INDEX

Table of Contents
STEVIA: A new player in artificial sweetener game ......................................... 1 Stevia Sweet eners: S afet y, ADI and Met abolism ................................................. 2 Stevias popul arit y spans the globe ...................................................... 3 Regulations on stevia ............................................................................ 4 Safety of stevia . .4 Stevia for use as sweetener in the European Union ................................ 5 Stevia Market. ........................ .5 Sweeten er Market .......6 Mark et of Stevia in India ................... ...7 Large un tapped market ................ ..7 Herbal sweeteners could eat into the mark et .... ..8 Current Pl ayers in the mark et ...... ..9 "Natural" Stevia Muscles into Sweeten er Market ....... .9 New Player on the Fi eld Taking Ai m at Quality, Costs.. 10 Formulation for a Stevia Pure Play . .1 1 Summary . .11 Appendix ..12

STEVIA: A new player in artificial sweetener game.

Stevia is a natural sweetener extracted from the leaves of the stevia plant (Stevia rebaudiana), a member of the sunflower family (Compositae). Found originally in Paraguay, its sweet taste comes from a group of compounds called steviol glycosides, which can be up to 400 times sweeter than sugar. Yet, unlike sugar, stevia has no calories1. That gives stevia the distinction as the only commercially viable, naturally-derived, no-calorie sweetener for global food and beverage applications.

Stevia Sweeteners: Safety, ADI and Metabolism

Acceptable Daily Intake (ADI) Studies on the safety, metabolism and intake of food-grade (purified) steviol glycosides have demonstrated their safety for all populations. The Joint FAO/WHO Expert Committee on Food Additives (JECFA) conducted a thorough scientific review of all the available scientific data and concluded stevia sweeteners are safe for use in foods and beverages. In the US, stevia sweeteners are considered GRAS (Generally Accepted as Safe) by the US FDA. JECFA has established a permanent Acceptable Daily Intake (ADI) of 4 mg/kg body weight expressed as steviol equivalents, or 12 mg/kg body weight for steviol glycoside. This means that a 60 kg (132 pound) person can safely consume 720 mg of stevia sweeteners every day over his or her lifetime without any adverse health effect. The maximum amount of stevia sweeteners used in Coca-Cola products worldwide is 60 mg per 250 mL serving [~ 8.33 fl. oz]. (Amount of stevia sweeteners is rounded to the nearest 5 mg.) Metabolism Studies have been conducted in humans to document the metabolism of steviol glycosides. Steviol glycosides are not absorbed in the small intestine. They are broken down by bacteria in the colon into steviol, which can be absorbed. Absorbed steviol is converted into steviol glucuronide by the liver and is excreted in the urine.

The steviol glycosides are used to sweeten a number of foods in Asia and South America. Table 1. Food Use Levels Reported to the Committee
Food type Reported maximum use level (mg/kg)

Food Type

Maximum Use level 500

Beverages 500 Desserts 500 Yogurt 500 Cold Confectionery

Sauce Pickles

1000 1000 1000

Delicacies 200 Sweet Corn 160 Bread 300 Biscuits Food consultancy Zenith International reports that stevia products saw a 27% increase in worldwide volume sales in 2010 over 2009, taking its overall market value to US$285 million. From mid-2009 to mid-2010, new product launches using stevia extracts increased by 200%, with products launched in 35 countries 237 new products in the first half of 2010 alone, according to market research firm Mintels Global New Product Database (GNPD). Mintel values the natural sweetener product market at US $763 million in 2010, with the stevia market alone at $670 million. A leading stevia manufacturer has projected that stevia will penetrate 20% to 25% of the US$60 billion global sugar/ sweetener market. Regulatory approval in the European Union (granted in November 2011) has set the stage for stevia use to explode on the other side of the Atlantic in 2012 and beyond. Asia Pacific, where the ingredient has been used as a sweetener in some regions for decades, has the largest market share for stevia at 35.7%, followed by North America (30%) and South America (24.3%).

