Delivering a competitive edge

From the 2019 Annual Report

AB Sugar is taking further bold steps to strengthen our competitiveness in a challenging marketplace.

As a consequence of policy reforms and abolition of quotas within the EU in 2017, the global sugar market has changed substantially creating both opportunities and challenges. As a result, current low world sugar prices and intense competition combined have squeezed producers’ margins, requiring them to reinvent their skills, behaviours and capabilities.

Increasing competitiveness and developing capabilities

We began preparing for this much tougher commercial market long before our peers to deliver substantial benefits through our performance improvement programme (PIP); focusing on improving processes, investing our capital wisely and increasing revenue generation.

In addition, we recognised that we would need to do things differently in today’s marketplace, beyond reducing costs, by strengthening capabilities across the group. We are, for instance, equipping commercial teams with the tools to navigate this environment, including systems to assess and manage risk as we begin to use financial hedging to offset price volatility. Also, our management teams are increasingly drawn from both within our sector and externally, to give us the right mix of skills, experience and fresh thinking to thrive. 

We are evolving our business model to suit this new sugar market. For example, Illovo Sugar Africa has moved its commercial focus away from bulk sales into the EU to more domestic sales direct to retail consumers. This has required us to adapt our product, branding, formats, channels and logistics as well as address them operating model to further improve efficiency, reduce overheads and increase profits. In Europe, we are building on recent progress in making our factories more efficient. In Spain, Azucarera will continue to automate its sites and in the UK, we will consolidate improvements to our factories, warehousing and logistics.

Investing in innovation

We continue to invest a significant slice of our cost savings back into higher return capital projects. In 2019 we injected £32 million into the business, from backing new product development within Germains, our seed technology business, to increasing daily factory throughput in our factories in China. We continue to invest time and money in our growers’ businesses and are now using learnings from China to improve farmers’ methods and yields in Africa.

Reducing waste, growing revenue

In addition to our core products made from sugar beet or cane, we also sell a range of co-products from the advanced manufacturing process, ranging from molasses to ethanol, and much more. To maximise this income stream, as part of our PIP, we systematically reassess our co-products and facilities. In 2017, for example, we replaced the production of tomatoes at British Sugar’s horticultural site in Wissington, Cambridgeshire with a non-psychoactive variety of the cannabis plant used in epilepsy drugs. In Spain Azucarera launched its Betalia brand, which includes products for animal feed, agriculture and industrial uses.

Meeting changing needs

Since launch, our PIP continues to go from strength to strength. The programme is embedded in AB Sugar’s DNA, with a high profile across the business and a three-year pipeline of future projects. It will remain central to our efforts to anticipate and meet the

fresh challenges and opportunities that will inevitably arise, as our industry continues to evolve and new technologies emerge.