A World With Less Sugar Would Taste Just As Sweet!

A World With Less Sugar Would Taste Just As Sweet

Ari: 39% of the adult population in the world is already overweight or obese, and one of every three children in the world is already overweight or obese. think about those children 20 years from now. obesity is killing millions of people every year. 6.5 million people are dying every year globally with heart problems, blood pressure problems, all kinds of diseases mainly derived out of excessive use of sugar. That's more than covid across the last three, four years every year. the sugar industry is a $90 billion industry, almost a hundred billion dollar industry, it's one of the biggest industries in the world. And that's because we see sugar everywhere.

Amir: That was Ari Melamud, the CEO of Incredo Sugar, a company that's figured out a way to deliver the same sweet taste to sugary food like chocolate, with half the sugar. Incredo is working with big food manufacturers in the US to help them reduce the amount of sugar they put into their products. 

It's a slow and tricky process, but Ari says food companies are responding to consumer demand for healthy ingredients in healthy food. On this episode. Ari is our guide as we dive into big sugar, a global multi-billion dollar industry that very few of us know anything about, even though sugar is an almost everything we buy and the food that we put into our bodies. I'm Amir Mizroch, and this is The Dejargonizer. 

Amir: Ari, thanks for coming onto the The Dejargonizer. before we start and get into your company, there's been a rebrand lately. There has been, funding around. I was hoping you could just paint a picture very high level. what is the sugar problem?

We know about obesity and diabetes and heart and teeth, but from your perspective, just give us why are we listening to this podcast now? How big is this deal? is

Ari: Yeah. thanks for asking, because I think this is really an important point, sugar is a huge problem. We need to remember, sugar by itself is not a bad ingredient, although it has a very bad reputation. It's not a bad ingredient because it's completely natural and it is a great source of energy for our body. if you talk to the experts, they don't recommend for you unless you are a diabetic, to not use sugar at all. The problem with sugar is that we eat too much of it. we consume about four times more sugar than we should.

Amir: It's in everything. It's in everything, right? Almost everything that, that you buy.

Ari: We consume a lot of sugar and That's the main driver for the obesity pandemic around the world.

Just to give you two numbers, 39% of the adult population in the world is already overweight or obese, and one of every three children in the world is already overweight or obese. And that is even a lot more worrying because think about those children 20 years from now. The pandemic of obesity is killing millions of people every year. 6.5 million people are dying every year globally with complications derived out of obesity, which is, as you said, heart problems. Blood pressure problems, all kinds of diseases which is mainly derived out of excessive use of sugar.

Amir: Six and a half million people around the world. 

Ari: That's more than covid across the last three, four years every year. diabetes has increased four times over the last 20 years. And is expected to increase another three or four times in the next coming 20 years.

Amir: This is all data from World Health Organization?

Ari: yes. So definitely this is something that we need to address. It's one of the top priorities And we need to understand, as you started saying earlier, is that we see food, with excessive amount of sugar everywhere today. So you can find sugar in products you don't even imagine like pasta, like bread, like, alternative meat. 

Amir: Why, Ari? why are they putting that sugar in there?

Ari: One. we love the taste of sugar. we get addicted in a way to the taste of sugar.

Amir: We're wired for it.

Ari: Yep. Two, it gives us a boost of energy. So that's part of why we get addicted to, it's not just the taste, it gives us a lot of energy, sometimes too much energy,

Three, it's one of the cheapest ingredients inside the recipe. So the more sugar we have, the cheaper the products become. instead of putting in good ingredients like fibers, like proteins, those could be sometimes replaced with sugar. And sugar is sometimes 10 times cheaper compared to fiber as an example. So for many years the food industry had, financial motivation to add more sugar to our food. if you add more sugar, it makes it tastier and cheaper. That's a winning proposition for everybody except the consumer.

Amir: Ari. These food companies, they're big brands. They're Fortune 100 companies. They are massive. They have shareholders, they have corporate social responsibility. But you're saying they are driving this?

Ari: I am not saying they are driving this. I'm saying that they had motivation and I think this is now changing. consumers are becoming more aware of what goes into our food. if you look at the younger population today, my kids read the labels.

They would go online, search for ingredients that they're not familiar with,

Amir: You've raised your kids very well. My kids will go for the sweetest things. 

