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STEVIA FROM PARAGUAY

PARAGUAY VENDE

IntroductionWe are pleased to present the following study of the market opportunities for Stevia. The report is an analysisof existing information regarding the properties, uses and benefits of Stevia, the regulatory environment,the current market environment in Japan, a case study of a Brazilian production company, Steviafarma, andrecommendations for marketing “Stevia from Paraguay” in the global market.

One of the main reasons for Paraguay Vende to complete this study was to help us better understand thewide ranging development of Stevia, and give shape to our current program of assistance to local companies,in addition to the many Paraguayan firms and associations that may benefit from the information in thisstudy.

We look forward to expanding the original objective of this study, to propel “Stevia from Paraguay” into theglobal market, and increasing economic returns for Paraguayan families.

Reinaldo Penner,Director Paraguay VendeSeptember 2004


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Tabla de Contenidos

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Executive SummarySection I

1. Uses, Applications and Regulations of Stevia1.1 Introduction1.2 Many Types of Stevia Products1.3 Many Qualities of Stevia Products1.4 Research and Development1.5 Uses of Stevia1.6 Main Producers1.7 Regulatory Constraints1.7.1 Regulations in Japan

1.7.2 Regulations in the United States1.7.3 Regulations in the European Union1.7.4 Codex Alimentarius Commision1.7.5 Regulatory Environment in Mercosur

1.8 Changing the RegulationsSection 2

2. Development of Stevia from Paraguay2.1 Introduction2.2 Stevia from Paraguay

2.2.1 Production and Exportation2.2.2 Geographical Expansion of Stevia2.2.3 Paraguay Vende's Assistance

2.3 Cultivation and Associated Costs2.4 Commercialization2.5 Comparison of Sweetener Contents

Section 33. Steviafarma of Brazil

3.1 History3.2 Markets

3.2.1 The Products3.2.2 Direct Distribution3.2.3 Indirect Distribution

3.3 Production3.4 Relationship with Paraguay3.5 Quality3.6 Prices3.7 Research and Development

Section 44. Stevia in Japan and China

4.1 Introduction4.2 Opportunities for Stevia from Paraguay4.3 The Japanese Market4.4 Production Processes4.5 Supply from China


Section 55. Prospective Market Opportunities in the United States

5.1 Introduction5.2 Capturing the Market5.3 The U.S. Market5.4 The Competitiveness of Stevia from Paraguay

5.4.1 Improving the Price5.4.2 Quality of Stevia from Paraguay5.4.3 Image of Stevia from Paraguay5.4.4 Developing a Service Advantage5.4.5 Advantages of Developing Relationships5.4.6 Minimizing or Eliminating Risk for the Buyer

5.5 The Media Kit5.6 Creating a Marketable Difference5.7 Growth Potential of Stevia from Paraguay

Bibliography

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5 STEVIA FROM PARAGUAY

The most important market for Stevia is currentlythe food and beverage industry, where it is chiefly employed as a sweetener and flavoring agent. Thehealth market takes second place in importance. Inthird place there are the byproducts made from theplant remains after removing the leaves destined forthe tea industry or extractive industries. Seventypercent of the total worldwide production of Steviais used to extract crystals known as "Steviosides"and "Rebaudioside-A," while the remaining 30percentis destined for herbal uses.

Stevia was always subjected to a regulatoryframework which determined its economic evolution.Its commercialization is somewhat more limited whenit is regulated as a dietary supplement, and widerwhen it is defined as a food additive which includes,among other uses, food sweeteners. In mostcountries, the use of Stevia as a sweetener is notapproved. It is noteworthy to add that the food andbeverages industry is one of the most regulatedindustries worldwide. Therefore, it should not be asurprise to see barriers to the growth of Stevia,especially as a certified natural sweetener.

Scientific studies supporting the use of Stevia areavailable in Japan, Brazil, Denmark, and othercountries. Around 1,500 scientific studies come fromJapan alone. The Japanese use a holistic method,trying to use the whole plant and not only the leavesthrough several applications pertaining not onlyhealth and human well-being, but also those of theanimals, soil, and ecology.

The biggest producer of Stevia is China. TheShandong Huaxian Stevia is the biggest and oldestStevia factory of China. It accounts for almost 50percent of that country's total production. More thanhalf ofthis factory's production is sold in China'sinternal market, while 40 percent is sold to Japan,and the rest is sold to Korea, Indonesia, and theUnited States.

Paraguay, the world's second producer, is focusedinto supplying the Stevia industry of Brazil. It also exports to Europe, Mexico, and other Latin Americancountries. The ideal markets to be considered by Paraguay and Brazil would be those of the UnitedStates and the European Union member countries,

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Executive Summary

which have a limited regulatory framework for Stevia.

Production of Stevia leaves and extracts hasflourished in China thanks to the accessibleregulations of Japan. Near 95 percent of the rawmaterial used in Japan comes from four producersof China.

The Codex Alimentarius serves as a reference forthe international trade of foods. Its main goals areto protect the health of the consumers, to ensurefair practices in food trade, and to promote thecoordination of all food regulation studies undertakenby international organizations, as well as bothgovernmental and nongovernmental ones. SinceJune 2004, the Joint FAO/WHO Expert Committeeon Food Additives) sees Stevia as a safe product,which opens the door to a more lenient futureregulation.

There are elements which give more competitiveadvantages to Asian markets. Probably, thesemarkets are better positioned than those of Paraguayand Brazil to take advantage of the benefits of aderegulation. However, conditions might change,especially if action is taken to improve Stevia growthin Paraguay, with investments in its production andsale, and its preferred use is promoted among theconsumers of the world.

The Paraguayan Central Government, together withseveral Departmental Governments andMunicipalities and the majority of the international

agencies operating in the country are aware thatStevia is an attractive crop for small farmers. Privatecompanies have shown a growing interest in Stevia.In the 1980s, the James May company startedoperations, thus marking an important milestone inParaguay's Stevia business. Later, in the 1990s,Paraguayan companies such as Telnet, KH Agrícolaand the Ka’a He’e Poty Cooperative started topromote Stevia growth and to buy dried leaves inorder to sell them to regional markets.

The efforts recommended by this study comprisethe following points:

Focus the efforts towards existing marketsImprove Paraguay's Stevia competitivenessInform consumersWork in partnership with government agencies and other agencies toward achieving a review of laws impacting on Stevia's sales

USAID’s Paraguay Vende started to assist Steviabusinesses, analyzing potential product demand,which in this case is ensured by regional companieswilling to buy two times the current volume of grownleaves. Thus, Paraguay Vende focuses now intoproviding technical assistance to producers. In theshort and medium term, this action will account foran increase in sales and jobs in the Northern corridor,where work currently is concentrated.

The existing markets require little effort in changingneeded laws; rather, they ask for improved


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competitiveness of Paraguay’s Stevia in the worldmarkets and to increase production in order to satisfylocal demand.

In order to achieve Stevia's biggest potential, it isnecessary that, in the long term, it be used as a foodingredient/sweetener. Stevia industry should continueto focus in that potential long-term market. However,it is imperative to keep using the current allowedmarket in order to change the regulations which inturn will open the doors to the potential market.

An industry review in the United States pointed outthat China is, by far, the biggest Stevia provider inthe market. Also, a review of the U.S. market showsthat the American importer associates Stevia withChina, and not with Paraguay. Therefore it is veryimportant that Paraguay work to establish itsreputation as a provider of a Stevia of superior quality.When American importers were asked about whythey bought Stevia from China, they give a varietyof answers such as quality, price, and lack ofknowledge about Paraguayan providers.njknjkjkjk.

If Paraguay is going to compete with China and withother Stevia producing countries, it will need to informthe consumers, seeking to internalize the notion thatStevia "is" from Paraguay, in the same way as thewine is from France, the cheese is from theNetherlands, the coffee is from Colombia, and thekiwi is from New Zealand.

China gives a steady offer of prices considerablylower for Stevia crystals, and it also has the image

of being "the" Stevia provider. This study suggeststhat Paraguay should not focus on obtaining the bestprice, but to offer a competitive price instead, which,when added to other strengths, will lead to the notionthat buying Stevia from Paraguay is "the right choice."Other strengths are quality and image. A remarkmade by James May about Stevia quality states that"Good quality Stevia leaves, whether whole, cut andsifted or in tea bags, are about 30 times sweeterthan sugar and have no calories. The best qualityleaves are imported from South America and Mexico,and are about 12 percent to 13 percent Stevioside.The poorest quality, but most ample supply, iscurrently coming from China, where the leavescontain only 5 percent to 6 percent Stevioside. Asimple taste test quickly demonstrates the difference."

The Paraguayan Stevia image in the world marketis one of an unknown product and quality. This couldbe easily changed to Paraguay's favor. If Paraguaycould make a difference in the image by whichconsumers perceive the "original" Stevia of Paraguayvis-à-vis those of different origin, this could be anadvantage. Stevia culture and track record inParaguay have centuries of production and use. Thishistorical foundation could be used as an advantageby producers and marketers of Stevia of Paraguay.For example, "Terra Soda" is a Stevia-sweetenedsoda, natural and low-calorie, introduced in the U.S.market by the Web under the formula of"ecomarketing" as a product coming from Peru,focused towards social consciousness and an imagethat promotes saving the forest through the purchaseof their products.

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When exploring the possibilities of turning Paraguayinto an important world producer of Stevia it isfundamental to first understand the nature of Stevia.Stevia has a number of properties, which makes itmore attractive than sugar and much more attractivethan most of the synthetic products available. Someof the reasons for increasing interest in Stevia maybe the decreasing popularity of these artificialsweeteners and the increased consumer interest innatural organic products (Mitchell, 2003).

The sections of this report are organized to presentthe uses, properties and qualities of Stevia, theinternational regulatory framework, and how it affectsthe willingness to supply Stevia.

Stevia is a leafy green herb, native to the Rio Monday

Valley in the highlands of Paraguay, where it is wellknown by the name Ka’a–he’e and has been usedas a sweetener by the Guaraní people long beforethe colonization of the Americas (Bertoni, 1905). In1887, while studying the herbs used by natives inParaguay, Moises Santiago Bertoni “discovered”Stevia. In 1905, in honor of the Paraguayan chemistDr. Rebaudi, the plant was scientifically named Steviarebaudiana (Bertoni).

Since its discovery, Stevia, as it is most commonlyreferred to, has been subjected to changinginternational regulations marking its economicevolution and use in the world market. Central toStevia’s international evolution, there is an importantdebate that could represent millions of dollars to theStevia industry.

1.1 Introduction

1. Uses, Applications and Regulations of Stevia

Section 1PARAGUAY VENDE


The Stevia Registration Debate

1.2 Many Types of Stevia Products

Seventy percent of all the world production is usedfor processing Stevioside crystals, while the remaining30 percent of the world’s production is designatedfor herbal uses. The leaf form includes all forms ofthe plant in its natural stage (fresh or dried), and theextracts from the leaves can be processed into eitherpowders or liquids (see table next page). The bestform of Stevia to use depends on the amount ofsweetness required in a product and the degree towhich the particular recipe or beverage will benefitfrom the licorice-like taste produced in less refinedforms.

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1921: US Trade Commissioner George Brady first presented Stevia to the US Department ofAgriculture, calling it a "new sugar plant with great commercial possibilities." Brady took note ofits non-toxicity and its ability to be used in its natural leaf state. He also claimed that it was "anideal and safe sugar for diabetics."

1954: Japan, who is now today’s largest user of Stevia in the world, began cultivating the plant.

1970: Food manufacturers began marketing Stevia in Japan.

1991: US Food and Drug Administration (FDA) banned the import of Stevia into the USA.

1995: US FDA modified its import guidelines to allow Stevia into the country as a dietary supplement,not a food additive.

2000: EU Commission refused to allow Stevia either as a novel food and/or a novel food ingredient,in the European market

2003: Paraguay sent documentation to the Codex Alimentarius Commission requesting a regulatorystatus of food additive.

2004: The 63rd JECFA meeting declared the ADI of Stevia extract to be 2mg/kg per day, a temporarydecision that could influence the decisions in the next Codex Alimentarius Conference when re-evaluating the Stevia status, which will also be reviewed by the EU.


The use of fresh or dried leaves (pieces or ground)is acceptable in domestic cooking but it leavessediment and a greenish color in clear drinks(Midmore & Rank, 2002). Processed products wereintroduced as an alternative to avoid the side effectsof the natural leaves. There are several forms of

processed Stevia (see table next page) and one ofthe challenges in using these various forms of Steviain cooking and beverages lies in finding the rightamount to suit the recipe and consumer taste (Bonvieet al., 1997).

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Stevia Leaves

Fresh leaves: have a mild licorice flavor. This is the simplest formof Stevia in its most natural and unrefined state. The leaves are usedto prepare sauces but are best in herbal teas and for directconsumption. They do not dissolve. In various markets they may bepurchased loose or in tea bags. They are 15 to 30 times sweeterthan sugar.

Dried leaves: are 10 to 15 times sweeter than sugar. To dry them,one just removes all the water (the easiest way is to dry them witha dehydrator, but drying them in an oven on the lowest setting willalso work), which allows them to have an extended storage period.They have the same uses as fresh leaves but are also for industrialpurposes, to extract the Stevioside.

Powdered or ground leaves: can be found in bulk form and in teabags. They have a greenish, leaf color and are used as a flavorenhancer or sweetener in teas, salads, fruit, and coffee, amongothers. Ground Stevia leaves do not dissolve.

Byproducts (plant remains): The remaining parts of the plant,including stems, seeds, flowers and even leaves that were notclassified for industrialization, are collected and processed into animalfeed or fertilizers.


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Stevia Extracts

Dark liquid extracts: “a concentrated syrup made from the dried leaves in a base of water andalcohol” (Kirkland, 2000). Used for the sweetening of beverages.

Clear Liquid Extracts: a solution of powdered Steviosides dissolved in water, alcohol or glycerin.Used for the sweetening of beverages.

Powdered Stevia extracts with 40–50 percent Sweet glycosides: the Stevia leaves are processedthrough one of several extraction methods, usually water or ethyl alcohol based. The resultingpowder, usually off-white, contains 40 to 50 percent sweet glycosides and is more than 100 timessweeter than sugar (Richard, 1999). Used for the sweetening of food and beverages.

Powdered Stevia extracts with 85–97 percent Sweet glycosides: the same as above, exceptwith greater concentration, it is usually between 200-300 times sweeter than sugar. Stevia is primarilyused as a sweetener in this form. Not all Stevia powders are the same. The taste, sweetness andcost of the various white Stevia powders will likely depend on their degree of refinement and thequality of the Stevia plant used (Bonvie, L. et l, 1997).

