---
title: "The Company Working for Genki Forest Goes Public Before It"
description: "The supplier of sugar substitutes for Genki Forest, with a market value of 17 billion yuan, has gone public. As sugar-free beverages dominate shelves, suppliers of sugar substitutes behind brands like Genki Forest, Nongfu Spring, and Uni-President are reaping huge profits and becoming listed companies."
author: "董柴玲"
publisher: "New Distribution"
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published: "2022-02-15"
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# The Company Working for Genki Forest Goes Public Before It

> The supplier of sugar substitutes for Genki Forest, with a market value of 17 billion yuan, has gone public. As sugar-free beverages dominate shelves, suppliers of sugar substitutes behind brands like Genki Forest, Nongfu Spring, and Uni-President are reaping huge profits and becoming listed companies.

Source: Future Consumption APP (ID: lslb168) Author: Dong Chailing (Editor: Xie Kangyu)
**Genki Forest's sugar substitute supplier, with a market value of 17 billion yuan.**
As sugar-free beverages dominate shelves, suppliers of sugar substitutes behind brands like Genki Forest, Nongfu Spring, and Uni-President are not only reaping huge profits but also becoming listed companies. On February 10, Shandong Sanyuan Biotechnology Co., Ltd. (Sanyuan Bio), China's largest erythritol supplier, was listed on the ChiNext board. At the close of the first trading day, Sanyuan Bio's stock price was 128.01 yuan per share, up 17.12%, with a market value of 17.27 billion yuan.
The surge in demand for sweeteners from beverage manufacturers has driven Sanyuan Bio's performance to new heights. According to the prospectus, **Sanyuan Bio's revenue grew from 292 million yuan in 2018 to 783 million yuan in 2020, and net profit rose from 68.09 million yuan in 2018 to 233 million yuan in 2020.**
By the first three quarters of 2021, Sanyuan Bio's revenue reached 1.305 billion yuan, a year-on-year increase of 132.29%; net profit was 441 million yuan, up 155.94%, showing doubled growth. **With a gross margin close to 40%, new natural sugar substitutes are becoming a lucrative business.** Currently, leading beverage companies such as Coca-Cola and Genki Forest are increasing their procurement of erythritol.
In 2021, Genki Forest was Sanyuan Bio's largest customer. In the first half of 2021, Genki Forest contributed sales of 185 million yuan, accounting for 23.5% of Sanyuan Bio's total revenue.
**Genki Forest as the Largest Customer**
Sanyuan Bio was founded in 2007, but its performance truly took off with the domestic sugar-free beverage trend in recent years, and Genki Forest's contribution is undoubtedly the greatest. Since becoming Genki Forest's erythritol supplier, the procurement volume from Genki Forest has been increasing. According to the prospectus, among Sanyuan Bio's top five customers, Genki Forest's procurement amount in 2020 was 54.56 million yuan, accounting for 6.97%. **By 2021, Genki Forest's procurement amount reached approximately 185 million yuan, jumping to the largest customer, accounting for 23.5%.**
Having established cooperation with Saraya, Coca-Cola, PepsiCo, as well as domestic brands like Genki Forest, Nongfu Spring, and Uni-President, Sanyuan Bio's rapid growth has also captured the dividends of the global sugar substitute industry. Third-party data shows that since 2017, the erythritol industry has grown rapidly, with global production increasing from 51,000 tons in 2017 to 85,000 tons in 2019, an increase of 66.67%. Under the national slogan of "sugar reduction," the growth rate of sugar-free and low-sugar beverages on the market far exceeds that of bread and dairy products.
The sugar-free product market has given rise to new brands, and for the supply chain, erythritol, as a new sweetener, has replaced sucrose and entered a state of supply shortage. In the nascent and relatively fragmented erythritol industry, Sanyuan Bio, targeting the new trend, began expanding production capacity. Starting in 2017, Sanyuan Bio increased its erythritol production from 17,400 tons in 2018 to 48,900 tons in 2020. In the first half of 2021, the company's erythritol production was 38,900 tons, with an annualized growth rate of 343.69%. With capacity expansion, Sanyuan Bio successfully attracted major customers like Saraya and Genki Forest.