Ari: it starts with consumers. Consumers are expecting to have healthier food.

Amir: in the West

Ari: not only we'd be surprised I actually thought when I started, with these companies, that sugar is a western world problem. Well, it's not, it's even a bigger problem in some of the countries in Asia as an example, India, Indonesia are countries where the consumption of sugar per capita is one of the highest in the world. India has the highest diabetes ratio in the world. So it's not just a Western world problem, it's a global problem.

Amir: just that I understand this. It's a very poor country with huge amounts of sugar and diabetes.

Ari: Yes.

Amir: Wow.

Ari: But again, because sugar is cheap, that should not be a huge surprise, actually. 

Amir: it's too cheap.

Ari: if you go around the world today, I don't know any, there might be a few, but I don't know any company, either large or medium sized company, that doesn't have at least one, sometimes even more projects for sugar reduction. The food companies absolutely understand that if they want to survive. And they want their main brands to keep their market shares they need to make the products healthier.

Amir: in preparation for this conversation, I spoke to, a few people in the food industry, just to get a sense of, if and how, and how quickly innovation is moving through that. And you've painted here a very broad picture of a global, industry with global repercussions it's really huge. The amount of food that some of these companies through some of their factories are producing is vast. I heard of one, factory that has on the roof, 90 tons of sugar, that it goes through a month. I dunno if that sounds right.

Ari: it's not a lot.

Amir: that's not a lot??

Ari: No. the sugar industry is a $90 billion industry, almost a hundred billion dollar industry, it's one of the biggest industries in the world. And that's because we see sugar everywhere. those companies, usually they don't act until they have to because the business is going well and the sales are fine.

Market share and profitability is okay. We can go on, but they're also listening to the consumers, they're listening to the trends in the market. they're very good at this. they always stay very connected to the market and they understand that things are changing. 

Amir: on a scale of one to 10, where are we in the journey of the change in the food industry to the more healthy and let's focus on sugar because we know there's other things.

Ari: I'd say in terms of awareness and in terms of companies trying to act on it, I think we're a very high score. every medium to large size food company today, has at least one project. They have divisions that are called better for you, which means how do we take our current products and make them better for our consumers?

So they are absolutely on the right track in terms of the understanding that they need to make our food healthier. We know that food is the number one criteria for our health, life expectancy, et cetera. more important than exercising, uh, I'm not quoting myself. These are the experts. What goes into our food impacts our health more than anything else, besides probably our DNA that we were born with.

The companies understand that this is something that needs to be done. They're acting on it. But in the case of sugar, it takes time and it takes time because sugar reduction sounds simple. So what's the big deal? Let's just cut some of the sugar out.

Amir: Yeah.

Ari: Well, it's simple, but it's actually very, very complex.

Amir: you, mean it's simple but difficult? which is one of my favorite.

Ari: In this case, it's not simple but difficult. It's simple, but very difficult. And the reason why it's difficult is because there are few elements that needs to be added together. One, There are plenty of sugar alternatives in the market, you know, all the way back to the seventies of the previous century with Saccharin, Aspartame, Stevia monk Fruit, new Molecules.

Amir: sorry, for people who might not have heard this or don't even know how this works, just give us a, side bubble here. These are products created by food tech companies or scientists or food, technologists?

This is the market you operate in?

Ari: the market has been trying to reduce sugar for a while, and the way. they were searching for solution is either by looking for natural ingredients that are sweeter than sugar. Stevia will be a good example for a product that is natural. it derives out of plant, and in some versions of Stevia, it could be 400 times sweeter than sugar.

So that's one track. The other track is the chemical track. artificial solutions developed in the lab for sweet molecules that can replace sugar so you can use less of it or you can drop sugar out completely. There are plenty of solutions. Natural, artificial. Very sweet. Some of them are not sweet enough. They all have two things in common. The first one is that they have a different taste profile.

Amir: They taste different, 

Ari: they taste different.

Amir: Big, really wildly different?

Ari: depends on the solution that you choose, but it could be a metallic taste, it could be an aftertaste, could be all kinds of flavors that you feel in your mouth.

Amir: People aren't going to buy it.

