The soft drinks opportunity from a hard Brexit – Comment

Source: https://www.just-drinks.com


It’s coming up to a year since the UK shocked itself – and Europe – by voting to leave the European Union. Article 50 has now been triggered and Brexit, we have been told, means Brexit. Richard Corbett considers the likely fallout of the UK’s departure for the country’s soft drinks industry.

The early indicators are that divorce discussions between the UK and the EU are not going smoothly, and that this is not going to be a straightforward ‘decoupling’. Indeed, at the current rate of progress, we’ll be lucky if we’ve managed to split the record collection by the end of the allotted two-year negotiation period.

All of the UK’s major soft drinks players were far from enthusiastic at the prospect of Brexit. AG Barr even put a price on it, estimating that the drop in the value of the pound would cost them between GBP3m (US$3.9m) and GBP4m per year in higher import costs, adding also that it would have to cut costs elsewhere as a result.

The subsequent fall in the value of the Pound has had implications beyond the price of imported raw materials. Following the referendum, the UK sales for international players like Coca-Cola European Partners were suddenly worth a lot fewer Euros. Exhibit B: In February, private-label producer Cott Corp blamed its 23% drop in 2016 profits on “the post-Brexit adverse foreign exchange impact on the British pound”.

Brexit has been flagged by companies in all spheres when issuing bad results, but there have undoubtedly been considerable negative repercussions for the soft drinks industry following the UK’s decision to leave.

There will, however, be some changes in a post-Brexit environment that will provide some comfort.

In the short term, the weak pound has inevitably pushed up the price of soft drinks. Further down the line, however, one important ingredient is likely to see a fall in price. Sugar has been subjected to high import tariffs to protect EU beet sugar producers, and this has made prices artificially high. Not surprisingly, sugar refiner Tate & Lyle was one of the more vocal proponents of a ‘leave’ vote. A drop in the price of sugar may even offset the effect of the oncoming soft drinks tax – if, politically, that is allowed to happen.

The lower value of the pound has also made British soft drinks more competitive on the international stage. This factor already seems to be helping Britvic, which this week announced that sales from its international division had increased by 25% in the fiscal first-half. Elsewhere, exports of bottled water from the UK increased by double digits last year, according to trade data provider Business & Trade Statistics, with CSDs up a more modest 1.5%. If the value of the pound stays low, one can expect these figures to climb at a more amplified rate.

While Brexit is unlikely to be a positive for UK exporters to Europe in the longer term, there may be some short-term wins from the worst-case scenario. If we end up with a so-called hard Brexit, then the UK can expect tariffs, which could actually work to the advantage of the UK’s soft drinks producers.

There’s quite a balance-of-trade deficit between the EU and the UK: In 2016, the UK imported more than 1.25bn litres of CSDs and waters from EU countries, but sent less than 500m litres in the other direction. The UK is a price-sensitive marketplace, and any added price burden on imports would tip the scales in the favour of domestic companies.

This is particularly evident in the bottled water category. UK consumers love their glamorous mineral water brands: Last year, nearly 250m litres were imported from France alone. Any price rises on these imported waters will more than likely prompt a consumer shift to cheaper UK-sourced waters, and that would be a boost for the likes of Highland Spring and Harrogate Water.

Meanwhile, at the cheaper end of the CSD market, European private label producers selling into the UK will find it very challenging to match the prices of domestic producers. This will be music to the ears of Cott Corp’s UK operations and other private label bottlers.

While the referendum has been proceeded by a sustained period of unpredictability, the UK’s bigger soft drinks players have worked to come to terms with and adapt to the evolving trading environment. Both Britvic and AG Barr have since posted encouraging results, with Britvic’s net sales in the 28 weeks to 16 April increasing by more than 10%. AG Barr meanwhile reported a 4.4% lift in profits for the 12 months to the end of January.

The companies’ share prices have also settled down, after initially falling steeply following the vote. Britvic’s share price is now 6% higher than it was on the day of the referendum, with AG Barr’s up by around a quarter from the day before the vote.

