Profit, Power and Sugar

There is more sugar being consumed in the world than ever before, even on a per capita basis. What was once a luxury has for millions become a staple part of their diet. The processed foods and drinks to which it has been added have been turned into billion-dollar brands, recognisable around the world. And the expansion of planting continues apace, with a land mass the size of Poland now used to grow sugarcane and sugar beet, the two crops from which sugar is produced. This production takes place in over 100 different countries, the largest of which are shown below.

Largest sugar producing countries, 2013

largest sugar producers

Source: FAOSTAT data for 2013, raw sugar equivalent.

These trends can make it seem as if sugar has a life of its own. Indeed, in the colonial Caribbean sugarcane was seen in just this way, anthropomorphised as ‘King Sugar’, a crop capable of ruling an entire region. A similar idea is present today when we talk of ‘sugar addicts’, suggestive of a substance beyond our control with powerful command over the human body. I prefer instead to think of sugar as a profoundly human product, something that has been purposely created and its consumption actively encouraged. A central motivation in this endeavour has been the pursuit of profit, and the organisation of the sugar economy reflects the way this has been carried this out.

Increasing demand

The first way in which profit has been pursued has been by increasing demand for the products derived from sugarcane and sugar beet. There is an important historical observation to make here: sugar crops were not always grown for edible sugar. The origin of the refined white sugar we now stir into our coffee can be traced back to South Asia, the native habitat of the sugarcane plant. The first known human cultivation of sugarcane was in New Guinea at least 6,000 years ago, where it was chewed for its sweetness and used as animal fodder. The practice of crushing the sugarcane stalks and boiling the sucrose-rich juice into a sweet viscous mass then developed in the wider region, with lumps of unrefined sugar first recorded in India in 500 BC. But these were not treated as food, but as medicine instead.

Such alternative uses of sugarcane can be found today in the form of biofuel. Around 15 per cent of all cane harvested is used to power vehicles rather than to sweeten foods. In Brazil, the biofuel boom of the mid-2000s was a major driver of the industry’s rapid expansion. And it is not just the juice that has a range of uses, but also the by-products. One of these is molasses, the sticky substance left after the sucrose has been removed from the juice and which has long been used as an animal feed or fermented and distilled into rum. Finally, there is the remaining pulp and all the other vegetation from the plant, which are used by some sugar factories to burn as a source of heat and electricity, turning them into energy generators.

To create the opportunity to sell these products, markets have had to be constructed. For example, biofuel markets have been created by state regulations that have required oil companies to blend a certain amount of biofuel into their vehicle fuels, supposedly to mitigate climate change. Without these requirements and other policy supports like tax breaks, demand for biofuel would undoubtedly fall.

The most valuable market for sugar crops, though, remains the food industry. The vast majority of sugar is consumed indirectly, contained in things like soft drinks, confectionery and breakfast cereals. Again, this is no accident. These markets are dominated by multinational companies such as Coca-Cola, Hershey’s, Kellogg’s, Mars, Mondelez, Nestlé, PepsiCo and Unilever – which together made over $50 billion profit in 2013 – and sugar has been extremely useful for them in subverting the social rules governing eating, especially through the phenomenon of snacking. To encourage this they have engaged in what I consider to be coordinated cultural manipulation, using large marketing budgets to target women and children and reinvent nutritionally-vacuous foods as lifestyle choices. The shared interest of sugar producers and industrial food manufacturers in advancing the mass demand for sweet processed foods was the great unifying project of sugar politics in the 20th century.

Protecting against competition

The alliance between sugar producers and food manufacturers has not been without its tensions, most notably over price. Food manufacturers want sugar, but they also want it cheaply. For this reason they have tended to be advocates of free trade in agriculture. This brings us to the second way in which sugar producers have sought to pursue profit: by insulating themselves against trade competition. History is relevant here, too. The beet sugar industry began in the late 18th century after a German chemist, Andreas Marggraf, found a way to make sugar from a specially-bred variety of beet. Hugely inefficient at the outset, the embryonic sugar beet industry was given the support it needed during the Napoleonic Wars (1803-1815) when blockades interrupted the supply of cane sugar coming from Caribbean plantations. This led governments in continental Europe to engage in what we would now call infant industry protection: setting aside land, investing in research, overseeing the construction of factories, and providing fiscal incentives. Aided later by the abolition of slavery, which made beet sugar more competitive vis-à-vis cane sugar, production grew considerably and by the 1890s Germany was producing more sugar than the entire Caribbean.

Beet sugar producers in the European Union still have protection, only now it takes the form of tariff barriers and is designed to keep out cheap exports from Latin America. This means that the price of sugar in the EU is typically higher than the world market price. Former European colonies and other poor countries are also allowed preferential access to the EU and so support this system as well. Guyana, which has such access, received US$615 per tonne for its sugar exports in 2011, while Guatemala, which depends on the world market for sales, got just US$503. But of course, the major beneficiaries of this policy have been European-based producers. The four biggest are Südzucker, Nordzucker, Tereos and British Sugar, which account for around 60 per cent of EU production. Through their industry associations they have lobbied against attempts to liberalise external trade, and have also found other ways to restrict supply and push prices upward. During the 2000s, Südzucker, Nordzucker and Pfeiffer & Langen colluded to limit the distribution of sugar in Germany and were later fined €280m for price fixing by the German competition authority.