Regulations on stevia
The stevia leaf, which contains several glycosides, is used as a sweetening agent in various parts of the world. It is recognized for its ability to reduce the caloric content of popular food and beverages. The safety of steviol glycosides for human consumption has been tested through peer-reviewed research, including metabolic and pharmacokinetic studies. Stevia is approved as a sweetener for food and beverages in many countries. Governing bodies around the world have concluded that stevia is safe for use as a general purpose sweetener. Specifically, in 2008 and 2009, the Food and Agriculture Organization/World Health Organizations Joint Expert Committee on Food Additives (JECFA), a global panel of food ingredient safety experts, and the United States Food and Drug Administration stated the use of pure steviol glycosides (95%) is safe for human consumption as a non-medical ingredient up to 4 mg/kg of body weight/day. In 2011, the European Commission authorized the use of pure steviol glycosides (95%) in foods and beverages across the European Union.

Agence Franaise de Scurit Sanitaire des Aliments (AFSSA, or French Agency for Food Safety) Codex Alimentarius Commission (CAC) European Food Safety Authority (EFSA) FAO/WHO Expert Committee on Food Additives (JECFA) Food Standards Australia New Zealand (FSANZ) Health Canada U.S. Department of Agriculture (USDA) and Food Safety and Inspection Service (FSIS) U.S. Food and Drug Administration (FDA)

Safety of stevia
Stevia has been consumed for centuries by the indigenous people of Paraguay. It was also approved decades ago (1970) and commercially available as an alternative sweetener in foods and beverages. Reportedly, stevia extract represents more than 40% of the high-intensity sweetener market in Japan. Stevia extract contains several steviol glycosides and other molecules from stevia leaves; until recently the technology for the separation & characterization of such molecules were not adequate enough to determine the safety and stability of stevia leaf extract that regulatory authorities needed for approval as a food ingredient. However, with the advancement in the process and characterization technologies over time, more high purity stevia extracts were produced and thoroughly studied for generating safety and application data. On evaluation of these data, the global regulatory bodies have come to trust and accept stevia as a safe food ingredient.

Stevia for use as sweetener in the European Union

Brussels, Belgium: 14 November 2011

The International Stevia Council, the authoritative voice for the stevia industry, applauds the final approval of the European Commissions Regulation to authorize the use of steviol glycosides as a non-caloric sweetener in the European market. Maria Teresa Scardigli, the Councils Executive Director, said: The final hurdle in the regulatory process for steviol glycosides the scrutiny of the regulation by the European Parliament and the Council of Ministers has been cleared. The regulation has been formally adopted on 11 November and will enter into force twenty days after publication in the EU Official Journal, which occurred on 12 November. As a result, consumers across Europe will be able to enjoy products sweetened by steviol glycosides as early as 2 December 2011. Carl Horn, President of the International Stevia Council, said: This is a major step forward for consumer choice in Europe. Steviol glycosides are derived from a natural source, the stevia plant, and are zero-calorie. These two characteristics are key attributes for consumers searching for better for me products in their efforts to lead healthier life styles and manage weight. In the coming weeks and months, consumers will begin to see new products sweetened with stevia appearing on the shelves in European supermarkets. This will include a wide range of goods, including yoghurts, cereals, beverages, soft drinks, confectionary, chocolate and table top sweeteners. Hundreds of new products are being launched each year made with stevia extracts across a wide range of countries and products from table top sweeteners to beverages. Stevia extracts have become particularly common in Asia, South America and the United States.

Stevia Market
A perfect storm driving market demand Driven by a near perfect storm of demand, the market for all natural, zero-calorie stevia sweeteners is exploding. A leading stevia manufacturer has predicted a global stevia products industry valued at $10 billion as soon as 2015. The World Health Organization (WHO) estimates stevia intake could eventually replace 20-30% of all dietary sweeteners. The total global sweetener market was estimated at $58.3 billion in 2010. Market drivers include: Soaring rates of obesity, diabetes and heart disease. Increases in the rates of these diseases are linked to high consumption of sugar and/or high-calorie sweeteners, and are soaring worldwide.

