BUSINESS INTERVIEW: Alain Beaumont

Date: 25/09/1997

Spoonful of reform needed in sugar sector

By Michael Mann

TALKING to Alain Beaumont over a can of a well-known soft drink, it is hard to imagine that the product fizzing away on the table was once a sugar beet growing in a dank European field.

But it is exactly this point that Beaumont's federation UNESDA (the Union of EC Soft Drinks Associations) is most anxious to stress as it begins a lobbying offensive to force the reform of what it claims is an antiquated and indefensible system of support to EU sugar growers.

The organisation, representing some of the biggest players in international retailing, believes the European Commission has made a major mistake in leaving the sugar sector out of reform plans included in the Agenda 2000 package.

“The sugar sector has not been reformed since its inception in 1968 and now all other regimes are going to be reformed except sugar. Agenda 2000 certainly goes in the right direction and there are definitely new factors which make reform of the sugar sector vital,” stresses Beaumont, who is UNESDA's secretary-general.

He insists that if the Union can reduce the cost of producing sugar, his organisation is committed to ensuring that savings are passed on down the line.

“There is a definite commitment from industry that any reduction in prices coming from a change in the regime will be passed on to our customers, who have to give it back to the consumers,” he says.

A survey carried out for the federation by consultants Canadean Ltd found that production in the soft drinks sector had grown by more than 4&percent; between 1985 and 1995. Beaumont puts this down to two factors: “innovation and the ability of our industry to keep the rise in prices below the level of inflation”.

But the only core ingredient used by the industry which has continued to become more expensive is sugar, with increases which, according to Beaumont, are increasingly threatening the sector's ability to keep prices under control.

UNESDA is keen to stress that there is more to its arguments than self-interest and consumer concerns. Jobs are at the top of the EU agenda and these could be at stake.

“We directly employ 122,000 people in our industry in Europe. Indirect employment puts that figure up by a factor of seven, so the soft drinks sector generates around a million European jobs,” claims Beaumont.

In his view, the major drawback of the sugar market is the fact that export refunds to help EU products compete on the world market are financed by an increase in the price of sugar sold in the Union.

“This is what allows governments to say the regime doesn't cost anything to the budget. But the cost is paid by the consumer, not through taxes but through price,” he explains.

The soft drinks industry believes that everyone would benefit if the market were freed up to allow the “excellent” European product to compete freely on the world market.

Beaumont stresses that even if producer prices were cut, this would not mean a reduction in farmers' incomes, because the drinks industry would be perfectly capable of soaking up part of the current surplus as long as price levels were genuinely competitive.

“There is also lots of potential on the world market and lots of very efficient producers in Europe, but they need the flexibility to prove they are the most efficient,” he adds.

Quite apart from simple frustration that the sugar regime prevents UNESDA's members from operating in the way they would like, Beaumont feels there are more pressing reasons making reform inevitable one day.

“EU enlargement will cause overproduction. It says as much in the Santer package. The countries which are going to join are very well-suited to growing sugar and certainly better than some of the existing members,” he explains.

UNESDA is not naïve enough to believe the sugar market will ever be entirely freed from the shackles of the Common Agricultural Policy. But Beaumont thinks that there is a definite argument for the gradual elimination of production quotas, a cut in prices and the introduction of direct compensation to farmers.

“We need increased freedom and flexibility; a market-orientated policy instead of one driven by price support.”

But for all the apparent logic of its arguments, UNESDA has a large mountain to climb to persuade those who matter that reform is needed. It has begun an intensive lobbying campaign at both EU and national level, and is working together with other federations with similar interests.

But it will not be easy. “At the moment, sugar producers live in a comfortable situation, so why should they change it?” says Beaumont, acknowledging the size of the challenge.