LifeSavers’ Sugar Factor Explained

Published online: Apr 02, 2002
Viewed 888 time(s)
As usual, sugar was mistakenly blamed when Kraft decided to move its LifeSavers plant from Holland, MI, to Quebec, Canada.

Responding to the criticism, Joseph Terrell of the American Sugar Alliance pointed out that the real reason for the move was savings in labor, health-care costs, taxes, the dollar exchange rate ($.63/$1.00), factory utilization, packaging and energy costs.

Terrell quoted from a report by Peter Buzzanell and Associates of Reston, VA, on “U.S. Confectionery Companies: The Move to Canada and Jamaica—Encouraged by What Cost Variables?.”

Terrell explained that fiscal 2001 national average wholesale-refined sugar prices were 22.1 cents per pound in the United States and 20.7 cents in Canada. Prices vary with market conditions, it was pointed out. Local prices in Michigan in March 2002 were 26.0 cents per pound and 18.0 cents in Quebec.

Even if one assumes the unusually high eight-cent differential prevails, and that LifeSavers uses as much as 30,000 tons of sugar per year, Kraft's savings on sugar prices total $4.8 million per year at the most. This is less than half of Kraft's savings on wages and health insurance alone, Terrell pointed out.

Union wages in Michigan average $15.30 per hour. Non-union wages in Quebec are $7.10 per hour. If Kraft hires the same number of workers in Canada as it had in Michigan, Kraft will save $10.2 million per year alone on wages.

Total savings on wages and health insurance will be $11.2 million per year. Kraft paid $2,256 per worker per year for health insurance in Michigan. It will pay $605 per worker per year in Canada.

Though Holland electricity rates are unusually low at 5.05 cents per kilowatt-hour, Quebec rates are even lower, at 5.01 cents/Kwh.