Paper prepared for the BSA Food Study Group Conference – please do not cite without permission
Sweet nothings: consumer ethics and the political economy of sugar
Ben Richardson
Department of Politics and International Studies
University of Warwick
Over the years the UK sugar industry has been accused of undermining competition and healthy eating, the costs of which have been borne by poor farmers abroad and out-of-pocket and overweight consumers at home. Now the tide of bad publicity has changed. British Sugar started importing cane sugar from Africa and Tate & Lyle made the biggest ever branded switch to Fairtrade. Further, both companies have launched organic sugars and publicly pledged to reduce their greenhouse gas emissions.
This research asks: have these changes resulted from a new consumer ethics; and do they represent the ‘embedding’ of a large-scale conventional food system?
The epiphenomenal impact of consumer ethics
Beginning with trade relations, Tate & Lyle’s decision to sell its bags of sugar under the Fairtrade label deal transfers an additional £2 million to 6,000 cane growers in Belize per year and was motivated by consumer interest in ethics and provenance. Yet what was also important was that the industry in Belize was comprised of many small-scale growers anyway, and that Tate & Lyle had sourced cane from the country for 30 years and so had the capacity to implement the Fairtrade certification system. In other words, the company was ‘sitting on a good story’ that needed to be told.[1]
Another consideration is that retail sugar sold in high street shops account for just 20% of UK consumption. The vast majority is sold as industrial sugar to food and drink manufacturers. For these customers, the priorities remain price, quality and security of supply. In this respect, the more significant change in trade relations has been caused by reform of the European Union sugar regime. The part-liberalisation of the long protected regime resulted in a decrease in domestic EU production by about a third, an end to the preferential trade agreement with the ex-colonial sugar producers, and the opening of the EU market to the Least Developed Countries. European sugar supply is concentrated in a handful of companies and many of these have invested abroad to harness the new duty-free export opportunities. British Sugar has brought control of the African sugar cane producer, Illovo to process cane grown in countries such as Zambia in its European refineries. In a joint venture with Mitr Phol, Asia’s biggest sugar company, Tate & Lyle has invested in Laos.
Moving to the environment, British Sugar and Tate & Lyle were two of the first companies to work with the Carbon Trust, a company set up by the UK government to accelerate the move to a low-carbon economy. This work involved calculating the carbon footprint of their sugar and committing to reduce this every two years. The rationale behind this agreement was to pre-empt claims that Tate & Lyle’s ‘food miles’ or British Sugar’s ‘uncompetitive beet’ made them environmentally unsound. However, the intended result was not so much to win consumer approval as it was to prevent scare stories in the press and secure confidence among shareholders.[2]
The recent ‘greening’ of production should be seen as part of an effort to reduce exposure to energy prices and maximise return on raw materials. The small carbon footprint of sugar (380 grams of CO2 per 1kg bag for Tate & Lyle, and 500 grams for British Sugar) is reflective of previous investments in energy efficiency. Both companies use co-generation technology in their factories to generate electricity and useful heat. This enables them to reduce reliance on a single fuel – Tate & Lyle’s refinery is now powered mainly by burning wheat feed – as well as export electricity to the national grid and sell carbon credits.
Capturing the heat generated from beet processing, British Sugar has become the UK’s biggest supplier of domestic tomatoes, growing 190 million a year in the country’s largest glasshouse. This is indicative of a wider trend in the industry to move into alternative markets, which are far more significant commercially than the niche developed in organic sugar. These markets are for ‘non-sugar food’ and ‘non-food sugar’. While British Sugar now produces tomatoes, one of Tate & Lyle’s most profitable products is the sweetener Splenda. This is made by reformulating sugar so it is not metabolised by the body and is therefore calorie-free. This product contributes 5% of revenue but 23% of profit; a ratio which is inverted for the lower-profit ‘natural’ sugar.[3] The company has sought to develop other ingredients that serve a specific dietary function, using extensive consumer research and its new ‘Wellness and Nutrition Centre’ to uncover and validate their particular health benefits.