Sweetener Market
Strong trend toward natural sweeteners The global sweetener market, dominated by sugar, had an estimated value of $58.3 billion in 2010. Stevia is one of the fastest-growing newcomers in the $6 billion (est.) sugar substitute market. This includes artificial chemical sweeteners as well as naturally derived non-caloric sweeteners. The global sweetener market is growing at 2% to 3% a year. There are two main segments, sometimes called natural artificial, but also called nutritive and non-nutritive. Nutritive sweeteners include sugar and high fructose corn syrup (HFCS); non-nutritive sweeteners include zero-calorie High Intensity Sweeteners, e.g. artificial sweeteners such as aspartame and sucralose, and naturally derived sweeteners such as stevia. Sugar/HFCS comprise 80% of sweetener market and are growing in-line with population expansion. Non-nutritive sweeteners are projected to grow at 5% a year between (20082015). Artificial sweeteners have been dominant but the trend is toward natural sweeteners, according to a Raymond James publication, Agribusiness. In an August 2011 report, market research firm Packaged Facts said artifical sweeteners Sweet N Low (saccharin), Equal and Nutrasweet (aspartame) all saw sales drop in 2010, while natural sugar substitutes saw sales increase. Stevia sweetener Truvias sales jumped 73.7% between 2009 and 2010.

Sales of Splenda sucralose, the leading player in the US retail/tabletop sugar substitute market, dipped 5.6% from 2009 to 201; Splenda fell from a 61% share of the retail sugar substitute market in 2007 to 45.5% in 2010, while Truvia and Stevia in the Raw accounted for 13.8% of the market in 2010. Equal went from 12.4% of the market in 2007 to 6.5% in 2010, and Sweet N Low fell from 13.2% in 2007 to 11% in 2010.

Market of Stevia in India

The market for artificial sweeteners has been valued at INR1.25bn. Niche play on wellness categories It is estimated that the market for health and wellness products in India to be worth INR113.6bn; it is likely to grow at 15% to 20% per annum. With 50% of the population in the 25-50 years age group, India is one of the largest markets for wellness products. According to a study by Tata Strategic Management, the wellness market is estimated to reach INR355bn by 2015. The main player of artificial sweetener in market is Zydus Wellness (ZYWL) through products such as Sugar Free, which has 82% market share in artificial sweeteners, and Nutralite, which has a market share of 65% in spreads. Combined, these products account for 76% of sales. Increasing health ailments likely to drive demand for wellness products At 50.8mn, India had one of the largest diabetic populations in FY10. With an improvement in health awareness, the diagnostic and usage rates are likely to increase, leading to a rise in the number of diabetics consuming artificial sweeteners from 2.96mn in FY10 to 9.6mn in FY15f. This implies the artificial sweetener market is likely to increase to INR2.7bn in FY13f, up from INR1.25bn in FY10. Exponential growth opportunities in Sugar Free The change in lifestyles has led to a rise in lifestyle diseases such as diabetes. In FY10, there were 50.8mn diabetics in the country. The number of diabetics has been growing at 5.9% per annum during the past 10 years. We believe the growth rate is likely to accelerate to 7.15% to reach 71.7mn diabetics by FY15f. Based on the estimated growth in the number of diabetics, the demand for Sugar Free is likely to rise substantially during the next few years.

Large untapped market

Of the 50.8mn diabetics in the country, only 2.96mn consume artificial sweeteners. Of the 50.8mn diabetics in the country, 27mn are in urban areas, while the rest are in rural areas. However, we believe only 60.7% of diabetics have been diagnosed, with the urban diagnosis rate at 70% against 50% for rural. Hence, there are 30.8mn diagnosed diabetics in the country, of which 19.1mn reside in urban areas. It is believe that of the diagnosed diabetics not everyone is a consumer of artificial sweeteners; only newer additions consume

artificial sweeteners. This reduces the potential market size. Nevertheless, even if we consider the additions in the past 10 years (16.15mn, the target market is huge, given that currently only 2.96mn people consume any artificial sweetener. Consumers of artificial sweeteners are growing at a CAGR of 20% during FY07-FY10f. Assuming that a diabetic consumes four pellets per day (each pellet is equivalent to a teaspoon of sugar; in all our calculations, only the pellet form of consumption is considered), the size of the artificial sweetener market is pegged at INR1.25bn or 0.2% of total sugar consumption in the country. Product concentration and raw material cost increases are concerns ZYWL derives 76% of its sales from two brands: Sugar Free and Nutralite. High product concentration and the growth opportunity in both categories are likely to draw competition. In case of Sugar Free, which contributes 40% of sales, the new range of herbal sweeteners using the stevia plant could pose a big threat to artificial sweeteners based on aspartame and sucralose. If approved, they could capture 50% of the market. Another risk is the price of key raw materials such as aspartame. Unlike other FMCG products, the company does not undertake frequent price changes in Sugar Free as it looks to grow the market. This is likely to put pressure on margins.

