Sugar Producer

22 Sugar Producer JUNE/JULY 2016 I worked for the Senate Agriculture Committee nearly two decades ago. Back then, large candy companies would come in to complain about sugar policy inflating the cost of food, harming their economic well-being and threatening American candy jobs. Sugar growers also visited to complain about foreign subsidies, explain the dump market and extol the virtues of no-cost U.S. sugar policy. This debate excited me because both sides' arguments were so good and so believable, and there seemed to be no middle ground that would satisfy either. In other words, it had all the makings for a real slugfest. But the old-timers on the staff were more stoic. "This same debate has been going on for decades," they said, "and decades from now it'll still be going on." These long-time Capitol Hill aides were right. Here we are, 20 years later, and Big Candy's lobbyists are still telling lawmakers about their financial woes, still saying the sugar policy is single-handedly driving up grocery prices and still claiming that jobs are being lost as a result. With that said, the debate has evolved quite a bit. That's because the sugar industry started tracking and publicizing the financial success of sugar-containing product (SCP) producers and cataloging the flurry of their U.S. expansion projects. Turns out that the best way to counter opponents of sugar policy is to simply point out how misleading they've been on Capitol Hill. And sugar producers recently got a big boost in their truth-telling efforts when Dr. Alexander Triantis, the dean of the University of Maryland's business school, released a detailed paper on the subject. Since the current U.S. sugar policy took FROM THE ASA By Phillip Hayes | Director of Media Relations Big Candy Lobbyists Not Being Honest hold in 2008, he found candy companies and other SCP producers have added jobs, increased production and boosted profitability. The SCP sector is largely insulated from the price of sugar and from U.S. sugar policy, he explained, because sugar makes up less than 4 percent of SCP food products' costs. Furthermore, sugar prices have declined 40 percent over the past 25 years when corrected for inflation, whereas the price SCP makers receive for their products has steadily risen over that time. This has helped Big Candy bank big economic gains and set itself apart from other industries. To help illustrate his point, Triantis examined the investor filings for the nine largest SCP companies, essentially creating a stock index for sugar policy's biggest critics. Among his findings: • Share prices of these SCP companies more than doubled over the past 15 years, while the S&P index only increased by 50 percent during that period. • Revenues grew by 131 percent over the past 15 years, almost double the growth rate for the rest of the U.S. economy during this period. • Net profit margins during the past 15 years were 37 percent higher than the average for all U.S. public companies, and 67 percent higher than the average for the overall food processing industry. • Return on equity averaged 25 percent higher than that of the overall food- processing industry and double that of the total U.S. economy during the past 15 years. Again, the exact opposite of what agriculture's detractors continue telling lawmakers. As for claims that sugar policy has driven away candy jobs and been a drag on the economy, Triantis said "The SCP industry is thriving, and job losses in this industry over the past two decades are no worse than in non-SCP food manufacturing industries. Rather, they reflect productivity gains and other factors unrelated to sugar prices. "Furthermore, if U.S. sugar policy were to be altered in any significant way, producer prices would fall, a large number of jobs supported by the sugar industry would be lost, and there is no evidence that consumers would benefit through lower retail sugar or SCP prices." Sugar producers have been making these points for decades; however, these points now pack more punch thanks to one of the most respected business minds in academia. And that should make a big difference in future sugar policy debates. n Editor's note: Hayes is the director of media relations for the American Sugar Alliance. Email phillip@sugaralliance.org. University of Maryland economist details business returns under current sugar policy MAKING MONEY While sugar prices have declined 40 percent over the past 25 years when corrected for inflation, prices for sugar- containing products have steadily risen over that time.

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