Most in the industry have consistently viewed Brexit as a negative. The sky is yet to fall in, though, as some had warned.

The UK’s soft drinks industry has had to navigate around the subsequent uncertainty and upheaval. This navigation will continue to define the category going forward.

 

Malaysia: Manufacturer-backed sugar hike rejected by government

Source: https://www.foodnavigator-asia.com


Malaysia will not increase the market price of sugar, despite a request to do so from one of the country’s most prominent companies and pressure from consumers’ associations to introduce a de facto sugar tax.

Last week, Malaysia’s biggest sugar producer, MSM Malaysia Holdings, called on the trade, cooperatives and consumerism minister, Hamzah Zainuddin, to raise the price of sugar by MYR0.29 (US$0.07) per kilo.

Consumer groups in Selangor and Penang also weighed into the debate, in support of a sugar price hike.

It appears that the price will not rise for the time being, though. Hamzah announced this week that it would stay put, especially as the global commodity price of sugar had fallen since Malaysia last increased the domestic price by MYR0.11 in March.

So, why should we increase the price of sugar when the world market price has dropped?​” he said, in response to MSM’s request.

I told [MSM] firmly that the price of sugar could not be increased unless the company has made a big loss​.”

Though closed now, the issue has reignited debate over how a sugar price hike could be used as a sugar tax.

Consumer groups see the move as a means to promote safer consumption of sugary foods while having a marginal effect on manufacturers.

One has suggested that any increase would be small enough to be absorbed by manufacturers, as long as it were policed properly by government inspectors.

Speaking to Free Malaysia Today​, Jacob George, president of a consumers’ association in Subang and Shah Alam, voiced his hope that the domestic trade, cooperatives and consumerism ministry would play its part in ensuring no profiteering and no undue increase in prices of related items.

Meanwhile, Dr Jacob’s counterpart in Penang, SM Mohd Idris, said its own group’s research had shown that most consumers will choose healthier options.

Even our data survey found six out of 10 people opt for a less sugary option when they go to restaurants and coffee shops​,” Idris said.

For the past 20 years, the association has been talking about sugar-related diseases. So, we’ve always wanted the sugar price to go up​.”

MSM, for its part, has been hit by raw sugar price volatility and a poorly performing ringgit. To ensure profitability this year, its chief executive recommended an increase in the government-mandated selling price of MYR2.95 per kilo to MYR3.24.

Zakaria Arshad said the current price was manageable while the world price was relatively low, though “it will be very difficult for us​” if the price increases.

Even Thailand, which is a raw sugar and sugar producer, is selling the product at a higher rate than us​,” he added.

Government Reduces Cost Of Milk And Sugar

by how kenya The government has reduced the price of milk and sugar. The State, on Thursday, June 9 announced a reduction in the price of these commodities in an attempt to cushion consumers from the rising cost of living, a situation that has become a campaign tool for the opposition.

This move will see the price of milk reduce from Ksh 60 to Ksh 50 and a reduction of the price of sugar from Ksh 10 to Ksh 120 going by the current market rates. The prices are expected to be effective as from Monday, June 12, 2017.

see more- http://bit.ly/2vGu2xU

Sugar price rise ‘inevitable’ due to sugarcane FRP hike: NFCSF

Source: https://economictimes.indiatimes.com


The National Federation of Cooperative Sugar Factories, which represents cooperative sugar mills, welcomed the government’s decision to hike sugarcane FRP for the next season.

NEW DELHI: Rise in retail sugar prices is “inevitable” due to 11 per cent hike in fair and remunerative price of sugarcane announced by the government for the 2017-18 season, industry body NFCSF said today.

Sugar is retailing at Rs 40-45 per kg, showed official data.

Yesterday, the Cabinet Committee on Economic Affairs (CCEA) approved Rs 255 per quintal fair and remunerative price (FRP) of sugarcane for 2017-18 season (October-September), up Rs 25 from the current Rs 230.

