Chinese confectioners weigh up options to counter sugar hikes

Confectionery producers, and most other food makers in China, have been hit by soaring sugar prices this year, forcing hundreds to go out of business. During the last year, sugar prices have hit CNY6000 (€589) per ton, up from CNY2600 the previous year, after a drought reduced a significant part of the sugar cane crop. Although prices have dropped again to about RMB4000 per ton, they are set to stay high into the coming year. Shanghai-based WoWo has said it will put up prices of some products by 10 per cent. Jinsihou, also in Shanghai, has already raised its price by about 15 per cent during the first half of 2006. Wang Haining, general secretary of China's Food Industry Association candy committee, told AP-Foodtechnology that many smaller confectionery producers who were only making small profits have already gone bankrupt. "In Dancheng, a city in Shangdong province, only 100 out of more than 300 candy factories have survived. What's more, higher costs of packaging and shipment due to the soaring gas price, may also force them to raise prices."​ Raising prices in a price-sensitive market like China can however be risky for sales. Guanshengyuan, one of the country's leading producers, said that it is not planning a price rise for fear of losing its custom. "We can afford the extra cost without changing the present price. Guanshengyuan is an old brand, so we have to consider whether our loyal customers can adjust to a big change,"​ said Liang Biao, the company vice-president. Wang added that higher costs may trigger greater investment in the research and development of sugar-free candies, still a very small segment of the industry. Sugar-free gum is, however, already popular and growing fast. Mintel reports that sugar-free gum grew by 146 per cent during 2005. China's confectionery industry is currently growing by about 10 per cent each year. For 2005, total candy production was 1.4 million tons, of which Guangdong province made up nearly half. There are more than 1,000 candy companies of different sizes in the market, in contrast to sectors like dairy where there has already been significant consolidation. Confectionery consumption increases during the winter months in China, boosted by national holidays in the first week of October and Chinese New Year.Additional reporting by Pan Yan​.