Shanxi Securities: Domestic natural pigment companies may benefit from demand explosion, recommend paying attention to CCGB

According to the Zhitong Finance APP, Shanxi Securities has released a research report stating that the U.S. HHS and FDA have announced plans to gradually phase out petroleum-based synthetic food colorants, and the demand for natural colorants in the U.S. is expected to explode. Domestic natural colorant companies are likely to benefit from the U.S. synthetic colorant elimination plan, with a recommendation to pay attention to CCGB (300138.SZ). The company is actively promoting the market application of products such as chili red, lycopene, and lutein in the field of natural colorants, and is expected to benefit from the U.S. synthetic colorant elimination plan. The main points of Shanxi Securities are as follows: Event The U.S. HHS and FDA have announced plans to gradually phase out petroleum-based synthetic food colorants, and the demand for natural colorants in the U.S. is expected to explode. On April 22, 2025, the U.S. Food and Drug Administration (FDA) and the U.S. Department of Health and Human Services (HHS) announced a series of measures aimed at eliminating all petroleum-based synthetic colorants from the U.S. food supply by the end of 2026. The specific measures are as follows: 1) The FDA will establish national standards and timelines to encourage the industry to voluntarily transition from synthetic colorants to natural colorants. 2) The FDA will revoke the authorization for two synthetic colorants and eliminate the use of six major synthetic colorants on a "voluntary" basis by the end of 2026. 3) The FDA will accelerate the review of natural colorants. 4) The FDA plans to collaborate with NIH to conduct comprehensive research to understand how food additives may affect children's health and development. The bank believes that natural colorants will fully replace synthetic colorants in the U.S. market On one hand, referencing the European precedent, in 2008 the EU required the disclosure of the use of six synthetic colorants on food packaging, which nearly eliminated the use of these colorants in food and beverage products. On the other hand, the U.S. food retail network is typically distributed across states, so a synthetic colorant ban in a single state will lead companies to quickly switch to natural colorants nationwide. U.S. natural colorant company Sensient Technologies stated that the transition from synthetic to natural colorants in the U.S. is "the biggest opportunity in the company's history." More than half of U.S. states have initiated legislative activities regarding synthetic colorants in food, and many leading brand food companies have announced plans to complete the transition to natural colorants by the end of 2027. Currently, the penetration rate of natural colorants in Europe exceeds 80%, Japan is mainstream, the U.S. is close to 1/3, Latin America is about 25-30%, and China is close to or below the U.S., indicating that there is still considerable room for substitution in China, the U.S., and Latin America. The usage of natural colorants is expected to increase 4-12 times compared to synthetic colorants, leading to an explosion in demand for natural colorants According to Sensient Technologies, due to the lower color concentration of natural colorants compared to synthetic colorants, achieving the same hue will require 4-12 times more natural colorant. For example, the demand for sunset yellow in the U.S. is expected to be about 2,500 tons in 2025; if replaced with natural colorants, there will be at least an additional demand of 10,000 tons for natural colorants. According to Mordor Intelligence, the global demand for yellow colorants accounts for only 34% (including sunset yellow and lemon yellow), while the market for replacing temptation red colorants, which accounts for over 56%, is even broader. Currently, the natural colorant varieties that can replace synthetic colorants such as temptation red, sunset yellow, and lemon yellow include beet red, cochineal red, chili red, lycopene, lutein, and others Risk Warning: Risks of U.S. natural pigment policies falling short of expectations; food safety risks; fluctuations in upstream agricultural product prices and supply risks; trade policy risks