Ari: that are not, same as sugar. So if you take a chocolate and you remove the sugar and you put Stevia in it, it's gonna be second before you notice the difference. Not to mention your kids will notice the difference. And this is a taste that people usually don't like. So a company that has a successful chocolate brand, for them to reduce on sugar means that they need to change the taste of the product.
And that's a huge risk. And consumers not gonna buy the product again, because taste is and will continue to be the king. So consumers are making their preference on brands based on whether they like the taste or not. That's the number one criteria.

So for companies to reduce on sugar on existing products that they have on the shelf and maintaining the original taste of the product today is impossible. It's basically impossible

Amir: And it's impossible because the factories, the facilities are too big?

Ari: No, no, no, because they cannot maintain the taste of the product. So that's a big showstopper for sugar reduction. The second point, is that these sugar alternatives, they're worse than sugar in terms of their impact on our health. Taking out sugar replacing it with any one of these alternatives is not gonna make the product better. the contrary,

Amir: let's pause for a second. now that we have this picture: The health, the economy and everything. let's go into Incredo. You mentioned a couple of Sugar Alternatives, Stevia and some of the others. Is that where Incredo came from? 

Ari: we, decided to take a completely different approach instead of searching for a new ingredient, the new Stevia, decided to actually be the first company in the world that uses sugar to reduce sugar. We improve sugar so we can use less of it. That's the whole idea. we're the first and only company in the world that is commercially available that can actually reduce significant amount of sugar in food applications by using sugar.

Amir: Right. let's dejargonize that. You use sugar to reduce sugar, meaning you're using the chemical properties of sugar, in combination with, I guess it's your own, formula?

Ari: It's more simple.

Our first product that we've launched into the market almost two years ago is basically 99.8% regular sugar,

Amir: 99.98.

Ari: 0.8% 

Amir: sugar, almost 0.2% 

Ari: 0.2% not sugar. And it allows us up to 50% reduction in the amount of sugar. but how does it work? This is actually very interesting. So let's assume you take a bite of the chocolate. milk chocolate usually have about 50% 5 0 sugar in it more or less. So what happens in our mouth is that we break the chocolate with our teeth and then it dissolve through the saliva and reach the taste receptors that are mainly on our tongue, and then the tongue sends a signal to our brain so we can sense the different taste that we just felt.
The problem is that this whole process takes just a few seconds before we swallow. Could be two seconds if you are a fast eater, or maybe four or five seconds if you're a slow eater. But it's a very short period, and because it's a short period, most of the sugar inside that bite doesn't have enough time to break, dissolve, and even reach the taste receptors and affect the taste whatsoever. So the sweet taste that we feel in chocolate, it's only 20 to 30% of the sugar inside that bite. Those particles contain sugar that's never been dissolved and reached a taste receptor. This just goes into our body and turns into fat immediately. 

Amir: Extra sugar.

Ari: yes, a lot of waste because this is sugar not impacting taste whatsoever. Just going into our body and turning into fat, that's a huge waste. Now, the whole idea behind our technology is 99.8% sugar, the only difference is the way we form our crystals. Our sugar is exactly like any other sugar. It's made out of sugar cane or sugar beet, under the same process like normal sugar, it looks the same, it smells the same and it tastes the same, but with one difference: the way we form our sugar crystals at the back end of the process is slightly different. Which means that our particles that exactly like regular sugar but are more amorphous, they break and dissolve faster.

Amir: they're made from the same plant?

Ari: From the same sugar cane plant or sugar beet. That's how sugar is produced today. We do the same process until the last phase of producing the sugar, which is taking the liquid, drying it into the crystals. We dry it a bit differently.

We're not adding any chemicals, the whole thing is physical. We're adding 0.2% of natural material that is added to the liquid. So it's embedded inside the crystal and the physical presence of these particles inside the sugar crystal make the structure less stable.

Amir: the protein structure?

Ari: No, not the protein structure. It's a natural mineral that we add at the last phase. Think about a crystal with some little dots inside that their job is to interfere in the structure of the molecules, how they connect one to the other is less organized, it makes the whole structure more fragile. What happens is, when our sugar meets our saliva in the mouth, it just dissolves much faster. So under those very few seconds, you actually get more sugar delivered into a taste receptor. That actually allows us to significantly reduce up to 50% without changing the sweetness level. Not less importantly, without changing the sweetness profile because this is still sugar. 

