Sugar Consumption: Examining the Bend in the Trend
The long-term outlook for sugar consumption is often a consideration in a sugar company’s strategic planning. In this article, we ask what a simple, base-case, ‘business as usual’ scenario for future global sugar consumption growth should look like these days. Our current view is that it shouldn´t be much more than 1.0%.
A Tale of Two Trends
An analysis of annual global sugar consumption since 2000/01 is not very eye-catching on first examination, but it gets a little more interesting when we add two trend lines for the data covering the first ten years and the final ten years of the series (see Figure 2).
These trend lines depict very different rates of growth. For the first ten years, the annual growth trend is 2.5%. For the last ten years, it is just 1.0% per year. This hasn’t occurred in a controlled environment – the real world is messy and complicated. So at least a couple of issues need more scrutiny.
The first issue is whether data from 2019/20 and 2020/21 should be included in any evaluation of the trend in recent years, as the Covid-19 pandemic impacted consumption of many foods, including sugar.
It’s a fair point. The pandemic created a negative shock to incomes (see Figure 3). It also affected purchasing and consumption patterns. Removing 2019/20 and 2020/21 data, the trend annual growth rate for the years 2011/12 to 2018/19 is 1.3%.
Second, the 2.5% annual growth rate for the 2000/01 to 2009/10 decade looks like an outlier – the world of sugar was always used to a 2.0% annual rate of consumption growth as a rule of thumb.
Growth Slowed After the Financial Crisis
Figure 3 illustrates a trend that may have been at least a partial driver of the unusually strong growth in sugar consumption in the first decade of this century. Per capita GDP in low- and middle-income countries (World Bank classification), which represented around 83% of the global population during those years, reached exceptional levels until the financial crisis pulled the rug out from under the global economy.
It’s a given that lower-income consumers have a propensity to spend a high share of any additional income on food. So, although the appearance of correlation doesn´t imply causation, it seems very possible that the exceptional growth in income among a population of 5bn people during this period, in conjunction with other trends like increasing urbanization, could have given global sugar consumption a significant boost.
Moving into the following decade, annual per capita GDP growth in low- and middle-income countries didn’t return to pre-crisis rates. Instead, it drifted lower, in all likelihood contributing to slower global consumption growth in comparison with the 2001-2010 period.
And the Obesity Crisis Put a Spotlight on Sugar
At the same time, another globally relevant factor emerged in the form of rising worldwide concern about obesity. While the obesity issue is complex, sugar has, to date, been a prime focus of initiatives from both governments and corporations to address obesity via taxes and measures to reduce the sugar content of foods and beverages.
If we look at the per capita consumption growth trend over these two periods (see Figure 4), we see that from 2010/11 to 2018/19 the growth trend was very close to zero. Figure 5 provides a regional breakdown.
So, at the global level, it looks like just about all of the growth in sugar consumption over the 2010/11-2018/19 period came through population growth, with only the Middle East and Asia (57% of global population) displaying some modest per capita consumption growth.
What can we take from this? We know that the consumption statistics themselves aren´t perfect – remember, no one actually measures sugar consumption. Historical statistics can be revised more than once in the years after they are initially released. And again, reality is messy. Many one-off events took place between 2010/11 and 2018/19 that could have impacted consumption. To cite just one example, the recession in Brazil that started in 2015 certainly had an impact on national and regional consumption.
Could Prices Have Had an Impact?
Could prices have been an influence? A look at inflation-adjusted US dollar world prices between 2000 and 2020 (see Figure 6) indicates that the average price from 2011 to 2020 was some 25% higher in real terms than during 2001 to 2010.
It’s certainly possible that price may have contributed to the changing trend, but a closer look would be needed for a couple of reasons:
First, price intervention is common in the world of sugar; for many countries, local market price trends may not reflect world market price trends. Furthermore, local prices are in local currency, so exchange rate movements may drive a further wedge between local price trends and world price trends.
Second, for processed foods and beverages, the value of the sugar in these goods is a relatively small share of the retail price. So, for this category of consumption, even big fluctuations in sugar prices may translate into little or zero fluctuation in the price of such goods on the supermarket shelf, which is the price that consumers respond to.
‘Business as Usual’ Looks a Little Different Now
So, to wrap up, where does that leave us? The recent pre-Covid past indicates that world per capita consumption growth slowed considerably, but there’s more work to be done to better understand the causes, which may differ between regions.
Looking ahead, trend annual world population growth is projected by the UN at 0.85% to 2035. In most high-income countries, per capita consumption is already trending downwards. For emerging markets, it is natural to expect gradually diminishing gains in per capita consumption as incomes rise further in the future. Meanwhile, we suspect that the repercussions for sugar stemming from the world’s obesity problem are unlikely to dissipate anytime soon. So for now, it seems that a base-case, ‘business as usual’ long-term trend for future annual global sugar consumption growth should not be much more than 1.0%.
Where to go from here
Andy DuffHead of RaboResearch Food & Agribusiness - South America; Global Strategist - Sugar Read more