Herbal sweeteners could eat into the market

Researchers have found that sustained use of aspartame-based products could be harmful in the longer run. Thus, there was a need for a natural product with no side effects. The stevia plant has a long history of safe usage. It has received government approval in over 20 countries; regulatory approvals for the use of stevia and steviosides as a food additive have been received in Japan, Korea, China, Taiwan, Australia, Russia, Ukraine, Kazakhstan, Malaysia, Indonesia and Latin America. It is awaiting approval in the US and Canada. In the US, the U.S. Food and Drug Administration (FDA) recently approved the use of Truvia and PureVia, two zero-calorie sweeteners made from the stevia plant, for use in foods and beverages. These newly-approved sweeteners are purified forms of stevia. Thus, according to the US FDA, stevia itself cannot be marketed as a sweetener. However, it can be sold in the form of Truvia or Purevia, in which case the US FDA will neither approve nor object. The global market for stevia sweeteners is already worth over USD500mn; Japan is the largest consumer with consumption of USD200mn (in Japan, artificial sweeteners are banned). According to market surveys, the market could easily reach USD10bn following US FDA approval for use as a dietary supplement. Currently, it has been approved as a food ingredient (use in large consumer packaged goods). Thus, stevia-based sweeteners are likely to capture over 50% of the market share of aspartame and sucralose-based sweeteners. However, before that, three issues need to be dealt with: (1) improving stevias taste profile; (2) regulations; and (3) sourcing of stevia leavesthough India is the second-largest producer, South America is the preferred destination for sourcing.

Current Players in the market

The sugar and corn camps are squared off against each other in court, but both groups are looking over their shoulders at another enemy. Both have been fingered as culpable in the ever widening girth of Americans. In 2010, at least 36% of U.S. adults and children were considered obese. Extra weight increases the risks of diabetes, heart disease, stroke, cancer and sleep apnea, among other chronic illnesses. It is such a critical problem that Mayor Michael Bloomberg in New York City spearheaded a ban on large-size, sugary soft drinks beginning March 2013. Diet drinks laced with artificial, no-calorie sweeteners will get a pass from Bloomberg's crackdown. There are a number of artificial sweeteners, with NutraSweet's aspartame the most popular. Merisant also sells aspartame under the Equal brand name. Running a close second is sucralose marketed as Splenda by Tate & Lyle Ingredients. Cumberland Packing Company sells saccharin under the brand Sweet'N Low. These and other artificial sweeteners are increasingly used in formulations of popular soft drinks and prepared foods as well as table top sweetener alternatives for coffee and cereal. Artificial sweeteners have taken a 10% bite out of the total sweetener market. As enticing as artificial sweeteners seemed to be, they have faced increasing criticism from health researchers as potentially harmful. Many consumers refuse to embrace "diet" drinks and food. Consequently, along with caloric big-sluggers sugar and corn syrup, artificial sweeteners are vulnerable to new competitors.

"Natural" Stevia Muscles into Sweetener Market

All sweeteners are facing a new threat from stevia. Extracted from the leaves of a subtropical shrub, stevia products can claim to be "natural" and that has excited consumers. Besides a purity pedigree, stevia has a glycemic index of zero and does not affect blood-sugar levels. Steviawas designated GRAS (Generally Recognized as Safe) by the U.S. FDA in 2008 and approved for sale in the European Union in 2011. With consumers on board several of the major sweetener market players have embraced stevia. AC Nielson reported that sales of Cargill's Truvia branded stevia product surged to 8.2% of the $2 billion U.S. table top alternative sweetener segment in 2011, displacing Sweet'N Low as the second most popular sugar alternative. Cumberland's Stevia in the Rawalso experienced a dramatic surge in sales in 2011. Sales rose 77%, making it the second best-selling stevia brand currently on the market. Merisant is marketing its stevia sweetener as PureVia and Ingredion (INGR) sells stevia under the brand name Enliten. Ingredients producer Tate & Lyle is apparently not intimidated by brands already on the market and recently introduced its own stevia sweetener under the nameTasteva. Tate & Lyle's confidence is probably boosted by the fact that, despite some concerns about taste, beverage formulators are adopting stevia tosweeten their products. Stevia's taste comes to the palate slowly but lasts longer than sugar. In high concentrations some of its extracts may have a bitter aftertaste. Nonetheless, Coca-Cola (KO) launched three of its Odwalla juices sweetened with Cargill's Truvia and PepsiCo is usingPureVia for its SoBe