Stevia blends: combine pure Stevioside extract with a filler to make an easy-to-measure greattasting powder. Stevioside is the purified or most highly processed form of Stevia. It is the mostpowerful form of Stevia glycoside and is available in either a white powder or a liquid extract.Because of the great strength of Stevioside, manufacturers combine Stevioside with filler. Theseblends are the most versatile and easy-to-use form of Stevia. The Stevia to sugar ratio mostcommonly used is 4:1.

According to Kirkland (2002), the types of fillers used in Stevia Blends are:Lactose: Derived from milk, it has a slightly sweet taste and dissolves instantly.Malt dextrin: It is a non-sweet complex carbohydrate with virtually no taste. It can be derived from corn, rice, tapioca or other starches and has a very low glycemic index.F.O.S.: This is the common term for fructo-oligosaccharides. It is a sugar found in a varietyof common foods like bananas, garlic and wheat.Dextrose: It is a common processing agent derived from corn sugar.

Stevia packets: these normally contain the same ingredients as Stevia blends, except in convenientand pre-measured servings.

Stevia quick dissolving tablets: They normally contain Stevioside along with other ingredientsand are mainly used to sweeten beverages.

STEVIA LIQUID EXTRACTS

STEVIA POWDERS

STEVIA GLYCOSIDES AND ITS COMBINATIONS

1.3 Many Qualities of Stevia Products

As the table above shows, not all Stevia productsare the same. The taste, the sweetness and cost ofthe various white Stevia powders will likely dependon their degree of refinement and the quality of theStevia plant used. Stevia quality is determined bythe levels of Steviosides and Rebaudiosides-A, andis also often detected by the sweetness of the product.

Kirkland (2000) declares that the quality of any Steviaproduct depends on the amount of Steviosides itcontains, but even more important is the percentageof Rebaudiosides, which is the result of the cultivationand the extraction methods. He also suggests thatthe presence of these additives at any time duringgrowing, harvesting or processing, are an importantissue in determining the final quality of the product.

Midmore further expand the argument when hereferences the conclusions from six scientific studies.“Stevioside (St) traditionally makes up the majorityof the sweetener (60 to 70 percent of the total) andis assessed as being 110 to 270 times sweeter thansugar. It is also responsible for the aftertastesometimes reported (licorice taste). RebaudiosideA (R-A) is usually present as 30–40 percent of totalsweetener and has the sweetest measure ofsweetness quality, the more R-A the better. If R-A ispresent in equal quantities to St (or more), it appearsthat the aftertaste is eliminated. The minor glycosidesare considered to be less sweet, 30 to 80 timessweeter than sugar.”

The differences in quality, taste and prices areimportant when researching Stevia and comparingproducts from a Chinese and a Brazilian plant.

1.4 Research and Development

Stevia has become a popular research topic inuniversities and laboratories the world over. Researchobjectives range from health studies, such as diabetesand cloning research to environmental impactassessments, and extraction patents. Some betterknown studies include “confirming the safety of Steviafor diabetic use, showing dental benefits in the formof plaque inhibition and cavity reduction, investigatingcarcinogenicity and mutagenicity (if any) in animaltesting. The safety of animal consumption including,chickens and humans has also been confirmed bya wide range of studies.” (Midmore 2002) Someimportant studies in Paraguay are discussed insection 2.

There are hundreds of patents for the Stevia extractionprocesses around the world; Europe, the UnitedStates, and Canada all have valuable patents onStevia. Japan alone has around 150 patents(Angelucci, 1982; Bonvie et al., 1997a). Brazil hasconducted considerable R&D regarding Stevia andcontinues to do so (see section 3). These studiesare important because they will help the industry todiscover the best production methods. Although mostbasic research has been done, this does not meanthat the results are accessible and open to all. In2003, Norina et al published the following chartcategorizing the extraction processes. (see tablenext page from Food New Zealand 2003).

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1.4 Research and evelopment


Scientific research studies on Stevia are availablein Japan, Brazil and Denmark which are supportingthe use of Stevia (Brandle, 1998). Around 1,500scientific research works on Stevia have originatedin Japan. The Japanese have an integrated approach,seeking to utilize the whole plant, not only the leaf,

through various applications that not only affect thepeople’s health and well-being, but also animals,ecology and the soil. (JBB Stevia Laboratory, 1988).The table next page summarizes some of theimportant anti-oxidizing effects of Stevia, beneficialto the health and environmental communities.

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Method Publication Name

Methods of Extracting Stevia Glycosides

Based on solvent

Ion exchange

Absorptionchromatography

Solvent anddecolorizing agents

Selectiveprecipitation ofindividual glycosides

Ultrafiltration

Haga, T., R. Ise andT. Kobayashi (1976)

Uneshi, H., R. Iseand T. Kobayashi(1977)

Itagaki K., and Ito, T.(1979)

T. Ogawa (1980)

Matsushita, K. and T.Kitahara (1981)

Tan, S. and H. Ueki(1994)

A method forpurifying Stevioside.

Purification of Stevia sweetening agent.

Purification of Stevioside

Decolorization and purification of Steviacomponent.

Separation of Rebaudioside A bycrystallization

Method of extracting and separatingsweet substances.


1.5 Uses of SteviaThe single most important market for Stevia is thefood and beverage industry, mainly as a sweetenerand flavor enhancer. The health market is secondin order of importance. The third most importantmarket is byproducts, which consists of the remainderof the plant, after the best leaves have been harvestedfor tea or for extraction. Many producers have difficultyin finding buyers for these by products, which reducestheir return per hectare considerably. The byproductmarket can be developed by promoting use of theseproducts for fertilizer and as an additive in animalfood products. All three markets require considerablepromotion to overcome the acceptance barriers.

Sugar contentVitaminsMineralsEnzymes

Kill food- poisioning bacteria

0 157SalmonellaStraphylococcusaureus

Does not killuseful bacteria oflactobacill& bifidobacteria

HelicobacterpyloryVIHAujeezkyVirusRotavirus

AgrochemicalsDioxinNicotine

for manure productionfrom animal faces andfood garbagefor restoring healthy soil

SteviaAplicationes

Increases sugarcontent

and nutritiensin fram products

Bactericidalactivity

Antivirusantiviy

Detoxifiesharmful

chemicals

Previentsallergy & atopy

Anti-oxidizingactivity

Detoxifies histamine& reduces los

side-efectsof steroid hormone drugs

Helps growroots

Activatesreproductive

ability

Activatesuse ful microbes

Enhances immunity& natural healing power

Act

ivat

es n

atur

al e

colo

gy

The Antioxidizing Power of Stevia

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Stevia sweeteners are heat stable to 200º C, are acid stable, non-discoloring and do not ferment.

(Glycemic Research Institute, 2000; Midmore and Rank, 2002).

Enhances flavors and odors (Ikan, et al., 1993; Mowrey, 1992).

It has no calories and it is natural (Johnson, 1990)

It is a non-toxic and non-addict ive sweetener (Alvarez, 1986; Kirkland, 2000)

It is potent, 250 to 300 times sweeter than sugar in its processed forms (Glycemic Research Institute,2000)

It is a table top sweetener for tea, coffee, etc. (Midmore & Rank, 2002);

A source of antioxidants

Alcoholic beverage enhancer (aging agent and catalyst)

Potential products: Additive for soft drinks, cordials, fruit juices, ice creams, yoghurts, sherbets, cakes,biscuits, pastries, pies, baking, jams, sauces, pickles, jellies, desserts, chewing gum, candies,confectioneries, seafood, vegetables, weight loss diets, diabetic diets, flavor, color and odor enhancers

Applications in Accordance with the Stevia Markets


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Hypoglycemic action

Diabetes treatment

Cardiovascular Action

Antimicrobial action

Digestive tonic action

Plaque retardant/ cavities prevention

Eczema and acne control, rapid healing agent for skin care

Zero calories

Treats hypertension and controls blood pressure

Calcium antagonist

Bactericidal agent

Potential products: mouthwash, weight loss programs, toothpaste, skin care agents, medical treatments

(1) Food and Beverages Market

(2) Health Market


1.6 Main ProducersThe largest Stevia producing country is China. Steviawas introduced to China during the 1970s and hasbeen produced commercially there since the 1980s.China is the main supplier to Japan, which is themajor commercial producer and user of Steviosides.Within China, Stevia has been considered a majorcrop in the past (more than 2,000 tons per year), butthere has been a reduction due to lower demandand price from Japan (Midmore & Rank, 2002).

According to Midmore, the Shandong Huaxian SteviaCompany is the largest and oldest Stevia factory inChina and produces about 50 percent of China’stotal production, with speculation that this figuremight have changed with the new factories in thenorth. More than 50 percent of this company’sproduction is sold within China, around 40 percentto Japan and the rest sold throughout Korea,Indonesia, and the United States. (op.cit).

In the late 1990s, Paraguay and Brazil started toproduce and distribute Stevia products direct toconsumers internationally via health food stores,herbal product outlets and by direct mail order sales.Paraguay – the world’s second largest producer –currently has around 750 ha dedicated to Stevia(more than 500 tons per year; see Section 2). Othermain Stevia producing countries are: Thailand, Korea,Russia, Indonesia, Australia, Spain, Brazil, Canada,Costa Rica, Colombia, Bolivia, and Peru.

The production of Stevia leaves and extracts in Chinahas flourished because of Japanese regulationsregarding these products, which allow greater accessfor Stevia producers than the regulations in the UnitedStates and Europe. Some 95 percent of the rawmaterial used in Japan comes from four majorproducers in China (Midmore & Rank, 2002). Theproduction of Paraguay and Brazil are focused onthe Brazilian, Mexican and other Latin Americanmarkets. The ideal export markets for Brazil andParaguay would be those of Europe and the UnitedStates. As latecomers, Brazil and Paraguay facecompetitive constraints when compared to China,for example, higher transport and transactional costsin the Japanese market.

1.7 Regulatory ConstraintsThe food and beverage industry is one the mostregulated markets worldwide. Therefore it should benot surprising that Stevia is experiencing growthconstraints, especially as a certified natural sweetener.Firms involved in the production of Stevia shouldtake notice and keep track of regulatorydevelopments.

1.7.1 Regulations in JapanToday, Japan has the largest consumption of Stevia.In 1954, Japan, began cultivating the plantdomestically. In 1970, food manufacturers beganmarketing Stevia in the country. Japan banned artificial

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Agriculture: green fertilizer, golf grasses, and garden grasses

Animal product ion: for balanced rat ions, farm animals, racing horses, f ishes

Cosmetics: additives for creams, lotions, soaps and shampoos

Environment: to decontaminate dioxin and dangerous chemicals

Soil: disinfectant that kills bacteria, filamentous fungi and seaweed

(3) Byproducts Market


sweeteners in the 1960s, and has strict regulationsregarding products that pose health concerns. Inorder to verify the safety of Stevia sweeteners, theJapanese authorities conducted several safety tests(carcinogenicity tests, teratogenecity and propagationtests, single administration test, repeated

administration tests, and mutagenicity tests),concluding that Stevia is safe (Chan et al. 1998;Chan et al. 2000). Why then do other countriesrestrict Stevia from entering their markets as asweetener, when the Japanese have found it to besafe?

The Situation of Stevia in Japan and Other Countries

1.7.2 Regulations in the United States

In 1921, the U.S. Trade Commissioner George Bradypresented Stevia to the Department of Agriculture,declaring it a “new sugar plant with great commercialpossibilities.” Brady took note of its non-toxicity andits ability to be used in its natural leaf state. Heclaimed that it was “an ideal and safe sugar fordiabetics.” There was little movement in the Steviamarket in the United States between 1921 and 1991.In 1991, the US FDA banned the import of Steviainto the U.S., and in 1995 it modified these restrictionsto allow Stevia into the country as a dietarysupplement, but not as a food addit ive.

According to the Federal Food, Drug and CosmeticAct of 1994 (revised April 2000), Chapter 402 (a) (2)(c), Chapter 409, 21 CFR 170 and 21 CFR 189-1,

Stevia is a substance “Prohibited from use in humanfood.” Per 21 CFR 190, Stevia may be sold in theUnited States as a stand-alone "dietary supplement"or herb, but not as a sweetener. The US FDAauthorities base their position on results of the studypublished in 1968 that claimed that certain tribes ofIndians in Paraguay (the Matto Grosso) used Steviatea as a contraceptive (Planas & Kuc, 1968). Thisposition was unchanged even after other studiesshowed that Stevioside does not affect either growthor reproduction in animals (Yodyingyuad, &Bunyawong, (1991), Takanaka, Kawashima, Usami& Sakami, (1991), Bonvie et al., (1997)).

The impact of applying one or another of the terms“food additive” or “dietary supplement” in regard toStevia regulations represents millions of dollars tothe potential Stevia industry.

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Stevia holds 41 percent of the sweetenersmarket (Bonvie et al., 1997a)

Artificial sweeteners such as saccharin andaspartame were banned or strictly regulatedin the 1960s due to safety concerns (H. Fujita,T. Edahiro, 1979)

Japanese food processors use Stevia and itsproducts in a wide variety of applications(Richard,1999)

There are several Stevia manufacturers whohave formed the Stevia Association of Japan(Richard,1999)

Stevia is almost unknown and accepted onlyas a dietary supplement

Artificial sweeteners such as aspartame andsaccharin are consumed and used in foodpreparation

Stevia products can only be found in healthshops as a dietary supplement

There are some Stevia manufacturers butthere are no strong associations of Steviaproducers

JAPAN OTHER COUNTRIES


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The statutory definition of “food additives” accordingto the FD&C Act Chapter 201(s) are any substancesthe intended use of which results or may reasonablybe expected to result, directly or indirectly, in itsbecoming a component or otherwise affecting thecharacteristics of any food…” (Ditto, 2002).

In reference to dietary supplements, the DietarySupplement Health and Education Act of 1994(DSHEA), states that “(dietary supplements) are thefollowing: vitamins; minerals; herbals and otherbotanicals; amino acids; dietary substances used tosupplement the diet by increasing its total daily intake;and concentrates, metabolites, constituents, extracts,and combinations of these ingredients. In addition,these products must be intended for ingestion in pill,capsule, tablet, or liquid form; must not be representedas a food or sole item of a meal or diet; and mustbe labeled as a "supplement." (US FDA, 2001).

1.7.3 Regulations in the European UnionThe European Union’s (EU) position, which is evenmore restrictive than the U.S. position on Stevia, isgiven in the Document 300DO196, 2000/196/EC,which says: “The Commission (Environment, PublicHeath and Food Safety Committee of the EuropeanUnion) Decision of February 22, 2000 deniedpermission to place Stevia rebaudiana (Bertoni):plants and dried leaves as a novel food or novel foodingredient, in the market, under Regulation (EC) No.258/97 of the European Parliament and the Council(notified under document number C) (2000) (77)Official Journal L 061, 08/03/2000 p. 0014.” It appearsthat the commission will change this position andallow Stevia in the food market, once they believethere is sufficient research done to better understandthe side effects, dietary properties, etc., of Stevia(see the following section).