The ‘non-food sugar’ market refers to the transformation of sugar into industrial products like fuels or materials. Strictly speaking, this involves more than just sugar. British Sugar is making ethanol from sugar beet at its factory in Wissington, and in partnership with BP and chemical company DuPont will produce bio-fuel from wheat at its purpose built refinery in Hull. Likewise, in a US subsidiary, Tate & Lyle has begun making a bio-chemical from corn that is used in fabrics, cosmetics and cleaning liquids. By making products from agricultural biomass instead of fossil fuels, crop processors across the EU and US have garnered significant political support for what has been dubbed the ‘bio-based economy’.
In short, consumer ethics have not been the driving force shaping how the sugar industry behaves. To the extent that an ‘ethical turn’ can be discerned in the industry, it has because certain practices which were happening anyway have been seized upon and highlighted by the processors. In this sense, consumer ethics have been epiphenomenal. The more important factors in shifting patterns of production have been (international) change in political regulation, commodity markets and dietary habits.
The processor’s perspective: how to exercise control over input and output markets
The political regulation of sugar within the Common Agricultural Policy is historically unique. It relied on high trade tariffs and consumer prices to support European beet producers, which then met most EU demand as well exporting cheap surplus sugar to the world market. The last round of reform began to dismantle this system and reduced the profitability of sugar. Already for farmers it is no longer a special commodity but ‘just another crop’.[4] Yet despite this step, sugar still remains the only commodity managed by a quota and EU policy-makers have suggested that this will be abolished in the next round of reform in 2014. A deregulated market would make it more difficult for farmers to bargain collectively and for processors to manage supply.
The volatile and rising prices of fossil fuels in international markets have been another concern for the sugar industry. Apart from employees and the raw sugar itself, energy is the highest cost item for Tate & Lyle in the UK and the need to lessen dependence on a single, expensive fuel has been paramount.[5] Fossil fuels are also used to produce agricultural inputs, which helps explain why British Sugar has helped its suppliers reduce nitrogen fertiliser use by 30% and pesticide use by 60% since 1980.[6]
The third issue is that demand for sugar across the EU has been broadly stagnant for twenty years. It has actually decreased in the UK, falling from 2.53 million tonnes in 1990 to 2.06 million tonnes in 2009.[7] Though consumption of added sugar has grown via products such as soft drinks (especially in women) and alcoholic drinks (especially in men) this is outweighed by a decrease in the consumption of table sugar, sweet spreads and preserves over the last decade.[8] Worse still for the sugar industry, the coalition with manufacturers that has promoted high-sugar diets shows signs of loosening. The Food and Drink Federation has begun to advocate the financial benefits of reformulating products for healthy eating. In a 2009 report entitled ‘Recipe for Change’ the FDF noted that total sales of reformulated ‘healthy eating options’ were worth £8 billion in the UK alone, and in some areas were growing at twice the rate of the market as a whole. An example of this success is the growth of low-calorie drinks targeted at men, such as Coke Zero and Pepsi Max.
Source: F.O. Licht (Various Years) International Sugar and Sweetener Report (Ratzeburg: F. O. Licht)
The contemporary politial economy of sugar: who benefits?
