British Sugar plc

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British Sugar plc

Sugar Way
Peterborough, PE2 9AY
United Kingdom
Telephone: (44 0 1733) 563171
Fax: (44 0 1733) 422967
Web site: http://www.britishsugar.co.uk

Wholly Owned Subsidiary of Associated British Foods plc
Incorporated: 1936 as British Sugar Corporation
Employees: 1,711
Sales: $1.45 billion
NAIC: 311310 Sugar Manufacturing; 311119 Other Animal Food Manufacturing

British Sugar plc is the United Kingdom's leading sugar producer, supplying the country with more than half of its sugar. About 7,000 farmers contract with the company every year, providing it with some nine million tons of raw sugar beet. The sugar beet is used to produce approximately 1.3 million tons of white sugar at the company's six factories. British Sugar's products are used by the food industry (in cereals, baked goods, confections, ice cream, and nutritional products) as well as by pharmaceutical companies. Other markets served by British Sugar are perhaps less readily associated with sugar: agriculture, soil improvement, and landscaping. British Sugar is a wholly owned subsidiary of Associated British Foods plc.

FROM MANY TO ONE IN THE EARLY 20TH CENTURY

Britain's sugar industry dates back to the early 1900s, with the formation of the National Sugar Beet Association in 1909. By 1928 the country was home to 18 factories, mainly on Britain's eastern side. Beginning in the mid-1920s, global overproduction and falling prices threatened the British sugar industry, along with the ability of domestic producers to compete with inexpensive, imported sugar.

The Greene Committee was formed by the government in 1934 to evaluate sugar industry conditions in the United Kingdom. The committee's recommendations led to a bill that proposed an independent Sugar Commission, as well as the amalgamation of Britain's competing sugar factories into a single organization called the British Sugar Corp. Introduced to Parliament in February 1936, the Sugar Industry Act was passed and the British Sugar Corporation was registered under the Companies Act 1929 on June 12.

British Sugar's first chairman was Lieutenant Colonel Sir Francis Humphrys, Britain's first ambassador to Iraq. Under his leadership, operations of the nation's once independent companies were standardized, allowing the enterprise to realize efficiencies that otherwise would not have been possible.

WAR AND RECOVERY

World War II complicated Britain's sugar industry. Because food imports were affected by German patrols, farms were given top priority when labor was needed. Price controls and rations were instituted for sugar, and the company focused on producing as much sugar as it could during this challenging period.

During the war, British Sugar's focused on producing the greatest possible output of sugar to meet wartime needs, as well as tops and dried pulp that was needed for animal feed. Larger sugar beet crops, production increases, and longer campaigns took their toll on the company's equipment by the war's end, requiring significant capital investments in 1945. Upgrades were made to British Sugar's plants in Allscott, Bury, Cantley, Ely, and Felsted.

Sir Francis Humphrys retired as chairman in 1949 and was succeeded by Sir Alan Saunders. In addition to guiding the company through the war and overseeing various physical improvements, the August 31, 1948, issue of the London Times noted that during Humphrys's tenure the company put an emphasis on worker safety, installed canteens to provide employees with good meals at reasonable prices, and promoted inter-factory sports competitions.

POSTWAR IMPROVEMENTS AND MODERNIZATION

On the heels of the capital improvements that were made immediately after the war, British Sugar initiated a £9 million modernization program in 1950 to update all of its 18 factories. Completed in 1954, the program consisted of various equipment upgrades, construction of several new buildings, the development of a central machine shop for engineering work, and new technical headquarters in Peterborough for the firm's mechanical accounting staff and central drawing office. According to British Sugar, this modernization program resulted in substantial improvements in the areas of capacity, quality, production, and efficiency.

After an eight-year term as chairman, Sir Alan Saunders died in 1957. During his tenure, he was known for carrying on the safety and staff appreciation programs started by his predecessor. Examples included hostel accommodations for casual workers, efforts to improve working conditions and reduce turnover, long-service certificates, and a pension for manual workers.

Saunders was succeeded by Sir Edmund Bacon, who served as Premier Baronet of England and Lord Lieutenant of Norfolk from 1949 to 1978. A man of both influence and vision, Sir Edmund's leadership in the beet sugar industry had much to do with his being made a Knight Commander of the British Empire in 1965, according to company literature.

By the early 1960s the use of precision equipment, processed seed, and mechanical harvesting was resulting in higher crop yields. This, in turn, put the capabilities of British Sugar's factories to the test. In 1960 and 1961, nearly 900,000 tons of sugar was produced from a record 7.2 million tons of sugar beet. Improvements to the company's physical infrastructure continued, including the introduction of computers for data processing, as well as equipment that automated and mechanized sugar production and sugar packaging.

