Canada-based stevia firm GLG Life Tech plans to team up with state-backed Chinese food giant COFCO to develop food and drink products containing the sweetener.

The two sides have signed a letter of intent to produce stevia extracts and formulated products to sell in China.

The venture is GLG’s second attempt in China. In 2010, it set up another business, AN0C, to sell and distribute zero-calorie food and drink products in China. However, demand zero-calorie drinks in China was low and a spokesperson said the venture is now “dormant”.

“The AN0C (All Natural, Zero Calories) products that we developed and marketed in 2011 proved that there was a market for low and zero calorie drinks sweetened with stevia. Unfortunately, at the time we launched there was also a cool summer, some problems with our bottles, and significant competitive response, so we were not able to get any momentum. We haven’t had any funds to do the marketing required to re-enter the market,” he said. “COFCO certainly could, they want to be able to provide these types of products, and with us, they don’t need a lot of development time.”

Reflecting on the prospects for the tie-up with COFCO, China’s largest food company, the GLG spokesperson said rates of obesity and diabetes were on the up in China. Government attention on the problems, he said, could lead consumers to look for zero-calorie products.

“In the past, they haven’t been big buyers of low or zero calorie products, but we think this will change as the government focuses on these issues,” he said. “When I first started to go to China just ten years ago, hawking on the sidewalk and smoking everywhere was the norm. Now it is much different, and this is because the government focused on the issues. Next will be obesity and diabetes – hello, stevia”.

Restrictions on artificial high intensity sweeteners in China could also benefit the two companies, the spokesperson added. “What COFCO like about the deal is that they can get a sweetener that is grown in China, does not need imported sugar,” he claimed.

COFCO’s investments include a stake in Chinese dairy Mengniu, which could become a customer for GLG’s stevia products. COFCO also owns 65% of one of the two bottlers for Coca-Cola Co. in China. In the US and Europe, yoghurt, cereal and ice cream brands have used the sweetener, although stevia has been most seen in soft drinks. The GLG spokesperson said it was “too early to tell” whether the venture would focus on drinks or food.

Xiao Ming Hao, president of COFCO’s Nutrition and Health Institute, said: “We plan to increase the health value of stevia from developments of technology, basic application, products and quality safety and to provide more health options for the Chinese diabetic and obese population.”