In apparent contradiction to this EU position, someEuropean countries grow and use Stevia, including:Germany, Belgium, Italy and the United Kingdom(Glycemic Research Institute, 2001, Bonvie et al.,1997a, Kirkland, 2000). Individuals in Europe arealso conducting research on Stevia to determine the

benefits, and safety of the products (op.cit.).

1.7.4 Codex Alimentarius CommisionThe Codex Alimentarius Commission was createdin 1963 by FAO and WHO to develop food standards,guidelines and codes of practice under the JointFAO/WHO Food Standards Program, as a referencefor international food trade. The main objectives ofthis program is to protect the health of the consumers,ensure fair trade practices in the food trade, andpromote coordination of food standards studiesundertaken by international governmental and non-governmental organizations.

The Joint FAO/WHO Expert Committee on FoodAdditives (JECFA) recently held its 27th Session inthe International Conference Centre in Geneva(Switzerland) June 28-July 3 2004. Paraguaypresented its position paper, supported by a seriesof documents, from medical to quality studies, provingStevia as a safe product. Other countries includingJapan and China also presented similar documentsrequesting a change in Stevia’s regulatory status.

This 63rd JECFA meeting updated the official opinionregarding Stevia. In a temporary decision, thecommittee declared that Stevia is innocuous anddoes not appear to be harmful in amounts of up to2mg/kg of body weight per day. The Commissionhas requested additional studies to be completedand presented prior to 2007, to include experimentson humans. Although this does not open thecommercialization in the European Union, this is animportant step for the Commission and the EuropeanUnion. The Stevia community anxiously awaits theoutcome of the above mentioned studies.

1.7.5 Regulatory Environment in MercosurThere are no regulations that prohibit thecommercialization, processing or consumption ofStevia in Paraguay. The product can be found in itsnatural stage (whole leaves, powder, and teabags)

European Union


or in a processed form (crystals, liquid extracts,culinary uses). In 2000, the ParaguayanCongressdeclared Stevia of “national interest” andrecommended to the executive branch, that thecountry strengthen its competitive development, trainthe growers, start market research, and promoteinvestment. In 2001, a Presidential decree declaredStevia a “crop of interest” for the agriculturaldevelopment of the country, and the Ministry ofAgriculture, in a Resolution dated October 2003declared Stevia of “institutional interest.”

Both at the MERCOSUR level, and within Paraguay,Stevia is not listed as a natural sweetener in thecustoms nomenclature code. The National TechnicalCommittee of Customs Affairs and NomenclatureCodes (Sección Nacional del Comité Técnico deAsuntos Arancelarios y Nomenclatura) in Paraguay,states that Stevia is a relatively new export productand thus is not listed separately as a sweetenerproduct. For this reason, Stevia products are listedin the miscellaneous category, as a product withgeneral components, with no specific definition.However, this Commission is discussing theimportance of listing Stevia as a separate item, apartfrom the miscellaneous category, to show consistencyin the petitions Paraguay has presented to the CodexAlimentarius Commission.

In Brazil, the Ministry of Health, the National Secretaryof Sanitary Monitoring, National Division of SanitaryFood Monitoring, Port N° 14, on September 10, 1986decided to authorize the use of Stevioside as anatural sweetener (additive) in dietetic foods anddrinks, with an acceptable ADI of 5.5 mg/kg of bodyweight per day.

In Argentina, the National Institution of Nutrition andthe National Administration of Medicine, Nutritionand Medical Technology (Instituto Nacional deAl imentos y Administración Nacional deMedicamentos, Alimentos y Tecnología MedicaINAL–ANMAT) informs that Article 1398.64.3 of theArgentine Food Code, classifies Stevioside as a“white crystalline powder, odorless, not fermentable,not hygroscopic, of a sweet taste even in watersoluble and well diluted solutions.”

1.8 Changing the Regulations

To change these factors and laws in the consumingcountries will require considerable resources. Thebenefits to a single country to change the regulatorynorms in other countries are limited by a cost–benefitrelationship just as they are for a single business.Paraguay could spend the time and money to helpStevia obtain approval as a sweetener and ingredientin the United States or Europe; however, due to alack of monopoly controls on supply, Paraguay wouldnot receive the complete reward for their efforts.

The competitive advantage can be measured in anumber of areas, including:

Lowest cost of production, processing andshippingGreatest ability to produce and meet thedemands of the market for quality and supply.Product quality or product image advantageLogistical or location to market advantage– USAID is supporting or exploring Steviaproduction in Peru, Colombia and EasternEurope.Available resources, and associated costs,to dedicate to the production and processingProcessing technologyFavorable or political advantage in countryof consumptionCultural ties between exporter andconsuming nation and businesses

This study evaluates the comparative advantage ofthe markets (see sections 2, 3 and 4). Consideringthese elements, some markets are most likely in abetter position than Paraguay and Brazil, to benefitonce the regulations are changed.

However, the conditions can change, and theParaguayan market can benefit, especially if therecommended actions are followed, such asimproving the cultivation, investing in the productionand promoting the preference for Stevia fromParaguay with the international consumers.

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2.1 Introduction

2. Development of Stevia from Paraguay

Section 2

The success of Stevia in Japan and China in the1980s was followed by the development of Steviain Paraguay and Brazil in recent years. During thelate 1990s the Paraguayan government receivedsome assistance from Japan, earmarked for Stevia,which generated many reports assessing theadvantages of promoting its cultivation. In general,the assistance given to Stevia by the Paraguayangovernment was research oriented (see sub section2.5), and in the case of the donor agencies, it waslocal ized and based on pi lot programs.

The central government and many local governments,as well as most international agencies in Paraguayhave been aware that Stevia it is an attractive cropfor small growers in Paraguay. Although presentlythe average yearly yield per hectare (ha) of Steviain Paraguay is low, a crop should achieve yields of3,000 kg, generating a gross income of $1,800 perha. There are growers that produce well above these

levels, achieving 5,000 kg per ha per year. The cropmay be harvested two to four times per year. Oncestarted, Stevia is a relatively simple crop to growand store. Dried leaves can be produced and storedfor up to three years in a “low tech” system (see subsections 2.2 and 2.3).

Private firms have shown increasing interest inStevia. In the 1980s when James May formed hiscompany with the mission to make a business basedon Stevia, this marked the beginning of what washoped to be a blossoming export business forParaguay to the United States (see section 5). Inthe 1990s, Paraguayan firms, such as Telnet, KHAgrícola and the Cooperativa Ka'a He'e Poty startedto promote cultivation, and buying leaves for theregional market (see section 3). In 2002, theproducers, traders and consultants formed a chamberof commerce and launched an ambitious plan ofexpanding Stevia cultivation. The Paraguayan

PARAGUAY VENDE

government placed Stevia high on its agenda duringits official visit to the United States in 2003 in orderto explore the possibilities of obtaining support fora plan to expand Stevia cultivation in Paraguay.

In 2004, the United States Agency for InternationalDevelopment (USAID), through its Paraguay Vendeprogram, decided to analyze the possibilities ofexpanding Stevia from Paraguay. Paraguay Vendeinitiated assistance to Paraguayan companiesdedicated to Stevia with two firms, Telnet/Steviafarmaand a local branch of a U.S. firm Wisdom NaturalBrands, the company founded by James May.

The Paraguay Vende approach consists ofestablishing links with new buyers and providingtechnical assistance to the firms, in order to improvetheir commercialization and production process. Theexpected results of the program are an increase inthe volume of sales, employment and investmentsin Paraguay, thereby helping to reduce poverty. Theprogram analyzes the potential demand for a product.In the case of Stevia, regional companies are willingto buy up to three times more than the presentvolume of Stevia leaves. Other donor agencies likethe Japanese (JICA) and the Germans (GTZ) arealso interested or planning to start projects promotingStevia cultivation.

The main advantages of Stevia from Paraguay canbe defined by the following: 1) it has more productionper hectare, in other words, up to five crops can beharvested per year; and 2) the Stevioside andRebaudioside A content per kilogram is slightly higherthan other producing countries.

Unfortunately, production has expanded slowly andhas not reached the minimum volume for meetingthe demand of just one extraction factory. Althoughthe market information available gives hope fordeveloping the Stevia business in Paraguay, thereare also cautionary signs. One aspect to be takeninto account is the need for competitive positioningwith the Chinese Stevia producers, who currentlyproduce at a rate cheaper than the Paraguayanproducers.

This section explores the potential of increasing the

supply and commercialization of Stevia fromParaguay. Each section gives an overview of whataccomplishments have been achieved regardingStevia in Paraguay, assessing the quality issues andprice development in different segments of themarket.

2.2 Stevia from ParaguaySince 1998, considerable efforts from private firmshave been made to promote the cultivation of Steviain Paraguay, teaching, guiding and helping thegrowers. Stevia is a labor-intensive crop, requiringmore labor per ha than most crops. For this reason,the government and international donor agenciesare providing technical assistance to small producersas a tool for combating poverty.

2.2.1 Production and Exportation

Subsequently, Paraguay has a designated area ofcultivation of more than 750 ha for cultivating Stevia.This is not a large area dedicated to Stevia, but isa step in the right direction. In the coming years,more land should not only be dedicated to Stevia,but cultivated as well. One local company exportsmost of the Stevia leaves from Paraguay, 330 ton in2003, which is 61 percent of the total leaves exportedduring the whole year, and 82 percent of the leaveswere exported to Brazil. The second exportingcompany has 36 percent share of the Stevia leafexport market of Stevia leaves shipped to variouscountries: China 51 percent, Brazil 36 percent,Argentina 12 percent, and others (see table nextpage).

Production in 2004 is expected to be less thanprevious years, because a drought reducedproduction by about 50 percent. Paraguay sellsalmost its entire production (approximately 600ton/year) as dried leaves. According to the table innext page, 85 percent of this production goes toSteviafarma, Maringá, Brazil. The remaining 15percent is mainly distributed between France, UnitedStates and Germany.


PARAGUAY VENDE


Export of Stevia Leaves, 2003

(In Kg and by country of destination)

Some firms do not export Stevia directly but combineStevia in an herbal blend with other natural products.Although the U.S. market is small, the role is veryimportant when discussing the possibilities of

transforming this market into a major importer ofStevia from Paraguay. The following businesses arethe main suppliers of Stevia leaves and/or Steviafinished products in Paraguay:

WISDOM NATURAL BRANDS: The US firm is market leader of Stevia in the United States (seesection 5). The Paraguayan branch of Wisdom is exporting finished Stevia products, like solublemate with Stevia, tea bags, and others to the US firm. They have a requirement of 25 ton of selectedStevia leaves per year, of which most are imported from Paraguay.

TELNET S.A.: Representatives of Steviafarma (Maringá, Brazil). TELNET sells dried leaves to thefactory and distributes their “Stevita” finished products in Paraguay and South America (excludingBrazil).

KH AGRÍCOLA: Exports to the Steviafarma factory. In 2003, KH exported 300 ton of Stevia leavesto the Shandong Stevia Company (China).

NATURIT: Produces Stevia tea bags (Stevia, Stevia with Tea, and Stevia with other herbs).

INSTANT FOODS: Produces Stevia concentrates that are added to instant tea and coffee. They buyaround 40tn of Stevia leaves per year.

LAS PALMAS: Exports Stevia green powder and Stevia stems to France and Germany (the latterbeing used for animal food).

SHIROSAWA: Exports selected Stevia leaves to Japan.

Brazil

326.668

70.600

397.268

China

100.300

100.300

Argentina

24.200

9.100

33.300

EE.UU.

100

665

411

1.176

Germany

307

532

839

Mexico

204

204

Total gral.

326.668

195.711

9.100

665

532

411

533.088

Source: OCIT, Paraguay 2004

PARAGUAY VENDE

The Main Firms Involved in Stevia in Paraguay

EXPORTCOMPANY Brasil China Argentina EE.UU

TELNET

KH AGRICOLA

FUNDECA

ARASY ORGANICA

LAS PALMAS

WISDOM NATURALBRANDS

Total kilograms

Germ. Mex. Total

2.2.2 Geographical Expansion of Stevia

As mentioned on the previous page, one of thecautionary factors regarding the Stevia industry inParaguay is the slow start, even after the push inthe late 1990s when more private firms entered themarket. The reasons for this slow start include thedifficulties of introducing a new crop to small producerswithout any effective government or internationalsupport. The main Stevia cultivation area is locatedin the regions of San Pedro and Concepción wherelow income farmers and small producers dominatethe rural economy. This however is not the regionwhere Stevia is grown naturally. Stevia wasdiscovered growing wild in the highland region ofParaguay and Brazil (see circle in the map).

One important reason for this shift of Stevia’scultivation area to the north is that the highlandshave been dominated by the soybean cultivation,which is not compatible with Stevia cultivation. Steviauses virtually no agrochemicals whereas there is anintensive use of agrochemicals in the cultivation ofsoybeans. There are no effective herbicides forStevia. Stevia needs plenty of water in its first years,which makes it susceptible to weeds. These weedscan only be removed by hand, because there is noknown mechanization system that can replace themanual labor. In contrast, soy cultivation is a highlymechanized process.

The highlands of Paraguay and Brazil have not beensuccessful in introducing Stevia, whereas the SanPedro and Concepción region have shown somesigns of progress. Both major trading companies ofStevia are operating in this region. These regionscould increase their cultivation because most growersare planting sesame, which they could easily combinewith Stevia. Sesame is compatible as it is also anagrochemical free crop.

2.2.3 Paraguay Vende’s Assistance

Paraguay Vende is inaugurating their technical

assistance in respect to Stevia in the northern regionof the country. On one hand, the objective is toexpand the cultivation by incorporating new familiesand new parcels of land, while on the other hand,the cultivation will be expanded by reincorporatingold plots previously dedicated to Stevia. In the regionof Concepción, there were areas dedicated to thecultivation of Stevia in the early 1990s, but shortlyafter these areas experienced a decrease inproduction. There are various breeding grounds forStevia, but the commercial cultivation could neverbe solidified in the geographic area. There is anirrigation system in the area that is partially abandonedtoday, although there is a probability that GTZ willhelp provide technical assistance to reactivate thesystem. All of these characteristics helped ParaguayVende decide to begin offering technical assistanceto Stevia farmers in the north.

