Tate & Lyle PLC

views updated Jun 27 2018

Tate & Lyle PLC

Sugar Quay
Lower Thames Street
London EC3R 6DQ
United Kingdom
Telephone: (020) 7626-6525
Fax: (020) 7623-5213
Web site: http://www.tateandlyle.com

Public Company
Incorporated: 1921
Employees: 21,500
Sales: £4.09 billion ($6.24 billion) (2000)
Stock Exchanges: London
Ticker Symbol: TATE
NAIC: 311311 Sugarcane Mills; 311312 Cane Sugar Refining; 311221 Wet Corn Milling

Formed in 1921 by the merger of two family-run sugar refiners founded in the mid-19th century, Tate & Lyle PLC is one of the world’s leading processors of sugar—from both cane and beet—cereal sweeteners (mainly those made from corn, such as high fructose corn syrup), and starches. The company has particularly strong positions in sugar in several countries, including the United Kingdom, Portugal, Canada, and Zimbabwe. Tate & Lyle also produces citric acid, ethanol and potable alcohol, and monosodium glutamate (MSG), as well as various byproducts that arise through the carbohydrate production process, such as molasses, from the production of sugar, and corn oil, from the making of starch. Over the nearly century and a half since its earliest beginnings, Tate & Lyle has successfully adapted to changing conditions, from the threat of government nationalization to the introduction of non-sugar sweetening products. A dramatic company retrenchment in the late 1970s rid the company of unprofitable ventures; Tate & Lyle subsequently completed a number of acquisitions in its core areas of expertise to build its position as a global leader in carbohydrate processing in the early 21st century.

Henry Tate and Abram Lyle: 19th-Century Origins

Henry Tate was born in Liverpool in 1819, the seventh son of a Unitarian clergyman. At age 13, he was apprenticed to his older brother Caleb, a grocer, and at 20 he set out on his own. By age 36, he owned a chain of six grocery shops and began to look for other profitable ventures. In 1859, Tate became the partner of Liverpool sugar refiner John Wright and began to learn about sugar.

Use of sugar at the time was burgeoning in Great Britain, where decreasing prices led to a steady increase in consumption. New uses were being developed for sugars, including jams, condensed milk, and desserts, which made it a staple on British tables.

In 1869, Tate, a man who liked to be his own boss, dissolved his partnership with Wright and, with sons Alfred and Edwin, formed Henry Tate & Sons. He began building his new refinery in Liverpool in 1870. By 1878, the business had grown so much that Tate opened a second refinery on the Thames, which specialized in making sugar cubes using a process developed on the continent. His 250 employees at that refinery worked 60-hour weeks in 12-hour shifts.

If Henry Tate was successful in sugar, that was not true of all sugar producers, most of them family firms like his own. At the end of the 18th century, about 120 sugar refiners in Great Britain had supplied the growing need for sugar. By 1882, that number had been reduced to 26, and there were only 16 by 1900. But the changing business climate for sugar producers did not deter Abram Lyle III.

Lyle, born in 1820, had gone from his father’s cooperage into shipping, like Tate setting up a business with his sons. The story goes that he got into the sugar business when he accepted a cargo of sugar in lieu of payment and had to find something to do with it. In 1881, Lyle bought Odam’s and Plaistow Wharves on the Thames and began to build his own sugar refinery, which would form the foundation of Abram Lyle & Sons.

Lyle got off to a rocky start. An especially large continental sugar beet crop in 1882 severely depressed the price of sugar. At the same time, the cost of construction for his refinery soared well over the estimates. Lyle was forced to adopt severe personal measures, including taking his children out of school, to get his fledgling business off the ground.

Lyle’s policy at his Plaistow Wharf refinery was to produce a few types of sugar as cheaply as possible. He specialized in Golden Syrup, a low-price sugar product designed to resemble honey (packaging that highlighted a bee motif enhanced the identification). It was said that the poor of the industrialized cities of England lived on bread and cheap sugar products such as Golden Syrup and treacle.

Although both their refineries were on the Thames, Henry Tate and Abram Lyle never met. But the two firms seem to have had a tacit understanding: Lyle never produced sugar cubes and Tate never produced syrup. When Lyle died in 1891, he left his sons firmly in charge of his business, as Tate did when he died eight years later.

In 1903, Sir William Henry Tate, the founder’s oldest son, made a significant change in his father’s company by taking it public, perhaps because one of his brother’s widows wanted to withdraw her share of the investment. Only 17 shareholders, the majority of them family members, originally invested in the company.

By 1914, both concerns were successful family-run businesses. With the outbreak of World War I, however, they faced a very difficult situation. Between 60 percent and 90 percent of the sugar refined at the two Tate factories and at Lyle’s Plaistow Wharf had been raw beet sugar, primarily from Germany and Austria. That supply was quickly cut off, and U-boats threatened cane supplies from regular suppliers in the West Indies, Peru, and Mauritius. In 1914 the government took control of sugar refining, confiscating the Lyles’supplies of raw sugar and portioning out supplies of all incoming sugar to the country’s sugar producers. Government wartime policy allowed companies the same profit as they had averaged on granulated sugar for the three preceding years. Since granulated sugar was not the major product of either company, this formula was a blow.

Both companies faced other hardships during the war years, including an inability to replace crucial supplies such as the charcoal used as a filter during sugar manufacture, and overworked staffs of women who replaced the soldiers. But both the Tates and Lyles survived.