Before going public, this Shandong-based company was already an invisible champion in the industry. According to Frost & Sullivan data, in 2019, Sanyuan Bio's erythritol production accounted for 54.90% of domestic production and 32.94% of global production, making it the world's largest erythritol producer. **In Sanyuan Bio's product line, erythritol and monk fruit compound sugar are the two main businesses, with erythritol currently accounting for over 90% of revenue.**
Erythritol, considered a "zero-calorie" sweetener, does not participate in sugar metabolism, produces almost no calories, and does not cause blood sugar changes. It is widely used in the production of sugar-free foods and beverages. Genki Forest's sugar-free sparkling water is also one of the drivers of strong domestic demand for erythritol. After Genki Forest launched its Jiancha and sparkling water series using erythritol as the main sweetener, sugar-free beverages have become increasingly common. Nongfu Spring's soda sparkling water, Coca-Cola's Xiaoyuzhou sparkling water, and Heytea's sparkling water all use erythritol from Sanyuan Bio.
Looking at overall performance over the past three years, from 2018 to 2020, Sanyuan Bio's revenue was 292 million, 477 million, and 783 million yuan, respectively, and net profit was 68.09 million, 136 million, and 233 million yuan, with performance almost doubling. The gross margin increased from 36.85% to 42.27%.
**New Battles in Sugar Substitutes**
In the past two years, the slogan "0 sugar, 0 calories, 0 fat" has spread across streets and alleys, and sugar-free beverages from major brands have crowded into offline shelves in convenience stores and supermarkets.
Following Genki Forest, traditional beverage giants such as Nongfu Spring, Yili, Uni-President, and Jianlibao, as well as new players like Heytea and Hankou No.2 Factory, have all launched sugar-free beverages. The explosion of the domestic sugar-free beverage industry has driven the development of the sugar substitute market. In the past, when the market was relatively blank, Japanese beverage giant Suntory brought sugar-free beverages to the Chinese market, and domestic companies like Uni-President and Nongfu Spring also launched sugar-free tea drinks, but with little success.
Although the concept of sugar reduction and sugar-free for health is pursued, taste and price often deter consumers. Additionally, public attitudes toward sweeteners have been resistant due to safety concerns about artificial sweeteners like saccharin and aspartame. The emergence of new healthy sweeteners, such as natural sweeteners like erythritol, which are safer and lower in calories, has begun to replace traditional sweeteners.
In the new wave of sugar-free beverage consumption, there are already many brands and products, and the presence of erythritol suppliers is increasing. Data shows that China's annual erythritol production increased from 18,000 tons in 2015 to 51,000 tons in 2019, with a compound annual growth rate of 29.9%. Erythritol itself has relatively low production and high technical barriers. With only a few players competing, Sanyuan Bio has established cooperation with well-known beverage brands like Genki Forest, giving it a relative advantage in production capacity and market share.
However, as a pure raw material producer, its ceiling is foreseeable because its gross margin improvement is largely constrained by rising raw material costs.
In terms of gross margin, Sanyuan Bio's comprehensive gross margin from 2018 to 2020 was 36.85%, 45.77%, and 42.27%, showing a downward trend, and further declined to 41.09% in the first half of 2021. **Facing rising raw material glucose prices, Sanyuan Bio chose to raise prices for erythritol. In the first half of 2021, the average selling price of erythritol increased by 25.25% compared to the previous year.**
If going public is to pave the way for capacity expansion and use economies of scale to reduce costs, it may help improve Sanyuan Bio's gross margin to some extent in the future. However, looking at the entire industry, compared to peers such as Baolingbao, Jinhe Industrial, and Zhejiang Huakang, Sanyuan Bio has a higher customer concentration and a more single-product structure. The supplier nurtured by Genki Forest still needs to develop more competitive product categories to avoid being abandoned.
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