In May 2004, Paraguay Vende participated in thelaunch of a Stevia campaign in the Department ofConcepción that brought together farmers, nurseries,representatives of the central government, thegovernment of Concepción, a commercial companyand the municipalities of Yby Yau and Horqueta.The government of Concepción provided Steviastarter plants, Paraguay Vende provided free technical

PARAGUAY VENDE


Brasil

Bolivia

Argentina

Steviosides tn.600 hacultivatedLess than 100ha cultivated

Naturalenvironmentfor Stevia.


assistance, and the trading company offered topurchase the harvests at a specified quality andprice. During the same month, Paraguay Vende alsoparticipated in the launch organized in the Departmentof Amambay, again bringing together farmers,representatives from the government of Amambay,private companies from Brazil and Paraguay, offeringto purchase harvests at a specified quality and price,and this time a representative from the Braziliancompany for Agricultural Research, EMBRAPA, wasalso present.

The project has planned to incorporate approximately25 new hectares into the cultivation of Stevia, involvingapproximately 100 families in Yby Yau. Likewise, itplans to implement cultivation in the Colony of theVirgen of Caacupe, where a poll has shown thatthere are approximately 60 families interested instarting the production. At the same time, ParaguayVende trained farmers in Stevia cultivation methodsin the designated areas of San Vicente, Yrybu Cua,and December 25. A committee of the Steviaproducers was formed with the assistance of themunicipality of Yby Yau with 20 producers eachcultivating a quarter hectare of Stevia. This initiative

expanded to Amambay, where the Department isoffering starter plants to 50 producers who are eachpreparing one quarter hectare for growing. Finally,there are another 60 additional hectares beingprepared for the cultivation of Stevia in the extremerural areas of the Department of Concepción.

2.3 Cultivation and Associated Costs

To begin to cultivate Stevia, it is necessary to preparethe land: analyze the soil, ensure the best conditions,plow the soil, till the soil and if needed, add someagriculture lime to it. It is calculated that 80,000 to100,000 Stevia plant starts are needed for everyhectare. Plowing, tilling, and cultivation costs dependon how many people are involved in these activities.If only family members work the land, no additionalcosts are involved, however, below are somecalculations assuming everything is outsourced. Theproduction costs do not include the implementationcosts, shown separately in the tables below and onthe next page.

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Implementation Costs for a Stevia Crop Per 1 ha

Value US$

1.000,00

10,00

50,00

66,67

500,00

100,00

33,33

1.760,00

Activities Description

Cost of purchasing land

Soil Analysis

Plow and Trail

Agriculture lime

Stevia plantings (100.000)

Cultivation Costs

Fertilization

TOTAL COSTS

Value US$Activities Description


The following information includes all of the product costs except for the implementation costs listed in thetable on the previous page.

The trading firms follow strict quality standards. Ifthe products do not reach this standard, they arerejected or purchased at a lower price. This situationis a direct result of the specifications demanded bythe industries that processes the leaves. The pricepaid to growers for dried Stevia leaves isapproximately $0.60 to $0.66 per kilogram. Theprice paid to the middle man (see next section) isapproximately 10 percent above the amount paidto growers, because they perform screening andstore purchased leaves. When a certain volume isreached, the middle man comes and collects thestock. However, the growers usually end up sellingtheir first quality leaves directly to the trader,bypassing the middle man.

Taking into account that Stevia leaves are also soldto clients in Europe, the United States, China andother destinations, the regional industry may affordshortages of supply even if the cultivated area inParaguay increases to a level of 1,500 ha.

Investment in Stevia cultivation is highly

recommended because the level of returns cannotbe met by most other crops. Even if the family laboris paid, and a linear depreciation rate of 20 percentis incorporated into the calculations, the rate ofreturn on investment is high. The internal rate ofreturn is 88 percent when considering the profitminus the operational and implementation costs(see following table).

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Annual Production Costs for a Stevia Crop of 1 ha

Quantity

10

3

3

100

1

1

Description of Activities

Soil preparation

Harvests

Drying/Packaging

Kg. Fer t i l izers (US$/kg)

Fungicide

Insecticide

Organic fertilizer

Total Product ion Costs

Value(per Unit)

25,00

25,00

25,00

0,33

16,67

16,67

33,33

Total ValueUS$

250,00

75,00

75,00

33,33

16,67

16,67

33,33

500,00

Quantity Description of Activities Value(per Unit)

Totl ValueUS$


PARAGUAY VENDE

Net Returns on Investments per 1 ha of Stevia cultivated

Yieldp/Year

Kg

1.500

3.000

3.000

3.000

3.000

13.500

GrossIncome

$

900

1.800

1.800

1.800

1.800

8.100

Depreciat.$

352

352

352

352

352

1.760

Operatingcost

$

500

500

500

500

500

2.500

NetReturns

$

48

948

948

948

948

3.840

TIR

CashFlow

$

-1360

1.300

1.300

1.300

1.300

3.840

88%

2.4 CommercializationThe Paraguayan Stevia association recommendeda commercialization system for Stevia leaves,whereby a middleman, usually as well a lead farmer,serves as the intermediary between the growers andthe traders purchasing the leaves. The middlemanor lead farmers purchase the production, and insome cases they provide starter plants and technicalassistance to the growers. Usually there is no writtencontract between the parties, but rather a verbal

agreement that governs the relationships.Unfortunately, disloyalties are very common betweengrowers, middle men and traders. Once the middleman has accumulated a volume of Stevia for shipmentto the firm, he or she will sell the production andreceive payment for it.

The Commercialization System

GROWER LEAD FARMER/MIDDEL MAN

TRADER FINALCONSUMERS

INDUSTRY

OTHERBUYERS

Operatingcost

$

contract between the parties, but rather a verbalagreement that governs the relationships.Unfortunately, disloyalties are very common betweengrowers, middle men and traders. Once the middleman has accumulated a volume of Stevia for shipmentto the firm, he or she will sell the production andreceive payment for it.


PARAGUAY VENDE

In the recommended system, the tradingfirm deals directly with the middle man,who then in turn is responsible for manycommittees of growers, each withmultiple growers. Each grower plantsapproximately 0.25 ha to 1 ha of Stevia.Although the growers should havesome equipment, e.g., a tractor, plow,rake (harrow), or water tank, in realitymost work the land by hand.Middleman’s used to be as well leadfarmers and should have at least 3 haof Stevia planted with an irrigationsys tem. Th is represen ts anapproximate investment of $4,200. Thepayback period for this investment isestimated to be 15 to 18 months.

Additional details of the contracts between middleman and the growers include a requirement that theproducers must sell green dried leaves, with amaximum of 12 percent of foreign materials (stems,flowers, earth and non Stevia leaves). The middleman must pay a pre-established price per kilogramto the producers. This price is adjusted andestablished according to the world price for Stevia.Payments to growers are made in cash on the farm.The buyer must provide technical assistance. Thetechnical assistance may include distribution ofstarter plants, which is essential to new growers.In many cases, failure to provide some form oftechnical assistance may delay the entire cultivationand commercialization process, as it stunts theexpansion of the cultivation area.

The prices are paid in accordance with the qualityand the use of the leaves:

First grade quality leaves receiveapproximately $1 to $1.50 per kg.Second grade quality leaves receiveapproximately $0.80 to $1.00 per kg.Standard grade quality for industrial usesreceives an average of $0.66 per kg.An industrial plant in Brazil pays $1 to $1.1per kg of dried Stevia leaves.Other countries that buy the first quality leaves, used especially for infusion blends,pay from $1.30 to $1.50 per kg.

In some cases, discussions arise either through pricedisagreements between growers, middle men and/orthe traders, or because someone does not complywith other terms of the agreement. Despite thecontracts or verbal agreements, traders no longerrequire the growers and middle mans to only sellproducts to them, a cause of many problems in thepast. Growers have the freedom to choose to whomthey will sell their Stevia leaves, but firms try tomaintain a cordial relationship with the farmers inorder to gain and maintain their loyalty.

When there is a shortage of leaves, additionalproblems related to the price arises. Businesses arewilling to pay whatever it takes to purchase theleaves, even if a business has signed a contract witha buyer. In recent months, due to shortages, growersdemanded higher prices, but did not provide thequality originally promised, losing the credibility ofthe middle man and traders. While this may seemlike a fairly ordinary dispute between growers andtraders, the outcome of these disputes can and havegreatly impacted the supply of Stevia in Paraguay.It also has damaged the relationships betweengrowers and traders resulting in growers ceasingproduction because they feel they are not receivingthe fair market price for their crop. Additionalcommercialization problems are summarized in thetable on following page.


The investment climate in Paraguay must improve before international firms will invest in Paraguay.

There is no governmental support for the cultivation of Stevia. It was named a Crop of NationalInterest in the parliament and the central government some years ago, but no resources werededicated to help the cultivation of the crop.

The plant demands more humidity than others. However, considering the unstable weather conditionsin Paraguay and the fact that small producers can not afford investments in irrigation, the lack ofirrigation could be a major setback to the industry.

Prices have not been very stable from the point of view of low income farmers (the growers), andthus, they do not trust the buyers, and mix lower quality leaves with the first quality leaves.Stevia is a labor intensive crop, due to the fact that there are no herbicides that can effectively clearthe weeds without killing the crop, and thus, the crop must be weeded manually, requiring the attentionof at least four workers per hectare.

Profiting from an intense cultivation of Stevia requires changing some cultural practices. The Steviacrop as mentioned before is a labor intensive crop which needs a lot of care, and it must be harvestedwhen mature, otherwise, a big part of the crop is lost.

There are some commercialization problems. Many growers who once cultivated Stevia are nolonger in the business, because they do not know where to sell their products, how to take care ofthe crop, and what characteristics to consider.

There are growers interested in planting Stevia, but they do not have the starter’s capital for cultivatingthe crop. It is difficult to obtain financial support to increase the cultivation of Stevia, since most ofthe governmental programs are designated to support traditional crops such as cotton. The firmsinvolved have already lost some private capital, by financing Stevia seedlings to growers, or otherkind of expenditures. Today all firms clearly state that they are not in the condition to finance theimplementation costs of new growers.

PARAGUAY VENDE

Factors that Slow the Development of Stevia from Paraguay

Stevia producers are concerned about the lack ofmarkets for byproducts that are not in current demandby the industries. Paraguay Vende has assisted inidentifying a new market for these byproducts in orderto utilize the whole plant and to avoid losses or waste,for example, incorporating them into animal foods.

Many products in Paraguay, especially liquidconcentrates and powders, are marketed as Steviaproducts. However these products have a lowpercentage of Stevia and are combined with othersweeteners such as saccharin, aspartame andcyclamate. Prices for these products are much lowerthan pure Stevia products. Consumers buy the cheaperproducts ignoring the fact that it is not a pure Steviaconcentrate.

Consumers in Paraguay and Brazil prefer the liquidconcentrate in the smallest 40 cc size, a result of thefact that most still purchase their food on a daily basis.Consumers in Argentina, Uruguay, and Chile preferthe tablets, because it is the most common way thatartificial sweeteners entered the market just as in theU.S. consumers like the little individual packets best.

In 2004, Paraguayan authorities are finally controllingthe product labels, to make sure that the componentsare listed correctly. This was an important step for thepure Stevia finished products, since they werepreviously unfairly competing with other products thatclaimed to be Stevia, when they only had


These results are consistent with results of Chang-Shing & Cook (1983) and Kawatani (1983), fromtheir studies of Paraguayan Stevia. These resultsprove that it is possible to select samples with a highcontent of Rebaudioside -A and use them to constructa clone line. According to the IAN, the analysis ofthe above result shows that there is a high variabilityof Stevioside and Rebaudioside-A contents in Stevia

plants. It may be a result of crossed fertilization(alogama) of Stevia plants (CAPASTE 2000).Similarly, there can be observed a high diversity inglycosides content. The results indicated that genesof quantitative inheritance govern both characteristics.Conclusions may be made on influence of outsidefactors such as, harvesting time, temperature,humidity, photoperiod, or post-harvesting handling.

PARAGUAY VENDE

a small percentage of Stevia in the finished product.In the local market Stevia-based sweeteners are soldin the supermarket chains, specialty stores (ice creamshops, pastry shops, among others) and pharmacies.The local market for Stevia leaves is almostnonexistent. At this moment the single biggest problemfacing the Stevia business in the shortage of driedleaves in the MERCOSUR region. Demand shouldincrease by 2005, according to industry estimations.This is important information for international firmsinterested in investing in an extraction factory inParaguay.

2.5 Comparison of Sweetener Contents

The National Agronomic Institute (IAN), a Paraguayangovernmental research unit, is currently working ona research project with the objectives of (1) Evaluatingthe content of Stevioside and Rebaudioside A in Stevia

plants to determine how to most efficiently grow thepurest plant in Paraguay, and (2) Identifying the purestform of the plant, and cloning it for mass production.The IAN picked plants before the flowering seasonand sorted them according to their phenotypes andagronomical characteristics. All plants belonged tocommercial growers who were willing to help in theresearch. The analytical methodology used is the onesuggested by Hashimoto-Morigasu (1978). The HPLCequipment used for the quantitative determination ofthe Stevioside and Rebaudioside-A is “Shimadzu,”equipped with an air compressor and an UV/VISdetector. The content of Stevioside and Rebaudioside,is presented through “chromatogram,” and the resultsare later expressed in percentages.

The results, summarized below, show that on averagethe content of Stevioside ranges from 5,1 percent to21 percent of and of Rebaudioside-A from 0 percentto 12 percent A (see table).

Contents of Stevioside and RebaudiosideA in Stevia Leaves from Paraguay

% of the Population

61,4 %

32,0 %

61,0 %

100,0 %

Range

5,1% - 10,0%

10,1 - 21,0%

3,1% - 9,0%

0% - 12,0%

Stevioside

Rebaudioside “A”

Source: IAN

31 STEVIA DE PARAGUAY

PARAGUAY VENDE

According to the Midmore study (2002), with China’sability to select for high yield, it is not surprising thatChinese growers have doubled the level of

sweetness and have considerable increased theRebaudioside-A content.

There is an obvious similarity between the resultsof the Midmore (2002) and IAN study when comparingthe Stevioside content of the Stevia from Paraguay.The content ranges from 5.0 percent to 14.0 percent(Midmore 2002) and 5.1 percent to 21.0 percent(IAN). In comparison with the Midmore studyregarding the Stevia from China, the range ofStevioside content is much less, with a 3.78 percentto 6.98 percent range.

However, there are fewer similarities between thetwo investigations in respect to the content ofRebaudioside-A in the Stevia from Paraguay.According to Midmore (2002), the range of

Rebaudioside-A in the Stevia from Paraguay isbetween 2 percent and 4 percent while, accordingto IAN, the range is 3.1 percent to 12.0 percent.Midmore’s (2002) study shows a range ofRebaudioside-A content of Stevia From China from3.86 percent to 12.15 percent. In conclusion, whenMidmore’s results on Stevia from China are comparedwith the results of the IAN’s study of Stevia fromParaguay, Stevia from both countries has a similarcontent of Rebaudioside A. However, according toMidmore’s study, Stevia from Paraguay has a lowercontent of Rebaudioside A when compared to theStevia from China.

