Confectionery firms face sugar price hikes

Related tags New member states European union

Earlier this month CAOBISCO, the body which represents European
manufacturers of sugar-based foods, came racing to side of the
businesses it represents in the accession countries. Once installed
in an enlarged Europe, the new Member States face a hike in sugar
prices to conform with the EU sugar regime.

For 36 years the European sugar market has been controlled by leading sugar companies in the UK, Germany and France, which, according to a recent report from Oxfam, is subsidized by EU taxpayers to the tune of €819 million a year.

"In recent years many leading manufacturers of sugar-based goods have shifted their manufacturing operations from western to eastern Europe in an effort to capitalize on lower costs,"​ said David Zimmer. "However, now those businesses are facing the added challenge of shifting to the western European regime, which will undoubtedly have a significant impact on their margins."

In fact CAOBISCO estimates that many of its members will be facing price hikes of up to 60 per cent, a figure that will undoubtedly have a significant impact on producers of sugar rich foods such as confectionery.

The European Commission has promised change to the regime, but nothing concrete is expected until 2006. So far three proposals have been tabled the first establishing a status quo on flexible quotas and price intervention, the second to simply reduce internal EU sugar prices and the third which embraces full liberalization.

"Either way the current situation has to change because it is anti-competitive,"​ said Zimmer. "We are looking for definite change and hoping that Brussels will be bold with the changes that it makes. In the meantime we are left with transitional issues, such as the problems being faced by our members in the accession countries, and these are issues that have to be addressed immediately."

Manufacturers of sugar-based foods in the new Member States have been keen to play down the overall impact of sugar prices on their operations. They are acknowledging that the costs will impact the pricing of their products but say that they are hoping that sales will not be severely impacted.

Nestle Polska is one of the leading manufacturers of sugar-based foods in Poland, with a turnover of €300 million in 2003. Agnieszka Wasak, spokesperson for Nestle Polska, says that on the back of stock piling sugar prices have already risen significantly in the country.

"Nestle is attempting to limit the effect of higher raw material sugar costs on the price of the final product,"​ she said. "Ultimately we expect that the cost of sugar-based products will increase by an average of a few percent in the coming months."

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