Amir: let's go there. We have created 100 tons of Incredo sugar.  It's now in the factory. The doors are opening, it's being loaded onto trucks, and these trucks drive to the sugar factories?

Ari: The sugar that comes out of the sugar factories goes to the food companies. Let's say I'm Strauss in Israel or Ferrero in Europe. I buy a lot of sugar for my different products; any food company in the world, they buy sugar from the sugar manufacturers. So we will be selling our sugar to the food companies to replace the regular sugar.

Amir: Got it. And these big sugar companies, these, producers, these are also big companies, but no one knows their name? They're not like brand names. 

Ari: No, because they're ingredient companies, they're in the back of the chain. if you are in the industry, you would know the sugar manufacturers. But what we know as consumers are the branded products that are on the shelves. So, normally we don't know those huge companies, billions of dollar companies, that are producing and selling sugar all around the world.

Amir: right? Is the demand for them to use Incredo Sugar or to reduce their sugar using other alternatives, is that gonna be driven by the food companies that are reacting to the consumers? 

Ari: Well, that, that could be a way, because that's one model. The way we do this is that we currently produce our own sugar in partnerships with some of these large sugar manufacturers, and we are selling our sugar to the food companies to replace the sugar that they used to buy from the traditional sugar manufacturers.

Our sugar's purpose is to replace regular sugar. So let's assume you are a food company somewhere in the world and you buy a hundred tons of sugar a year. By switching to our sugar, you can cut down your sugar by up to 50%, so you don't have to buy 100 tons anymore. You can probably buy 60 tons instead.

Amir: and let's talk about the business, the fundraise, it says here on the press release that it's a Series C, it's $30 million, that's a punchy number in today's markets. How are you gonna use this money? 

Ari: We've been commercial for the last almost two years. We now have a team on the ground in the US to work with the food companies. We've just launched into Europe with the same idea. 

Amir: when you say launch, do you mean that you're producing over there or you're exporting from here?

Ari: we're currently producing in Canada, shipping from Canada to the US. 

Amir: there's a couple of partnerships under your belt. Just very briefly, Blommer Chocolate Company. Give us a little bit of a insight.

Ari: we are currently running something like 300 projects with some of the biggest companies in the US market. A lot of people don't know the Blommer Company, but Blommer is a huge company. It's actually the largest chocolate B2B company in the US, so they produce chocolate as raw material and sell it to companies like Hershey's and Mars and others, and those guys would buy the chocolate and then convert it into the different applications.

So Blommer is a huge, factory 

Amir: a big chocolate factory.

Ari: it's absolutely a chocolate factory. I'm very happy about this launch.

Amir: Are you able just to give us a little bit of a fly on the wall, an anecdote of how the deal happened? again, this is an, example of what is possible.

Ari: what we normally do is we go into the first meeting, which we call a POC meeting. So, proof of concept meeting with some samples. If I go to a meeting with Hershey, I'll take a Hershey chocolate and produce a new Hershey chocolate at our labs with 40, 50% less sugar in it. And we go into the first meeting with their R&D teams and we ask them to do a blind test and tell us if they can tell a difference which one is which.

And in most cases, they cannot tell the difference. We don't have to say much after that They understand the potential right there. immediately. 

Amir: did this actually happen at Hershey's?

Ari: I cannot talk about Hershey's specifically, but it happens. Our teams, our sales and technical support teams in the US are doing those kinds of meetings on a daily basis.

Amir: All right. in this part of the podcast, we'll say you used Hershey's just as an example of it happened somewhere that, that's for the record.

Ari: yeah. 

Amir: so that we don't get calls from Hershey's.

Ari: absolutely. No, I gave Hershey as an example for a leading chocolate company in the US. 

Amir: Alright. 

Amir: Okay, what I'd like to do now, if you look at this conversation as a path, as a road through the mountains, we started off by looking at the sugar industry, and the health implications of it. Then we went down into the sugar companies, the food companies.

We started to see that there's already been a change, from the food companies to start looking into more of this stuff. You said that your company is doing about 300 projects, which just sounds incredible. And now we are seeing maybe an acceleration towards more adoption of healthy use and reduction of sugar.