Stevioside and Rebaudioside Analyses in China

Source: Midmore, 2002

Stevioside %

8-14

5-10

6.44

5.73

3.78

6.98

RebaudiosideA %

2-4

2-4

3.86

12.03

12.15

10.47

Rebaud. A/Stevioside

ratio.4

0.4

0.6

2.1

3.2

1.5

TotalSweetener

10-15%

9-15%

10.2-13.5%

10.3%

17.9%

18.3%

19.57%

LocationCultivars

Paraguay – average

Paraguay – typical

Paraguay – wild

China – average

China selection 508

China selection J2/8

China selection J”/23


This case study focused on Steviafarma of Brazilwas chosen due to the firm’s leadership in the SouthAmerican market, and its relationship to theParaguayan firm Telnet, which is associated with theParaguay Vende program.

The company was created in 1985 by a group offarmers located in southern Brazil on the easternslopes of the Amambay Mountains, in the city ofMaringá. The exportation of Stevia leaves was agrowing business for these farmers. They decidedthat instead of just exporting the leaves, it would bemore profitable to export the pure Stevia extracts.By hiring Japanese consultants and scientists fromthe University of Maringá, the company developed

a unique proprietary process to extract the glycosidesfrom the leaves of the Stevia plant and built a state-of-the-art factory to produce Stevia crystals. Thefactory repeatedly experienced financial problems,until the Meneguetti’s, a well-known family operatingin the Brazilian sugar industry, decided to take overthe business.

There is no information about the existence of anotherStevia plant operating in the southern hemispherethat can produce Stevia crystals on commercial scale,with a high concentration of glycosides. Most of thecompany’s machinery was developed by the factory’sown technical resources together with the technologyfrom the University of Maringá. At the beginning ofthe venture the directors launched a Stevia cultivationprogram in the area. Originally there wereapproximately 300 ha of Stevia crops but most of thegrowers stopped their cultivation. The reasons

Section 3

3.1 The History

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3. Steviafarma of Brazil


reflect recurrent problemsassociated with the cultivation ofStevia: the leaves were notbought at a consistent price,failures in the production process,and persistent difficulties inherentto growing the crop. Today some50 ha of Stevia are cultivated inBrazil, but this is no where nearthe maximum capacity neededfor the factory that could producemore than 100 ton of Steviacrystals per year. When thefactory first started, the idea wasto focus on food additives in theindustrial market, but as timepassed, they decided to focus onfinished consumer products suchas table top sweeteners.

3.2 Markets

3.2.1 The ProductsThe main categories are powder and liquid extracts,all of which are 97 percent pure Stevia. It is believedthat the best quality extracts have a 50/50 ratio ofSteviosides to Rebaudiosides–A. The company istrying to obtain the best of both properties in theirproducts.

For the finished products, the company uses somefiller to give volume to the products. The mostcommon fillers are lactose and malt dextrin. Incontrast to the artificial sweeteners in the market,Stevia crystals are heat resistant and, can be usedin products that need ultra high temperature andhigh temperature short time, it is ph stable and it has30 percent solubility in water.

The company sells 95 percent of its products to theBrazilian market. There are some companies in Brazilthat are using Stevia crystals from Steviafarma asfood ingredients. For example, they are selling it toa company that produces yogurt (Rio Grande) andanother that produces chocolate (Curitiba). Thereare also other companies interested in includingStevia sweetener as an ingredient in their food

products, for example: Garoto (famous Brazilianchocolate company), Kraft, Nestlé, and Coca Cola,but as the company cannot yet commit themselves(due to the lack of raw material), to provide the levelof production these companies would demand sothey are in a stand by situation.

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“Stevita” Products

StevitaPackets

SpoonableStevita inBulk

StevitaLiquid

SpoonableStevita inBulkwithoutLactose

Stevita forCulinaryUse-OvenandKitchen

(7%) Steviosideand (93%) lactose

(7%)Stevioside and(93%) lactose

(12%) Stevioside,(2%) Xilitol,(0.18%) Sorbate, andwater.

(7%) Stevioside, (1%) Anti-Humectant,(92%) Maltodextrin(natural product fromcorn)

(1%) Stevioside, (1%)Anti-Humectant,(93%) Malt dextrin

Each packet hasthe sweeteningpower of 2teaspoons of sugar.

1 g = 3.7 Kcalequivalent to 6 g =24 Kcal

4 drops (0 Kcal) areequal to 1tablespoon of sugar(12 Kcal)

For people who arelactose intolerant.

Substitute for thesame amount ofsugar.

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1 g packets comein packages with50, 150, and 100packets.

120 g220 g540 g2,000 g

40 ml100 ml

160 g

400 g1, 200 g

DescriptionProducts Ingredients Packs


StevitaInstantChocolate(50% lesscalories)

StevitaCocoa(60% lesscalories)

SteviaLeavesPowder

StevitaMagrinsShake

(2%) Stevioside,(98%) CocoaPowder

(1%) Stevioside,(30%) PureCocoa Powder,(68.32%)Maltodextrin,(1.68%)Calcium, (1%)Anti-Humectant

Powdered Stevialeaves incapsules.

Wheat fiber,flour, oats, soy,rice, brewer’syeast, stevita,and naturalpapaya aroma.

120 g

220 g

60 capsules

500 g

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60% less caloriesthan conventionalhot or coldchocolate products.

Dissolve onteaspoon (10 g) foreach 200 ml of skimmilk.

Can be used onsalads, teas, etc.

Mix 2 tablespoonsof Magrins with 150ml of milk.

DescriptionProducts Ingredients Packs


3.2.2 Direct DistributionThe company distributes the products directly to themain supermarkets and retail outlets in Brazil, whichreceive the orders at their central stores and thendistributes them through the entire country via theirown transportation systems.

3.2.3 Indirect DistributionThe company contracted a well-known Sao Paulofirm to organize their distribution system to reachthe small pharmacies, health stores, and small retailstores with their products. The company also sellsa small amount to Argentina, Peru, and Mexico andsince 1996 to the U.S. market, through a distributorin Arlington, Texas. Some products marketed in Brazilare not available in the U.S. market, and not all theproducts marketed in the United States are availablein Brazil. The firm sells some products to Germany,France and Italy, even though the European marketis still not officially open to Stevia.

3.3 ProductionThe ideal conversion rate of raw material into Steviacrystals is approximately 10 percent (10 kg of driedleaves to 1 kg of Stevia crystals). With the currentlyavailable technology, the company’s conversion rateis between 5 percent and 10 percent. However, withthe new spray dryer being designed, the rate isexpected to jump to 10 percent. Taking thisconversion rate of 10 percent into account, the totalcapacity of leaves currently being processed in thefactory is 1,000,000 ton/year resulting in 100 ton/yearof pure Stevia crystals. The factory is now workingat approximately 20 percent to 30 percent of its totalcapacity (see tables below), using only one 8 hourshift. The only reason the factory is not working withthree shifts and utilizing 100 percent of its capacityis that it lacks sufficient raw materials, the Stevialeaves. Employment would increase considerablymore than the 99 people currently working at thecompany, but most importantly the rural employmentin Paraguay would rise significantly.

3,6

12,3

17,2

0

2

4

6

8

10

12

14

16

18

2001 2002 2003

Steviosides tn.

84,6

165,8

265,3

-30

20

70

120

170

220

270

2001 2002 2003

Stevia Leaves tn.

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The production process begins with the receipt ofthe dried leaves. Growers that bring a quality productreceive a premium price. Those that bring a lowquality product receive a lower price. The company’snew policy regarding the leaves is that they only paypremium price for leaves with 12 percent or lessimpurities. Leaves that have more than 12 percentimpurities are paid lower prices.

The first step of the production process is to test theStevia leaves for their content of Steviosides andRebaudiosides-A. Once they past the test, the leavesare processed into a paste, which goes through afiltration and extraction processes and finally thecrystals are dried. Liquid products are processed ina different manner. The powder crystals are packagedas a final product for industrial uses, or mixed withthe fillers and other ingredients, for finished consumerproducts.

With the incorporation of a spray dryer, the companywill also produce a higher quality product with abetter taste. The process will be faster, more efficientand as a result, they will produce a better product.

After a long period of studies, the company hasdecided to relaunch the liquid product. The factoryworked together with the university to create a productwith a better taste. All products will have newpackaging. Formerly, they had two sizes of the liquidextract: 40 ml and 100 ml. They decided todiscontinue these options and market a moreattractive 75 ml bottle. The powder products will alsoundergo some changes, the packets for export willbe made in the shape of a leaf. The objectives ofthe relaunch is to give a new image to the enterprise,increase sales, attract consumers attention and givethem the opportunity to try a new, better product.

3.4 Relationship with Paraguay

The main problem that the company faces is thelack of supply of Stevia leaves. There is a strongworking relationship between the company andParaguay through its associated company Telnet.The Brazilian company buys almost its entire

requirement of dried leaves from Paraguay throughTelnet. If the Brazilian company buys ParaguayanStevia leaves that are not sent by Telnet, they paya commission to Telnet for these “outside” leaves.

The management of the Brazilian firm believes thatParaguayan leaves are of good quality, however,they are concerned with the quality of the leavesthat have recently been sent from Paraguay, as theyhave found more foreign material mixed in with theleaves. Because of this, they are more rigorous inthe selection of leaves and no longer accept lowquality leaves. The company’s policy is to payaccording to the quality of leaves. The better thequality of the leaf, the better the price the growerreceives. This motivates the growers to produce andselect the better quality leaves.

3.5 QualityIn the Brazilian market there are around eight differentproducts that claim to contain Stevia. The companytook samples of some of these products and analyzedthem in the laboratory, concluding that many of themcontained other artificial sweeteners with very littleStevioside and Rebaudioside-A, and some of themdid not even contain any extracts.

The company is trying to convince Brazilianauthorities to establish a standard label forsweeteners, since most of the marketed productshighlight the fact that their sweetener is made ofStevia when in reality it is not only Stevia, or itcontains very little. The same problem exists inParaguay, and the food control authorities are nowestablishing standard labels for the products offeredin the sweetener market.


A study, analyzing the treatment of Type II diabeteswith Stevia has recently been concluded, througha joint project with Aarhus University, Denmark andthe National University, Paraguay. The scientistresponsible for the study, Dr. Per Bendix Jeppesenhas more than nine years of investigating Stevia,first with animals and later with humans. In thecoming months, the study is expected to bepublished for the scientific community, demonstratingthe important benefits of Stevia for one’s health.

It is important to note that, for the development ofthis study, the researchers analyzed various crystalsproduced throughout the world and the Steviosidesproduced in Brazil were chosen for their purity andabilitiy to remaining completely homogeneousthrough the production process.

Fernando Meneguetti, Chairman of SteviafarmaInd. S.A. Bras i l , www.stevi ta.com.br

and Juan Carlos Fischer, Chairman of Telnet S.A.Paraguay, www.steviaparaguaya.com.py

According to the university studies in Maringá, theBrazilian Stevia extracts (using leaves from Paraguay)have 97 percent purity rate, which is considerablehigher than those of Asia. (See section 4).Furthermore, the Brazilian producer claims that theynever incorporate artificial sweeteners such assaccharin, aspartame, and/or cyclamate into theirStevia products. The Asian products have a lowcontent of Stevia and the flavor is very strong andleaves a strong aftertaste. The company claims thisis the reason why Asia can produce products at amuch lower price.

The company does not have enough finishedproducts to meet their current demand and thereforethey sell everything at their established quality levels,at their established prices. Depending on the quantitythe client requires, the price per kilo of Stevia crystalsare $150 per 1 kg and $140 per 2 kg per kilo.According to the company’s management, the pricesare considerably higher than those of the competitors(see section 4), but the qualities are different too.

3.6 PricesStevia from Brazil and Paraguay is sold for $140 to$150 per kg, while Chinese Stevia sells for $14 to$33 per kg (see sub section 4.3). The companysuggests that this is only possible because there isa high difference of quality, or purity. But the firm isas well aware that their price could be lowered ifthe production volume were to increase or theproduction process modernized. For instance, withthe installation of the new spray dryer, the firmbelieves that they will be able to lower the price.

The firm claims that if the factory works full time theStevia crystals price would drop down to around $60per kg, which is less than half the price that theyare offering it at today.

The Meneguetti family owns four sugar refineriesin Brazil which are subsidizing their investments inthe Stevia industry; Steviafarma is working thanksto the sugar business.

It is interesting to compare the cost structure of theplant when considering a scenario of producing

6 ton/year with another scenario of producing 32ton/year of Stevia crystals (see table on the nextpage). The increaseof production is directly relatedto the increase of costs, not only of the variable costs,but also of fixed costs. The firm claims that theincrease in the fixed costs is mainly because untilnow they do not assign the real expenses to thoseaccounts. For example, the wages and salaries ofthe management and administration would increasesignificantly, due to the fact that the managementhas not been receiving any revenue, dividends, fromthe factory since it started, and therefore if productionwere to increase, there would be additional revenuethat could be distributed among the members of themanagement.

The variation in the variable costs is understandablebecause, with the increase of production, there willbe a direct increase in the costs involved (raw material,energy, wages and salaries). The total costs wouldincrease enormously with an augmentation ofproduction, but as can be observed, the cost per tondecreases to more than a half; which confirms thefact that the factory is utilizing its capacity insufficiently.

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Comparing to Scenarios of Annual Cost Structure (in $)

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173.636,4

127.575,8

46.969,7

80.606,1

26.363,6

19.697,0

686.363,6

225.454,5

170.909,1

54.545,5

106.060,6

13.333,3

14.848,5

48.484,8

1.818,2

21.818,2

37.878,8

216.666,7

860.000,0

143,3

299.090,9

224.242,4

72.727,3

151.515,2

45.454,5

29.393,9

1.911.818,2

575.757,6

454.545,5

121.212,1

142.424,2

17.878,8

78.787,9

96.969,7

9.090,9

36.363,6

196.969,7

757.575,8

2.210.909,1

69,1

6 ton

1- Fixed Costs

1.1. Wages and Salaries

1.1.1. Directory

1.1.2. Administration

1.2. Depreciation

1.3. Area and Equipment Maintenance

2- Variable Costs

2.1. Raw Material

2.1.1 Stevia Leaves

2.1.2. Chemical Products

2.2. Salaries and Wages

2.3. Energy

2.4. Firewood

2.5. Financial Costs

2.6. Fuel and Lubricants

2.7. Travel Costs

2.8. Taxes

2.9. Packaging

3- Total Costs

Cost per Kg

32 ton

It is iteresing to note that if packaging and tax costare deducted from the cost structure (see scenarioof 32 tons per year in the table above) a cost priceof $ 39.30 per kg of extracts would result. Consideringthat the purity of Stevia from Paraguay produced inBrazil is of 97 percent, a competitive price couldresult after adding the prevailing profit margin to thiscost price.