In addition to prepacking sugar in wrapped containers, in response to consumer demand for greater convenience, the company also introduced small paper packets for use by institutions and the transportation industry during the early 1960s. Other new products included icing sugar and sugar cubes.

Advancements continued at British Sugar throughout the decade. In order to stave off competition from newly introduced artificial sweeteners, the company played a hand in the establishment of the British Sugar Bureau in 1963. Five years later, a £10 million effort to rebuild its Wissington factory was in progress. The new facility became the company jewel when it was finished in 1971, equipped with the latest technology and offering twice the production capacity as its former incarnation.

Several leadership changes occurred at British Sugar during the late 1960s and early 1970s. Chairman Sir Edmund Bacon retired in 1968 and was succeeded by Gerald Thorley. Knighted in 1973, Sir Gerald had served as vice chairman of Allied Breweries, and as chairman and CEO of Ind-Coope. Additionally, K.C. Sinclair was named CEO in 1971. A longtime employee, Sinclair had joined the company as an assistant to Sir Alan Saunders in 1949.

COMPANY PERSPECTIVES

At British Sugar, our entire operation revolves around one objective: exceeding the demanding and diverse needs of all our customers. This focused approach influences the way we develop, manufacture and distribute the extensive range of products sought by our customers.

During the 1970s British Sugar's new senior leaders guided the firm through an extraordinary period of capital expenditure which, according to the company web site, "completely altered the character of the U.K. beet sugar industry and laid the foundations for today's modern, energy efficient and economic sugar extraction operation." After shuttering operations at its Cupar plant in 1972, British Sugar proceeded to invest £40 million to upgrade and revitalize its other locations and expand capacity.

A NEW CLIMATE

Britain's entry into the European Community (EC) in 1973 changed the competitive landscape for British Sugar. Prior to membership in the EC, market sharing agreements made it so that cane sugar refiners, namely Tate & Lyle, provided sugar to the country's southern and western regions, while British Sugar concentrated on the eastern region. Starting on February 1, 1973, British Sugar began competing in all regions of the United Kingdom against all EC sugar producers.

British Sugar's massive capital improvements during the late 1960s and early 1970s helped to prepare it for the new climate of the EC. Another important change occurred on the marketing front, when the company branded its retail sugar products under the name Silver Spoon. The new brand name was promoted in both new and established markets via print advertising, press campaigns, posters, and other publicity tactics. Silver Spoon was being marketed throughout all of the United Kingdom by 1977 and had established itself as Britain's best-selling brand of sugar by 1978.

By the mid-1970s, Britain was supplying about 33 percent of its own sugar. Globally, the demand for sugar was outpacing supply, causing a hike in prices. The European Economic Community raised the country's beet production quota, with a goal that Britain supply 50 percent of its own sugar. According to the company, it responded with plans to increase capacity by an amount that equaled the output of three factories. To support this ambitious target, £100 million was earmarked for capital spending through the decade's end.

In July 1975, John Beckett succeeded Kenneth Sinclair as CEO. Prior to joining British Sugar, Beckett served as group executive director of Tarmac Ltd. During his tenure, the company's saw its profits rise 10 to 15 percent annually, while overall factory capacity climbed 25 percent.

With Beckett at the helm, British Sugar established Beet Sugar Development Ltd. in 1976. The new subsidiary offered the company's sugar production knowledge to other countries, including Iran. Beckett also oversaw a major reworking of British Sugar's management structure, whereby three new regions were formed in order to reduce pressure on the main office. By 1977 British Sugar's profits totaled £20 million, and the government's stake in the company had fallen from about 36 to 24 percent.

British Sugar ended the decade by successfully fighting an EC proposal to cut the community's sugar quota by 10 percent. The quota reduction would have meant a 30 percent cut at British Sugar, threatening beet growers and the jobs of almost half of the company's 6,000 employees. In 1979 British Sugar finished the massive capital improvement plan it had announced midway through the decade. Due to inflation, the £100 million it had planned to spend had grown to £150 million.

RAPID CHANGES

The 1980s ushered in a series of major developments at British Sugar. In 1980 the company's operating regions were streamlined into north and south divisions. That same year, a surprise hostile takeover bid for British Sugar was made by S & W Berisford, Britain's leading sugar merchant.

KEY DATES

1936:: Amalgamation of Britain's competing sugar factories into a single organization occurs; British Sugar Corporation is registered under the Companies Act 1929.
1949:: Sir Francis Humphrys, the company's first chairman, retires.
1961:: British Sugar produces nearly 900,000 tons of sugar from a record 7.2 million tons of sugar beet.
1973:: Following Britain's entrance to the European Community (EC), British Sugar begins competing against other EC sugar companies for market share throughout the United Kingdom.
1981:: The British government sells its stake in British Sugar for £44 million to 150 city institutions.
1991:: Associated British Foods acquires British Sugar.

