Tate & Lyle Shares Plummet After Morgan Stanley Downgrade

Tate & Lyle’s share price fell by over six percent on Monday after a significant downgrade from Morgan Stanley. The investment bank lowered its rating from “equal weight” to “underweight,” setting a new price target of 500p. This decision stems from increasing concerns regarding Tate & Lyle’s mid-term objectives, particularly following announcements from Tyson Foods about phasing out certain ingredients.

Tyson Foods revealed plans to eliminate sucralose, a zero-calorie artificial sweetener, from its U.S.-branded products by the end of 2025. The company is also removing high-fructose corn syrup as part of a broader strategy to reduce additives in its products. Donnie King, CEO of Tyson Foods, stated, “We continuously review and assess our product portfolio to ensure the highest quality products that meet the needs of consumers.” King emphasized that this decision aligns with their commitment to providing healthier options for families.

In response to shifting consumer preferences, Tate & Lyle has been actively reformulating its products to reduce sugar content. The company is leveraging scientific innovations to enhance the health profile of consumer goods. For instance, McVitie’s digestive biscuits now feature a ‘light’ version that incorporates Tate’s Sta-Lite polydextrose fibre, successfully lowering sugar while increasing fibre content.

Despite challenges, Tate & Lyle reported strong demand for sucrose in its recent full-year results, with revenue increasing by 16 percent for the year ending in March 2023. However, overall group revenue witnessed a decline of five percent. Nick Hampton, CEO of Tate & Lyle, noted that the company has been undergoing a “major strategic transformation” over the past seven years. This transformation aims to position Tate & Lyle as a “growth-focused speciality food and beverage solutions business,” in line with long-term consumer trends favoring healthier and more sustainable food options.

Hampton stated, “As an expert in reformulation, taking sugar, calories, and fat out of food and adding fibre and protein, we are leaders in helping customers improve the nutritional balance of food.” As Tate & Lyle navigates these changes, the company’s ability to adapt to evolving market demands will be crucial for its future performance.

With the food and beverage industry increasingly focusing on health and sustainability, Tate & Lyle’s proactive measures may play a pivotal role in shaping its trajectory in the coming years. However, the recent downgrade by Morgan Stanley underscores the volatility and challenges that lie ahead for the sugar giant.