Lifewater products. Formulations for Coca-Cola's flagship drinks Sprite and Nestea have been modified to include enough stevia to reduce the sugar level by up to 30%. The market share of stevia products among alternative sweeteners is small but growing at a fast pace. The market might shift to stevia at faster rates if supply and quality issues could be resolved. Today nearly all stevia is grown and refined in China and South America. The plant will not grow from seeds and must be painstakingly propagated in greenhouses and transplanted into fields. Harvesting is also challenging. So far production is limited and the cost of stevia extract remains higher than equivalent sugar or corn syrup. UKbased PureCircle is among the largest stevia producers with grower relationships in the stevia shrub's native home of Paraguay and the U.S. PureCircle's Paraguay sources reached commercial production levels in early 2011, and a new grower relationshipp with S&W Seed (SANW) is expected to yield its first stevia crop from a California test field in yet this year.

New Player on the Field Taking Aim at Quality, Costs

Short supplies and high production costs translate into opportunity for any company with stevia know-how. A developmental stage company based in California, Stevia First Corporation is one of several new entrants to the stevia alternative sweetener market. The Stevia First management team has lengthy experience in California's agriculture sector and hopes to tap its connections and expertise to become one of the first major U.S. stevia growers and refiners. The company is presently conducting field trials to perfect mechanized cultivation and harvesting of the stevia shrub, both aimed at improving the steps that represent as much as 70% of stevia costs. Stevia First is also designing a pilot extraction facility that will enable it to more efficiently tap the plant's sweetening secret called "steviol glycocides" from the harvested leaves. The extraction process will rely on organic solvents followed by refinement and crystallization steps. Stevia First is also pursuing a fermentation-based process to produce Rebaudioside A, the sweetest of the stevia glycocides. The process begins with a yeast or other microbe that overexpresses enzymes elemental in steviol. The fermentation alternative eliminates the need to grow and harvest the stevia plant. The company has begun process optimization studies at its laboratory in Yuba City, California and hopes to publish data in early 2013. While not yet proven, Stevia First management believes the fermentation route to stevia glycocides could lead to more consistent flavors from batch to batch as well as reduced aftertaste compared to extractions from stevia leaves. The novel fermentation alternative has been licensed from a horticulture research group in Canada, Vineland Research, which has given Stevia First exclusive use of the technology and is also providing consulting services to the company. If perfected, the process could give Stevia First a clear edge in a market eager for high quality steviol extracts and finished products. With both farm and fermentation-based sources, Stevia First is hopeful it can bring large quantities of no-calorie sweeteners to the market. Once stevia glycocide supplies are assured, Stevia First plans to formulate and brand its own stevia products. The management team not only has smart agronomists and stevia experts in its ranks, several members of the group have

marketing and brand development expertise. Robert Brooke, the company's chief executive officer, is confident the group can become a successful vertically integrated participant in the stevia market.

