Global de­mand for sugar sours

As con­sumers be­come more health aware, man­u­fac­tur­ers use less of the in­gre­di­ent


LON­DON— It’s not this year’s price crash that haunts the $150-bil­lion (U.S.) sugar in­dus­try. It’s the fear of worse to come.

Raw sugar’s 16-per-cent drop ranks it at the bot­tom of the 22 raw ma­te­ri­als on the Bloomberg Com­mod­ity In­dex. Shocks to de­mand in top con­sumer In­dia and prospects of more European sup­ply are help­ing shift the mar­ket to a sur­plus, hurt­ing prices. Yet be­yond such mar­ket damp­en­ers, hang darker clouds.

Af­ter decades of sta­ble de­mand growth, al­most dou­bling per person since 1960, the world is head­ing for a tip­ping point as shop­pers turn against the cola and candy blamed for an obe­sity epi­demic in the rich world. At the same time, sugar has to com­pete with cheap syrups in­creas­ingly used in pro­cessed food.

De­mand is ris­ing by some es­ti­mates at the slow­est since at least the global fi­nan­cial cri­sis as com­pa­nies like Coca-Cola Co., con­sum­ing about 14 per cent of all sugar traded, and Nes­tle SA, the world’s big­gest food com­pany, re­act to such trends. Group Sopex and Green Pool Com­mod­ity Spe­cial­ists see growth in 2017-18 below the av­er­age 2 per cent a year of the past decade or so. The U.S. Depart­ment of Agri­cul­ture sees the first drop in de­mand in a quar­ter cen­tury.

“Growth is not what it’s been,” Tom McNeill, man­ag­ing di­rec­tor of Green Pool, said in an in­ter­view. “There is un­doubt­edly a move by global bot­tlers and by a lot of global food man­u­fac­tur­ers to re­duce the sugar con­tent in their prod­ucts.”

Con­sump­tion may sink below 1 per cent for a sec­ond year in the 20162017 sea­son, less than half the av­er­age pace in the pre­vi­ous decade, So- pex fig­ures show. The slow­down may mark a turn­ing point for an in­dus­try that’s seen near lin­ear growth for half a cen­tury on an ex­pand­ing world pop­u­la­tion and ris­ing wealth, con­cen­trated most re­cently in dy­namic economies like China.

In­deed, food giants are only just be­gin­ning to re­spond to noisy calls from cus­tomers, lobby groups and law­mak­ers to cut empty carbs from prod­ucts.

Coca-Cola has 200 re­for­mu­la­tions of prod­ucts in the works to lower sugar con­tent, chief ex­ec­u­tive of­fi­cer James Quincey said in Oc­to­ber. Pep­siCo Inc. has vowed that at least two-thirds of the com­pany’s vol­ume will have no more than 100 calo­ries from added su­gars per 12-ounce serv­ing by 2025.

Nes­tle said late last year it had found a way to re­duce sugar in choco­late as much as 40 per cent and would lower sugar in the choco­late and con­fec­tionery it sells in the U.K. and Ire­land by 10 per cent. Glob­ally, com­pa­nies curbed in­gre­di­ents that raise health con­cerns such as sugar and salt in about a fifth of their prod­ucts in 2016, says the Con­sumer Goods Fo­rum, a re­tail­ing lobby.

“We are hear­ing from right, left and cen­tre all the in­ten­tions of the in­dus­trial users — food and bev­er­age com­pa­nies — to re­for­mu­late their prod­ucts,” said Sergey Gu­dosh­nikov, se­nior econ­o­mist at the In­ter­na­tional Sugar Or­ga­ni­za­tion, rep­re­sent­ing pro­duc­ing na­tions. “Sooner or later it will work.”

U.S. cities such as Philadelphia and San Fran­cisco and coun­tries such as France and Mex­ico have added “sin taxes” pre­vi­ously re­served for to­bacco or al­co­hol to sug­ary so­das, with oth­ers lin­ing up to join them. The World Health Or­ga­ni­za­tion says its re­search shows that a 20-per-cent in­crease in the re­tail price of fizzy drinks re­sults in a pro­por­tional drop in de­mand.

The in­dus­try is now hav­ing to adapt to what some have dubbed a war on sugar.

Cut­ting sugar alone won’t solve obe­sity con­cerns, ac­cord­ing to Courtney Gaine, pres­i­dent and CEO of the Sugar As­so­ci­a­tion, a Washington-based lobby group. Re­plac­ing sugar with starches or fat doesn’t re­duce to­tal calo­ries, she said.

“It’s very im­por­tant that the sugar in­dus­try preaches mod­er­a­tion and doesn’t say, ‘Hey, it’s not our prob­lem’ be­cause it’s the whole food and bev­er­age in­dus­try’s prob­lem to try and help the world be a health­ier place,” Gaine said. “I would like for sugar not to be blamed as the sole cause, but we are also not in­no­cent.”

Be­yond the de­vel­oped world, con­sump­tion of sugar isn’t go­ing to fall off a cliff as long as the world’s pop­u­la­tion is still ex­pand­ing and there are bur­geon­ing mid­dle classes in Asian and African cities, ac­cord­ing to Rabobank In­ter­na­tional.

Trends in richer coun­tries with more money to spend are sig­nif­i­cant, nev­er­the­less. De­mand is set to sink in Ger­many, France and the U.K., ac­cord­ing to Trop­i­cal Re­search Ser- vices data for the sea­son that starts in Oc­to­ber. Some mid­dle-in­come na­tions are also hurt­ing from weak economies.

Brazil­ian de­mand has dropped by about one mil­lion tonnes over the past three to four sea­sons, ac­cord­ing to Sopex. It’s also down in Ar­gentina.

More sig­nif­i­cantly, sugar is los­ing out to cheaper sweet­en­ers as food man­u­fac­tur­ers pro­tect profit mar­gins. Soda mak­ers in China and the Philip­pines are us­ing more high­fruc­tose corn syrup. The pro­cessed sweet­ener is about 4,400 yuan ($640 (U.S.)) a ton cheaper than sugar, ac­cord­ing to Sopex.

“That’s se­ri­ously erod­ing de­mand,” said John Stans­field, an an­a­lyst at Sopex who has worked in the sugar in­dus­try for two decades.

The drop in raw-sugar fu­tures prices this year in New York to 16.38 cents a pound can mostly be blamed on short-term prob­lems such as the weak Brazil­ian econ­omy and cur­rency poli­cies in In­dia that dis­rupted de­mand.

But be­yond such squalls, oth­ers hear dis­tant thun­der.

“Some of the changes are tem­po­rary, oth­ers are not,” said Sean Dif­fley, head of sugar and ethanol re­search at TRS, which ad­vises hedge funds. “I sus­pect the food and bev­er­age in­dus­try doesn’t go back to larger bars of choco­late or full-sugar Coca-Cola.”

“I would like for sugar not to be blamed as the sole cause, but we are also not in­no­cent.” COURTNEY GAINE PRES­I­DENT AND CEO OF THE SUGAR AS­SO­CI­A­TION


Shop­pers are in­creas­ingly turn­ing against the cola and candy blamed for an obe­sity epi­demic in the rich world, due to high sugar con­tent.

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