(Yicai) Sept. 7 -- Producers of sugar substitutes in China have reported a sharp drop in earnings in the first half of this year, mainly because sugar alcohol prices fell due to extreme production overcapacity in the industry.

Net profit at Shandong Sanyuan Biotechnology, a leading producer, tumbled 72 percent to CNY33.3 million (USD4.6 million) in the six months ended June 30 from a year earlier after the price of erythritol continued to fall, it said in an earnings report. Revenue shrank 49 percent to CNY235.3 million (USD32.1 million).

The gross profit margin of Sanyuan’s erythritol business turned red in the first half, sinking to minus 3.9 percent, from an 18.3 percent margin a year ago, the Binzhou-based company noted.

Consumers are paying more regard to healthy eating, and sugar substitute drinks have become hot products, leading to severe overcapacity as firms rushed into the market. China consumes about 200,000 tons of erythritol each year, while new production capacity is about five times as much as that, according to research by Sanyuan.

Guilin Layn Natural Ingredients, which mainly makes sweeteners from monk fruit and stevia, saw net profit plunge 73 percent to CNY36.2 million and revenue fall 20 percent to CNY512 million. Baolingbao Biology, a sugar alcohol producer, had a net profit of CNY32.8 million and revenue of CNY1.3 billion (USD178 million), down 64 percent and 7.3 percent, respectively.

In July, some consumers switched to natural sugar-free drinks without added sweeteners after the World Health Organization classified aspartame, an artificial sweetener, as possibly carcinogenic to humans.

As people continue to pay more attention to their health, natural sugar-free drinks will become a new critical category, taking some of the popularity of sugar substitute drinks, Zhu Danpeng, vice president of Guangdong Food Safety Promotion Association, told Yicai.

Editors: Dou Shicong, Martin Kadiev