In late May 2007, Tate & Lyle reported that what was an expected increase in sales would likely be postponed and profits associated with Splenda would be affected due to the amount of money that the company has to dump into fighting patent infringements. In recent history the company has spend hundreds of millions of pounds in the process of increasing and expanding its production capability for the sweetener Splenda and it appears as if they are going to have to spend more in the effort to win battles over patents. In May 2007 the company began battling a claim against 18 different Chinese import and distribution firms at the International Trade Commission over patents. Unfortunately, times may be tougher than normal for the company as they make 20% of their profits from the artificial sweetener.

Hard Times for Tate & Lyle

After telling stock holders and consumers about the legal battles with the different import and distribution firms at the International Trade Commission shares for Tate & Lyle closed down 40p at 605p with 30 million shares changing hands, which is three times the usual daily average. Consumers are obviously responding to the announcement and they feel like it is better to sell than stay on board, at least for the time being. This fall in stock prices came after an announcement in January of 2007 when the company warned that the product was not selling as quickly and as much as they had expected, which caused shares to fall by 16%. Apparently after the fall in prices in January and then another ominous report in May many stock holders were ready to jump ship and watch from a distance as those who stayed on either sink or swim.

A lot of the problem for Tate & Lyle is that the makers of Splenda are involved in an ugly court battle in the United States. The problem is that the maker of NutraSweet and Equal believe that the makers of Splenda are guilty of false advertising by likening their product through unclear language to sugar. While times seem a bit grim for Tate & Lyle their product is gaining market share internationally with shares going up from 26% to 28% for the year to March 31, 2007.

While there are struggles stateside with Splenda and Tate & Lyle have been seeing some drops in shares as a result, the chief executive, Iain Ferguson, has stated that he will continue to produce Splenda and they are expected to reach a respectable 70% of capacity by 2012. This is good news for the group because until the fall of 2006 they had been unable to meet the demand for Splenda and was even forced to ration the product that they did have on hand because its one plant in Alabama did not have the ability to produce any more. Luckily for Tate & Lyle, the plant has been expanded and is now two times as large as it was and the group has also added a £100m plant in Singapore that has tripled the previous capacity.

Tate & Lyle jumped on the Splenda wagon when consumers who were following the Atkins and South Beach diet were looking for low calorie sweeteners, especially in the United States. Production of Splenda took off and has quickly become the number one seller of artificial sweeteners. In fact, Splenda outsells Equal four to one in the United States, and though shares have suffered a bit because of legal action, the numbers don’t lie: Splenda is a force to be reckoned with and Tate & Lyle knows it.