Splenda — utilizing the artificial sweetener sucralose — has been successfully marketed in the U.S. and across the world as a safe substitute for sugar. Its slogan says it all — “Made from sugar, so it tastes like sugar.”

The sweetener’s draw is a simple one: It’s much sweeter than sugar, so you can use less and still get the sweet taste you desire. Splenda is marketed to people counting carbs or watching their caloric intake. If you bake a batch of cookies with substituting Splenda for sugar, you use only half the required sugar amount. It’s that sweet…

This sweet taste with less product is achieved through the science of flavor enhancement. And there are very real benefits to making less taste like more. Obviously, those struggling with diabetes or obesity stand to benefit most from low-calorie artificial sweeteners…

But now, with commodity prices skyrocketing, there’s a whole new reason to look at flavor enhancers.

Take Coca-Cola and its bottling and canning subsidiaries, for instance. Coca-Cola’s main product is its syrup. If you’ve ever worked in food services, you know that fountain Coke is shipped as a box of syrup that you hook up with a hose to the CO2 machine…

Now Coke is under incredible pricing pressure since its main sweetener — high-fructose corn syrup — is becoming more and more expensive. The company is even considering going back to using actual cane sugar to flavor its cola…still not exactly a cheap alternative.

Squeezing Hard Profits From a Soft Drink Empire:
Coca-Cola and the Corn Crunch

Coca-Cola isn’t just a slice of Americana. It’s actually one of the strongest brands on the planet, according to countless surveys. More people recognize the Coca-Cola logo than the Nike swoosh, General Electric’s GE and even the golden arches of McDonald’s.

Unsurprisingly, Coke products can be found in more than 200 countries.

Obviously, Coca-Cola has enjoyed years of success. But very soon, Coke could begin to feel the squeeze from soaring commodity prices.

You might not associate Coca-Cola with corn. However, these two items are inexorably linked. Beginning in the early 1980s, Coca-Cola began substituting high-fructose corn syrup for cane sugar in its signature soft drink in the U.S. At the time, it was the cheaper option.

Now, high-fructose corn syrup and other corn-based products are hitting record high prices. Soaring commodities, mandated increases in corn-based ethanol production and the recent devastating floods in the Midwest are set to send the price of corn even higher this summer:

The science of flavor enhancement saves money. If Coke had a substance that enhanced its sweeteners by more than six times, the company could use less product and protect its margins.

These are the kinds of hidden opportunities that we look for here at Penny Sleuth. We’ll keep our eyes peeled for more game-changing companies as commodity prices climb higher and higher…

Best,

Greg Guenthner
June 23, 2008

Editor’s Note: As always, send any questions or concerns to us at jim@pennysleuth.com.

Greg Guenthner

Greg Guenthner heads up Agora Financial’s small-cap division and is the founder of one of the only independent OTC research advisories in the industry. A graduate of George Mason University, Guenthner joined Agora in 2005 after several years as a journalist. He is managing editor of Penny Stock Fortunes and Bulletin Board Elite.

View articles by Greg Guenthner