A BITTERSWEET BAT­TLE

The price of cheap al­ter­na­tive sweet­en­ers comes with im­mea­sur­able health and eco­nomic costs

F&B World - - NEWS - Text by ERIC NI­COLE SALTA Pho­tos by PAT MATEO and JILSON TIU ( PLANTATION)

In­tro­duc­ing a con­tro­ver­sial sweet­ener into a mar­ket whose his­tory has long been rooted in sugar will al­ways yield ques­tions about its in­tent, im­pact, and what it will take for the com­mu­nity to ac­cept this for­eign in­va­sion. Yet, Ba­colod’s cur­rent stance on high fructose corn syrup ( HFCS) sums up the sugar in­dus­try’s feel­ings for the cost­ef­fec­tive al­ter­na­tive.

A quick look at the Killer Cola posters plas­tered all over the city is proof enough that the wheels have fallen off in the City of Smiles. There’s also the “Pinoy ba sugar mo?” cam­paign, which was orig­i­nally cre­ated in 2012 to pro­mote Philip­pine sugar but now serves as the main ar­gu­ment ex­press­ing the sugar in­dus­try’s ap­par­ent angst. It aims to fire up the peo­ple to rally against HFCS im­porters.

In the 11 years since HFCS was first im­ported into the coun­try, the pro­tracted de­com­po­si­tion fi­nally reached its peak, dis­solv­ing ex­po­nen­tially in 2016 when the HFCS in­flux was at an all- time high.

NO SUGARCOATING

Statis­tics from in­dus­try sources show that HFCS first reached lo­cal shores in 2006, but it wasn’t un­til last year when sugar pro­duc­ers felt the heat. What started with a seem­ingly harm­less 18,363 ki­los of HFCS im­ported in 2006— mostly from the United States— in­creased to the stag­ger­ing 373,137,994.18 ki­los of HFCS im­ports from China and South Korea last year val­ued at nearly P7.5 bil­lion. It’s not sur­pris­ing that the huge vol­umes have an­gered the sugar in­dus­try con­sid­er­ing that “there are about five mil­lion peo­ple who de­pend on sugar,” says Con­fed­er­a­tion of Sugar Pro­duc­ers As­so­ci­a­tion Inc ( ConFed) pres­i­dent Fran­cis De La Rama.

It must be noted that while Pepsi- Cola Prod­ucts Philip­pines and other in­dus­trial users also uti­lize HFCS, Coca- Cola was al­most ex­clu­sively sin­gled out be­cause they are the big­gest im­porter of the sweet­ener. “The other bev­er­age cor­po­ra­tions usu­ally use 50: 50 ra­tio, while they ad­mit­ted to us­ing up to 90 per­cent HFCS and 10 per­cent lo­cally grown sugar,” ex­plains Atty. Dino Yulo, spokesper­son of the Sugar Al­liance of the Philip­pines, a group made up of four ma­jor sugar fed­er­a­tions in­clud­ing ConFed, the United Sugar Pro­duc­ers Fed­er­a­tion of the Philip­pines, the Na­tional Fed­er­a­tion of Sugar Planters, and the Panay Fed­er­a­tion of Sug­ar­cane Farm­ers, Inc. ( PanayFed).

“Now, we’re wor­ried be­cause those com­pa­nies used to be our big­gest buy­ers,” says De La Rama. “And the threat of HFCS is here.” From P1,700 to P1,800 per 50- kg bag when milling started in Septem­ber 2016, sugar prices have since plum­meted to P1,300 per bag.

With pro­duc­tion for this crop year es­ti­mated at 2.3 to 2.4 mil­lion met­ric tons and US ex­port quota ( dubbed “A” sugar) only at eight per­cent or 137,000 met­ric tons and as­sum­ing do­mes­tic con­sump­tion ( branded “B” sugar) dra­mat­i­cally falls be­low the usual 1.8 to 2 mil­lion met­ric tons, the re­sult could be a sup­ply over­hang rang­ing from 400,000 to 600,000 met­ric tons. This could fur­ther af­fect the prices in the next crop year— if this over­sup­ply isn’t ab­sorbed by the mar­ket. “It’s not just a ques­tion of price,” states Rafael Coscol­luela, for­mer Ne­gros Oc­ci­den­tal gov­er­nor and SRA ad­min­is­tra­tor. “Traders may not want to buy when milling starts [ in Au­gust or Septem­ber] un­til their stocks are gone.”

