Difficult context for Guyanese sugar sector restructuring faced

Guyanese Sugar Exports to the EU (tonnes) and % share Guyanese production 2005-2016

Source: EC market access data base

What is more, between 2008 and 2015 in most years exports of sugar to the EU market were concentrated on the UK market.  This represents a matter of considerable concern given the UK’s scheduled departure from the EU on 30^th March 2019 and the consequent lapsing of existing market access arrangements.  Even if current preferential access arrangements to the UK market were to be extended from the 30^th March 2019, this would still leave considerable uncertainty over the future trajectory of UK sugar and sugar trade policy. There is strong domestic pressure on the UK government to abandon the €98/tonne duty levied on non-preferred sugar imports, once the UK is no longer bound by the EU’s common agricultural policy. This policy uncertainty creates serious doubts as to the future commercial value of any preferential access which may be secured to the UK market from 30^th March 2019 (see companion articles ‘What are the implications for ACP sugar producers of Tate & Lyle Sugars expectations on UK sugar sector policy post-Brexit?’, 20^th March 2017).

It should be noted that it was only in 2016 that Guyana’s market dependence on the EU (and within the EU, the UK) began to decline. In 2016 the EU market accounted for only 56% of total Guyanese production, in the face of a 19.5% decline in sugar production and 39.5% decline in the volume of sugar exported to the EU. While the importance of the UK market within exports to the EU28 fell to only 51%.

Guyanese Sugar Exports to the UK (tonnes) and % total exports to EU28 (2005-2016)

Source: EC market access data base

Given the competitiveness challenges faced in Guyana and the major changes pending on the EU sugar market (including, sugar production quota abolition, major public health campaigns to reduce sugar consumption, the increased availability of a growing range of alternative sweeteners and the UK’s departure from the EU – for more details see ‘Multiple challenges pending for ACP sugar exporters’, 1 May 2017), it should perhaps come as little surprise that the EU market is notably absent from the Government of Guyana’s projected future for its sugar sector.

This being noted, given the desire to focus the Guyanese sugar sector on the production of direct consumption and value added sugars, there could still be scope for exports of specialty Demerara sugars to the EU market, particularly if appropriate marketing strategies can be set in place, in close association with an EU beet co-refiner.

EU beet processing company may have an interest in such a joint venture arrangement, if it extended their product range in ways which helped position their company as a ‘one stop’ supplier of a wide range of sugar products. Enabling such companies to serve market components which cannot be met through their own domestic production, could help support domestic market positioning strategies of individual companies as they position themselves within an increasingly competitive EU sugar and sweeteners market.

Drawing on the marketing and packaging expertise of an EU sugar company which is busy repositioning itself for the consequences of EU production quota abolition, could potentially open up new opportunities for the export of value added sugars from Guyana. This would be particularly beneficial if it formed part of a joint venture arrangement.

This would require GuySuCo to develop much closer commercial contacts with EU beet sugar companies. Such efforts would, to a certain extent, need to mirror the experience of the Mauritian Sugar Syndicate through its 2008-2015 joint venture arrangements with Sudzucker (8).

However it is unclear to what extent this will be possible under current conditions. The Mauritian Sugar Syndicate undertook its market repositioning strategy during the first stages of EU sugar sector reforms, with the joint venture agreement being concluded in 2008 and with investments having been prepared and undertaken for this market reposition in the preceding eight years (in part with EU sugar protocol accompanying measures programme and EIB funding).

It appears as if previous governments in Guyana consistently avoided having to ‘bite the bullet’ of fundamental sugar sector restructuring, preferring to bank on a high profile and equally high risk investment strategy (the Skeldon project) intended to make the leap into global competitiveness. This strategy has demonstrably failed, with, despite the political challenges, the current government now seeking to implement a new approach.

Looking beyond the EU market to the core focus on Caribbean and wider regional markets, the marketing challenges which will be faced should not be under-estimated. Other Caribbean sugar producers which currently serve the EU market are also likely to be looking to refocus exports on regional markets. This could see up to 163,000 tonnes of CARICOM sugar currently exported to the EU in search of regional markets.

Some of these producers, notably Belize, have access to sophisticated marketing infrastructure via their corporate links to American Sugar Refiners, a company which claims to be the ‘largest vertically integrated cane sugar refiner in the world’ (7). This suggests GuySuCo will have to pay far greater attention to the long term market positioning of Guyanese sugar than it has to date.  This will be by no means a simple task.

To date, the financial pressures on GuySuCo have led to a short term profit maximisation marketing strategy, which has left the industry deeply exposed to the EU/UK market, in the context of profound market changes.  This is threatening a major reduction on revenues from sales to these markets from October 2017 onwards.

Against this background it is difficult it see from where the expertise will be drawn for the design and implementation of the necessary targeted strategies for the marketing of direct consumption and specialty sugars in the Caribbean region and beyond.