $5.0 million in funding for the special purpose company in cash or in-kind. Fortress Global is in the process of securing the balance of the required funding through various non-dilutive sources, including federal and provincial grants, other non-recourse financing and consortium partners.

The demonstration plant will use C5 sugars extracted from hemicellulose, which is a byproduct from the FSC Mill, to produce xylitol. The extraction and conversion of this byproduct will also further debottleneck the FSC Mill and increase its annual production capacity of dissolving pulp. The demonstration plant is expected to commence operation in 2020 and have a production capacity of up to 2,000 tonnes per year of xylitol.

The FSC Mill is expected to produce sufficient C5 sugars annually to provide the feedstock for up to an additional 20,000 tonnes per year of xylitol production which Fortress intends to utilize by constructing an approximately $150 million full-scale plant following successful completion of the demonstration plant. When complete, the full-scale plant would be expected to generate up to $40 million of EBITDA annually.

S2G is the exclusive global licensee of the xylitol process technology that S2G and Mondelēz International have jointly developed. In connection with the acquisition of S2G, Fortress Global and S2G have entered into a non-binding term sheet with Mondelēz International with respect to the output of the demonstration plant and any future full scale plant.

We looked at the technology in depth in Sustainably-sourced advanced biobased chemicals: The Digest’s 2017 Multi-Slide Guide to S2G BioChem, here.

The Xylitol backstory

Xylitol is a naturally occurring sugar polyol that has a sweetening property matching that of cane sugar but with 40% fewer calories. In addition, based on third-party research, Fortress Global believes that xylitol is currently the best nutritive sugar substitute with respect to the prevention of dental cavities. Xylitol is used extensively in a variety of confectionary products such as gums and candies with estimated annual global xylitol sales volumes in 2017 of approximately 200,000 tonnes and an expected annual growth rate of 6.5% through 2024. Current spot prices for xylitol vary by region and are in the US$3,500 – US$4,500/tonne range.

Reaction from the stakeholders

You will not be shocked to learn that Evolva and Cargill are delighted, and Fortress and S2G are excited. And they ought to be.

Evolva CEO Simon Waddington said, “We are delighted that Cargill has started commercial production of EverSweet. We look forward to the next chapter in the exciting space of sweeteners.”

“Cargill has set a new benchmark for sweetness without calories with our EverSweet sweetener,” said Andrew Ohmes, global stevia business leader for Cargill. “Our goal has always been to address our customers’ needs to make lower calorie products that taste great and are affordable to all., Cargill is excited to bring EverSweet sweetener to the market. EverSweet sweetener provides healthier options to consumers whether our customers use it in beverages, dairy products or nutritional bars to name a few.”

Chadwick Wasilenkoff, President and Chief Executive Officer of Fortress Global said: “The acquisition of S2G and the expansion of our dissolving pulp operation into the sugar substitutes business is in line with our corporate strategy of pursuing innovative and value enhancing opportunities. We believe that the production of xylitol will further optimize the utilization of our wood fibre and also provide us with the added benefit of offloading the recovery boiler which will provide a separate measurable economic benefit. We are pleased with the positive feedback and funding opportunities provided by the federal and provincial funding agencies and look forward to finalizing all necessary arrangements in a timely manner.”

S2G CEO Mark Kirby commented: “We are very excited to become part of the Fortress team. It is the perfect partnership to commercialize the proprietary xylitol process technology which we have developed with Mondelēz International. Fortress brings proven operational capabilities, strong Canadian and Quebec government relationships, and a large and stable source of hemicellulose sugars that our research has shown are a preferred and cost-effective feedstock for xylitol production due to their high xylose and low ash content.”