Sugar pricing: time for a sweeter deal?

Turbulence in sugar pricing has led to challenges in the foodservice’s supply chain lately. And as the new Foodservice Price Index from Prestige Purchasing and CGA Strategy shows, there is more change—both positive and negative—still in store.

As we shared in my blog post last week, wholesale price rises are being particularly keenly felt in fruit and vegetables—prompting a host of stories about increases and the impacts on restaurants and consumers. But 2017 is also bringing turmoil in sugar—a commodity that has knock-on effects for soft drinks and other related items including jams and syrups.

It is the result of poor weather and limited supply from key exporters like Brazil, Thailand and India, which have pushed wholesale prices up. Increased transport costs, linked to rising oil prices, are another factor, and the weakness of the pound following last year’s Brexit has impacted this. The Foodservice Price Index shows that price rises were in evidence throughout most of 2016, and while they dipped slightly in December, they ended the month 4.6% up on a year earlier—easily outpacing the Consumer Price Index.

More fluctuations are likely, though some of them could be in a more positive direction. The European Union plans to lift production and export restrictions on European sugar in September, and that should lead to an increase in production. Some commentators predict a rise in levels of up to 20%, and greater supply should certainly pull down wholesale prices.

That is good news for any food outlets selling soft drinks. But counterbalancing it is the government’s looming ‘sugar tax’—a new levy on the producers and importers of drinks with high sugar content. It is intended to reduce the sugar that is added to drinks and so promote healthier drinking, with the money going to fund educational programmes for children. Implementation is expected from April 2018.

Graeme Loudon is CGA's commercial director. Read more about the key findings from the Foodservice Price Index and download an exclusive summary here.