Evolution in a changing sugar market

Author: John Giles Divisional Director, Promar International and President of CIM's Food, Drink & Agriculture Group.

On Wednesday 6 June, in London, Paul Kenward, the Managing Director of British Sugar addressed CIM's FDA Group and gave a fascinating insight in to how the business is facing up to the challenges of operating in a de regulated market, increased competition, the looming impact of the decision of the UK to leave the European Union and challenges of a fast changing market operation.

All this has lead the need to change the culture of the business and adapt to a new set of market and industry circumstances. While naturally focusing on the sugar sector, you could not help come away thinking there were plenty of transferable lessons for the rest of the UK agricultural and food sector too. Paul gave a straight forward view of the challenges and opportunities that these will bring and which included:

Sugar is a highly cyclical business with aspects of a roller coaster ride in terms of price and profitability, and so a genuine long term vision for the business is required. Since the de regulation of the EU sugar regime at the end of last year, there has been a record UK crop and prices have been towards the bottom of the price cycle.
The opportunities brought about by having a diversified customer base – only 15% of product is sold in to the retail sector, with the balance being accounted for by demand from the food and drink processing industry, by products going in to animal feed, the production of ethanol and the generation of electricity from waste heat from 4 factories and an AD plant, as well as the production of pharmaceutical grade cannabis under glass at Wissington.
Sugar being a globally traded commodity and one of the most volatile soft products. As a result there is a need to invest in efficient processing plants, agronomy, farm mechanisation and crop genetics to make British Sugar a highly competitive business.
The increased importance on listening not only to customers more, but excelling in product, service and logistics, as well as price. There is a need also to listen to other key stakeholders in the business, not least the 3,000 growers who supply them and British Sugar employees too.
The need to update the British Sugar brand which had basically been the same since the late 1970s.
Facing up to new challenges that might appear as a result of post-Brexit trade deals with countries such as Brazil, the US and Thailand, all of whom in some way benefit from substantial government subsidies. As one of the lowest cost producers in the world, British Sugar can compete with anyone fairly, but not against what might be seen as dumped, subsidised sugar.
The requirement for the business to be more nimble, decisive and proactive and to work more closely both internally and externally. There is a need for h a more open attitude towards learning from other in agriculture and food industries, and in some cases, even from outside this sector.

Paul painted a picture of a fast moving industry and market environment and one could not help be impressed by the energy and drive he brings to the business per se. He also spoke of the devolved management style within the Associated British Foods business, of which British Sugar is part of and which now has operating units in six African countries, China and Spain. Paul concluded by talking about the need to combine an ability to grow the business, develop a better customer proposition and at the same time, target costs to ensure a lean operating style too. An impressive speaker, an impressive business and an impressive view of the future opportunities it faces. This was an evening well worth attending.