When the is­sue first came to light, says Yulo, the lo­cals’ at­ti­tudes to­wards HFCS was just as re­veal­ing. They ditched sub­tlety and opted to ex­press their col­lec­tive dis­ap­proval with high- oc­tane mes­sages and push the dis­course into a ter­ri­tory that tap into Ne­gros’ tem­pes­tu­ous his­tory, com­plex sugar eco­nomics, and na­tional ap­a­thy.

Three high- pro­file de­vel­op­ments en­sued. In Jan­uary, Ne­gros Oc­ci­den­tal Fifth Dis­trict Board Mem­ber Alain Ga­tus­lao planned for the probe of HFCS’ en­try. The fol­low­ing month, the Sugar Reg­u­la­tory Ad­min­is­tra­tion is­sued Sugar Or­der No. 3— which reg­u­lates the is­suance of clear­ances for re­leas­ing HFCS and chem­i­cally pure fructose im­ports. In March, the in­dus­try called for a boy­cott of HFCS prod­ucts in restau­rants and fes­ti­vals.

Then again, ex­pec­ta­tions have changed since the un­prece­dented stand­off be­gan.

“We have plateaued ac­tu­ally,” says Yulo. How­ever, he con­firmed that the boy­cott still stands. He adds, “But they al­ready with­drew the case [ seek­ing to nul­lify SO No. 3] be­fore the Que­zon City Re­gional Trial Court, so we hope the with­drawal will be a con­fi­dence- build­ing mea­sure to come to an agree­ment that would help both the bev­er­age and sugar in­dus­try.”

SOFT POWER

Ne­gros is still the top pro­ducer of sugar in the Philip­pines, ac­count­ing for 60 per­cent of the na­tional out­put. It’s home to 11 sugar mills— which in­clude the Lopez Sugar Cor­po­ra­tion, Vic­to­rias Milling Com­pany, Hawai­ian- Philip­pine Com­pany, the First Farm­ers Hold­ing Cor­po­ra­tion, as well as a clus­ter of fam­i­ly­owned busi­nesses that build the back­bone of the econ­omy. The now- de­funct publication Su­gar­land even doc­u­mented the flour­ish­ing sugar life­style and put into per­spec­tive the in­dus­try’s im­pact.

Cutouts of the vin­tage mag­a­zine now re­side in Café Uma, a pro­gres­sive her­itage restaurant es­tab­lished in 2001 that also serves as a fo­cal point for the sugar in­dus­try’s sur­vival. Its owner, Joey Gas­ton, also of Ha­cienda Crafts and for­mer As­so­ci­a­tion of Ne­gros Pro­duc­ers pres­i­dent, sees the whole con­flict from a broader per­spec­tive.

Gas­ton notes “This is an ef­fect of Span­ish and Amer­i­can col­o­niza­tion; it’s been [ in­grained] in our cul­ture to just fol­low and not take on and think of the big­ger pic­ture. HFCS is just one of the many is­sues.” What he is al­lud­ing to are the corn lobby against sugar and HFCS’ detri­men­tal health ef­fects.

In the US, the HFCS in­dus­try waged an ex­pen­sive and in­tri­cate cam­paign to sell HFCS, which comes in two com­po­si­tions, HFCS- 42 and HFCS- 55 or 42 or 55 per­cent fructose and the re­main­ing be­ing glu­cose, as just like sugar. What is hap­pen­ing here is a re­flec­tion of the bit­ter bat­tle be­tween two sweet in­dus­tries in coun­tries like the US and Mex­ico where “un­fair trade prac­tices” and the threat of higher tar­iffs have pushed the HFCS in­dus­try to look at al­ter­na­tive mar­kets.