At the time, Berisford handled about half of British Sugar's output and approximately 33 percent of Tate & Lyle's. British Sugar believed that the takeover would be unhealthy for the market. The bid was quickly referred to the Monopolies Commission by the Secretary of State for Trade, and although it was cleared, the takeover ultimately failed by a slim margin, as the British government held onto its 24 percent stake.

In the midst of falling domestic sugar consumption, as well as smaller sugar beet crops, the EC cut Britain's sugar production quotas. British Sugar was forced to shutter four factories (in Nottingham, Selby, Ely, and Felsted) in response.

On July 22, 1981, the British government sold its stake in British Sugar for £44 million to 150 city institutions. In the July 23, 1981, issue of the Times, CEO Beckett expressed his pleasure with the sale, explaining that the company's share price had been depressed by the government's stake.

John Beckett and Sir Gerald Thorley saw their careers with British Sugar end when Berisford finally succeeded in acquiring British Sugar in 1982. Berisford's Gordon Percival assumed the role of managing director. The takeover was not without benefits for British Sugar; through the decade's end, some £350 million was reinvested in modernizing the enterprise.

A variety of technological advancements occurred at British Sugar under its new ownership. A mainframe computer was installed at the company's Peterborough headquarters, allowing the computerization of administration, distribution, and sales support. Electronic process control was instituted at the plant level, and bar coding was introduced on retail packaging. Other improvements during the early 1980s included the construction of an £18 million, purpose-built packaging complex at Bury St. Edmunds in 1982, and a £40 million modernization program to revamp the company's Ipswich factory between 1983 and 1989.

In 1986 Peter Jacobs succeeded Gordon Percival as British Sugar's managing director. The following year, he revealed a new seven-year growth and diversification strategy. The plan called for British Sugar to become the nucleus of Berisford's new Bristar Group, which quickly acquired two U.S. seed companies and began investing in biotechnology firms in the United Kingdom and Ireland.

Profits soared to a record £82.2 million in 1988. That year, heightened efficiency and productivity gains at all of the company's plants prompted it to shutter its Spalding facility. The company ended the decade by naming Peter Jackson as its new managing director.

THE ABF YEARS

Heavy losses eventually forced Berisford to put its assets up for sale. With record profits of £110.3 million, British Sugar was arguably its most valuable possession. Associated British Foods plc (ABF)—headed by Canadian billionaire Garry Weston and already a 23 percent stakeholder in Berisford—beat out all other bidders and acquired British Foods for £880 million. After the deal was approved by shareholders on December 28, 1990, ABF formally assumed ownership on January 2, 1991.

There were several positive developments at British Sugar during the early 1990s. The company invested approximately of £2.25 million to improve the quality of its workforce via skills training, and a number of efforts were made to improve and protect the natural environment surrounding its production plants. According to the company, almost of £40 million pounds was allocated to so-called green projects in the early and mid-1990s alone. In addition, a five-year improvement program was announced in 1991 in which £200 million was earmarked to improve the company's factories.

British Sugar ended the 1990s on a sour note when, in 1998, it was charged with price fixing. Following an investigation that began in 1991, the EC ruled that the company was the leading player in a cartel that included competitor Tate & Lyle, as well as distributors James Budgett and Napier Brown. According to the October 14, 1996, Evening News, the parties held 18 meetings from 1986 to 1990—prior to ABF's acquisition of British Foods—to discuss pricing issues. British Sugar was fined $28 million for its role in the cartel.

On a more positive note, the company extended its geographic reach when it established a joint venture in Poland to oversee two sugar plants there. An entity was set up for overseeing operations outside of the United Kingdom, called British Sugar Overseas or BSO. In 1994, BSO completed construction of a new sugar plant in the town of Ostrowite.

Peter Jackson was still British Sugar's chief executive when it entered the new millennium. Production efficiencies led the company to halt beet processing at its Ipswich, Bardney, and Kidderminster plants during the early part of the decade. At Bardney, liquid sugar production continued, as well as packaging and syrup operations for Silver Spoon.

In 2005 ABF announced that some of its production would be used to produce the environmentally friendly fuel bioethanol from sugar beet. Specifically, the company proposed to make 55,000 tons of the fuel at British Sugar's Norfolk plant. Also that year, the EC implemented radical reforms in which support prices for sugar would be cut by 36 percent over a four-year period. One source placed the impact of the policy change on British sugar refiners at £120 million.

After acquiring a 51 percent stake in Africa's largest sugar producer, Illovo Sugar, in mid-2006, British Sugar announced it would shutter its 80-year-old beet processing plants at York and Allscott, Shropshire, in February 2007. The move brought the company's beet processing facilities to six, down from a high of 18 many years before.

Paul R. Greenland