3.7 Research and DevelopmentThe company provided Paraguay Vende with a copyof eight volumes of R&D documents available to thepublic. The different documents include toxicologicalstudies, chemical and physical studies, analytical


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studies, botanical studies, and general studies. Thesestudies were also given to the INTN (National Instituteof Technology and Normalization) of Paraguay andwere presented with Paraguay’s position paperpresented to the Codex Alimentarius Commission in2003.

The company is constantly researching and analyzingissues related to Stevia. Presently, they aredeveloping two different methods to improve thequality of their products, working together with theUniversity of Maringá and EMBRAPA, the mainBrazilian research institution for agribusiness, toimprove all Stevia related matters. Most changes ornew methods considered for production are evaluatedand analyzed by an independent research institute(University of Maringá, University of Campinas, andEMBRAPA).

EMBRAPA is currently undertaking a research projectregarding Stevia (varieties, growing issues) in two

locations within Brazil. The company is also involvedin organizing a joint project with the Brazilian Embassyin Paraguay, with the aim of strengthening therelationship between Paraguay and Brazil on allStevia related issues.

The University of Maringá and the company havemaintained a good relationship. The university hasworked with Stevia for many years and has conductedstudies and several International Seminars of Steviarebaudiana (Bertoni). They worked together with thecompany in designing and building the extractionand processing machinery for the factory. AgronomistOsvaldo Hidalgo da Silva is the adviser of theDepartment of International Cooperation of theUniversity of Maringá, and has expressed his interestin working together with any Paraguayan institutioninterested in further developing the research regardingStevia.


Section 4

4.1 Introduction

4. Stevia in Japon and China

A discussion of Stevia from Paraguay cannot becomplete without covering issues involving theJapanese market and Paraguay’s competitor, China.Japan is a key global market with consumption inexcess of 150 tons of finished Stevia products peryear. Indications are that more than 95 percent ofthe Stevia imported into Japan is coming from fourmajor suppliers in China.

Scientific data referencing Stevia is supported bymore than 1,500 research projects with the bulk ofthese studies completed under their authority ordirectives of Japan. This research has opened manydoors for the use of Stevia in the Japanese market,which are not available in other countries. Forexample, Stevia is an ingredient in the health drinkP o c a r i S w e a t ( s e e W e b s i t ehttp://otsuka.com.jp/pocari_e/pocari1.htm) which is

similar to Gatorade. Stevia has also been utilizedas an ingredient in the Japanese staple, soy sauce.

Japan utilizes Stevia as a sweetener. They havefound no negative health impacts from Steviaconsumption. Given Japanese food standards andimportation restrictions this is amazing. Many of theingredients that are “standard” and without questionin the United States are banned in Japan, includingartificial sweeteners. Japan typically does not allowproducts into Japan that are of any questionablehealth concerns.

The conclusion is that the Japanese allow Steviaimports for the following reasons:

The nearly 1,500 reports commissioned andundertaken in Japan show no ill health efforts to the use of Stevia

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Japan is promoting a cost efficient alternativeto sugarJapanese companies have investments inStevia use and production supported by theirregulatory environment

The purpose of this section is not to argue the logicbehind the Japanese laws but rather to understandthe market potential that they allow and to developa strategy for getting a market share in Japan forStevia from Paraguay.

The fact that Japan has approved Stevia, whiledenying access to other products, supports theargument that Stevia is safe and should be approvedin other markets – specifically the United States. Thisis a key argument where the business associationsof Stevia in Paraguay should focus on whenpresenting their petitions to amend the regulationsin the various markets. Japan has records, statisticsand professionals that know about every aspect ofStevia processing and consumption. Thesedocuments and professionals should be utilized byParaguay in their efforts to change the regulatorystatus of Stevia. The Japanese Stevia experts willsee the value in working with Paraguay, if Paraguaycan show that it is serious about its intention forleading the Stevia industry.

4.2 Opportunities for Steviafrom Paraguay

Japan offers the single greatest market opportunityfor Stevia from Paraguay. Nothing will happen in thismarket until the Stevia industry of Paraguayapproaches the Japanese market, determines theirneeds, and defines how “Stevia from Paraguay” canmeet these needs.

The nature of Japan’s economy and agriculture hascaused Japan to be the world’s leader in outsourcingthe products that their economy requires. TheJapanese buyers are experts in finding the world’sbest sources for their product. The question theStevia industry in Paraguay needs to answer whileworking with the Japanese is “why in the world wouldJapan buy Paraguay’s product over everything else

available in the world?”.

Japan is currently purchasing products from Chinato fill their demand for Stevia products, most comingfrom the Shandong Province. According to thein format ion f rom Paraguayan bus inessrepresentatives, the level of sophistication of theChinese cultivation is low and harvested in smallparcels of land, as in Paraguay. It would be a goodinvestment for Paraguay to regularly send arepresentative, or a group of representatives, toJapan and China to review their industry.

Developing a dialogue with Japanese buyers andprocessors of Stevia is a simple process. The SteviaAssociation of Japan consists of 10 companies (seesub section 4.3). These companies includeprocessors, pharmaceutical and food companies allinvolved in the processing and distribution of Stevia.These companies currently purchase Stevia productsfrom China and “reprocess” the product to meetJapanese standards and to modify the product forspecific uses. It is not unusual for Japanesecompanies to “reprocess” imported products to meettheir needs, however, in the case of Stevia, theJapanese companies have more than 150 patentedprocesses for which to process Stevia.

One question that has not been answered in thisstudy is how the product from Paraguay comparesand meets the quality requirements of the Japanesebuyers. This needs to be determined through adialogue with the Japanese companies. Inviting the10 Japanese companies to visit Paraguay to reviewthe state of the industry in Paraguay should be a toppriority of Paraguay or a company planning to takethe lead in Stevia exports from Paraguay. If a programis outlined to include plant visits, farm and field visits,technical discussions and presentations on Steviafrom Paraguay, Japanese buyers will support theirtravel to Paraguay to participate in this program.

To capitalize upon the Japanese market, a dialogueneeds to exist between the industry and companiesin Paraguay and the Japanese buyers. The buyershave been identified (see sub section 4.3 on the nextpage) and therefore what needs to occur now is anopen dialogue. The dialogue can be done directly


PARAGUAY VENDE


as most Japanese companies English-speakingrepresentatives.

One company in Paraguay has exported leaves toChina for processing into crystals (see section 2).This exportation was sold at a price of $1.00 per kgFOB versus the US$0.66 price sold in Paraguay.The fact that China can buy raw materials fromParaguay at a premium and still process the productcompetitively provides hope for the competitivenessof Stevia leaves and finished products from Paraguay.

If Paraguay is able to implement several of thesuggestions in this report they will be able to selltheir finished goods in Japan. The key steps toaccomplish this include:

Develop a dialogue with the SteviaAssociation in JapanPresent Japan with the standards forprocessing Stevia leaves from ParaguayEducate the Japanese companies about thevalue of the “Stevia from Paraguay” sealInvite the Japanese to visit the farms, fieldsand operations in ParaguayIncrease production and processing at thefarm and factory level to allow for adecreased price and greater overall profits.

4.3 The Japanese MarketAccording to this section, the current volume ofimported Stevia products in Japan has declined from200 tons to 150 tons/year and it is expected to remainflat, with little to no growth. The price of Stevia inJapan has increased in recent months from US$14to US$15 per kg to a price currently around US$33per kg, which would result in an imported value of$4.95 million per year. The market for Stevia crystalshas decreased in Japan over the past several yearsand according to Japanese Stevia companies, it isexpected to remain flat. Stevia consumption in Japanis decreasing because many consumers associateStevia with Genetically Modified Organisms (GMO).

The fact that Stevia is not a GMO product, but rathera natural herb with centuries of production in itsnatural condition – only in Paraguay – is not a point

understood by the Japanese consumers. Japaneseconsumers are unaware of the nature and history ofStevia in Paraguay. These misconceptions can onlybe overcome with access to the correct information.In this case, consumer education, if developedproperly through a marketing campaign on thebenefits of Stevia from Paraguay, could be deployedto the advantage of Paraguay and not the industryas a whole, thus returning rewards nearly exclusivelyto Paraguay. This can be accomplished via the mediakit to be produced by the Stevia Association inParaguay (see section 5).

In recent months there has been a leaf shortage inChina. It has not been determined whether thisshortage will be short-term or long-term and thereforeit is difficult to make recommendations on the long-term trend of the Japanese market.

The main applications of Stevia in Japan are:Salty foods: pickles, sea foods boiled insweetened soy sauce, soy sauce, miso, andfish pasteDrinks: beverages (low calorie or no sugardrinks) and milk drinksDesserts: ice candies, ice cream, yogurt andjellyCanned and jarred fruitsConfectioneries: gums and candiesTable sweetenersToothpaste

The Japan Stev ia Industry Associat ion(http://www.stevia.gr.jp/index_02.htm) is composedof the following 10 major Stevia processing andmarketing companies.

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Japanese Stevia Companies

Ikedatohka Industries Co., Ltd. (http:www.ikedatohka.co.jp)

TAMA Biochemical Co., Ltd. (http:www.tama-bc.co.jp)

DAINIPPON INK AND CHEMICALS, Inc.(http:www.dic.co.jp)

Toyo Sugar Co., Ltd. (http:www.toyosugar.co.jp)

Tokiwa Plant/Chemical Lab. Co., Ltd. (http:www.trade.or.jp/member/tokiwa/tokiwa.html)

Nichinouseiken Co., Ltd. (http:www.daily-yamazaki.co.jp/group_m.html)

NIPPON PAPER CHEMICALS Co., Ltd. (http:www.npchem.co.jp/e/product/stevia/index.html)

Fuji Kagakukogyou Co. Ltd. (http:www.waila.or.jp/kasei/fuji1.html)

Maruzen Pharmaceuticals Co., Ltd. (http:www.maruzenpcy.co.jp)

Morita Kagakukogyou Co., Ltd. (http:www.morita-Kagaku-kogyo.co.jp)

The association members’ supply to the customersare very specific to each end product, which meansthe Stevia extract/enzyme-treated products (forinstance alpha glycosiltransferase-treated Stevia)are marketed as original but refined extracts, butalso can be combined with other ingredients suchas dextrin to adjust and/or improve the sweetnessand taste. Because of this larger number of diversemarket segments, which add considerable valuesto the commodity imported form China, it should beconcluded that the actual Stevia sweetener marketis a multiplier of the imported value of $ 4.95 millionmentioned on the previous page.

The price of refined/reprocessed Stevia extracts inJapan has a very wide range because in most casesthey are not sold as the pure Stevia extracts (>80or 90 percent of the two sweetness components)but rather at the blend that meets customerrequirements or applications. Very roughly speaking,the market price of Stevia extracts is about 4,000 to9,000 yen/kg ($36.9 to $83.20 p/kg) depending onthe quality (Stevioside and Rebaudioside contents),and enzyme-treated extracts about 10,000 to 25,000yen/kg ($92.50 to $231.20). The price range looks

quite wide, of course, the higher the concentrateratio (Rebaudioside–A/Stevioside) the higher theprice, as the sensory evaluation regarding sweetnessmentioned above is very critical.

Few soy sauce/brown sauce producers in Japanuse Stevia products, and the volume of those specialsauces are very limited. According to a couple ofsauce producers, a blend of licorice and Stevia ismore favorable than straight Stevia in terms ofmasking salty taste.

What are the prospects for the future? As per thediscussion with several association members aswell as with sweetener suppliers, the future marketof Stevia and Stevia products in Japan as sweetenermay stay flat. The reasons would be: 1) safety issue,many scientific research results show that it is safe,but the consumers are rather leery, simply becausesome consumers have associated Stevia with GMO;2) competition from alternatives, sugar derivatives(enzyme-treated sugar by Nikken kasei, Sucraloseby San–Ei Gen), licorice (by many suppliers), andSUNET (Acesulfame K by Takeda).

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The association in Japan also applied to place Steviainto the JECFA agenda (Joint FAO/WHO ExpertCommittee on Food Additives) that met in Switzerlandin June 2004. The fact that the JECFA Committeerecognized Stevia as a safe product may help withconsumer acceptance. As mentioned earlier, theimport price of raw materials has not been consistent,which may cause some uncertainty for Japaneseprocessors. They need a stable supply in volume,price and quality.

4.4 Production ProcessesSince the first entry into Japan’s market in the 1970s,extensive R&D has investigated its breeding,cultivation, processing/reprocessing methods, andits safety. The farming and processing has movedto China due to the lower associated productioncosts. Presently most Stevia marketed in Japan isimported from China as semi-processed Steviaextracts, but because of the quality requirements inJapan, e.g., purity or the content of sweetnesscomponents, foreign materials, moisture content andmicrobial contamination, almost all Stevia extracts

imported from China are reprocessed to refine theextracts.

The members of the association have know-how forreprocessing imported Stevia extracts to meetJapanese quality standards. Two companies (ToyoSugar Co., Ltd. and Nippon Paper Chemicals Co.,Ltd.) reprocess the imported extracts by using aspecial enzyme treatment technique to produce Alphaglycosiltransferase-treated Stevia, which was patentedby the Hayashibara Company. Others companiesonly reprocess and blend with other ingredientsdepending on the applications. The refining orreprocessing techniques of imported Stevia extractsare not separately disclosed but it is assumed to bevery similar to the process mentioned below exceptmembrane or ion exchange resin technique forsweetness and taste adjustment. The purpose of theenzyme treatment is to improve the taste of thefinished products.

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For Stevia extract:

Sweetness of the four components: higher than 80 percent;

Dry matters: higher than 94 percent (1 g at 105° C for 2 hours);

Ash: less than 1 percent (1g);

Heavy metals: less than 10 micro g/g as Pb;

Arsenic: less than 2 micro g/g as As2O3;

Sweetness components are analyzed by HPLC.

For Enzyme–treated Stevia:

Sweetness of the four components: higher than 80 percent;

Dry matters: higher than 94 percent (1 g at 105° C for 2 hours);

Ash: less than 1 percent (1g);

Heavy metals: less than 10 micro g/g as Pb;

Arsenic: less than 2 micro g/g as As2O3;

Sweetness components are analyzed by GC.

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The Japanese Specificationsfor Stevia Extracts

The following specifications for Stevia extracts and enzyme-treated Stevia were agreed to by the membersof the Japanese Stevia Association and discussed at the JECFA meeting in Switzerland.