Creation of Tate & Lyle in 1921

In 1918, Ernest Tate, the son of Henry Tate’s oldest son William, approached second-generation brothers Charles and Robert Lyle about combining the two firms. The products of the two companies were complementary, and there would be advantages in being able to purchase in larger lots and exchange technical expertise.

Tate was probably motivated by two factors: although his company had a greater refining capacity, it also made a lower profit per ton of sugar processed and a lower total profit. Also, the Tates saw a coming dearth of family leadership. Although the two founders were virtually the same age, the second- and third-generation Tates were much older than the Lyles and only one grandson, Vernon, was coming into the firm. The Lyles, on the other hand, had two active second-generation brothers and four family members in the firm from the third generation.

Negotiations began in the autumn of 1918 and dragged on until the spring of 1921, although the actual stumbling blocks in the negotiations were minor. Perhaps the most important deterrent was that the Tates and Lyles had different ideas about management. While the Tates hired people to handle purchasing, sales, and management, the Lyles handled those positions themselves. Philip and Oliver Lyle, grandsons of Abram III, were said to dislike the Tates on principle.

But the advantages of merger finally outweighed the objections, and the two companies became Tate & Lyle in 1921, with Charles Lyle as the first chairman, to be succeeded by Ernest Tate. The actual mechanics of merger were complicated, especially since Tate’s was a public company and Lyle’s was privately owned. But the merger was designed to form a 50/50 partnership.

Despite agreements between managements and an exchange of personnel between plants, however, fraternization between Tates and Lyles was slow. Even 15 years after the merger, old Tate employees were reluctant to mingle with the Lyle group and vice versa.

Early Challenges for the New Firm: Post-World War I Era

The first challenge the newly amalgamated company faced was to respond to the postwar economy. The end of World War I meant a growing worldwide demand for refined sugar—in West Africa, in fact, sugar cubes were used as currency after the war. Tate & Lyle invested in sugar-cane producing land in Africa (an experiment that was later transferred to local government control after political upheavals), expanded capacity with new refining techniques, and became a leader in the distribution of brand-name goods instead of bulk commodities.

Tate & Lyle also became involved in the effort to develop a homegrown sugar industry so Britain would not have to face the supply crisis precipitated by World War I. The company invested heavily in the Bury Group, which was set up to develop a beet sugar industry in Britain.

Company Perspectives:

The pace of change today in industry is rapid. Companies only survive long term if they are able to adapt and change. Tate & Lyle’s history is testament to that. It is one of only five of the original FTSE 100 companies still remaining and has survived by constantly reinventing itself to respond to the needs of its customers and shareholders. As the 21st century begins, Tate & Lyle is a world leader in sugar, cereal sweeteners and starches and citric acid. The Group has unrivaled expertise in processing carbohydrates and is continuing its drive to focus on activities that add value to those carbohydrates .

But the government also had its eye on beet sugar production. In 1933, national quotas for beet sugar products were established. The government was soon prepared to go even further. In 1936 existing beet sugar companies were combined into the British Sugar Corporation under the supervision of a Sugar Commission. The Bury Group received £1.4 million in British Sugar Corporation shares in exchange for its assets; this money was distributed to its shareholders, including Tate & Lyle.

The company was now effectively excluded from the beet sugar industry at home. But with the money from the transaction, Tate & Lyle looked for new sources of sugar cane to offset the loss. In 1937, Tate & Lyle formed the West Indies Sugar Company to buy property in Jamaica and Trinidad. The company also built a new central processing center in Frome, Jamaica.

By this time, however, a new crisis was at hand with the opening of hostilities leading to World War II. Sugar rationing began in mid-February 1940 and limited each citizen to ½ pound of sugar a week. That meant a huge reduction in Tate & Lyle production. The directors, still primarily immediate family members, decided to keep both the London and Liverpool refineries open despite the drop in production. Plaistow made Golden Syrup, which was in great demand because of its low price. The Thames facility continued to make sugar cubes, although wartime shortages meant that the quality was lower. Both London factories were hit hard by bombs and required substantial repairs. By 1942 over half of the employees in both refineries were women.

Postwar Era: Fighting to Remain Independent, Expanding Abroad, Diversifying

The end of the war again meant increased demand and an abundant workforce, but it was not long before government intervention in the sugar industry became a direct threat to the company. In 1949, with Socialists in power, it looked as if the government was ready to expand from its base in beet sugar and directly nationalize Tate & Lyle. To avoid becoming a subsidiary of British Sugar, the company enlisted the support of other sugar producers and took its case directly to the people with its “Mr. Cube” campaign. The little square cartoon character told homemakers, “State control will make a hole in your pocket and my packet,” and “If they juggle with SUGAR they’ll juggle with your SHOPPING BASKET!” The pressure held off the threat to the company’s independence, which was further relieved when the Socialists were defeated in 1951.

Tate & Lyle may have been independent, but in the postwar world the company could not function freely. The U.S. Sugar Act of 1948 set the price of sugar there to protect its own sugar industry. The act also admitted Cuban sugar under a preferential tariff and regulated other imports under a quota system, thus severely limiting Tate & Lyle’s expansion in the United States.

Other industry regulations followed. In 1951 the Commonwealth Sugar Agreement, an agreement suggested by the British West Indies Sugar Association (which included Tate & Lyle interests in Jamaica and Trinidad) specified quotas and prices for imported sugar in Great Britain. The agreement was monitored by the Sugar Board to provide fixed quantities of sugar at reasonable prices, and it did provide a stability in the industry that Tate & Lyle welcomed.