The National Federation of Cooperative Sugar Factories (NFCSF), which represents cooperative sugar mills, welcomed the government’s decision to hike sugarcane FRP for the next season, but alluded to its impact on retail sugar prices in coming days.

“This rise in raw material (prices) is bound to push up the cost of production of sugar and thereby retail price of sugar may show increase in coming days,” NFCSF MD Prakash Naiknavare said in a statement.

But this is inevitable because the farmers must get the remunerative price commensurate with their expenses in growing sugarcane, he said, adding that “this alone will encourage them to continue growing sugarcane which will help the industry sustain”.

Naiknavare further said states like Maharashtra, Karnataka and Gujarat have already appointed cane price fixation boards in line with the Rangarajan Committee recommendation.

In light of these developments, the selling price of not only sugar, but its byproducts namely bagasse, press-mud and value-added products like ethanol, and co-generation need to be at a reasonable high level, he noted.

“This inevitable fact also needs to be recognised, understood and appreciated by all the stakeholders… and the government for ensuring a healthy sugar sector,” he noted.

Sugar prices have increased this year due to estimated fall in production of the sweetener at about 20 million tonnes in 2016-17 season, from 25 million tonnes in the previous year.

UPA’s investment board to be axed

Source: https://www.dnaindia.com


In another decision, the Cabinet also approved the sugar policy for 2017-18, fixing a fair and remunerative price of sugar at Rs 255 per quintal, which is an increase of 10.6 per cent over the previous year.

Days after the CBI raided the home of former finance minister P Chidambaram and his son Karti to probe their role in Foreign Investment Promotion Board (FIPB) approval for INX Media, the Union Cabinet here on Wednesday approved phasing out of the board.

In another decision, the Cabinet also approved the sugar policy for 2017-18, fixing a fair and remunerative price of sugar at Rs 255 per quintal, which is an increase of 10.6 per cent over the previous year. It also decided to allow use of 2.5 per cent of money collected under the Central Road Fund Act for development and maintenance of waterways.

The Cabinet also approved a 29.7-km metro rail corridor from Noida to Greater Noida costing Rs 4,403 crore. It will be a fully elevated corridor, Jaitley underlined.

According to the Cabinet proposal, the administrative Ministries/Departments will be allowed to process applications for FDI requiring government approvals in consultation with the Department of Industrial Policy & Promotion.

The Ministry of Commerce will also issue the standard operating procedure (SOP) for processing applications and implementing government decision under the FDI policy.

Union Finance Minister Arun Jaitley, who briefed the media on Cabinet decisions, said the foreign investors will find India a more attractive destination after abolition of the FIPB as it will make it easier to do business here. The move, he said, is in tune with promoting the principle of ‘Maximum Governance and Minimum Government’.

He said the board had become more or less redundant as 91 per cent to 95 per cent of foreign investments in the last three years came through automatic route and prior approval was needed only for a few sectors. The mechanism of the board for just 5 to 9 per cent FDI proposals was felt unnecessary and rather time consuming.

In some cases involving security issues, an additional approval of the home ministry will be required. The foreign investment proposals exceeding Rs 3,000 crore will continue to go to CCEA headed by the Prime Minister, Jaitley said.

Jaitley had already indicated abolition of the board in his budget speech, he said, pointing out that all that has been done is to disband a panel of the five secretaries of different ministries constituting the board while representatives of the concerned ministry or department will now decide independently instead of bringing its study of every proposal before the board for a final decision.

Housed in the Department of Economic Affairs, the FIPB was initially constituted under the Prime Minister’s Office (PMO) in the wake of economic liberalisation drive in 1990s by the then Finance Minister Yashwant Sinha. The FIPB has five senior bureaucrats from different ministries and handles foreign direct investments up to Rs 600 crore (larger amounts need to be sanctioned by a cabinet committee).

CABINET DECISIONS

  • Fair price for sugarcane hiked by Rs 255 per quintal. The move will benefit five crore farmers.
  • Govt to partially fund the Noida-Greater Noida metro rail corridor being built on the outskirts of Delhi.