One of the smartest ways I've heard at the moment is to use sugar to reduce sugar, so that hits that whole taste market, which is really important.

That'll have, I guess, long term implications on the sugar industry, the growers, the producers, the transporters, the food companies -- that's gonna change a big chunk of the world. Take us into that. What is your estimate? Five years, 10 years? When do we start to see real moves?

Ari: The big question. That's exactly what my board is asking me every time we meet. We need to realize two things. One is that the food industry is a conservative industry, so, it takes time for them to adopt new technologies, et cetera.

Two, there's a big risk in this, which is part of the being conservative because for any brand to change its recipe is difficult. We remember what happened to Coca-Cola all the way back in 85 when they introduced, new Coke, 85. Coca-Cola, after so many years, decided they want to create a small change in the recipe and consumers almost killed the brand over a few months, so they had to go back, rebrand it and relaunch.

Amir: Coca-Cola probably won't do that again.

Ari: Yeah, it's an amazing story that is being taught in universities, in marketing courses, how not to do. Companies are very cautious and rightly so about changing their recipes, especially if you have a brand that consumer like and they're buying. you have a significant market share, why change? The only reason to change is that consumers are asking for healthier food. So back to your question, it's gonna take a while, it's not gonna happen over two or three years. let's put the expectations in the right place. I think it's gonna take anything between four to five years until we actually see massive products on the shelf with less sugar in it, built on our technology. there might be new technologies coming in by, I don't know how many years from now, which I bless actually, because, the more the better, because we are here on a purpose, which is to make our food healthier so people can be healthier as well. The market is big enough and we do not plan to take the entire market.

I truly believe that our technology is so unique and really solves a problem that hasn't been solved for so many years that our potential is quite large. So if you think that the market is almost a hundred billion, if you take a 5% of the market, that's a $5 billion company.

Amir: Yeah. it sounds like a plan, I guess when you guys are a $5 billion company and there's a lot less bad sugar and extra sugar and extraneous sugar, and more and more people, not just people who can afford the chocolate equivalent of Beyond Meat, or whatever it is. What's next? Is it always gonna be sugar?

Ari: when you look at our mission, it's not sugar only. there are a few other ingredients inside of food that are as bad almost as sugar.

Amir: like?

Ari: Well read the labels on the front of the pack. So it's sodium and saturated fat.There's some areas for big potential improvements there as well. Our mission as a company is not sugar only, but to make our food healthier by eliminating or significantly reducing the amount of those bad ingredients in our food. we're currently focused on sugar, that's a large enough task for us.

Amir: if we're talking about the tagline right now, the mission is to use sugar to reduce sugar. Maybe in five years time it'll be, use salt to reduce salt?

Ari: I can kill your promo at the moment: our technology can reduce salt the same way it reduces sugar. The problem with salt is that it's a much smaller market and there are already quite a few good technical solutions for salt reduction in the market. The reason for us not to go there is because it's, uh, from my perspective,  a red ocean.

Amir: what is a red ocean? I know what a blue ocean is, just a big opportunity. A red ocean is a burning lava ocean? What is that?

Ari: No, it's just, 

Amir: and what's the difference with boiling the ocean?

Ari: No, it's not boiling the ocean. red ocean versus blue ocean the whole difference is that the space is already occupied. It's already crowded. So it's a red. So there are already good companies with good technology that can reduce sodium. Okay. That's why for me, it's a red ocean. It's not attractive. the market doesn't need Incredo. Although we have a great technical solution, but there are other solutions that are, I think, quite good. and therefore from a business standpoint, I don't see a big opportunity there. 

Amir: that's where you're gonna boil the ocean?

Ari: This is what I call at the momenta blue ocean, because you can see clearly, you can see the problem and you cannot see competition there yet.  If we really want our food to be healthier, we need to start with sugar, but we need to move on to other ingredients.

Amir: That is just a great way to end. I think it's almost like we've arrived, on the other side of sugar. Now we're looking at this other big problem, but we're gonna take this step by step. Ari, this has been a great conversation. I've learned a tremendous amount. 

Ari: My pleasure as well.

Amir: All right. Thanks a lot. Bye. Bye.