The 1950s saw Tate & Lyle begin to branch out into related ventures. In 1951 the company established Tate & Lyle Technical Services to emphasize research and development. That company in turn spawned Tate & Lyle Enterprises, an agricultural planning service to help develop agricultural ventures, especially in the developing world.

Key Dates:

1859:: Henry Tate forms partnership with sugar refiner John Wright.
1869:: Tate dissolves his partnership and starts his own sugar refining firm, Henry Tate & Sons.
1881:: Abram Lyle III buys Odam’s and Plaistow Wharves on the Thames and begins building his own sugar refinery, the foundation of Abram Lyle & Sons.
1903:: Henry Tate & Sons becomes a publicly traded firm.
1921:: Henry Tate & Sons and Abram Lyle & Sons merge to create Tate & Lyle.
1936:: The government combines British beet sugar companies into British Sugar Corporation, effectively excluding Tate & Lyle from the domestic beet sugar industry.
1937:: Company forms West Indies Sugar Company to buy sugar cane plantations in Jamaica and Trinidad.
1940:: World War II sugar rationing begins, cutting back Tate & Lyle’s production.
1949:: Facing threat of nationalization, Tate & Lyle launches “Mr. Cube” campaign, which helps keep the firm independent.
1953:: Tate & Lyle buys 50 percent interest in Rhodesian Sugar Refineries.
1959:: Canada & Dominion Sugar Company (later renamed Redpath Industries) is acquired.
1964:: United Molasses is acquired.
1976:: Manbré and Garton, the only other British cane sugar refiner, and Refined Syrups and Sugars, based in the United States, are acquired.
1985:: Several U.S. beet sugar factories are acquired, forming basis of the Western Sugar Company.
1988:: Staley Continental, major U.S. corn wet milling firm, is acquired in hostile takeover; U.S. sweetener maker Amstar Sugar is acquired and is later renamed Domino Sugar.
1991:: Australia-based Bundaberg Sugar is acquired.
1998:: Tate & Lyle becomes the leading producer of citric acid in the world by purchasing the citric acid business of Haarmaan & Reimer.
2000:: Bundaberg is divested; Tate & Lyle buys out the minority shareholdings in Staley and Amylum.
2001:: Company announces that it has reached agreements to sell Western Sugar and Domino Sugar, thereby exiting from the U.S. sugar market.

The company continued to acquire interests in sugar, buying a 50 percent stake in Rhodesian (later Zimbabwe) Sugar Refineries in 1953. Another major subsidiary, Canada & Dominion Sugar Company (later Redpath Industries), was acquired in 1959, giving Tate & Lyle a new foothold in the beet sugar industry and a better opportunity to serve the large U.S. market (beet sugar imports were not regulated under the same quotas as cane imports). When the United States slashed Fidel Castro’s Cuban sugar quotas in the early 1960s for political reasons, Tate & Lyle took advantage of additional quotas for Caribbean cane sugar by buying Belize Sugar Industries. In 1964, the company diversified into a related area when it bought United Molasses. In 1967, as a member of a European consortium, Tate & Lyle expanded its interests in beet sugar outside of Britain by investing in the Say beet sugar factories in France.

Redpath Industries and United Molasses brought with them business areas outside of Tate & Lyle’s traditional concerns. Subsidiaries of Redpath manufactured automotive parts and vinyl siding for homes, and United Molasses included shipbuilding capacity.

Tate & Lyle’s diversification and expansion abroad proved to be the right course when Britain joined the European Economic Community (EEC) in 1973. One provision of membership that directly affected the company was the EEC’s sugar quotas. Traditional suppliers of cane sugar would continue to supply the EEC with specific annual quotas of raw cane sugar, both to assure British producers of an adequate supply and to protect the economies of developing countries dependent on sugar. The EEC Sugar Protocols guaranteed annual quotas of raw sugar from the African, Caribbean, and Pacific producers. These agreements, embodied in 1975 in the Lomé Convention, completely insulated the EEC from the world price of sugar and tightly controlled sugar trading.

Another provision of membership that affected Tate & Lyle was the EEC’s subsidization of beet sugar production. Locked out of the beet sugar market at home by government-controlled British Sugar, Tate & Lyle was never satisfied with the EEC’s subsidization, as it provided substantial incentives for the beet sugar industry to overproduce and decreased the market for Tate & Lyle’s cane products.

Nonetheless, EEC membership had little impact on the company at first. An acute world shortage of sugar in 1975 meant sugar reached all-time high prices. In 1976, Tate & Lyle was able to expand both at home and abroad, purchasing the last remaining independent British sugar refiner, Manbré and Garton (which specialized in starches and glucose), Amylum of Belgium, and Refined Sugars in the United States (which finally gave it a foothold in the U.S. market). But when sugar prices fell dramatically in 1978 at the same time that worldwide sugar production rose 14 percent, Tate & Lyle’s earnings plummeted 62 percent in one year.

Restructuring and Revival in the 1980s

That same year Lord Jellicoe became the first non-Tate or Lyle to fill the chairmanship of the company, and Tate & Lyle began a policy of retrenchment because of “a trading climate which [was] unlikely to become easier in the near future,” according to Jellicoe. Because of the “crisis of overcapacity” since membership in the EEC, the company closed its Liverpool refinery in 1981 to help reestablish a better balance between supply and demand. Liverpool had been in operation for more than 100 years, and some workers there were the third generation of their families to work for the company. Tate & Lyle also introduced cost-cutting measures at the Thames refinery and terminated the production of starches and glucose. Finally, the company put a new organizational structure in place, marked by a smaller number of chief executives who had clear lines of responsibility and were held personally accountable for the performance of their divisions.

