Sugar: The New Reality

The campaign against sugar has picked up pace since the start of this year and shows no sign of slowing. The Sunday Times dedicated the cover of their weekly magazine to sugar, while the Arte television channel in Europe rebroadcast the 2016 Canadian documentary “Sugar: the sweet lie”. Meanwhile Netflix is working on a programme to be broadcast later this year on corruption in the Florida cane sector.

The sugar sector continues to be taken aback by the success of the anti-sugar lobbyists. Sugar professionals have long known that per capita sugar consumption in developed countries has been falling since the 1960s, and they find it both unfair and illogical that sugar be blamed for the surge in obesity that began in the 1970s.

After all, according to the “Sweet lies” documentary (above), world sugar consumption increased 40 percent the 30 years up to 2016. However, in the same period, world population increased by 50 percent, from 5 billion in 1986 to 7.5 billion in 2016. As such, per capita consumption fell during the period.

What many in the sugar business had expected to be a short-term fad has accelerated the long-term down trend in consumption. Sugar has been demonised, and the fall in per capita consumption has reached the point where, in the UK at least, total consumption is now falling. This is the new reality facing sugar producers.

But as always, change, no matter how negative, always throws up new opportunities. It is the way that companies react to change that defines them. Negative can be transformed into positive.

Here are five ways in which some producers are already responding to change (and others should.)

1: Never give up

Companies must continue their work in trying to correct the widely held belief that sugar consumption is the cause of the global obesity epidemic. There are some signs that that tide may be turning, as in this recent BBC podcast, but for the moment the sugar sector is still swimming against the tide. No matter how tiring it may be, it needs to keep swimming! 

2: Consolidate, but responsibly

The sugar sector has responded to falling profits by cutting costs. Economies of scale are significant in sugar:  producers have tended to build large mills or refineries and maximise output to reduce unit costs. There is a tendency for cost cutting to result in increased supply—and increased supply usually results in lower prices that negate the costs saved.

When demand is stagnant the only way around this is close the smaller, less efficient mills and concentrate production in the bigger ones. This is already happening in Europe, but the social cost of mill closures can be high. Unfortunately, the social cost of a milling group going bankrupt can be even more horrendous.

3: Innovate, and innovate again

The sugar industry has a history of innovation, but to be more effective, innovation should be in the form of new products and processes, rather than simple cost cutting. Blockchain can reduce costs, but (see above) if it lowers costs across the whole sector it may just result in lower prices for the consumer. That’s a good thing, but a better thing would be a new product that the consumer may be willing to pay more for. That could be a sugar-stevia mix, or anything that comes under the SOFT (Sustainable, Organic, Fair Trade) category. There are opportunities here to turn a commodity into an ingredient.

4: Add even more value via by-products

Sugar cane and beet are wonder crops with multiple by-products. Ethanol can be used to drive cars or make bio-plastics (and fertilizer from the vinase). Bagasse can be burned for electricity generation or used as building material. Beet pulp can be fed to animals, or be used as an environmentally friendly alternative to salt on winter roads. There is a huge opportunity for the sector to add even more value to their by-products

5: Diversify across supply chains

As the Executive Director of the ISO recently pointed out, some of the most successful companies in the sugar sector currently are the most diversified, whether into pizzas or fruit concentrates. It can be tricky for a company to shift focus from its core competence, but it can be worth the effort. Trade houses are already moving that way, turning themselves into food companies, and sugar companies are slowly following.

So, in conclusion, the world is changing and the sugar sector is changing with it. Of course it could do more–and will do more–but the first steps are promising.

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