The EU is not unique in protecting its market. The invention of beet sugar meant it was possible to produce sugar in temperate climates as well as tropical ones, and the imperatives of profit, rural development and food security have led almost all national governments to support a domestic industry at some point or other. The protectionist legacies of these state projects are one reason why just 37 per cent of all the sugar produced today is traded internationally. Most sugar is still sold within the national economy. The World Trade Organisation (WTO), established in 1995, was intended to reduce these trade barriers, but in sugar at least, progress has been slow. Moreover, state support to agriculture is evolving in ways that elude WTO rules. Subsidised credit and crop insurance is one example. Another is the use of welfare payments to farmers, which in the EU is facilitated through the Common Agricultural Policy. These help farmers stay in business, as although the price of sugar is managed to some extent, the reality is that it is still hard to make a decent living from growing the crop.

Reducing costs

A third way in which sugar producers have sought to pursue profit is by reducing costs. Another tension over price exists here, this time within the sugar industry. Sugar factories want crops to process, but they want them cheaply. In cases where farmers are major shareholders of the factory, as in cooperatives like Südzucker and Tereos, this tension is minimised, but where a division of ownership exists it can be conflictual. In Belize, for example, an attempted change by the sugar factory to the payment system in 2009 led to demonstrations on the streets and the death of a cane farmer in clashes with police. For their part, farmers also try to reduce the price they pay for inputs, labour being the most notable. In sugar industries around the world, some of the techniques first practiced in the colonial era are still evident: harsh manual labour carried out by immigrant workers for pittance wages in dangerous conditions. Outsourced and/or seasonal employment has been an important mechanism in allowing this to continue as it means workers have fewer legal entitlements and are less likely to be protected by a trade union. This can leave some struggling to make a living and can also lead to conflict, as in the strikes and protests by field workers in Colombia after they were stripped of benefits following their change in status from employees to independent contractors in the mid-2000s.

As well as reducing costs by pressurising suppliers and workers, producers have also mechanised, automated and enlarged the production process. This is an expensive undertaking, hence the large debts that many farmers and factories end up accumulating, but with the potential to lower per unit costs of sugar over time by reducing the numbers of people employed. This can be seen in São Paulo state in Brazil, where during the boom period of 2007-2013 the amount of cane harvested increased by 10 per cent while employment decreased by 6 per cent. In this case, it was the poorest workers among them who were hardest hit, with tens of thousands of manual cane cutters made redundant and unable to find alternative work. These tendencies are not confined to the Global South. For every 100 tonnes of sugar produced in the EU, an average of just one farmer is needed.

Investing through takeovers and expansion

 A final way that sugar producers have pursued profit is to invest outside their ‘home’ country. This has been encouraged during the last decade by the slow but steady liberalisation of trade, and the simultaneous search for finance and technology by foreign companies. In 2014 Südzucker had 29 sugar factories in countries including France, Belgium and Poland, while Nordzucker had ten in countries including Denmark and Slovakia. Others have gone further afield into cane production. The French company Tereos has expanded into Brazil and Mozambique, while the parent company of British Sugar, Associated British Foods, acquired a controlling stake in Africa’s biggest sugar company Illovo. This wave of takeovers and new ventures has turned Europe’s sugar producers into transnational companies, shifting their sources of profitability. Südzucker’s 2012 operating profit in its sugar division was €511 million, though only one third of its production was actually in Germany. It is also part of a wider trend in in the sugar economy in which the control of production and trade is becoming concentrated in the hands of a few wealthy owners.

Putting profit in its place

The four ways in which sugar producers have pursued profitability, often in conjunction with the state, has not been unequivocally bad. Certainly in terms of providing an abundant commodity for general consumption it has been a resounding success, though this has also contributed to the incidence of diseases like tooth decay and diabetes. So what I suggest is that the profit motive needs be put in its place; treated as a means to end, rather than an end in itself. The recent introduction of taxes on sugary drinks in Mexico, the UK, and the city of Philadelphia can be seen in this way. To the extent the revenue raised is used to provide additional funding for things like drinking water infrastructure and healthy eating programmes, I think this diminution of profit in the food manufacturing sector in the interest of public health can be justified.

Another example is Fairtrade sugar, which is grown in poorer parts of the world by smallholder cane farmers who receive a financial premium to spend in their community. This shows how a different division of proceeds from the sale of sugar is possible, although it must be noted that it does remain a market niche. Less than 1 per cent of all sugar produced is Fairtrade certified. A more mainstream certification system, albeit one that only covers 2.5 per cent of sugar, is Bonsucro. This does not try to increase the revenue received by farmers but seeks to ensure that high labour and environmental standards are followed throughout the sugar supply-chain. A final illustration of how profit-making can be made more socially beneficial is by making sure it abides by the law. In a recent report for Ethical Sugar, my co-authors and I found that 18 sugar factories in São Paulo state alone had violated labour or environmental legislation in the last six years. The role of state officials, trade unions, campaign groups and local residents in holding such companies to account is vital.

This is the original text of a piece translated into German and published in Welt-Sichten magazine. All data is referenced in Sugar published by Polity, copyright © 2015 by Ben Richardson.