 

Illinois would lose if Trump hits Mexican sugar with tariffs

Source: https://www.chicagobusiness.com


Illinois’ food industry is bracing for fallout from President Donald Trump’s latest global trade tiff. Egged on by U.S. sugar interests, the Trump administration is threatening to reinstate punitive tariffs on Mexican sugar imports unless new trading terms are negotiated by June 5. The duties were suspended in late 2014, shortly after the Obama Commerce Department imposed them during the last flare-up of long-running hostilities over sugar trade between the U.S. and Mexico.

Now the old gripes have been swept up in Trump’s broader campaign to reset global trade arrangements he considers unfair to the U.S. Many observers see sugar talks as a bellwether for broader negotiations on the future of the North American Free Trade Agreement.

But sugar is the main event for many in Illinois. As a center of food production, Illinois has a lot to lose in a sugar spat with Mexico. Local food companies from snackmaker Mondelez International to Tootsie Roll and countless mom-and-pop shops spend big on sugar, making them vulnerable to tariff-driven price hikes. Illinois farmers and corn processors, meanwhile, fear a backlash from Mexico, a key export market for the corn-based sweetener known as high-fructose corn syrup.

Retaliatory tariffs against U.S. corn sweeteners would hit farmers hard, depressing volumes and prices at a time when corn prices are already slumping. Tamara Nelsen, senior director of commodities at the Illinois Farm Bureau, estimates 13 percent of Illinois corn goes into sweetener, and says Mexico is a key export market. “This would be another hit to corn farmers’ pocketbooks in Illinois, and it would be significant to the Illinois economy,” she says.

Corn sweeteners are also big business at agricultural processor ADM. The Chicago-based company doesn’t separately disclose sweetener sales but reported $4 billion in combined revenue from sweeteners and starches last year, citing Mexico as a source of growth in an otherwise down year.

“We remain optimistic about the U.S. and Mexico reaching an agreement that continues a mutually beneficial trade of sugar and high-fructose corn syrup between the two countries,” spokeswoman Jackie Anderson says.

Ingredion spokeswoman Claire Regan says the Westchester-based maker of sweeteners and starches exports very little to Mexico, because it supplies Mexican customers from three plants in that country.

Preserving that trade flow is critically important to corn sweetener producers, says John Bode, CEO of the Corn Refiners Association. Bode says Mexico is the largest overseas market for U.S. corn sweeteners, accounting for 75 percent of exports and 15 percent of total production. “We see this as an irreplaceable market,” says Bode, whose lobbying organization represents ADM, Ingredion and two other major producers.

Bode predicts quick blowback if the U.S. reimposes tariffs on Mexican sugar imports. “Experience has taught us that Mexico will respond by retaliating against corn-sweetener imports from the U.S.,” he says, recalling an episode from the late 1990s, when Mexico shut down HFCS imports after the U.S. boxed out Mexican sugar. U.S. corn-sweetener companies lost access to Mexican markets for nearly five years, causing plant closures, job losses and about $3 billion in economic damage, Bode estimates.

He warns that Mexico currently has authority under trade rules to levy $163 million in punitive tariffs on U.S. imports immediately, without having to prove the products in question have been improperly subsidized.

Illinois food packagers have similarly painful memories. Their costs rise when tariffs boost the price of sugar. Higher costs squeeze profits, forcing companies to consider raising prices, cutting expenses (i.e. layoffs) or moving production to countries where sugar is less expensive.

Company spokespeople are reluctant to comment publicly on the issue, perhaps fearing a Twitter barrage from Trump, who made Deerfield-based Mondelez a poster child for U.S. job losses during the campaign. But a lobbying group for food and beverage companies is fighting to block new duties on Mexican sugar, which accounts for more than half of U.S. sugar imports.

Additional import restrictions would “artificially force U.S. food companies to pay at least twice as much as their offshore competitors,” says Jennifer Cummings, a spokeswoman for the Sweetener Users Association. She points to a 2006 U.S. Commerce Department study showing that higher U.S. sugar prices caused confectionery companies to shift production out of the country. As a result, three confectionery jobs were lost for every U.S. sugar job protected by tariffs.

