R&R’s call for action to halt soaring sugar cost

by yorkshirepost.co.uk/ - 18/08/2011

"R&R Ice Cream has demanded urgent action from the EU to help the European food industry deal with the soaring cost of sugar."

The North Yorkshire company is Europe’s largest own-label ice cream manufacturer with annual sales of nearly 500 million euros.

It urged commissioners to increase quotas on production in Europe and reduce tariffs on imports to the region.

James Lambert, chief executive and chairman, said: “The price is increasing virtually daily and we have to get some stability back into the market.”

Costs have risen more than 60 per cent in the last year alone, he added.

Mr Lambert said: “Europe has since gone from being one of the world’s largest exporters of sugar to one of its largest importers.

“These dramatic price increases have been caused by our politicians acting against consumers’ interests.”

He appeared to be referring to EU reforms, which came into effect in 2009 and led to a sharp fall in sugar production in Europe.

The EU acted after the World Trade Organisation ruled that all sugar exports from the EU were subsidised and should be limited to 1.3m tonnes a year, down from around 5m tonnes.

Campaigners for those reforms had described the old regime as “Stalinist”, with five-year plans, fixed prices and micro-management by quota, and called for the market to play a greater role.

“The market has responded in the way it has,” said an industry expert, commenting on the fallout from the reforms.

“The industry users are right to say the market is in short supply. Whether that remains a long-term supply thing, no-one knows.

“It’s not going to come down to levels they want because the world market is so high.”

R&R said annual global production and consumption are approximately equal at around 167m tonnes, but added that demand is accelerating by two per cent a year.

This is equivalent to the annual consumption of 80m people, the population of Germany, the company said.

Other contributing factors to the shortage of sugar include poor harvests, such as the damage caused to sugar beet crops by the severe UK winter of 2010-11.

Investors seeking safe havens for their money have also inflated prices by piling into commodities since the financial crisis.

Mr Lambert said: “In order to have a stable, efficient and economically viable sugar industry, the EU needs to increase quota to meet consumption levels.

“There is currently no quota left to purchase in the UK and R&R needs sugar to meet production needs in 2012.

“The other option is to buy our sugar on the world market but this currently attracts duty of 417 euros per tonne so bringing the total price to nearly 1,000 euros.

“The tariffs on buying this sugar need to be removed. We are not alone – many other food and drink manufacturers are facing similar dramatic price hikes and urgent action is needed.”

Food giants Nestlé, Kraft and Unilever reacted to 30-year highs in commodity prices by speeding up price increases in the second quarter to offset input costs.

The issue has been taken up by the Food and Drink Federation, representing the UK’s biggest manufacturing sector.

Andrew Kuyk, a director, said: “Shortages of sugar and high prices have been a feature of the EU market for many months now – causing real problems for many food companies.

“But similar difficulties exist throughout the world market at the moment, so it is not simply a question of lowering tariffs or increasing import quotas, though the EU commission has taken action on both these fronts to increase supply by up to 1m tonnes in the last year.”

Mr Kuyk added: “It seems that a number of other EU member states are reluctant to agree to further action in the short term, preferring to see if the situation improves when the new sugar year begins in October.

“We are continuing to monitor developments and are in close touch with Government officials.”

A spokeswoman for the Department for Environment, Food and Rural Affairs said: “High world market prices and the EU’s inflexible trade regulations have caused unacceptable shortages of sugar for British food manufacturers.

“The UK food industry will now benefit from more than 1m tonnes of sugar entering the market thanks to the UK successfully lobbying the EU to take emergency measures.”

A London-based spokesman for the European Union did not respond to calls for comment.

Proposals for reform of EU regime

The European Union decrees that sugar can only be imported from certain developing countries, such as Africa, the Caribbean and the Pacific regions.

But UK officials said supplies from these countries have been reduced as a result of increased competition from other importing nations outside of the EU.

The European Commission, the decision-making body of the EU, is due to publish proposals for the reform of the EU sugar regime in October.

Proposals are believed to include the abolition of beet sugar production quotas.

Sugar is one of the main raw materials used by R&R Ice Cream, which is based at Leeming Bar.

The company can trace its roots back to 1985 when Yorkshire farmer Jonathan Ropner bought a local ice cream manufacturer, and Richmond Ice Cream was born.

R&R is privately owned.

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