Existing theory suggests that alternative, socially embedded food networks evolve and mutate within the context of the conventional sector but always retain a separate identity. In the case of the sugar industry, this distinction cannot be upheld. The same company will produce organic and functional ingredients, use fair trade and free trade models, support British and foreign farmers. The result is a moral maze of sustainability and competitiveness claims which make it difficult to hold to the old normative judgements about the sugar industry. However, this is not to say the industry has been de-politicised. By disaggregating the commodity chain of sugar, a number of distributional issues can be discerned:
1) It is too simple to suggest that fair trade or foreign investment is the best means to development. Each has their problems. Fairtrade sugar is an equitable but small market. Out of a UK sugar market worth around £1,100m, just £2m a year is to be transferred to growers. Moreover, it is a system that depends on existing large-scale production since the sugar grown is usually crushed at the same mill as non-Fairtrade sugar and then mixed in down the duration of the supply chain. Conversely, the huge investment by British Sugar’s subsidiary in Zambia has created thousands of extra jobs (albeit mainly temporary) but also raised difficulties regarding access to land and water, limited opportunities for small-scale growers, and a questionable influence over government tax and competition policy.[9]
2) Driven by impressive yield increases, concentration of production around bigger factories, and lower prices following reform of the sugar regime, the amount of farmers in sugar beet industry continues to fall. Moreover, it is the biggest beet farms that still receive most benefit: roughly one third of the beet growers take two thirds of the farm gate revenue.[10] A further concern relates to the burgeoning demand for non-food beet. Rather than contract exclusively from existing suppliers, British Sugar recently decided to grow 200,000 tonnes of beet for ethanol production itself since it could sell the crop at cost. Commenting on the decision, Managing Director Gino De Jaegher admitted that ‘...if I were in their shoes [the growers] I would hate it with venom’.[11]
Note: Factory employment averages seasaonal and out-of-season workforce.
Source: Comite Europeen des Fabricants de Sucre (2009) Sugar Statistics 2008 (Brussels: CEFS)
3) UK sugar processors are publicly-limited companies that have to satisfy their shareholders. To do so they have sought to get off the treadmill of commodity production in traditional markets by becoming less energy intensive, targeting markets in Asia, and widening their product portfolio. In this way they can be seen in the same vein as Lawrence and Burch’s assessment of food corporations, which are depcited as reconfiguring their activities in the Global North toward healthier products, whilst simultaneously selling products of dubious health benefits to the South.[12] To these activities we can also add the sale of renewable products in the Global North as crop processors seek to profit from government mandates to reduce climate change. In turn, these strategies of accumulation are affecting industry concentration as some companies expand as a means to strengthen their market position, while others, such as Tate & Lyle, succumb to investor pressure to divest their sugar division and concentrate on ‘food ingredients and bio-based operations’.[13]
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[1] UK sugar industry employee; interviewed 14 January 2010
[2] Martin Barrow, Head of Customer and Project Management, Carbon Trust; interviewed 3 February 2010
[3] Tate & Lyle (2009) Annual Report (London: Tate & Lyle).
[4] William Martin, Chairman of National Farmers Union Sugar; interviewed 8 February 2010
[5] Simon Gibbons, Sugar Operations Director, Tate & Lyle; quoted on The Institution of Mechanical Engineers website. Available at: http://www.imeche.org/industries/process/food-engineering/tate-lyle-biomass-plant.htm
[6] British Sugar (2008) ‘Sustainability and the Production of Bioethanol from Sugar Beet in the UK’, British Sugar Policy Document, June 2008.
[7] F.O. Licht (Various Years) International Sugar and Sweetener Report (Ratzeburg: F. O. Licht)
[8] Food Standards Agency (2010) National Diet Nutrition Survey: Headline Results from Year 1 (2008/2009)
[9] Richardson, B. (2010) ‘Big Sugar in Southern Africa: The Perverted Potential of Sugar and Ethanol Exports’, Journal of Peasant Studies, 37: 3
[10] Department for Environment, Food and Rural Affairs (2009) Agriculture in the United Kingdom 2009 (London: DEFRA)
[11] Tasker, J. (2010) ‘British Sugar to Grow More Beet’, Farmers Weekly, 25 February 2010
[12] Lawrence, G. and Burch, D. (2010) ‘The ‘Wellness’ Phenomenon: Implications for Global Agro-Food Systems’ in Lawrence, G., Lyons, K. and Wallington, T, eds. Food Security, Nutrition and Sustainability (London: Earthscan)
[13] Fletcher, N. (2010) ‘Tate & Lyle Considers Cutting Sugar as it Refines Core Business’, The Observer, 23 May 2010