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Global surplus, low prices and diversification

In the recent past, right across the global sugar sector, many sugar companies, big and small have been hit by low prices amidst global surplus. For many of these companies, the persistently low price is well below the cost of production. It is therefore not surprising that even heavily diversified big companies, the likes of British Sugar, Nordzucker have suffered from reduced profitability. Those smaller companies who mainly rely on the sale of sugar have invariably had greater hit. One of the top sugar producer Mitr Phol claims to generate only 42% of its revenues from sugar. It is widely acknowledged, that sugar is the most volatile of soft commodities. Doubtless, most of the companies operating in the sugar sector are well aware of this. But it is equally true, that during good times, many of these have simply not invested in diversifying their business to shoulder themselves from such volatility in the future.

Over the past year or so, the following candidates represent compelling avenues to embrace for diversification. Entrepreneurs from Central Taiwan Innovation Campus have developed biodegradable drinking straws made from cane bagasse which recently won a gold medal at an international invention fair in southern France. The straws contain no plastic. The bagasse-based straws are developed by Ju-Tian Eco-Material Co., which was founded by Huang Chien-Chung. Even though over 20 Chinese manufacturers have approached the company willing to pay a high price for their technology, Huang said his team rejected them all because, although they want to make money, they prefer to market their technology and product globally. 

The constant battle in the alcoholic beverage sector for market share against both changing tastes and certain craving for novelty has given rise to entrepreneurs in Thailand and Barbados opening boutique rum distilleries. Marine Lucchini and Thibault Spithakis started production of rhum agricole, from cane juice, the “Chalong Bay Pure Rum, with its notes of nutmeg and coconut (other varieties are infused with lemongrass and kaffir lime)”1 in 2012. ThaiBev’s new high-end rum Phraya, which ”exudes deep hues of honey and hazelnut that sparkle with cinnamon on the tongue” won Double Gold at the 2013 San Francisco World Spirits Competition. It is exported to Singapore, Hong Kong, Germany and the United States. The distillery owner sources its cane from Nakhon Pathom. Another Frenchman, David Giallorenzo founded Issan Rum near the border of Laos at Nong Khai and has commenced exporting to Europe.

To continue reading, download the November ISJ lite issue below.

Download the November issue of ISJ Lite

ISJ Lite is a 'taster' version of the monthly International Sugar Journal, including a sample selection of articles and updates for the sugar industry.

If you are interested in learning more about International Sugar Journal, click here.

ISJ Lite Aug

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