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Sweet makers worry over sugar reform

By Catherine Boal , 13-Sep-2006

Confectioners are wary of price hikes following the decision by major UK sugar processor British Sugar to pay beet growers more than the EU minimum.

In a compensatory deal thrashed out by the National Farmers Union (NFU) and British Sugar after the closure of two of the company's plants last month, the processor agreed to pay growers £19 (€28) per tonne rather than the EU agreed £17.50 (€25.80).

But British Sugar's main customers - the confectionery industry - are concerned that increased costs arising from the higher price could be heading their way when contracts between confectioners and the company are renegotiated at the end of the year.

And with their market share paltry in comparison to the sugar giant's, businesses could find themselves squeezed between the supplier on one side and larger retailers on the other.

Director of trade policy at the Biscuit, Cake, Chocolate and Confectionery Association (BCCCA), Cliff Luckhoo told confectionerynews.com: "It's not that we don't want the farmers to get a good price, we are just worried that prices will increase for sugar customers. Businesses don't have the same strength as retailers so wouldn't be able to pass the costs on down the chain."

In the wake of EU sugar reform, British Sugar invested £27m (€39.9m) in its remaining four factories and pledged to buy an additional 83,000 tonnes of sugar quota.

The company would not confirm whether prices would rise for confectioners.

But a spokesperson told confectionerynews: "Sugar prices are rising as a result of supply and demand moving into balance across Europe following the radical reform of the sugar regime introduced in July this year.

British Sugar will continue to meet the needs of our customers by working with growers to ensure the most competitive supply chain. Our recent decision to apply for additional beet sugar quota in the UK is a clear demonstration of our commitment to the UK market."

Under the terms of the EU sugar reform, which came into operation at the start of July this year, sugar prices will be cut by 36 per cent over the next four years in order to make the market more competitive.

Prior to reform, the EU's sugar prices were artificially maintained at three times that of the world level.

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