Danish sugar giant to wind up beet operation

- Last updated on GMT

Related tags: Sugar beet, Lithuania

Functional flavours and ingredients manufacturer Danisco, one of
Europe's largest sugar suppliers, is to cease the processing of
sugar beet at one of its sites in Lithuania, Tom Armitage
reports.

Copenhagen-based Danisco​ said that sugar beet processing at its Kursenai facility would be discontinued before the start of the 2005 beet campaign, adding that the decision dated back to 1998, when the company first started its Lithuanian sugar activities.

The company, which processes around 1.3 million tons of sugar beet per annum, said that in order to meet existing sugar beet demand, production would be transferred to its existing sites in Panevezys and Kedainiai.

Michael Persson, vice president of Danisco's sugar division, commented: "Ever since we started up in Lithuania, we have been committed to streamlining the set-up. Over the past few years, we have succeeded in bringing the Panevezys and Kedainiai factories up to the high efficiency and product quality standards of Danisco's other sugar operations."

"By gathering production at these two factories we will achieve further efficiency required to support the continued viability of the Lithuanian sugar industry,"​ he added.

Sugar is the company's biggest division and currently it processes around 104,000 tons in Lithuania alone, with the remainder spread across 10 sites in Denmark, Sweden, Finland and Germany.

Around 80 per cent of its processed sugar is sold to the food industry, which is subsequently used to manufacture a range of products including soft drinks, confectionery, bakery and dairy.

Indeed, it has been a turbulent time for its sugar beet processing operations. Last year, for instance, the company halted investment across its sugar beet portfolio, in anticipation of the outcome of the EU's sweeping Common Agricultural Policy (CAP) reforms, intended to liberalise the region's €1.7 billion sugar regime.

Under current plans, orchestrated by Franz Fischler, the EU's former Agriculture Commissioner and implemented by his successor Mariann Fischer Boel, minimum sugar beet prices would be cut by more than a third, from €43.6 per ton to €27.4, in two steps over three years; and the total EU production quota would come down by 2.8 million tons to 14.6 million by 2008/9.

According to estimated figures from investment banker Goldman Sachs, the EU's sugar reforms could cause the Danish company's earnings to fall by as much as 40 per cent (its stocks have the biggest profit exposure to EU sugar at 46 per cent).

The potential loss of earnings from sugar has pushed Danisco onto the acquisition trail for ingredients, recently purchasing food ingredients firm Rhodia, a semi-refined carrageenan facility in Scotland, a 80/20 joint venture in China for xanthan gum, and the enzyme business of US biotech firm Genencor.

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