EX­TER­NAL IS­SUES

In a span of 10 years, Ne­gros is again greeted with a seis­mic un­der­tak­ing call­ing to mind the Batang Ne­gros and “sun­set in­dus­try” mem­o­ries. Ten years is a long time but the sim­mer­ing build- up to HFCS’ emer­gence to­day re­veals a crit­i­cal flaw of un­reg­u­lated free trade. “For the last seven years, no one bat­ted an eye,” says Coscol­luela. “Then the in­dus­try started notic­ing a drop in the with­drawals of re­fined sugar from the re­finer­ies. In other words, while traders were buy­ing their sugar quedans ( a trad­able cer­tifi­cate that tells how much sugar a mill has) and hav­ing them re­fined, the sugar wasn’t go­ing to the end user. It was stay­ing in the bode­gas.”

In the wake of these analy­ses, Coscol­luela be­lieves that while HFCS dis­placed the sugar mar­ket, re­duced demand could also have been the out­come of a chill­ing the­ory go­ing around in the south­ern Philip­pines’ per­vi­ous bor­ders: smug­gled sugar trick­ling in, quickly re- bagged into lo­cal sacks or plas­tic bags and then ab­sorbed in the re­tail mar­ket.

And ar­riv­ing on the heels of HFCS’ cross­over prospect and spec­u­la­tions of smug­gling, sugar pro­duc­ers are grap­pling with a more alarm­ing, murkier threat: an ex­cise tax on sugar- sweet­ened beverages. In the tax re­form pack­age, sweet­ened juice drinks, car­bon­ated beverages, and sweet­ened tea and cof­fee will be im­posed with a P10 per liter ex­cise tax— a vir­tual in­dus­try back­lash wait­ing to hap­pen. “We’re go­ing to be hit by that,” says Yulo. “We’re even go­ing to be hit by the ex­cise tax on diesel fuel be­cause the sugar in­dus­try re­lies heav­ily on the use of diesel [ to trans­port sugar canes from the farm to the mill].

“And then next year we’re go­ing to have an in­crease in land tax. All of these will fac­tor into the sugar in­dus­try. That’s why we’re ask­ing, is this the pol­icy of the govern­ment? Do you still want us to con­tinue plant­ing sugar or do you want us to look for an al­ter­na­tive crop?” says Yulo.

VIEW FROM THE OTHER SIDE

In Septem­ber 2016, the Bev­er­age In­dus­try As­so­ci­a­tion of the Philip­pines re­leased a po­si­tion pa­per op­pos­ing House Bill No. 292 or the Sweet­ened Bev­er­age Tax, which the as­so­ci­a­tion be­lieves is both dis­crim­i­na­tory and re­gres­sive.

“What they’re say­ing is when you im­pose ex­cise taxes on sugar sweet­ened beverages, the price will in­crease. When the price in­creases, demand drops. When demand drops, nat­u­rally demand for sweet­en­ers will drop,” ex­plains Coscol­luela, fore­cast­ing a prob­a­ble shift in the mar­ket demand for the non- sweet­ened sec­tor. For ex­am­ple, the price of 3- in- 1 cof­fee— a sta­ple in ru­ral ar­eas— will in­crease from P5 to P7 or P8 if the tax rate is ap­proved. A bev­er­age firm’s re­sponse? “Huwag na tay­ong mag- 3- in- 1. No more sugar. 2- in- 1 or stick to clas­sic cof­fee,” Coscol­luela says.

The big ques­tion, of course, is where Ne­gros goes from here. Un­like its for­eign coun­ter­parts, say, Thai­land where sub­si­dies are pro­vided, HFCS im­por­ta­tion isn’t al­lowed, and 100 per­cent cane sugar is used says De La Rama, Ne­gros’ his­tory of weath­er­ing storms has al­ways been driven by rein­ven­tion. Ne­gros has been rocked by decades of in­ter­nal and ex­ter­nal tur­moil. Rav­ages. Even in­sur­gency. It has hap­pened be­fore but not on this scale.

A cri­sis is de­press­ing but it sure shakes up peo­ple into mov­ing for­ward. What Ne­gros needs now is a fresh in­fu­sion of ideas and a re­fo­cus­ing of their ef­forts to ef­fect change that re­mains faith­ful to Ne­gros’ tra­di­tions. “I re­mem­ber when they were telling us to di­ver­sify be­cause the ’ 80s also had a sugar cri­sis. Peo­ple di­ver­si­fied in a big way— from prawns to ramie. There were play­ers that put up fa­cil­i­ties here to process it,” Gas­ton says of the awak­en­ing. But it’s not as easy as when you come up with bar­ri­ers like dwin­dling la­bor, poor tech­nol­ogy, lack of mech­a­niza­tion, the ef­fects of land re­form, and in­suf­fi­cient R& D.

