Sales of NutraSweet bubbling -- and the owner hopes to sell it off

Like shaken-up soda pop, sales of NutraSweet, the low-calorie sweetener in diet soft drinks, are fizzing fast and overflowing. Now that Coke, Pepsi, and 7-Up have announced their conversion to 100 percent NutraSweet from a mix of the ingredient with saccharin, the sales future for this product looks more bubbly than ever.

But the future is hardly so predictable for the company that makes it. The NutraSweet Group is owned by G. D. Searle & Co., which is in the pharmaceutical business. Last fall the Searle family, which has substantial holdings in the company, announced that it would like to diversify its investments and that all or part of the business is for sale.

Reportedly, a number of chemicalmakers have expressed an interest in the NutraSweet Group or made offers for it, most recently Angus Chemical Company, a subsidiary of Pacific Gas & Electric. The deadline for offers was Jan. 7, according to Roger Secrist, chairman of Angus, but Searle has not yet announced a winner.

Depending on the price, of course, the winner could be indeed fortunate. Jesse Meyers, publisher of Beverage Digest, an industry newsletter in Greenwich, Conn., believes aspartame -- the generic name for NutraSweet -- will push sugar-free sodas to 30 percent of the soft drink market by the end of this year and to 50 percent by 1990.

``There are several [major] cities . . . where diet volume is now approaching 40 percent,'' says Mr. Meyers, who has been watching the industry for 23 years. At the moment, the carbonated-beverage market -- at $25 billion -- is the largest market for NutraSweet.

Taste is everything for this product. NutraSweet does not leave the bitter afterflavor saccharin does. It has caught on big with consumers who want to cut calories but don't want to give up sugar taste. Now that the three big soda makers have moved to 100 percent NutraSweet (and more such announcements are on the way from other manufacturers, says NutraSweet), consumers who refused to buy any products containing saccharin will have a new choice, says Robert Shapiro, president of the Searle group.

``The introduction of a new choice expands the market,'' Mr. Shapiro said in an interview. For instance, he says, the market for tabletop low-cal sweeteners was about $100 million a year ago. Now it's over $200 million, and NutraSweet accounts for around 60 percent of it. ``A lot of it came from people who drank their coffee black -- who found saccharin unsatisfactory.''

There are other markets to look forward to: yogurt, ice cream, juice, gelatin, and frozen desserts. And, if aspartame is mixed with a bulking agent, it can be used in baking mixes. Six companies, including Tropicana, have applications pending with the Food and Drug Administration for approval of new uses for aspartame. General Foods, Ralston Purina, and General Mills are all experimenting with the sweetener for cereals, according to Shapiro.

Since the sodamakers introduced NutraSweet on a national scale two years ago, ``demand has outstripped supply,'' Shapiro comments. Searle just built a new factory for aspartame and it should be in full swing by the middle of the year, he says.

David Crossen, an analyst at Sanford Bernstein & Co., believes the plant will increase output by about 30 percent. NutraSweet sales were just shy of $600 million last year, accounting for over 70 percent of Searle profits. Mr. Crossen predicts the new capacity will push revenues to more than $800 million this year. ``Down the road,'' he says, aspartame could be a $1.5 billion market.

So does that make NutraSweet a plum for a buyer?

Hmm. Well, maybe. Maybe not. For the near term, the market is pretty well sewn up. NutraSweet's aspartame patents in the United States, Canada, Japan, and major European countries are good until the late '80s. Its US patent doesn't expire until 1992. ``NutraSweet is a real cash generator,'' says Robert Hodgson, an analyst at Shearson Lehman Brothers Inc.

Buyers, though, buy the future, not the present. To last in the long term, Searle, or whoever will own NutraSweet, will have to find a cheaper way to make aspartame or come up with a similar-tasting product that's less expensive, the experts say. NutraSweet is much more costly than saccharin. The soft drink makers, for the time being, have been unwilling to up prices and are taking this higher cost through smaller profit margins.

``Everybody wants more than one supplier for a product,'' says Mr. Meyers at Beverage Digest, and in the long run, he believes that condition will come about. NutraSweet is working on cheaper sweeteners, but so are competitors:

A German company, Hoechst, is selling a product in Britain that runs a middle road between saccharin and aspartame in both sweetness and price. It's awaiting approval in Germany. Meanwhile, it is generally expected that cyclamates will be reapproved and allowed back in the US market within the next two years. The soda companies themselves are experimenting with sweeteners. Pepsi has been been test marketing one in Japan made from grapefruit rind.

Even if another product came on the market, analyst Crossen is not sure how much of a dent it could make in NutraSweet. ``I've always believed aspartame is not simply an ingredient, it's an image. It won't be quite so easy to interchange it with some other products.''