With unprofitable areas of the business gone and a reinvigorated management team in place, Tate & Lyle worked to regain a position of leadership. In the early 1980s, Tate & Lyle took another step, recognizing that sugar was not the only sweetener consumers wanted. High fructose corn syrup had become an extremely important product early in the 1970s. Corn syrup not only used the bumper corn corps of the United States, but also was easier to use in soft drinks and many types of packaged goods. In 1981 Tate & Lyle’s Redpath Industries entered a joint venture with John Labatt to produce high fructose corn syrup for the soft drink industry. Redpath withdrew from the venture, called Zymaize, two years later, but Tate & Lyle was convinced that they would have to compete in the industry to stay on top of sweeteners. In 1985, Tate & Lyle reentered the beet sugar processing business by acquiring several U.S. beet factories; seven midwestern factories began operating as the Western Sugar Company.

As the decade went on, Tate & Lyle bought controlling interests in other foreign sugar producers, including the Alcantara and Sores refineries in Portugal, and developed new sugar technology with a microcrystalline process at the Plaistow plant to provide new types of sugar for packaged foods and industry. It also expanded some of its profitable non-sugar interests with the acquisition of Vigortone, a U.S. producer of animal feed, in 1984 and of Heartland Building Products, a producer of vinyl siding, in 1987. The Heartland acquisition put Tate & Lyle among the top five vinyl siding manufacturers in North America.

At the same time, Tate & Lyle began another strong public relations effort to counteract a trend toward decreased consumption of sugar in developed countries because it has been implicated as a cause of dental cavities, obesity, diabetes, and hyperactivity.

Three major developments in the late 1980s promised to keep the reinvigorated firm at the forefront of the sweetener industry. In June 1988, Tate & Lyle purchased Staley Continental, a major corn wet milling business in the United States. The $1.48 billion hostile takeover gave the company 25 percent of the U.S. high fructose corn syrup market. Tate & Lyle’s aggressive new chairman, Neil Shaw (who took over in 1986 after serving as group managing director, beginning in 1980), immediately began restructuring the company to fit with Tate & Lyle by selling Staley’s foodservice division. Staley Continental was later renamed A E Staley Manufacturing Company.

In October 1988, after resolving antitrust problems by selling the refining interests of Refined Sugars, Tate & Lyle acquired another major U.S. sweetener business, Amstar Sugar, which produced the Domino brand, for $305 million. Amstar was renamed Domino Sugar in 1991.

Finally, Tate & Lyle announced its development of sucralose, a calorie-free sweetener made from sugar that could compete with aspartame (marketed as Nutrasweet). This discovery was developed in a joint venture with the American company Johnson & Johnson to ensure approval for its use in the United States. The approval process, however, proved slower than anticipated, with final ratification from the U.S. Food and Drug Administration not coming until 1998.

1990s and Beyond: Global Operations, Global Challenges

The early 1990s saw Tate & Lyle expand still further, with the biggest prize being Bundaberg Sugar, which was secured in mid-1991 through another hostile takeover. The addition of the Queensland, Australia-based Bundaberg significantly increased the Asia-Pacific interests of Tate & Lyle. The year 1991 also saw Tate & Lyle make its first venture into the newly emerging markets of eastern Europe through an investment in the Kaba Sugar Factory of Hungary. In April 1991 Stephen Brown was hired by Shaw as group managing director and heir apparent. Formerly with Alean Aluminum Ltd. of Montreal, Brown was named chief executive in April 1992, with Shaw remaining nonexecutive chairman. “Differences in management style,” however, led to Brown’s departure in March 1993. Shaw returned to his previous roles of chief executive and executive chairman.

Tate & Lyle extended its global reach in the mid-1990s as the sugar markets in more and more countries were opened to foreign operators. The firm acquired companies or interests in companies in Slovakia, the Czech Republic, Saudi Arabia, Zambia, Namibia, Botswana, China, and Vietnam. In Mexico, Tate & Lyle in 1995 acquired a 49 percent interest in Occidente, the fourth largest sugar group in that nation. Profits suffered during the mid-1990s, however, in part because of difficulties with some of the operations in emerging markets, some of which were initially unprofitable. Ventures into the Ukraine and Bulgaria were abandoned altogether. Another problem was the high fructose corn syrup operation of A E Staley, which was hurt by low prices in the U.S. market caused by sector overcapacity. In 1992 Larry Pillard was hired away from Staley competitor Cargill, Incorporated to run Staley, and Pillard improved the situation by turning Staley into the lowest cost competitor and by finding additional markets for the company’s products. Through his efforts at Staley, Pillard emerged as the new heir apparent to Shaw and was named group chief executive in November 1996.

During 1996 Tate & Lyle made its first inroads into the starch and citric acid sectors of India through an investment in Bharat Starch Industries Ltd. and a citric acid joint venture with Bharat. The following year Tate & Lyle became the first foreign firm to enter into a joint sugar venture in India by investing in a new cane sugar plant in Chilwaria being built by Simbhaoli Sugar Mills Ltd. Tate & Lyle became the leading producer of citric acid in the world in 1998 by purchasing the citric acid business of Haarmaan & Reimer, a subsidiary of Bayer AG, for $219 million. This business was renamed Tate & Lyle Citric Acid. In June 1998 Shaw retired from his position as chairman after his long tenure of transformative leadership. David Lees, a former chief executive and current nonexecutive chairman of U.K. industrial giant GKN plc, was named his successor.

