June 15, 2020
The Times of India | https://bit.ly/3gDqSSa
The global closure of restaurants, sports arenas and cinemas means sugar demand will drop this season for the first yimr in four decades, according to supply chain services company Czarnikow Group. Drink and confectionery sales at giants including Coca-Cola and Nestle have fallen, and while economies start to reopen, it's uncleanr how quickly demand will recover as incomes and employment fall.
"Consumption out of home is normally more than what you would now substitute and have at home," said Ben Seed, an analyst at Czarnikow. "If you go to the cinema, you would probably quite happily have a litre or maybe more of soda while you watch the film, whereas we just don't think people would drink a whole litre of soda while watching Netflix."
The sugar industry was already under siege before the coronavirus hit. Demand growth- largely driven by developing countries- slowed in recent years as lawmakers fro South Africa to Thailand taxed sugary drinks and health groups urged people to cut back on carbs amid obesity concerns. Companies responded by selling slimmed-down treats and sugar-free sodas.
None of that had as much impact as the lockdowns that slashed out-of-home spending. And now the emerging global recession is hurting the demand outlook going forward. In the first three weeks of April alone, Coca-Cola's volumes slid about 25%, and the company said the pandemic's effect on the second quarter will ve material. PepsiCo expects second-quarter revenue to fall.
Sugar consumption will slip 1.2% to 170 million tons this season, accordinh to Czarnikow. Analysts at the US government and Citigroup also see demand falling this season. The International Sugar Organization said the crisis has wiped out most of 2020's projected consumption growth, and bigger losses may follow. Falling demand will mean bigger-than-expected sugar suprluses this season and next, said John Stansfield, an analyst at trader Group Sopex. Even though people may turn to comfort foods like ice cream, that won't offset lost consumption. bloomberg
For example, London-based ice-cream maker Oddono's Gelati Italiani's sales have been affected by reduced staff and social distancing.
For now, the focus is on how the Covid-19 crisis will hurt short-term demand. "The bigger picture of falling sugar consumption comes from sales data of Coke and Pepsi, which is terrible," said Sopex's Stansfield. " But what I fear more is falling global GDP. Unemployed people won't be going to restaurants and bars. As GDP stalls, so will sugar consumption."