‘We’re not big candy’: NCA says most confectioners are small to medium sized family companies
The confectionery industry acknowledged at the recent NCA State of the Industry Conference in Miami that it had lost the battle on sugar reform after the Agricultural Act of 2014 continued the existing US sugar policy for another five years.
But the NCA pledged to rally for a policy that brought US sugar prices in line with world prices that would not leave US confectioners at a competitive disadvantage.
The American Sugar Alliance last week launched a new website that included the section ‘Big Candy's Big News’, which tracks financial successes, expansion and job growth in the US confectionery industry to attest that the industry is strong and not suffering from the current sugar regime.
‘Lambasting its main customer’
Larry Graham, president of the NCA, told ConfectioneyNews: “The sugar industry is, in my opinion not defending, promoting, and protecting its major product: sugar.”
“What other ingredient supplier spends most of its PR time lambasting its main customer for making a profit?”
“They call us Big Candy even though Mars, Hershey, Nestlé, Mondelēz are only four of the 300 companies we represent, and four of the 1,800 companies that CAOBISCO represents.”
The US confectionery industry grew 3.6% last year to $33.6 billion in 2013 — marking the sixth consecutive year of sales growth, according to the NCA.
Lobbying spend
According to Opensecrets.org, the American Sugar Alliance spent $2.5m on lobbying last year, while the NCA spent $446,381. Major US sugar producer American Crystal Sugar dedicated $1.4m to lobbying efforts during the year compared to $950,000 for leading US confectioner Hershey.
Financial struggles ‘simply not true’
Phillip Hayes, a spokesperson for the American Sugar Alliance, said that sugar producers wanted the candy industry to grow because the sugar market would grow with it.
“But what we cannot tolerate are lobbyists for these candy companies telling Capitol Hill that they are struggling financially. It is simply not true."
“The US candy business is strong and thriving. When the rest of the economy struggled during the recession, confectioners of all sizes flourished and boasted net profit margins that were surprisingly larger than even major oil companies and casinos.“
The NCA’s Graham said: “Yes 60 to 70% of the products in the industry are from the big guys but they have plants all over the world and can adjust to sugar prices. The small companies can’t.”
Analyst’s view
We asked David Turner, global food analyst at Mintel, for an independent perspective. “In theory, both sides of the argument are right,” he said.
US sugar futures for May are currently trading at US¢ 22.3, 26% higher than the international price. “On that you would say that US confectioners have a point. But to say you’re unprofitable now is perhaps disingenuous because sugar prices are lower now,” said Turner.
Global and EU prices to fall
US sugar futures have fallen from around US¢ 35 in May 2012 to US¢ 22.3 for May 2014. But global sugar prices continue to fall and Turner said they were expected to come down further.
An earlier review by the UK government found that EU sugar prices were around 35% more than the international price. Turner said this made the EU and US sugar prices comparable, but since the EU had agreed to abolish production quotas in 2017, EU sugar prices were also expected to fall.
Turner said that it was unlikely the US would implement market measures to bring US sugar prices in line with international standards.
“By the fact they’ve passed the farm bill for the next five years, they want to protect their production base.”