Chinese Extracting Process of Stevia

DRIED STEVIA LEAVES

PRESS/ FILTRATION

DISCOLORATION

SPRAY DRVING

IMMERSION

ADSORPTION

CONCENTRATION

PACKAGING EXTRACTS

FILTRATION

DESALINATION

SEDIMENTATION


4.5 Supply from ChinaAlmost no leaves are currently imported into Japan,but the processors do not want to say that they arenot presently trading leaves. In order for other Steviasupply countries to compete with the raw materialsfrom China the price/quality is critical. Dried Stevialeaves belongs to tariff code 121299300 (tariff rateis 5 percent for standard and 3 percent for WTOcountries), and Stevia extract belongs to 293890000(tariff rate is 4.6 percent for standard and 3.9 percentfor WTO countries). There is no import quota orimport limitation for both products from Paraguayinto Japan.

The price of imported Stevia extracts from Chinawas about 14 to 15 US$/kg C/F until early 2003 butrecently the price has gone up over $30, even $33.They expect the price will come down again to themid $20’s when the next crop becomes available.Currently association members are facing a difficulttime caused by this very high price for raw materialsbecause they cannot increase the price to thecustomers as it would allow for the competition toenter the market with lower prices, or othersweeteners.

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The Two Main Suppliers of Steviafrom China

Supplier #1 from Shandong Province

Supplied extracts to Association membersSupplied to Japan: 240 MT in last 3 yearsSweetness components 90% (5 componentstotal=Stevioside, Rebaudioside-A, Dulcoside-A,Rebaudioside-C and Steviolbioside)Moisture content: 4 % maxMicrobial: Total bacteria counts 100 cfu/g maxYeast/Mold: 50 cfu/g maxTotal Coli forms: negativeTotal Coli: negativeSalmonella: negativeAppearance: White fine granulePrice: US$29.5/kg CIF or RMB260/kg FOBQindao

Supplier #2 from Shandong Province

Supplied extracts to Japanese tradingcompaniesThe amount supplied to Japan40 MT in 2001, 48 MT in 2002, and 56 MT in2003Specifications: There are 4 products.More than 90% sweetness products and morethan 95% sweetness productsMoisture: less than 4 %Foreign materials: less than 2/gMicrobial : bacter ia less than 100/gParticle size: 80 mesh passPrice: RMB260 to 450 /kg depending onthe specificationZhuhai Stevia Science Development Co., Ltd.,Following specification is obtained from ChineseWeb siteTEL 0756-3226318FAX 0756-3226319E_mail:[email protected]://www.zhstevia.com


Section 5

5.1 Introduction

5. Prospective Market Opportunities in the United States

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The U.S. market is probably the most dynamic andis in the process of transforming itself into the largestStevia market in terms of sales volume. In this section,the specific recommendations to the Paraguayancompanies for capturing this market can be groupedin the following points:

Focus on existing marketsImprove Paraguay’s competitivenessEducate consumersWork with government agencies andorganizations on the laws impacting Steviasales

By working on these objectives we believe that Stevia

production in Paraguay can rapidly increase andaccomplish the objectives outlined.

5.2 Capturing the MarketThe tendency in looking at a market is to look at thelargest potential market and to determine how bestto achieve sales in that market. In the case of Steviathe largest market is in consuming Stevia as aningredient used to sweeten products ranging fromsoft drinks to ice cream and soy sauce. Though thisis potentially the “greatest” market for Stevia, in mostcountries, it is not currently an available and openmarket.


Most countries prohibit Stevia as an ingredient orsweetener for other foods. However most majormarkets allow Stevia to be marketed and used as adietary supplement. Due to this fact, Stevia can notbe sold in bulk to industrial markets (sweetener), butrather is sold in specialty stores as a niche product.The U.S. market alone is greater than US$20 million.

In the long run, for Stevia to achieve its greatestpotential, it needs to be legally used as an ingredient,as a sweetener. The Stevia industry must continueto focus on this long-term potential market, however,using the market currently available as a steppingstone to changing the laws may be the best meansof opening this potential market.

Paraguay currently produces 500 tons of Stevialeaves. It was also determined through discussionswith regional companies, that they alone have acurrent demand for more than 1,000 tons of Stevialeaves. With the support of these regional companies,the current production could nearly double withoutan increase in marketing effort or changing anydomestic or international food laws.

Furthermore, a review of the U.S. industry determinedthat China is by far the largest supplier to the U.S.market. A review of the U.S. Stevia market illustratesthat the U.S. importer associates Stevia with China,not with Paraguay. Therefore, it is important thatParaguay works to establish its reputation as asupplier of quality Stevia. When asked why variousimporters purchased from China, we receivedanswers ranging from quality, to price, to ignoranceof the suppliers in Paraguay.

Existing markets do not require efforts to changelaws or extensive consumer education but ratherfocus on making Stevia from Paraguay competitivein the world market and increasing production tomeet domestic demand.

A search on the Internet search engine Google forStevia finds 295,000 hits. While adding the word“Paraguay” to the search hits are cut down to a mere5,300. This is a drop out rate of 98 percent of theWeb sites that have Stevia as their primary subjectthat are not associating Paraguay with Stevia in their

site. When you add the word “China” to the Steviasearch you get a return of 26,800 sites, nearly 10percent of the Stevia sites associate China withStevia while only 2 percent of the sites associateParaguay with Stevia.

This clearly illustrates that there is significant interestin Stevia in the United States. As another illustrationwe learned that The King County Library (Seattle,Washington) has 15 books on Stevia and cookingwith Stevia. When we checked availability we foundthat all of these books were checked out and therewere waiting lists. Some of the lists had as many asfive people waiting for the book – another testimonyto the interest in Stevia.

When doing a search on the term “Stevia Sales,”Google returns over 10,000 hits. When adding thename “Paraguay,” this drops to only 587, which againreflects a very small percentage of consumersassociates Stevia with Paraguay. When adding thename “China” the returns are 902, nearly double thatof Paraguay and close to 10 percent of the total whensimply searching for “Stevia Sales.”

If Paraguay is going to compete with China, andother countries, in Stevia production it will need toeducate the consumers that Stevia “is” from Paraguay,just as wine is from France, cheese is from Holland,coffee is from Colombia and kiwi is from New Zealand.

There is no question that Stevia captures interest ona global basis. The key for Paraguay is to: a)determining a strategy to capture a reliable and loyalmarket share and b) pursue the defined strategy.

5.3 The U.S. MarketAccording to businessman Steve May: “We estimatethe retail table top market for Stevia [in the UnitedStates] in 2003 was approximately $20 million to $22million and growing at 40 percent per year.” Thisentire sales volume falls within the existing FDAregulations. These products are marketed as dietarysupplements and come in the form of pills, powders,liquids and herbal teas. Wisdom Natural Brands(formerly Wisdom Herbs) has a 53 percent market

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share while their nearest competitor is currently at17 percent market share. Below the Wisdom ofNatural Brands there are several brands with marketsranging from sales in natural food stores to mailorder to Internet sales in virtual stores. For instance,there is an orange cream soda sweetened withStevia, low-carb and natural, called Terra Soda.

Another product is launched with a formula ofecomarketing, through a Web-based retailer andwholesaler with their product originating in Peru andutilizing the social conscience marketing program toprovide an image of saving the rainforest throughpurchasing their products.

Wisdom Natural Brands2546 W.Birchwood Ave, Suite 104Mesa AZ 85202United States

Stevia from ChinaEmpero`s Herbologist301 East 45th Street Suite 12 ANew York, NY 10017United States

Stevia from AustraliaGood Sugar Substitute

Sellers of Stevia plantsHerbal AdvantageRoute 3, Box 93Rogersville, MO 65742United States

NuNaturals2220 West 2nd Avenue #1Eugene, OR 97402United States

Stevia from CanadaStevia Canada

Stevia LLG – Brand SweeviaP.O. Box 80253Valley Forge, PA 19484United States

Amazon Herb Company

Terra Soda Orange Cream

+1 (800) 899 9908+1 (480) 9211373

+1 (212) 9229066+1 (212) 8084832 fax

Vea el sitio Web www.emperorhebologist.com

See the Website www.goodonu.com

+1 (800) 7539199+ 1(417) 7533999

[email protected]

+1 (800) 7534372See the Website www.nunaturals.com

See the Website www.steviacanada.com

+1 (888) 8783842See the Website www. sweevia.com

See the Website www.rainforestbio.com

See the Website www.sodaking.com

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Some Stevia Suppliers in the United States

Vea el sitio Web www.wisdomnaturalbrands.com

Sweet &Slender®NaturalSweetener

SteviaPlus®Fiber Packetsand Shaker

SteviaClear™Liquid Stevia

Stevia ExtractPowder

2.82 ozshaker1.75 ozpackets

50gpackets4 ozshaker

120 ml60 ml6 ml(travel)

25 g10 g

Frutafit® Inulin Fiber(FOS), Stevia Extract(standardized to aminimum of 90%).

Frutafit® Inulin Fiber(FOS), Stevia Extract(standardized to aminimum of 90%).

Purified Water, pureStevia leaf extractstandardized to aminimum of 90%Steviosides including40% Rebaudioside A,Grapefruit SeedExtract

100% pure Stevia leafextract standardizedto a minimum of 90%Steviosides including40% Rebaudioside A

Promotes fat burning,low calorie, lowglycemic, use incooking and baking

#1 selling Steviaproduct in America,zero calories, zeroglycemic, all natural

No alcohol, no glycerine,concentrated liquid

300 times sweeterthan sugar, purepremium qualityStevia extract, usefor baking andcooking, 25 gbottle = almost 17lbs of sugar, zerocalories, carbs,safe for diabetic.

Wisdom Natural Brands was founded by James Mayin 1982, and today it manufactures and marketsmore than 50 products through 10,000 natural foodsretail outlets and grocery chains throughout theUnited States and Canada. In addition, WisdomNatural Brands supplies raw materials to othermanufacturers as well as private label productformulations. Essentially the firm introduced and

marketed four unique herbs in multiple formulations:YerbaMate, Pau d’Arco (Lapacho), Stevia and ablend of herbs for cold and flu symptoms calledSymfre. During the tenure of Jim May’s son SteveMay, the firm changed its name to Wisdom NaturalBrands and developed new branded product lines,including SweetLeaf™ Stevia, which is the numberone selling Stevia brand in North America.

Products of Wisdom of Natural Brands

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DescriptionProduct Ingredients Packs



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SteviaTabs™Stevia Extract

SteviaConcentrateDark Liquid

HoneyLeaf™Stevia LeafPowder

100 mgeach

60 ml6 ml(travel)

1.8 oz

Stevia extract, sodiumbicarbonate, citricacid, lactose,magnesium stearate

Premium QualityStevia Leaves (SteviaRebaudiana Bertoni)in Pure Water (4:1concentrate)

Premium QualityStevia Leaves (SteviaRebaudiana Bertoni)

SteviaTabs™ Steviaextract will dissolve inhot or cold liquids,adding quality nutritionwith an intensely sweetflavor without sugar orartificial sweeteners. It’scalorie-free and safe fordiabetics andhypoglycemics.

This product is made byconcentrating nutritious,whole Stevia leaves inpure water by a specialcooking process.Contains no alcohol orchemicals.

It contains no caloriesand may help suppressgrowth of some oralbacteria that causedental cavities

5.4 The Competitiveness of Stevia from ParaguayFor Paraguay to increase its economic returns onStevia, it needs to be competitive with productsavailable from other markets. In order to market aproduct effectively Paraguay needs to answer thequestion: “why in the world would we buy your productover every other opportunity we have in the world?”It is clear that the Stevia industry in Paraguay doesnot have an answer to this question. Paraguayanentrepreneurs need to change this so that they caneffectively compete in the world market.

A product has an advantage when it can claimsuperiority in one of the following areas, a) price, b)quality, c) image, d) service, e) relationship and f)minimizing or eliminating risk for the buyer

Often the “comparative advantage” can be acombination of each of the above factors with nodefinite advantage in a single element but a solidperformance in all areas of consideration. In the caseof Stevia from Paraguay, this study believes that thecombination of strengths is going to be the best wayto achieve an overall advantage.

China consistently offers considerably lower priceson crystals and it has an image of being “the” source

DescriptionProduct Ingredients Packs


Paraguay could overcome the currenteconomic disadvantage by: (1) using currentlyavailable superior plant material alreadypossessed by the Paraguayan governmentto grow better tasting and higher yielding rawmaterial; (2) utilize new extraction technologyalready available for acquisition or developnew methods; (3) market a premium, brandedfinished product that would contain andcommunicate superior value to the consumer(i..e. “Equal” still commands a premium overgeneric aspartame in both table top andingredient markets); (4) further exploiting theagr icul tural advantage that a l lowsParaguayans to use a single plant forapproximately 15 harvests over 5 years versusa single harvest for Chinese or North Americanproduction; (5) initiating revisions to labor, taxand investment regulations that make doingbusiness in Paraguay more favorable thancompeting nations.

for exporting Stevia. “Paraguayan companies do noteffectively market their product” indicates thatcustomer service is not in the favor of Paraguay.Relationships, the final element when consideringan advantage is also to the advantage of Chinawhere they have existing business relationships andjoint ventures with Japanese buyers and other majorglobal buyers.

5.4.1 Improving the PricePrice is often the first, and occasionally the only,reason to purchase from one supplier over another.It is going to be difficult for Paraguay to obtain anabsolute advantage on price given several factors:

China’s economies of scale given theircurrent level of productionStevia in some form or another can beproduced in several geographic locationsLogistics costs associated with obtainingStevia shipped from ParaguayInefficiencies in agricultural production inParaguayBusiness environment discourages foreigninvestment in Paraguay

According to a statement of Steve May, “the price[of Chinese leaves] in large quantities would be$0.79/kg in "bad" harvest times (i.e. relative shortages)and $0.55/kg in good or normal harvests. This isFOB San Francisco, for tonnage quantities. We paya little under $0.70 for Paraguayan leaf FOBAsunción. Shipping by sea would add about$0.30/kg.”

Given these factors, and others, we suggest thatParaguay not focus on obtaining the best price, butachieving a competitive price, that when coupledwith strengths in other areas will make buying Steviafrom Paraguay “the right choice.”

5.4.2 Quality of Stevia from Paraguay

To date it has been difficult to compare end productsmade from Stevia leaves cultivated in Paraguay with

that of other countries because they are not soldon the industrial market, but rather as consumerproducts. However there have been studiescomparing the glycosides content, thus the purityand quality, of Stevia concluding that the productsmade from Stevia leaves cultivated in Paraguayanare better (see section 2).