That isn’t to say that a de­fin­i­tive solution will come out of ad­dress­ing these prob­lems, rather that al­ter­na­tives will arise with pro­gres­sive vi­sion.

“Why not fo­cus on our ca­pa­bil­i­ties, skills, and re­sources?” says Gas­ton. “It’s a mat­ter of find­ing the mar­ket fit and search­ing for more ef­fi­cient ways of do­ing what the farm­ers are do­ing. There’s al­ready an ex­ist­ing in­dus­try do­ing it for 150 years. The dis­tri­bu­tion chan­nels are set, the in­fra­struc­ture is be­ing im­proved.”

More­over, the Sugar In­dus­try De­vel­op­ment Act of 2015 is pro­vid­ing the sugar in­dus­try, af­ter be­ing ex­cluded in the gen­eral ap­pro­pri­a­tions bud­get, through SRA P2 bil­lion ev­ery year for the next 10 years to mod­ern­ize the in­dus­try and in­crease pro­duc­tiv­ity.

GLASS HALF FULL

The re­al­ity is, Ne­gros isn’t iso­lated. It’s deal­ing with the world. Pro­duc­ers may be band­ing to­gether to stop the bleed­ing but they shouldn’t lose sight of their re­spon­si­bil­ity to evolve with the times. Chart­ing a new course for sugar is the bolder, riskier al­ter­na­tive and the trap that the in­dus­try needs to avoid is to re­tain the “busi­ness as usual” mind­set.

“The en­emy is HFCS and not Coca- Cola or any other in­dus­trial user,” says Coscol­luela. “We can con­vince the con­sumer not to ac­cept any prod­uct with HFCS or let’s be­gin di­ver­si­fy­ing our prod­uct line be­cause we’ve al­ways said that the sugar in­dus­try should be the sugar cane in­dus­try. The sugar cane can pro­duce so many prod­ucts. There’s raw re­fined sugar, mo­lasses from which you can pro­duce ethanol.” There’s also bagas, a fi­brous byprod­uct used as fuel to gen­er­ate heat and power. De La Rama also men­tioned SanMig Cola, San Miguel’s valiant at­tempt to sup­port the in­dus­try by us­ing 100 per­cent lo­cal sugar.

“You di­ver­sify hor­i­zon­tally and ver­ti­cally, in the field and in the fac­tory, and then you find dif­fer­ent uses so that maybe, half your out­put now goes to the re­tail mar­ket for re­fined sugar and then the rest will go to spe­cialty mar­kets. That’s the fu­ture the in­dus­try should be tak­ing,” says Coscol­luela.

That said, Coscol­luela also be­lieves that res­cu­ing the in­dus­try’s fu­ture isn’t solely in the hands of those who cut canes. Savvy strate­gies are needed to save it, like in­vest­ing in R& D or an en­vi­ron­ment pol­icy that makes Philip­pine agri­cul­ture com­pet­i­tive.

“The big­ger pic­ture is Philip­pine sugar has to be­come com­pet­i­tive within the sphere of the world mar­ket. That’s what we aim for. It’s true that Philip­pine sugar is ex­pen­sive, that’s why we need to be­come more ef­fi­cient,” says Yulo.

But this crit­i­cal point also has its mo­ments of clar­ity— de­spite, or maybe be­cause of, HFCS’ gall to dis­rupt the mar­ket, the sugar in­dus­try has since closed ranks, strength­en­ing its al­liance to de­nounce a com­mon en­emy. “One of the most dis­united in­dus­tries is the sugar in­dus­try,” ad­mits Yulo. “Take a look at how many fed­er­a­tions and as­so­ci­a­tions we have. Maybe we can use this as a launch­pad to re­ally come to­gether.”

It’s a strug­gle rife with un­for­giv­ing pres­sure but what will fol­low in its mighty wake? If Ne­gros fails to ex­plore all av­enues, it at least in­spires be­lief that this riv­et­ing jour­ney of self- dis­cov­ery will swell into a storm of a sweet come­back.

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