Pillard and Lees faced fresh challenges as the 20th century drew to a close. Falling sugar prices around the world put severe pressure on profits. The situation was particularly dire in the United States, where strong beet and cane crops had pushed sugar prices down, forcing Tate & Lyle’s U.S. sugar operations into the red. The decline in world sugar prices also turned Bundaberg, the Australian firm acquired in 1991, into a loss-making operation. In starch, Staley’s high fructose corn syrup operations suffered from both declining prices of fructose and increasing raw material costs. By March 2000 Tate & Lyle’s stock price had fallen to its lowest level since 1989 following a series of warnings about lower than expected profits.

In response to this dire situation, Tate & Lyle began divesting itself of underperforming assets. During the second half of 2000, Bundaberg was sold to Belgium-based Société Financière des Sucres for $247 million and several other smaller sell-offs were completed. Another important move for the longer term was the purchase in June 2000 of the minority shareholdings in Staley and Amylum. By taking full control of these companies, Tate & Lyle could create global businesses in the areas of cereal sweeteners and starch and achieve significant cost savings in the process. In August 2000 Tate & Lyle entered into a joint agreement with Du Pont to develop bio-based polymers. Further divestments came in 2001, including the sale of the company’s interest in Zambia Sugar. Having concluded that the outlook for an improvement in the U.S. sugar market was bleak, Tate & Lyle placed its U.S. sugar operations up for sale. By mid-2001 preliminary agreements had been reached to sell Western Sugar to the Rocky Mountain Sugar Growers Cooperative and to sell Tate & Lyle North American Sugars, which did business as Domino Sugar, to an investment group led by brothers Adolfo and J. Pepe Fanjul. With its exit from the U.S. sugar market, its restructuring of Amylum and Staley, and a goal of being the lowest cost producer in all markets in which it operated, Tate & Lyle hoped for a return to the more robust profitability of earlier years.

Principal Subsidiaries

Amylum UK Limited; Greenwich Distillers Limited; Redpath (UK) Limited; The Molasses Trading Company Limited; Tate & Lyle Holdings Limited; Tate & Lyle Industrial Holdings Limited; Tate & Lyle Industries Limited; Tate & Lyle International Finance PLC; Tate & Lyle Investments Limited; Tate & Lyle Investments (USA) Limited; Tate & Lyle Sugar Quay Investments Limited; Tate & Lyle Ventures Limited; United Molasses (Ireland) Ltd. (50%) ; Caribbean Antilles Molasses Company Limited (Barbados) ; Amylum Europe NV (Belgium) ; Tameco NV (Belgium) ; Tate & Lyle Management & Finance Limited (Bermuda) ; Tate & Lyle Reinsurance Limited (Bermuda) ; Anglo Vietnam Sugar Investments Limited (British Virgin Islands; 60%) ; Mercocitrico Fermentaçoes S.A. (Brazil) ; Tate & Lyle North American Sugars Limited (Canada) ; Orsan Guangzhou Gourmet Powder Company Limited (China; 51%) ; Nordisk Melasse A/S (Denmark) ; Amylum France SAS (France) ; France Melasse SSA (61.6%) ; Orsan SA (France; 80.4%) ; Société Européenne des Mélasses SA (France; 66%) ; Hansa Melasse - Handelsgesellschaft mbH (Germany) ; Amylum Hellas SA (Greece; 98.6%) ; Caribbean Molasses Company Inc. (Guyana) ; Tate & Lyle (Hong Kong) Limited; Tate & Lyle Investments (India) Pvt Ltd; Melassa Italiana SpA (Italy) ; East African Storage Company Limited (Kenya) ; The Mauritius Molasses Company Limited (66.7%) ; Mexama, SA de CV (Mexico; 65.4%) ; Tate & Lyle Mexico SA de CV; Amylum Maghreb SA (Morocco) ; Companhia Exportadora de Melaços (Mozambique) ; Amylum Nederland BV (Netherlands; 98%) ; Nederlandsche Melasse Handel Maatschappij BV (Netherlands) ; Tate & Lyle Holland BV (Netherlands) ; Tate & Lyle Norge A/S (Norway) ; Alcântara Empreendimentos SGPS, SA (Portugal) ; Alcântara Refinarias - Açucares, SA (Portugal) ; Tate & Lyle (Portugal) Importaçao e Exportaçao Ltda. (Portugal) ; The Pure Cane Molasses Company (Durban) (Pty) Ltd. (South Africa) ; Amylum Ibérica SA (Spain; 97.4%) ; United Molasses (España) SA (Spain) ; Caribbean Bulk Storage and Trading Company Ltd. (Trinidad) ; A E Staley Manufacturing Company (U.S.A.) ; PM Ag Products Inc. (U.S.A.) ; Staley Grain Inc. (U.S.A.) ; Staley Holdings Inc. (U.S.A.) ; Tate & Lyle Citric Acid Inc. (U.S.A.) ; Tate & Lyle Finance, Inc. (U.S.A.) ; Tate & Lyle Inc. (U.S.A.) ; Tate & Lyle North American Finance Company, LLC (U.S.A.) ; TLI Holding Inc. (U.S.A.) ; Nighe An Tate & Lyle Sugar Company Limited (Vietnam; 80.9%) ; ZSR Corporation Ltd. (Zimbabwe; 50.1%) .

