Arco Chemical Announces New Fat Substitute : Food: Other firms are ahead on fake fats. But the market could top $1 billion a year, leaving lots of room for newcomers.
Arco Chemical Co. will weigh in with a new nondigestible fat substitute, joining the ranks of companies developing such products to satisfy health-conscious consumers.
The company has already patented a formula for EPG--esterified propoxylated glycerol, a chemical compound with properties similar to those of natural fats or oils but that is not absorbed by the body, said Thomas Beck, the Arco Chemical executive in charge of EPG’s development.
If it pans out, non-caloric EPG could replace oil or fat in everything from doughnuts to potato chips to ice cream. “We think this material will have a home and that there’s a very big market,” Beck said Friday.
In announcing the fat substitute, Arco Chemical joins Monsanto Co., which won Food and Drug Administration approval for its Simplesse fat substitute in February, and Procter & Gamble Co., which has been seeking FDA approval for its Olestra fat substitute for three years. All three companies are after a potential market of more than $1 billion, analysts said.
But Arco is several years behind its competitors, and FDA approval and commercial production of EPG is at least five years away, Beck said.
The development of EPG is part of Arco Chemical’s new strategy of diversifying into products that can be made from its main chemical, propylene oxide, normally used to make everything from antifreeze to food additives to foam padding. At its annual meeting on Thursday, Arco Chemical President Harold A. Sorgenti set forth a five-year, $2.5-billion program to double the size of the company. Based in Newtown Square, Pa., Arco Chemical has about $2.7 billion in annual sales. The company is 83%-owned by Atlantic Richfield Co.
The entire chemical industry, hit hard recently by slack prices and falling sales in its core commodity-chemicals business, has been casting about for non-traditional markets, analysts said.
“The whole area of food ingredients is attracting a lot of interest, and it’s part of the aging baby-boomer story,” said chemical industry analyst James H. Wilbur with Smith Barney, Harris Upham & Co. in New York. “Who else is better equipped to make these things than the chemical industry?”
Besides chemical companies, more traditional food firms such as the Kraft General Foods unit of Philip Morris Cos. and the Frito-Lay unit of Pepsico are investigating fake fats. Everyone hopes to siphon off some of what Beck estimated is an annual demand for about 16 billion pounds of fats and oils in the United States.
But it’s unclear how soon any of the products will actually end up on a dinner plate. Procter & Gamble admits that the FDA approval process is taking longer than hoped, with no approval in sight after three years. “We don’t know why,” sighed Procter & Gamble spokesman Don P. Tassone in Cincinnati.
Beck said Arco Chemical has been cooking up EPG for the past three years. The company is now conducting safety tests and examining EPG’s stability and usefulness in a variety of products. Application for FDA approval is at least three years away, he added. Arco Chemical would then look at a variety of business arrangements, including possible partnership with a major food company, Beck said.
As for the competition, he argued that EPG will have broader applications than Simplesse, a compound of egg white and milk proteins that can only be used in cold foods such as salad dressings, ice cream and mayonnaise. Like Olestra, an unrelated chemical compound made from sucrose and soybean oil, EPG is for both hot and cold foods.
Beck insisted that Arco Chemical will not suffer from its relatively late entry into the fat war. “We think there is room for other people in the marketplace,” he said.