Formulation for a Stevia Pure Play

All-natural stevia appears to be the fastest growing segment of the sweetener market. However, none of the established players the sweetener game presents a pure play on stevia. For example, both agriculture giant Cargill and food ingredient conglomerate Archer Daniels Midland sell stevia products, but sweeteners of all types are minor contributors to their respective total sales. UK-based PureCircle is among the largest stevia growers, but also sells flavorings and other sweetener enhancers. To tap into stevia growth on a stand-alone basis, investors will need to take on some risk with a developmental stage company like Stevia First. As an early stage company Stevia First has yet to book any sales and it has a modest balance sheet. Stevia First reported $917,146 in total cash on its balance sheet at the end of June 2012. The company used just over half a million in cash in the June quarter. However, management believes it can trim back its cash usage to $100,000 per month and stretch its piggy bank well into 2013. Stevia First has not been a public company for long. It was merged with a public shell in October 2011 and its shares began trading under the symbol STVF less than a year ago. The company raised $1.3 million in new capital through the sale of common stock in the private equity market in February 2012. No matter how frugal management is over the next few months, I believe it is more likely than not that Stevia First will need to open the door for new investors again. The sweetener market is in a bit of turmoil with heated competition. As the big guys battle in the court room, I believe it is a timely for an upstart like Stevia First to enter the market with new products and new technologies.

Summary
All the companies with stevia products are likely to be beneficiaries from consumer acceptance of stevia as a sweeterner alternative. For the larger players such as Carghill, ADM and Tate & Lyle and Integrion, stevia products may allow them to retain a share of the sweetener market as beverage forumlators such as Coca Cola and Pepsi introduce new non-calorie products. As ADM's income statement demonstrates, sweeteners are highly profitable. However, investments in any of these large conglomerates are impacted by their other businesses such as seeds or food products. To get a pure play on stevia, investors could consider Stevia First, which is bringing proprietary agriculture know-how to stevia cultivation and new technologies to stevia glycocide. As a developmental stage company, Stevia First has no operating history. It may also need to raise additional capital. It can be seen Stevia First is entering the market at the right time, when no player has yet to dominate the market. Thus a long position in STFA entails risk but could be timely.

APPENDIX
The Joint Expert Committee on Food Additives (JECFA)
Many countries rely on the safety assessments of the Joint Expert Committee on Food Additives (JECFA), a committee sponsored by both the Food and Agriculture Organization (FAO) and the World Health Organization (WHO) of the United Nations (UN). Comprised of internationally-prominent toxicologists, biologists and experts in risk assessment, JECFA has been investigating the safety of food additives since 19562. JECFA evaluated safety data of stevia extracts and proposed the specification of the extract containing at least 95% steviol glycosides content and approved an Acceptable Daily Intake of 4 mg (steviol basis) per kilogram body weight. JECFA follows an established set of guidelines for the evaluation of food additives, all JECFA evaluation reports are published in monograph form and are available to the public. Most regulatory bodies of different countries use JECFA determinations of safety in considering approval of food additives (2010 Monograph).

Codex Alimentarius Commission (CAC)

The Codex Alimentarius Commission, or Codex, was created in 1963 by two UN organizations, the Food and Agriculture Organization (FAO) and the World Health Organization (WHO). Its main purposes are to protect the health of consumers and to ensure fair practices in international trade in food through the development of food standards, codes of practice, guidelines and other recommendations. Codex standards and guidelines are developed by committees, which are open to all UN member countries. Member countries review and provide comments on Codex standards and related texts at several stages in the development process. In the United States, public meetings are held to receive comments on Codex drafts and comments are invited from all interested groups and individuals. Although the acceptance of Codex standards and related texts are voluntary, most member countries keenly follow the codex adoption of a food ingredient. More information about Codex is available at the Rome Codex web site.

Where is stevia in the Codex review?

The implications for approval by Codex are widespread, saving countries the extensive costs and manpower demands of conducting their own safety assessments of an ingredient for use in a wide range of food and beverages. Therefore, the Codex process of adoption of a food ingredient is deliberative, thus slow and follows eight stages of evaluations. Nonetheless, following the JECFA assessments and approval of stevia extract in several countries, Codex placed steviol glycosides on a fast track of evaluation during the March 2010 annual Codex meeting by forming an e-working group with several country-members to evaluate the technological reasons and the usage levels (concentrations) of the use of stevia extract in different applications. The e-working group presented their proposal for general comments and deliberations from all countries in the last quarter of 2010. The proposal was thoroughly discussed and modified during the GSFA (General Standard for Food Additives) sessions in March 2011 Codex meeting at Xiamen, China (Report). The final report of the forty-third session of the Codex committee on food additives proposed the adoption of steviol glycosides in a wide range of food and beverage application and will be presented to Codex Alimentarius Commission for their approval during July 4-9, 2011 meeting in Geneva, Switzerland.