Principal Competitors

Béghin-Say; Associated British Foods plc; Südzucker AG; Cargill, Incorporated; Corn Products International, Inc.; Archer Daniels Midland Company; Ag Processing Inc.

Tate & Lyle PLC

views updated May 21 2018

Tate & Lyle PLC

Sugar Quay
Lower Thames Street
London EC3R 6DQ
United Kingdom
(01) 626–6525

Public Company
Incorporated: 1921
Employees: 18,500
Sales: £3.4 billion (US$6.15 billion)
Stock Index: London

Formed in 1921 by the merger of two family-run sugar refiners founded in the mid-19th century, Tate & Lyle PLC is the largest refiner of raw cane sugar in Europe, and operates in nearly 30 countries worldwide. In addition to cane sugar refining, T&L processes beet sugar, produces starches and cereal sweeteners, and is engaged in a broad spectrum of activities both related and unrelated to the sugar industry. Over the more than one hundred years since its beginnings, Tate & Lyle has successfully adapted to changing conditions, from the threat of government nationalization to the introduction of non-sugar sweetening products. A dramatic company retrenchment in the late 1970s rid the company of unprofitable ventures; today, T&L concentrates on investment in its areas of expertise.

In 1869, Tate, a man who liked to be his own boss, dissolved his partnership with Wright and, with sons Alfred and Edwin, formed Henry Tate & Sons. He began building his new refinery in Liverpool in 1870. In 1878, the business had grown so much that Tate opened a second refinery on the Thames, which specialized in making sugar cubes using a process developed on the continent. His 250 employees at that refinery worked 60-hour weeks in 12-hour shifts.

If Henry Tate was successful in sugar, that wasn’t true of all sugar producers, most of them family firms like his own. At the end of the 18th century, about 120 sugar refiners in Great Britain had supplied the growing need for sugar. By 1882, that number had been reduced to 26, and there were only 16 by 1900. But the changing business climate for sugar producers didn’t deter Abram Lyle III.

Lyle got off to a rocky start. An especially large continental sugar beet crop in 1882 severely depressed the price of sugar. At the same time, the cost of construction for his refinery soared well over the estimates. Lyle was forced to take severe personal measures, including taking his children out of school, to get his fledgling business off the ground.

Although both their refineries were on the Thames, Henry Tate and Abram Lyle never met. But the two firms seem to have had a tacit understanding: Lyle never produced sugar cubes and Tate never produced syrup. When Tate died in 1890, he left his sons firmly in charge of his business, as Lyle did when he died a year later.

By 1914, both concerns were successful family-run businesses. With the outbreak of World War I, however, they faced a very difficult situation. Between 60% and 90% of the sugar refined at the two Tate factories and at Lyle’s Plaistow Wharf had been raw beet sugar, primarily from Germany and Austria. That supply was quickly cut off, and U-boats threatened cane supplies from regular suppliers in the West Indies, Peru, and Mauritius. In 1914, the government took control of sugar refining, confiscating the Lyles’ supplies of raw sugar and portioning out supplies of all incoming sugar to the country’s sugar producers. Government wartime policy allowed companies the same profit as they had averaged on granulated sugar for the three preceding years. Since granulated sugar was not the major product of either company, this formula was a blow.

In 1918, Earnest Tate, the son of Henry Tate’s oldest son William, approached second-generation brothers Charles and Robert Lyle about combining the two firms. The products of the two companies were complementary, and there would be advantages in being able to purchase in larger lots and exchanging technical expertise.

Negotiations began in the autumn of 1918 and dragged on until the spring of 1921, although the actual stumbling blocks in the negotiations were minor. Perhaps the most important deterrent was that the Tates and Lyles had different ideas about management. While the Tates hired people to handle purchasing, sales, and management, Lyles handled those positions themselves. Philip and Oliver Lyle, grandsons of Abram III, were said to dislike the Tates on principle.

Despite agreements between managements and an exhange of personnel between plants, however, fraternization between Tates and Lyles was slow. As long as 15 years after the merger, old Tate employees were reluctant to mingle with the Lyle group and vice versa.

The first challenge the newly amalgamated company faced was to respond to the postwar economy. The end of World War I meant a growing worldwide demand for refined sugar—in West Africa, in fact, sugar cubes were used as currency after the war. T&L invested in sugar-cane producing land in Africa (an experiment that was later transferred to local government control after political upheavals), expanded capacity with new refining techniques, and became a leader in the distribution of brand-name goods instead of bulk commodities.

T&L also became involved in the effort to develop a homegrown sugar industry so Britain wouldn’t have to face the supply crisis precipitated by World War I. The company invested heavily in the Bury Group, which was set up to develop a beet sugar industry in Britain.

But the government also had its eye on beet sugar production. In 1933, national quotas for beet sugar products were established. By 1935, the government was prepared to go even further. Existing beet sugar companies were combined into the British Sugar Corporation under the supervision of a Sugar Commission. The Bury Group received £1.4 million in British Sugar Corporation shares in exchange for its assets; this money was distributed to its shareholders, including Tate & Lyle.

The company was now effectively excluded from the beet sugar industry at home. But with the money from the transaction, T&L looked for new sources of sugar cane to offset the loss. In 1937, T&L formed the West Indies Sugar Company to buy property in Jamaica and Trinidad. The company also built a new central processing center in Frome, Jamaica.

