Replies to post #66 on PureCircle Ltd. (PCRTF)

[tykundegex]

This bit sums up the opportunity for me:

Our business model, as everybody knows, has been that we need to be vertically integrated. We need to take the risk and invest in the supply chain so that the food and beverage industry can come in on it and be comfortable to launch these brands, get the volume throughput, reduce the cost and then control the entire margin from leaf down to marketing margin. So if I look at the current landscape, there is no company that has vertical integration and control over the entire margin space from leaf to marketing margin and has the capacity.

With that said, as you use these brands rolling out, you will see competition coming in. We view the market 10 -15 years from now as a $10-15 billion industry. With that size, you can’t have an industry based on one product. Don’t be surprised if I tell you that in some instances on some Global Key Accounts we even commit to help competition in the future to supply product that we can’t supply ourselves.

There is some concern in the future that there could be that situation. So, if you look at the long-term, we are in the early stages of development. We are just getting approvals. We are just scratching the surface at the moment.

But as you see these big brand rollouts coming two or three years from now, you will see a big requirement of finished product. You will see a big requirement of vertically integrated supply chains. In that context, three to five years from now, I see us having a majority, maybe a 30-35% share, and I see big food ingredient companies coming in and employing proper resources. When I say “proper”, like we did $300 million, $400 million or maybe $500 million either buying their way in, either buying some pieces out there, what’s out there, and then filling in the gap.

But there will be big companies coming into the industry. So at the moment I don’t think there is really a big competitive situation. I think this question will be relevant three to five years from now.

Also, you have to remember in the first half we reported $6 million sales of new products. These products were introduced seven or eight months ago. If the market wants these products, competition will have to produce them. Many of these products are proprietary. That means they belong to PureCircle. The competition will have to have not just vertical integration and scale and therefore invest a lot of money to do that, but will have to have intellectual property to produce what the
market wants.

That’s the beauty of being the market maker. There is a downside to it which is you have to develop the market, but the upside to it is you do it in a way that adds competitive advantage to you because you are trusted to do it. I hope that gives you some kind of general perspective.