Furthermore, it is important to assess the quality ofthe leaves. According to May (2001) “Good qualityStevia leaves, whether whole, cut and sifted or intea bags, are about 30 times sweeter than sugarand have no calories. The best quality leaves areimported from South America and Mexico, and areabout 12 percent to 13 percent Stevioside.The poorest quality, but most ample supply, iscurrently coming from China, where the leavescontain only about 5 percent to 6 percent Stevioside.A simple taste test quickly demonstrates thedifference.”

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Steve May, Chief Operating OfficerWisdom Natural Brands®www.wisdomnaturalbrands.com

5.4.3 Image of Stevia from Paraguay

The image of Paraguayan Stevia in the world marketis one of unknown quality. This image can be easilyturned into the favor of Paraguay. In this case thediscussion of “image” relates to more than the imageof the product. It encompasses factors in the followingareas:

Image of the quality of the productImage of the company selling the product– their strength, integrity and experienceImage of the individuals within the companyselling the product – their knowledge,integrity and personalityImage of the country from which the productis produced and sold and their businessethics and understanding of the businessProduct shipping, packaging and marketingimageImage of outside factors ranging from risk,shipping lines and banking relationships

Image is the easiest influenced aspect of the decisionpoints when considering if a buyer should purchaseyour product over any other available to him in theworld. Image is also the most difficult to gain backonce an image is tarnished by market actions thatconflict with the existing image.

Advertising agencies are often used to improveimages, however, they are not as essential ascommon sense in image improvement. For example,an image of poor marketability can be changed byan improved label, and the image of poor serviceand business understanding can be improved byproviding immediate service and customer feedback.

The image of Stevia from Paraguay is discussedthroughout this document as it is the first step inachieving a competitive advantage as discussedabove. This can, and should, be done on an industryand company level in order to achieve the greatestresults.

5.4.4 Developing a ServiceAdvantage

Providing good service is closely tied with image asdiscussed above. Good service results from payingattention to business, knowing that the customer isalways right and communicating honestly with thecustomer.

A service advantage is often an individual companyfactor, however, a bad service image of one companycan impact the entire industry. Therefore, it is criticalthat all companies involved in the industry understandthat their actions impact the image of all in the Steviabusiness in Paraguay.

5.4.5 Advantages of Developing Relationships

Buyers are people and they want to work with peoplethat they enjoy working with and can trust. Thereforeit is critical that a trusting personal relationship beestablished between the exporter and the importer.This can be done on a face to face basis; however,an actual meeting is not always essential. Manybusiness contacts are maintained through theInternet. A strong business relationship is built uponhonesty, therefore, maintaining an honest and openbusiness relationship is essential.

A strong relationship between businesses is basedupon trust, and as such it should be treated with thesame high level of communication and commitment.It is always better to communicate “too much” thanto not communicate with your customer. Building astrong relationship requires time since love at firstsight is seldom the case in the business world;patience in this area is critical, however a competitiveadvantage in a relationship can be established,which will often overcome weaknesses in the otherareas of the buying decision process.


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5.4.6 Minimizing or Eliminating Risk for theBuyer

Buying a product from a new source is always a riskfor buyers. It is a personal risk if they make the wrongdecision because they lose their job and money. Itis a business risk if a new supplier cannot perform,or the buyer’s company cannot perform or meetcustomers’ needs.

Therefore, it is essential that the buyer and hiscompany have minimal risk in buying product. Thoughit is impossible to eliminate all risks when buyingproduct, some can be minimized through havingstrength in each of the decision points listed at theintroduction of this section.

It is critical to understand the risks the buyer faces.Paraguay can address these risks throughcommunications with the customer and advise themhow businesses can minimize their risks. For example,if quality control is a risk, provide customers with adiagram of the quality control system. Having HazardAnalysis and Critical Control Point (HACCP) or otherinternationally recognized quality control certificationis another means of providing a level of comfort withfor customers who know that HACCP helps minimizequality risks. Businesses address customer concernsby knowing risks associated with buying before closingthe deal.

In the case of Stevia from Paraguay the risks to anew buyer include:

New supplier presents unknown challengesUnrecognized quality raises quality concernsInexperience of importers in dealing withParaguayShipping and logistics limitations – availabilityof container spaceUnknown customer acceptance towardproduct from ParaguayOther company specific challenges

If Paraguayan entrepreneurs can answer thesequestions, they stand a better chance of success

being prepared as opposed to being surprised whenthese questions arise.

5.5 The Media KitTo achieve the greatest market potential forParaguayan Stevia, it is essential that companies inParaguay improve their production efficiencies andfocus on marketing Stevia from Paraguay as apremium product on a global basis. This requiresthat the Paraguayan Stevia industry have a visualpresence in the markets they are targeting. Thispresence can be an individual company presence oran industry presence. Although a single companycould accomplish the same objectives, their rewardswould be shared by others in the industry that didnot support the efforts, potentially producing frustrationby the company that invested the time and moneyin marketing “Stevia from Paraguay.”

It is often difficult to get competing companies toparticipate in a trade association, however, ifcompanies can see the individual benefit fromcooperation they can justify their participation. It ishighly recommended that the association include allprocessors, exporters, and growers in order to providea forum for all to participate. The association canenforce membership by issuing a grade certificatesupported by the industry, government and buyers.By providing a “grown at home – Paraguay” seal onproduct from Paraguay that meets the standards setby the association they can force others to join andsupport the association. If products that receive the“seal of quality” from the association receive apremium then others will be economically motivatedto join in order to receive a premium for theirproduction as well. The first objectives of theassociation of Stevia industry should be the following:


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Establish and adopt standards andgrading for Stevia products fromParaguay. Include in this effort the gradesand associated “quality seal.” Comparethese standards with those of otherorigins and publish a comparisondocument that clearly shows theadvantages of working with “certifiedStevia from Paraguay.”

Develop and disseminate a media kitthat covers all aspects of Stevia. Thecontents of this media kit are to providetechnical information, history, recipes,health data, technical specifications andother factual and historical informationrelating to Stevia produced in Paraguay.It should focus on the benefits of Stevia,but specifically focus on the benefits ofStevia from Paraguay. It should providethe reader with sufficient information todig as deep as they would like to answertheir questions on Stevia. The “targetmarket” for this media kit are journalistswho will write about Stevia and promoteits use to a wider audience. This listshould include all major newspapers,trade journals, gourmet magazines,health magazines, diet magazines, andfashion magazines in target markets.

By providing this information, the hope isthat these influencers of the diet in thetarget market will publish reports whichstimulate interest. By stimulating interestthe demand will increase and moreretailers will be forced to carry Steviaproducts to meet the demands of theircustomers. The caution here is that unlessdone effectively the media kit will stimulatedemand for “Stevia” not for “Stevia fromParaguay.”

This media kit should take the form of aCD Rom and a Web site. The traffic tothe Web site can be generated by theCD, news articles and direct e-mails totargeted groups of customers, importers,and regulators.

Develop a Paraguay Stevia Web sitethat provides full details on Paraguayan Stevia. This Web site should also provide avenue for Stevia leaf and Stevia productionsales through a bulletin board or other tradingtype of marketing tools.

5.6 Creating a Marketable Difference

For Paraguay to compete businesses need to develop,and quantify, a difference between their productionand that of other countries where labor, logistics orother resources are less expensive or othercompetitive advantages already exist.

A good example of an industry that has done this isthe U.S. orange juice industry in Florida. While manyorigins of the world have lower costs in producinganalytically identical orange juice to that of Florida,including a lower cost in production and shipping, theState of Florida has built an image over Florida orangejuice that consumers prefer and are willing to pay ahigher price. The producers of orange juice in Florida,as an industry, adopted a program which states ifproduct is “100 percent Florida Oranges” or “meetsFlorida standards.” They state that “when you seethe Florida Sunshine Tree, you know what’s insideis produced from oranges or grapefruit grown onlywithin the state of Florida.”

Does this mean that it is better than orange juice thatis not 100 percent from Florida? Probably not, but tothe consumers it does make a difference. If aconsumer perceives a difference in products offeredon the market, then the difference exists from amarketing standpoint. Product produced exclusivelywith Florida citrus has the Florida Sunshine Tree,

while product produced with Florida citrus blendedwith other oranges has the Florida Seal, signifying itmeets Florida standards but not with 100 percentFlorida citrus.

Another example of this type of perceived differencein the U.S. market is the “house” or private labelbusiness. In the United States there are now only ahandful of canners of corn and fruit products.


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These packing facilities often have their own brandwhich they market, however, work to fill theirproduction capacity with other brands which theydo not own or market. For example, Del Monte, thenumber #1 brand of canned vegetables in the UnitedStates, will also pack product under retailers’ brands— thus increasing their production capacity withoutincreasing their marketing or associated costs. DelMonte then spends millions of advertising to promotetheir brand as a premium brand over retailers’ brands,though technically the product may be identical fromthe same plant and with the same specifications.Del Monte works to promote a premium for theirbrand through an image, not always supported bya quality difference.

If Paraguay can create such a difference in howconsumers conceive the “original” of Stevia producedin Paraguay against that of other origins that wouldbe to their advantage. To achieve such designation,standards would need to be set and monitored bythe industry, or marketing companies inside ofParaguay. The efforts in creating a “difference” inStevia from Paraguay versus that of other originscan be accomplished through the Stevia associationor an individual company undertaking the actionsdiscussed before.

5.7 Growth Potential of Stevia from Paraguay

The history of Stevia lends itself well to being amajor crop produced and marketed from Paraguay.The history and culture of Stevia in Paraguay hascenturies of production and use. This history can beused to the advantage of the growers and marketersof Stevia from Paraguay. These centuries of bothcultivated and natural production of Stevia havehelped ensure that the genetic varieties of Steviaavailable in Paraguay are suited for the local climateand soil conditions. The tradition of Stevia productionand consumption provides for a cultural base fromwhich to produce Stevia. Where Stevia cultivationand processing is new to other countries, it is wellestablished in Paraguay. This history can be utilizedas a competitive advantage if built upon effectively.

The current area dedicated to cultivating Stevia inParaguay is 750 ha. From this total it is estimatedthat the San Pedro area has around 300 to 400 ha.With average family production of around .25 ha,this equates to roughly 1,600 rural families currentlyinvolved in Stevia cultivation. This number of familieswould represent only the 0.5 to 0.9 percent of thetotal number of families in the San Pedro area.Currently most of these families are involved withthe cotton crop as their primary source of income.A study would need to be done to compare Steviafinancial yields versus cotton yields in order todetermine the feasibility of switching from cotton toStevia, however, Stevia appears to be a viable optionfor these growers.

Considering the above mentioned situation, it canbe assumed that there is a potential for growth, bothto increase the economic activity (better income)and employment stability (more employment) through increased production of Stevia.

To be effective the increase of Stevia productionneeds to be driven by an increase in the demandfor the product. Given current market conditions,regional companies will buy the additional productionof Stevia leaves, until it reaches a total of 1,500hectares of production. Currently the regionalcompanies have a demand for finished products atthis level and their plant could produce at this levelwithout additional investment.

If Paraguay is successful in achieving this increasedproduction of 1,400 ha with an average productionof 2,500 kg/ha it would generate an increase ofaround US$2 million in rural income while providingan increase of employment efficiencies of around5,600 rural families.

If the 1,500 ha is cultivated, enough to fill the capacityof the regional companies, the need for additionalprocessing capacity would be required. At that timea Stevia processing factory in Paraguay could beeconomically justified, thus adding additional revenueand employment to Paraguay.

Paraguay Vende has not done a complete study on


the economics or efficiencies of production orprocessing of Stevia in Paraguay. The team hashowever talked with many in the industry who haveexpressed concerns about the production efficienciesin Paraguay and processing efficiencies in Brazil.Under most circumstances it is going to be difficultfor Paraguay to compete with China on a commoditybasis, in the target market of Japan as not only doesChina already possess economies of scale as acompetitive advantage and produces a highervolume. However, China is known for not valuinglabor when it comes to an export product. Therefore,it will be difficult for Paraguay to compete even whenthey are able to neutralize the economies of scaleissue. The freight distance to the primary market ofJapan and the cultural similarities and business tiesbetween Japan and China also provide an advantageto China in the Japanese market (see section 4).

Paraguay Vende has determined that Steviaproduction on a hectare of land can generate a “netincome” form $1,300 to $1,500 per year. With a landcost in the current areas of cultivation of $1,000 perhectare, it appears that, at the current market prices,Stevia production is a business venture that paysoff the investment in land in a very short period oftime (see section 2). Considering that mostParaguayan farmers already own their land thisincome is even more significant.

In comparing returns on farmland ownership in theUnited States, an Iowa State University study showsthe period 1992-2002 had an average return of 12.2percent of the value including a percentage changein land value average of 5.74 percent for a net returnon the use of the land of about 6.5 percent. Whatthis means is that in the U.S. farm returns pay offthe land in about 10 years, while Stevia returns inParaguay can pay off the land in 1 to 2 years.

Paraguay Vende has not completed a comparisonof the returns on Stevia versus other crops inParaguay. Given the return in 1 to 2 years, this farexceeds the return on agricultural lands in the UnitedStates where, without an increase in the value ofland, the returns on farming require an average of15 years to cover the cost of the land. This economicanalysis would encourage investment in Stevia

farming in Paraguay and further economic researchand investment prospectus should be developed topursue investment in this area. With this level ofreturn and as foreign ownership of land in Paraguayis assured, U.S. investors and others could beattracted to Paraguay agriculture for implementedcontract farming of Stevia.

Paraguay Vende also realizes that there are otherfactors which influence both the cost of land and therate of paying off the land including interest rates,availability of cash and loans, stability of currency.However, the team believes that the above figures,coupled with the cost/benefit analysis prepared inthe section 2 provide sufficient information to firmlystate that Stevia production in Paraguay can beprofitable and in fact the returns (sales price ofleaves) could be reduced and Stevia productionwould still prove to be a good investment.

If additional land were to be placed into Steviaproduction, it would result in increasing supply andlowering the price of the Stevia leaves while providingreasonable returns to the grower. The resulting lowerraw materials price (resulting from additional supplyof leaves) would allow the processor to producemore products, increase efficiencies and lower theircost due to two factors – lower raw material costsand increased efficiencies.

With the current demand of 1,000 tons of productionfrom regional companies it could mean that a doublingof hectares would not result in a significant loweringof prices. Simply stated, production could doublewithout demand increasing and prices could remainstable due to current demand.

Paraguay Vende realizes that the numbers used inthese calculations are theoretical and that being anagricultural crop there are several variables thatcome into play when theory changes to reality,however, given the calculations, additional land canbe placed into Stevia production at a profitable level.If demand for Stevia products from Paraguayincreases as a result of enhanced marketing orcompetitive market factors, this effort will prove evenmore beneficial to the expansion of hectares.

PARAGUAY VENDE


PARAGUAY VENDE

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