A tough negotiator like Trump wouldn’t take that deal, would he?

MSM adheres to no sugar price increase

Source: https://www.nst.com.my


KUALA LUMPUR: MSM Malaysia Holdings Bhd said that it will adhere to the government’s decision not to increase the price of refined sugar.

It said that the global sugar commodity is operating in a volatile market environment resulting in a gradual decline of international raw sugar prices, which saw the company make a call for a price hike.

MSM, in a statement today, said it accepts the Domestic Trade, Cooperatives and Consumerism Ministry’s decision not to increase the price of sugar.

This is for the benefit of consumers, as global raw sugar price dropped, currently priced at US$0.17 per pound (RM0.73 per 0.45kg).

Its minister Datuk Hamzah Zainuddin said it will be unfair for the consumers and subsequently influence the increase of prices on other goods if the price hike was approved.

“The government would have probably considered their request if the sugar producing companies are faced with major losses,” he was quoted as saying.

MSM said based on the price control and Anti-Profiteering act 2011 (Determination of Maximum Price – No.2, Order 2017), it hopes to continue a steady and sufficient sugar supply especially in the coming fasting month and Hari Raya festive period.

“We will continue to engage with the Government and update them on the global sugar market and it is hopeful for a favourable outcome in the future,” said the statement.

On March 1, the price of coarse refined white sugar rose by 11 sen due to an increase in the price of imported raw sugar, increasing to RM2.95 per kg. Prior to that, the price of stood at RM2.84 per kg.

Plot to keep sugar price volatile

Source: http://m.thedailynewnation.com


A strong syndicate of millers and the whole sellers are active to increase prices of sugar ahead of Ramzan, traders claimed.

They also claimed that the wholesalers have already increased Tk 300 to Tk 400 against each one hundred kilogram sack of sugar which will impact to the retail market.

The traders said the prices of sugar might be raised again in different phases during the holy month of Ramzan and ahead of Eid-ul-Fitr.

“Prices of sugar in the retail market increased by around Tk 5 per kilogram as we are forced to pay extra money to the wholesalers,” Ahmed Kamal, a retailer, told The New Nation on Tuesday.

He added: “Wholesalers charge us higher prices of sugar. We do not have any scope to bargain with them. But when we increase price of sugar accordingly then consumers become angry with us.”

When asked Nayeem Mustafe, another grocery shop owner in the city’s Fakira pool area, said they raised Tk 5 against each kilogram of sugar as they have to count extra fare to carry goods from the wholesalers to the retail market due to heavy traffic congestion ahead of Ramzan.

On the other hand, Abdul Mannan, a wholesalers at Kawran Bazar, said that they face different types of anomalies during receiving delivery of sugar from mills which pushes cost of their goods.

“There are huge rush of trucks in the mill gate. Taking delivery of sugar takes three to seven days which causes more than Tk 20,000 against each truck of goods. So we become bound to raise price,” Mannan said.
However, Fahamida Zaman, a consumer alleged that all the stakeholders, including millers, wholesalers and the retailers, are involved with price hike conspiracy.

“Prices of goods in each country across the globe decreases during any festival time but in our country, it is just opposite. Here businesses make syndicate ahead of any festival, including Ramzan, the holy month of Muslims,” she said expressing her anger.

After a visit to different kitchen markets in the city, this correspondent found that prices of sugar is different in different markets.

Retailers of Krishi Market in Mohammadpur area were selling sugar at Tk 66 per kg while in Fakirapool market it was found selling at Tk 67 and in Jatrabari area more or less at Tk 65.

Meanwhile, Commerce Minister Tofail Ahmed said prices of some consumable items may increase in the market slightly during Ramzan as demand for those increases significantly during the period.

“But if we find anyone increasing prices of goods making syndicate, we will not spare any of them,” the Minister added.