Local companies feel sugar price shock
From snack pie bakers to soft drink makers, local businesses are feeling the pinch of record high sugar prices.
Six months after Hurricane Katrina destroyed sugar crops and crippled refineries along the Gulf Coast, sugar prices, like gasoline prices, have been slow to come back down. U.S. prices are still hovering at a record 33-34 cents per pound wholesale, compared with 23 cents in the pre-hurricane season of 2005, according to the Arlington, VA-based American Sugar Alliance.Some companies that use sugar and related sweeteners in their products report they have had to swallow 28 to 30 percent price increases in new supply contracts for 2006. Those that don’t have long-term deals are using multiple suppliers to cope with higher prices. And at least one area supermarket chain, Stop and Shop, indicates that that industry is facing a sugar supply shortage after one of its stores had no sugar on the shelves for several days in early February.
While most sweet makers we spoke with have absorbed the mounting costs without raising prices, some say they are now forced to contemplate that measure. Even after the Gulf Coast sugar refineries rebound, world market factors, such as a growing demand for ethanol made from sugar cane, could give a whole new meaning to the phrase "sugar high."
Rob Keane, spokesman for Buffalo, NY-based Stop and Shop, says he expects what he says is an industry-wide sugar shortage to continue through Easter. While the price Stop and Shop pays for sugar has gone up by 20 percent, he says the store is committed to keeping sugar prices the same for consumers. Both the Big Y and Shaw’s supermarket chains say they have no ongoing sugar supply problems.
Harry Kokkinis, general manager at 100-employee Table Talk Pies in Worcester, says his company is considering price increases as it grapples with a 30 percent hike in granulated sugar and a 16 to 20 percent hike in liquid sugar. He declines to specify how much sugar Table Talk uses for the thousands of pies it bakes daily, but says it does use "truckloads" of sugar. "We’ve been hit very hard," he says.
Like others in the food industry, Kokkinis notes that the sugar increases follow increases in packaging, transportation, and even skyrocketing blueberry costs due to their new status as a "super" nutritious food.
Polar Beverages in Worcester uses corn syrup and fructose rather than sugar, but CEO Ralph Crowley Jr. says prices for those alternatives have risen 15 to 25 percent due to growing demand. This, along with higher prices for plastic and fuel costs meant "we just got pasted all around the board," he says. Polar was forced to raise its prices by 3 percent in 2005, Crowley says.
The move to use ethanol to replace gasoline could impact the sugar and corn syrup market, says, and he expects sweetener prices to continue to go up. And he doubts the U.S. will make any moves to change its policy protecting the domestic market for sugar, which remains one of the few commodities shielded by such trade barriers.
Hebert Confections was hit with a 28 percent increase, though COO Jeff Goodman says sugar is not a major ingredient in its products and the price of chocolate has not gone up that much.
Helen Siudah, owner of the European Bakery in Worcester, says she’s contending with paying $34 to $43 for the 100 pounds of sugar her 20-employee bakery uses every day. She doesn’t plan on passing the cost on to customers, who have already began to cut back on fancy sweets.
Conflicting with Stop and Shop’s take on sugar supplies, Phillip Hayes of the Sugar Alliance says the U.S. has ample sugar supply and there should be no shortages. And, he says, spot wholesale sugar prices have gone down since the hurricanes, having peaked at 39 cent per pound in September. He notes retail sugar prices have remained at 43 cents per pound since the 1980s and aren’t expected to change. He says he can’t predict if or when wholesale prices would return to pre-Katrina prices but contends ethanol demand is unlikely to impact sugar prices in the U.S.
Micky Baca can be reached at
mbaca@wbjournal.com
WBJ Web Partners
Most Recent
Most Recent
0 Comments