By this time, however, a new crisis was at hand with the opening of hostilities leading to World War II. Sugar rationing began in mid-February 1940 and limited each citizen to 3/4 pounds of sugar a week, later 1/2 pound. That meant a huge reduction in Tate & Lyle production. The directors, still primarily immediate family members, decided to keep both the London and Liverpool refineries open despite the drop in production. Plaistow made Golden Syrup, which was in great demand because of its low price. The Thames facility continued to make sugar cubes, although wartime shortages meant that the quality was lower. Both London factories were hit hard by bombs and required substantial repairs. By 1942 over half of the employees in both refineries were women.

The end of the war again meant increased demand and an abundant work force, but it wasn’t long before government intervention in the sugar industry became a direct threat to the company. In 1949, with Socialists in power, it looked as if the government was ready to expand from its base in beet sugar and directly nationalize Tate & Lyle. To avoid becoming a subsidiary of British Sugar, the company enlisted the support of other sugar producers and took its case directly to the people with its “Mr. Cube” campaign. The little square cartoon character told homemakers, “State control will make a hole in your pocket and my packet,” and “If they juggle with SUGAR they’ll juggle with your SHOPPING BASKET!” The pressure held off the threat to the company’s independence, which was further relieved when the Socialists were defeated in 1951.

Tate & Lyle may have been independent, but in the postwar world the company couldn’t function freely. The U.S. Sugar Act of 1948 set the price of sugar there to protect its own sugar industry. The act also admitted Cuban sugar under a preferential tariff and regulated other imports under a quota system, thus severely limiting T&L’s expansion in the United States.

Other industry regulations followed. In 1951, the Commonwealth Sugar Agreement, an agreement suggested by the British West Indies Sugar Association (which included Tate & Lyle interests in Jamaica and Trinidad) specified quotas and prices for imported sugar in Great Britain. The agreement was monitored by the Sugar Board to provide fixed quantities of sugar at reasonable prices, and it did provide a stability in the industry that Tate & Lyle welcomed.

The 1950s saw T&L begin to branch out into related ventures. In 1951, the company established Tate & Lyle Technical Services to emphasize research and development. That company in turn spawned Tate & Lyle Enterprises, an agricultural planning service to help develop agricultural ventures, especially in the developing world.

The company continued to acquire interests in sugar, buying Rhodesian (later Zimbabwe) Sugar Refineries in 1953. Another major subsidiary, Canada & Dominion Sugar Company (later Redpath Industries), was acquired in 1959, giving T&L a new foothold in the beet sugar industry and a better opportunity to serve the large U.S. market (beet sugar imports were not regulated under the same quotas as cane imports). When the United States slashed Fidel Castro’s Cuban sugar quotas in the early 1960s for political reasons, T&L took advantage of additional quotas for Caribbean cane sugar by buying Belize Sugar Industries. And in 1964, the company diversified into a related area when it bought United Molasses. In 1967, as a member of a European consortium, T&L expanded its interests in beet sugar outside of Britain by investing in the Say beet sugar factories in France.

Redpath Industries and United Molasses brought with them business areas outside of T&L’s traditional concerns. Subsidiaries of Redpath manufacture automotive parts and vinyl siding for homes, and United Molasses includes shipbuilding capacity.

Tate & Lyle’s expansion abroad and diversification proved to be the right course when Britain joined the European Economic Community in 1973. One provision of membership that directly affected the company was the EEC’s sugar quotas. Traditional suppliers of cane sugar would continue to supply the EEC with specific annual quotas of raw cane sugar, both to assure British producers of an adequate supply and to protect the economies of developing countries dependent on sugar. The EEC Sugar Protocols guaranteed annual quotas of raw sugar from the African, Caribbean, and Pacific producers. These agreements, embodied in 1975 in the Lomé Convention, completely insulated the EEC from the world price of sugar and tightly controlled sugar trading.

Another provision of membership that affected T&L was the EEC’s subsidization of beet sugar production. Locked out of the beet sugar market at home by government-controlled British Sugar, T&L was never satisfied with the EEC’s subsidization, as it provided substantial incentives for the beet sugar industry to overproduce and decreased the market for T&L’s cane products.

Nonetheless, EEC membership had little impact on the company at first. An acute world shortage of sugar in 1975 meant sugar reached all-time high prices. In 1976, T&L was able to expand both at home and abroad, purchasing the last other independent British sugar refiner, Manbré and Garton (which specialized in starches and glucose), Amylum of Belgium, and Refined Sugars in the United States (which finally gave it a foothold in the U.S. market).

But when sugar prices fell dramatically in 1978 at the same time that worldwide sugar production rose 14%, T&L’s earnings plummeted 62% in one year.

That same year Lord Jellicoe became the first non-Tate or Lyle to fill the chairmanship of the company, and T&L began a policy of retrenchment due to “a trading climate which is unlikely to become easier in the near future,” according to Jellicoe. Because of the “crisis of overcapacity” since membership in the EEC, the company closed its Liverpool refinery in 1980 to help reestablish a better balance between supply and demand. Liverpool had been in operation for more than 100 years, and some workers there were the third generation of their families to work for the company. T&L also introduced cost cutting measures at the Thames refmerey and terminated the production of starches and glucose. Finally, the company put a new organizational structure in place, marked by a smaller number of chief executives who had clear lines of responsibility and were held personally responsible for the performance of their divisions.

