Features International Sugar Journal

Global surplus, low prices and diversification

In the recent past, right across the global sugar sector, many sugar companies, big and small have been hit by low prices amidst global surplus. For many of these companies, the persistently low price is well below the cost of production. It is therefore not surprising that even heavily diversified big companies, the likes of British Sugar, Nordzucker have suffered from reduced profitability. Those smaller companies who mainly rely on the sale of sugar have invariably had greater hit. One of the top sugar producer Mitr Phol claims to generate only 42% of its revenues from sugar. It is widely acknowledged, that sugar is the most volatile of soft commodities. Doubtless, most of the companies operating in the sugar sector are well aware of this. But it is equally true, that during good times, many of these have simply not invested in diversifying their business to shoulder themselves from such volatility in the future.

Over the past year or so, the following candidates represent compelling avenues to embrace for diversification.

Entrepreneurs from Central Taiwan Innovation Campus have developed biodegradable drinking straws made from cane bagasse which recently won a gold medal at an international invention fair in southern France. The straws contain no plastic. The bagasse-based straws are developed by Ju-Tian Eco-Material Co., which was founded by Huang Chien-Chung. Even though over 20 Chinese manufacturers have approached the company willing to pay a high price for their technology, Huang said his team rejected them all because, although they want to make money, they prefer to market their technology and product globally. They are amenable to partner for production of the product.

The constant battle in the alcoholic beverage sector for market share against both changing tastes and certain craving for novelty has given rise to entrepreneurs in Thailand and Barbados opening boutique rum distilleries. Marine Lucchini and Thibault Spithakis started production of rhum agricole, from cane juice, the “Chalong Bay Pure Rum, with its notes of nutmeg and coconut (other varieties are infused with lemongrass and kaffir lime)”1 in 2012. ThaiBev’s new high-end rum Phraya, which ”exudes deep hues of honey and hazelnut that sparkle with cinnamon on the tongue” won Double Gold at the 2013 San Francisco World Spirits Competition. It is exported to Singapore, Hong Kong, Germany and the United States1. The distillery owner sources its cane from Nakhon Pathom. Another Frenchman, David Giallorenzo founded Issan Rum near the border of Laos at Nong Khai and has commenced exporting to Europe.

 

As many as one in every 10% of girls in Sub-Saharan Africa miss school during their periods, according to a UNESCO report, which can add up to missing 20 percent of school days. Missing school means falling behind, and girls who never graduate experience a number of long-term negative consequences, including childhood marriage. It was, therefore, particularly heartening to note that the Uganda-based new start-up Eco Smart Pads is keeping girls in school by offering them low-cost sanitary products made from sugarcane bagasse. They are cheap, locally made, and likely to be transformative in terms of the educational well-being of school girls from a modest background.

Some 15 years ago, the multi-national Proctor & Gamble learned that it could make good money selling its branded shampoo Pantene in India in single-serve sachets. The target market for this product was poor people. While the poor were brand-conscious and just as eager as anyone to buy a high-end-product, they could not afford to buy a whole bottle. Recently, Illovo Sugar has followed suit, and in Tanzania (through its Kilombero factory) and Zambia (through Zambia Sugar factory) have launched affordable packs in sizes 160 and 350 grams, and 195 and 330 grams for the respective markets.

Endnote

1 https://www.scmp.com/lifestyle/food-drink/article/2141287/thailands-boutique-rums-leave-global-industry-wanting-more