Cost Of Consumer Goods May Rise As Sugar Price Soars

Aside from its daily domestic use, on the average, sugar constitutes about 20 per cent of the entire raw materials utilized by manufacturers of consumer goods. The current high price of sugar in the market is telling notice that Nigerian consumers should brace up to pay more if nothing is done to stem the tide, as that could lead to a dramatic increase in most fast moving consumer goods. Ralph Tathagata reports.

Sugar and other sweeteners, both natural and chemical, are widely used, not just in the food and beverage industry but in products such as toothpaste, mouthwash, gum and breath fresheners etc. Marketers and product developers, as well as consumers, have a growing menu of sweetening agents to choose from, though some have lingering questions about safety. Demand for no- and low-calorie sweeteners continues to grow in some climes due to concerns about obesity, diabetes and tooth decay. But at the same time, some scientific research has suggested that the body is better able to maintain normal weight with sugar.
What basically makes sugar a staple food is that it enhances the beverages and other foods in which it is ingested. Sugar cannot be consumed by itself in significant volume. Even as a source of energy, sugar is added in almost everything consumers eat and drink. It is therefore not surprising, in view of its sundry roles, that sugar has become deeply embedded in politics over the centuries, and how much is produced and where has become heavily influenced by tariffs, taxation and subsidies.
Reportedly, Nigeria is the largest consumer of sugar in Africa, excluding South Africa. The country’s consumption rate has been grown annually, from 1.4 million tonnes in 2007 to 1.6 million in 2008. Per capita consumption is currently at 22. 9 kilogrammes and, with a steady population growth and growing of disposable incomes, annual consumption of sugar is expected to cross the 2.5 million metric tonne mark in the next five years, according to experts. At the moment, approximately 80 per cent of annual demand is met by four local refineries, among which are Dangote Sugar, BUA Group, and Olams Group of companies.
Research has also shown that the Nigerian government encourages local value addition by maintaining a duty differential of 50 per cent between imports of refined sugar and granting five year tax holidays to refineries. Some of these trading conditions, coupled with a high degree of concentration and low utilisation of capacities by the local refineries, support a persistent gap between local and import parity prices of refined sugar. Authorities have it that these tariff regimes were put in place to protect local sugar refineries from foreign imported ones; the reason being that when local refineries have to generate their own electricity, it becomes impossible for them to operate, make profit and compete favourably.
Dangote Sugar Refinery is one of the major refineries that produce and packages fortified white sugar in 50 kilogramme bags for direct consumption under the brand name, Dangote Sugar, in addition to the unfortified white sugar made for industrial use. Apart from the refining of this raw sugar imported mainly from Brazil, the company is also directly involved in the marketing and distribution of sugar for direct consumption and industrial needs.
However, M2’s recent market survey reveals that the price of sugar is soaring in the Nigerian market. It was gathered that a 50kg bag of sugar that used to sell for N6500, now goes for N 7500 each.
Given the fact that Dangote Sugar has about 60 per cent market share, M2 contacted Ngozi Ngene, of Dangote Sugar through cell phone to comment on the cause of this almost 40 per cent dramatic increase.
“Actually there is an increase in the price of sugar in the market. But I can’t really say what influenced it. I do know that something caused it.”
“Don’t forget that the increase in raw sugar at the international level could influence prices at the local level. The cost of refining sugar in this country is very high considering the fact that most manufacturers generate their own electricity. Some of these factors might have played one or two roles in the increase,” she said.
Conversely, report has it that the selling price of sugar (raw material) is heavily subsidized by home governments of some exporter countries like Brazil and Cuba among others. The question on the lips of market watchers then, is “what must have brought about the increase in the local market if local refiners buy at such subsidized rate?”
Ngene, however, explained that aside from the reported benefits from international subsidization, Dangote Sugar has more market forces (which she did not mention) militating against it that could influence price.
It is worthy to note that the presence of BUA Sugar, a close rival of Dangote Sugar from the stable of BUA Sugar Refinery Limited, was conspicuously absent from the major markets visited by M2. This finding is against the market promise made by the company at inception that it forayed into the nation’s sugar industry to produce one million tons of high quality sugar for industrial users and refined sugar for domestic users that will fill the supply gap in the market place. Meanwhile, every attempt made to get Mrs. Safiya Dauda, Head Corporate Affairs, BUA Sugar Refinery, to comment on the price increase and scarcity of BUA Sugar failed as her phone did not get through.
Due to the usefulness of sugar as a vital raw material for the manufacturing sub-sectors of foods, beverages, pharmaceutical and breweries, contacts were made to ascertain the possible effect of the increase in the price of sugar on consumer goods.
Femi Adelusi, PR Manager, Coca Cola Nigeria Plc, who was contacted, said: “Coca Cola does not buy sugar; so I cannot comment on this issue.”
He however, referred M2 to Nigerian Bottling Company Plc.
“You will need to talk to Mrs. Yanju Olomola, External Affairs Director, NBC. She might be able to provide some information in this regards,” he said. But Mr. Adelusi did not provide the contact number of Mrs. Yanju.
On the other hand, Mr. Udo Osuofia who works with a brand activation company is of the view that any increase in the price of sugar could lead to a concomitant increase in the prices of consumer goods such as soft drinks like Coke, 7Up and malt drinks among others.
“Manufacturers of consumer goods like bakeries, breweries and bottling companies consume about 80 per cent of the sugar in the local market and if the price of sugar remains on the upward rise, I am sure the prices of goods will also increase,” he said.