Early last year, Merisant Chief Executive Officer Paul Block found himself in a sticky situation. Recently emerged from bankruptcy, the sweetener maker relied on aspartame—an aging sugar substitute long dogged by concerns that its use increased cancer risks—for almost 90 percent of its revenue. Sales of Merisant's flagship Equal, whose blue packets were once as ubiquitous as forks on restaurant tables, had been dissolving for several years.
With less than $300 million in global sales and a balance sheet that had been wrecked by the recession, Block knew Merisant was in no position to develop a new patented sweetener of its own. His solution: Reject the "one-brand, one sweetener" strategy the $2 billion industry had hewed to for decades. Block decided to slap the Equal name on a range of popular sweetener ingredients already sold by competitors and then try to out-market the rivals. "It's going from dogma to heresy," he says.
For much of the 1990s, Equal was the market leader. Then in 1998 the Food & Drug Administration approved a sweetener called sucralose. Ingredient company Tate & Lyle, along with its retail marketing partner Johnson & Johnson (JNJ), branded their tabletop version Splenda and packaged it in bright yellow packets. Unlike aspartame, however, sucralose didn't break down as easily when heated and was ideal for baking. Splenda's marketing also played off consumers' suspicions about aspartame. By the mid-2000s, Splenda overtook Equal.
Splenda now holds 48 percent of the U.S. sugar substitute retail market, excluding Wal-Mart Stores (WMT), according to researcher SymphonyIRI Group. Cumberland Packing's Sweet'N Low is a distant No. 2 with an 11 percent share, while No. 5 Equal controls about 7 percent. U.S. sugar substitute sales rose 3.7 percent in the last year, aided by the rapid growth of all-natural sweeteners derived from leaves of the stevia plant. Sales of Splenda, Sweet'N Low, and Equal all declined.
To counter Equal's 10 percent sales drop in the past year, Block has introduced a new sucralose-based Equal in a yellow packet to take on Splenda, whose patents recently expired. New pink packets of a saccharin-based version of Equal this year will go head-to-head with Sweet'N Low, years past its patent. Green packets of stevia-based Equal are on the way as well. Merisant is marketing sweetener caddies with all four colors to restaurants. "We call it our rainbow strategy," Block says.
Block was named a Brandweek Marketer of the Year in 1998 after launching Dannon Natural Spring Water for foodmaker Danone and turning it into America's largest bottled-water brand within two years. He did it by pulling a hodgepodge of regional spring waters, all marketed separately, under a single brand. Block says it won't be enough to merely copy other sweeteners and group them under a single umbrella. He says Merisant will have to make Equal a better value as well.
In the U.S., Equal Yellow costs about 20 percent less than Splenda. James Targett, an analyst with Berenberg Bank in London, says Merisant will have to undercut it more significantly to take meaningful share. "Once people find a sweetener they think tastes good in their coffee or on their breakfast cereal, they tend to stick with it," he says.
Rather than blanketing the market with brand advertising, Block is counting on the Equal name to lure consumers once Merisant gets its rainbow of sweeteners on as many store shelves and restaurant tables as possible. Block hopes to have blue, pink, and yellow versions of Equal in 70 percent of large U.S. grocers by yearend.
One big risk remains: Surging sales of all-natural, no-calorie sweeteners could make artificial sweeteners less relevant. Truvia, developed by Cargill from stevia leaves and marketed with help from Coca-Cola (KO), grew 66 percent last year and is the fourth-largest sugar substitute in the U.S. Merisant, in partnership with PepsiCo (PEP), has its own stevia-based sweetener called Pure Via. Others are rushing in with similar concoctions. Explains Block: "You can't patent a plant."
The bottom line: Merisant, maker of the flagging Equal brand of aspartame, is slapping the Equal name on other more-popular sweeteners.