With unprofitable areas of the business gone and a reinvigorated management team in place, Tate & Lyle has moved since 1978 to regain a position of leadership. In the early 1980s, T&L took another step, recognizing that sugar was not the only sweetener consumers wanted. High fructose corn syrup had become an extremely important product early in the 1970s. Corn syrup not only used the bumper corn corps of the United States, but also was easier to use in soft drinks and many types of packaged goods. In 1981 T&L’s Redpath Industries entered a joint venture with John Labatt to produce high fructose corn syrup for the soft-drink industry. Redpath withdrew from the venture, called Zymaize, two years later, but T&L was convinced that they would have to compete in the industry to stay on top of sweeteners. In 1985, T&L re-entered the beet sugar processing business by acquiring several U.S. beet factories; seven midwestern factories now operate as The Western Sugar Company.

As the decade went on, T&L bought controlling interests in other foreign sugar producers, Alcantara and Sores refineries in Portugal, and developed new sugar technology with a micro-crystalline process at the Plaistow plant to proyide new types of sugar for packaged foods and industry. It also expanded some of its profitable non-sugar interests with the acquisition of Vigortone, a U.S. producer of animal feed, in 1984 and of Heartland Building Products, a producer of vinyl siding, in 1987. The Heartland acquisition put T&L among the top five vinyl siding manufacturers in North America.

At the same time, T&L began another strong public relations effort to counteract a trend toward decreased consumption of sugar in developed countries because it has been implicated as a cause of dental cavities, obesity, diabetes, and hyperactivity.

Three major developments in the late 1980s promise to keep the reinvigorated firm at the forefront of the sweetener industry. In June 1988, T&L purchased Staley Continental, a major corn wet milling business in the United States. The $1.48 billion hostile takeover gave the company 25% of the U.S. high fructose corn syrup market. T&L’s aggressive new chairman, Neil Shaw (who took over in 1986 after serving as group managing director), immediately began restructuring the company to fit with Tate & Lyle by selling Staley’s foodservice division.

In October 1988, after resolving antitrust problems by selling the refining interests of Refined Sugars, T&L acquired another major U.S. sweetener business, Amstar Sugar, which produces the Domino brand, for $305 million.

Finally, T&L announced its development of sucralose, a calorie-free sweetener that could compete with aspartame (marketed as Nutrasweet). It is developing this discovery in a joint venture with the American company Johnson & Johnson to ensure approval for its use in the United States. The approval process, however, has proven slower than anticipated, so T&L’s position in this new area of the sweetener industry lags far behind the industry leader.

Tate & Lyle’s policies under nonfamily leadership since 1978 have given the company a strong market position in cane, beet, and corn-based sweeteners and have positioned it to gain a share of the artificial sweetener market. These policies should keep Tate and Lyle in the forefront of the market for some time to come.

Principal Subsidiaries

Athel Reinsurance Co. Ltd.; Richards (Shipbuilders) Ltd.; Tate & Lyle Holdings Ltd.; Tate & Lyle Industries Ltd.; The Molasses Trading Company Limited; Tate & Lyle International Finance Limited; Tate & Lyle Investments Limited; Tunne Refineries Limited (66.67%); British Charcoals & Macdonalds; Four-F Nutrition; Hugh Baird & Sons; Kentships; Micronized Food Products; Milltech; Rumenco; Speciality Sweeteners; Tate & Lyle International; Tate & Lyle Sugars; Unitank Storage Company; United Molasses Company; Caribbean Antilles Molasses Co. Ltd. (Barbados); Amylum NV (Belgium) (66.67%); Tameco NV (Belgium); Tate & Lyle Management & Finance Ltd. (Bermuda); Tate & Lyle Commodities Ltd. (Bermuda); Tate & Lyle Reinsurance Ltd. (Bermuda); Tate & Lyle do Brasil Services e Participacoes Limitada (Brazil); Canada West Indies Molasses Co. Ltd. (Canada); Redpath Industries Ltd. (Canada); Nordisk Melasse A/S (Denmark); Schouten France Sari (France); Societe Europeene des Melasses SA (France)(50%); Biamyl SA (Greece)(97.5%); Caribbean Molasses Co. Ltd. (Guyana); Melassa Italiana (Melitalia) SpA (Italy); East African Storage Co. Ltd. (Kenya); The Mauritius Molasses Co. Ltd. (Mauritius) (66.67%); Nederlandsche Melasse Handel Maatschappij BV (Netherlands); Tate & Lyle Holland BV (Netherlands); Technostaal Schouten BV (Netherlands); Ten Have BV (Netherlands); Zetmeelbedrijven de Bijenkorf BV (Netherlands); Tate & Lyle Norge A/S (Norway); Alcantara Sociedada de Empreendimentos Acucareiros, SA (Portugal); Sociedade de Refinadores de Santa Iria, SA (Portgual); Tate & Lyle (Portugal) Importacao e Exportacao Ltda. (Portugal); Campo Ebro Industrial SA (Spain) (91%); United Molasses (España) SA (Spain); Caribbean Bulk Storage and Trading Co. Ltd. (Trinidad); Automotive Industries Inc. (USA); Tate & Lyle Inc. (USA); Pacific Molasses Co. (USA); The Western Sugar Co. (USA); AE Staley manufacturing Co. (USA) (92.7%); Amstar Sugar Corp. (USA); Staley Holding Inc. (USA) (92.7%); Technostal Schouten Inc. (USA); Vigortone Ag Products Inc. (USA); Unitank Inc. (USA); Hansa Melasse Handels GmbH (West Germany); Zimbabwe Sugar Refineries Ltd. (Zimbabwe) (50.13%).