Thai-ed Up in Big Candy Spin

Published in the February 2014 Issue Published online: Feb 14, 2014 Phillip Hayes
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Food Logistics, a food manufacturing industry publication, described Jelly Belly’s explosive growth this way in a 2008 article, “Jelly Belly’s Sweet Decision”:

“Business was sweet for the Jelly Belly Candy Co. The maker of the world’s most popular jelly bean, the family-owned firm was experiencing double-digit growth year after year. With sales booming, Jelly Belly expanded its manufacturing plants and distribution centers in the U.S. and began construction on a third facility in Thailand to keep up with the growing demand.”

At the time of the expansion, the California-based company noted that the new Thailand plant would supply non-U.S. customers in emerging markets that are close to Thailand. In other words, Jelly Belly smartly made its distribution network more efficient.

But today, the 2006 expansion has strangely become the poster child for candy industry lobbyists looking to outsource U.S. sugar production. U.S. sugar policy, they claim, chased Jelly Belly and U.S. jobs into Thailand’s arms.

Jack Roney, an economist for the American Sugar Alliance, says such accusations are tall tales by opportunists trying to score cheap political points during the farm bill debate. Sugar, he said, appears to be a non-factor in this case.

“Let’s not forget that Jelly Belly expanded its U.S. operations at the same time, too. It didn’t flee America; it grew its U.S. footprint,” he said. “So to say U.S. sugar policy chased the company abroad doesn’t pass the laugh test.”

In fact, Thai sugar prices are currently higher than those in the United States, averaging 30 cents per pound compared to 28 cents per pound in America, according to U.S. government data.

For Jelly Belly’s Thai operation to gain access to subsidized world price sugar—which is currently trading at about 22 cents per pound—it must agree to sell its jelly beans outside of Thailand. Thailand protects its domestic sugar producers from foreign sugar subsidies through a rigid price support program and an array of subsidies.

“With the sugar price situation being better in the United States, Jelly Belly’s decision to expand into to Thailand was the result of other factors,” Roney said.

Besides cutting transportation costs to key markets like China and Japan, the company also gained access to a cheaper labor pool with fewer employee benefits. Additionally, Thailand’s government offered tax incentives to fuel the move.

Roney doesn’t begrudge Jelly Belly for opening a factory outside of America to service overseas markets, but he does take exception to candy lobbyists distorting the facts about the situation to undercut American growers.

“America has a proud history of both sugar production and candy production. Both industries are important job providers and we need both industries to thrive,” he said. “Right now, confectioners are doing great while we’re wrestling with low sugar prices that are threatening our existence. Now is not the time to weaken U.S. sugar policy.”