Hyet Sweet

Finding new financing; a success

Hyet Sweet

It can take three to six months to raise financing although under the present economic conditions it sometimes takes longer.

With help from Zanders Corporate Finance, HYET Sweet did it significantly faster. This enabled the company to develop within a few months into the premier challenger in the European market for sugar substitutes.

HYET Sweet is a fledgling supplier of the sucralose artificial sweetener. The Breda-based start-up run by Leo Hokke (CEO) and Ad Timmermans (CFO) has only been around for a few months but is already supplying the sweetener to a host of high-profile corporations. “Nowadays I walk through the supermarket with a completely different purpose in mind,” laughs Timmermans.

“As a financial man I will do this perhaps three times in my life. For Zanders it is routine work.”

Sucralose was discovered in the mid-1970s by scientists at British sugar maker Tate & Lyle. “The powder is 600 times sweeter than sugar. One kilogram of sucralose replaces 600 kilograms of sugar,” explains Timmermans in his Breda office. “The sweetener does not break down in the body. It contains few calories, it won’t make you fat and it doesn’t cause tooth decay.” The market for sugar substitutes is growing by more than 30%, year-on-year.

Tate & Lyle, global market leader in producing ingredients using renewable raw materials, held a monopoly on sucralose for many years. Since April 6, 2009 other parties have also been allowed to make the sweetener. This cleared the road for the emergence of China’s JK Sucralose, which markets the product under the name of JK Sweet. ‘JK’ is now the world’s largest manufacturer of sucralose after Tate & Lyle.

Chinese connection

Timmermans and colleague Hokke have a strong network in China. It was through their Chinese connections that the pair encountered the ‘sucralose opportunity’. They were offered a chance to start distributing the product in Europe as a strategic partner of JK Sucralose. Timmermans and Hokke, both seasoned operators in international business, recognized the possibilities and entered the marketplace.

It proved a success. The start-up already has six people on its payroll, including a salesperson in France, and their customer base already includes several big names. They include Perfetti Van Melle, Danone, Nestlé Europe and Hak and also large producers of soft drinks and the house brand of British supermarket chain Sainsbury’s.

“HYET Sweet is showing that as a small player you can turn the established market order upside down.”

Without exception these companies are very happy that HYET Sweet has made them less dependent on the former monopolist. “They now have a second source supplier,” Timmermans points out. Since its establishment in May 2008, the HYET Sweet company has sold 20 tons of sweetener. Even now the company is assured of 2010 sales of 50 tons of sucralose, the equivalent of 30,000 tons of sugar. “Not bad for such a young company,” comments Timmermans with a sense of understatement.

Besides sucralose, HYET Sweet also sells other sweeteners. Over time the company wants to reduce its reliance on a single supplier to 25% at most.

Financing

The sucralose arrives in the Netherlands by sea once a month. If there is a rush, the product can be flown in. The delivery has to be paid for as soon as it arrives in the Netherlands. This can stack up to a sizeable amount of money, particularly at the start-up stage. “You must buy the product and immediately tick off the VAT and pay the import duties.

Initially JK did not want to supply on credit. Then you have to deliver to customers who sometimes take three months to pay you. The financial tie-up was considerable. We needed about €1.3 million to move the company forward and to avoid thin capitalization,” says Timmermans. “We were also under a lot of pressure because we noticed that the market wanted more than we were able to supply. It was enormously important for us to be able to pay our supplier quickly, deliver efficiently and keep the customer satisfied.”

Timmermans adds that, with the help of Zanders Corporate Finance, the company soon found an investor with whom it clicked: “They are two dynamic guys, not too complex. We quickly understand each other, consult briefly and then it’s go!”

HYET Sweet and its investor met each other as a result of the Zanders Investor Circle (ZIC). Sander Oude Luttikhuis, director at Zanders Corporate Finance notes: “The idea behind ZIC is that we offer a platform for entrepreneurs that need capital financing.
Together with the entrepreneur we write the case and validate the financing requirement. The entrepreneur presents the business case to interested investors.

Zanders Corporate Finance then explains the financial structure. After a brief introduction there is an opportunity to ask questions. The parties who are interested can indicate what stake they envisage taking.” For HYET Sweet this proved an exceptionally pleasant way of coming into contact with financiers. “My network is large, but not as large as the Zanders network. They know the people and have a way in.

As a financial man I will do this perhaps three times in my life. For Zanders it is routine work. They have far more expertise. You can leave it to them and things work out.” Timmermans explains that during an Investor Circle, an appealing investment teaser is presented and then the business case is examined critically. He adds: “Without Zanders this would all have been far more difficult.”

Enthusiastic trading company

“We encountered a young, enthusiastic trading company with a lot of knowledge of the Chinese market,” recalls corporate Finance consultant Jan-Willem Roossink. Zanders’ Oude Luttikhuis adds: “Investors and banks obviously take a good look at the management section. In HYET Sweet’s case it was fine. They are two experienced people, real entrepreneurs. It’s obviously fantastic that HYET Sweet is showing that, as a small player, you can turn the established market order upside down.”

Things moved very quickly after the initial contact was established at the Investor Circle. Zanders provided the necessary supervision. Roossink says: “You keep the process going, ensure that the parties continue to talk to each other and negotiate a good deal. If any matters are unclear, you make sure that they are discussed as soon as possible. We had the agreement in place before the end of July. Within about two months of the ZIC meeting, the deal was closed and HYET Sweet had the financial resources that it needed.”

Timmermans adds that the whole process was monitored in a very cordial way:“We could have gone to a major party active world wide. While they might have contacts all over the world, they don’t get very far in a local market. But Zanders does.

For Zanders, the Netherlands is a large village. Their network and their business relations are something you won’t quickly find with somebody else. It’s not just because they are nice people. It’s because they get results.”