Sugar Equals Pure Profit for Grocers

Published in the January 2015 Issue Published online: Jan 02, 2015 News Phillip Hayes
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Recently, I received a phone call from a reporter with a national newspaper who was curious about why sugar prices were so low.

Wow, I thought. After years of being highly critical of sugar policy and blaming it for high prices, perhaps the newspaper in question had finally seen the error of its ways.

Maybe my hard work had finally paid off and a big-name journalist recognized how remarkable it is that sugar growers are receiving about the same price for their product today as they did when Jimmy Carter was in the Oval Office.

Or maybe the mainstream media finally became sympathetic to how badly subsidized foreign sugar had wrecked the U.S. and global markets over the past couple of years.

I was wrong.

The reporter wasn’t calling about the wholesale sugar prices that producers receive but rather the price grocery stores chains charge for sugar at the retail level.

Unbelievable.

Grocers jack up prices without justification then get accolades for lowering prices a smidge when wholesale prices drop like a rock? That is kind of like applauding a car dealer marking up a car 100 percent then giving you 3 percent off the sticker price.

Not letting frustrations boil over, the American Sugar Alliance calmly led the writer through the basics of retail sugar prices, and how those prices have been steadily climbing, not falling.

Here’s how the tutorial went:

Retail sugar prices reflect what a grocery shopper pays for a pound of sugar at their local grocer. And because sugar producers package, store and ship the sugar on a grocer’s behalf, nearly every penny of difference between the retail price and the wholesale price grocers pay producers is pure profit.

Unlike growers’ sugar prices, retail prices and grocer profit on sugar have steadily climbed through the years. In 2013, for example, grocery chains charged consumers more than double what they paid sugar producers for the product.

To grocers’ credit, they do sometimes pass along a small portion of savings to consumers when wholesale sugar prices plummet—unlike food manufacturers who pocket it all. Retail prices fell from 64 cents per pound to 60 cents during 2014, for example.

But let’s not get too excited. Since the 1980s grocery stores have nearly doubled shoppers’ prices—from 33 cents a pound to more than 60 cents. Meanwhile, they are paying producers the exact same for sugar—27 cents per pound in the 1980s and 27 cents today.

They are making a whole lot more today on the backs of farmers and grocery shoppers, and if grocers were really interested in lowering prices, then they could shave off far more.

So did the little tutorial work?

Not even close.

The published article highlighted the sweet times bakers were in for as grocery stores dropped prices. Not so much as a mention of the blood, sweat and tears that went into growing the beets and cane that made it possible, let alone the fact we are still surviving even though our prices have been in the dumps.

It may be a story untold, but it remains a good one nonetheless. And one of which everyone in the sugar business should be proud.

 

Editor’s note: Hayes is the director of media relations for the American Sugar Alliance. Email him at phillip@sugaralliance.org.