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JACK RONEY: Big Candy's lobbying leaves sour taste

ARLINGTON, Va. -- Since the great recession, investors have been inundated with tips for turning losses into profit, ranging from gold to initial public offerings of social-media firms.

ARLINGTON, Va. -- Since the great recession, investors have been inundated with tips for turning losses into profit, ranging from gold to initial public offerings of social-media firms.

But through it all, a pretty obvious profit center garnered very few headlines, and now this "secret" soon could have public policy implications.

I'm talking about candy and the makers of other sugar containing products.

As the head of the National Confectioners Association said at the onset of economic recovery: "A lot of people think it's oil and energy that drives this economy, but it's candy, it's chocolate that's doing well in this economy."

Such a statement sounds laughable, but it turns out, he was spot on. Alex Triantis, a professor at the University of Maryland, examined 10 large publicly traded U.S. companies that produce highly sweetened products. He unearthed phenomenal financial performance.


Triantis, the former head of the university's finance department, found that shares of the makers of sugar-containing products have shot up more than 300 percent since 2000. That's compared to an almost flat Standard and Poor's index; and the bulk of that 300 percent has come since 2009, when other stocks were sluggish.

Since 2004, revenues for these manufacturers have spiked 45 percent, which is 50 percent higher than the growth of the rest of the economy. Return on equity has outpaced the U.S. economy by 115 percent.

And net profit margins over that period have been 17 percent higher than the average for other publicly traded companies.

These numbers show that had Herald readers bet on candy years ago, they'd be a lot richer today. But chances are good the readers didn't create a sugar-containing-product index for their nest egg because, like so many of us, they weren't aware of this story of prosperity.

Today, these same sugar-using industries are hoping that such ignorance will help them score political points at the expense of America's sugar farmers.

Led by the same National Confectioners Association that once bragged of oil-like profitability, big candy companies are telling lawmakers that U.S. sugar policy has caused them financial hardship over the past few years.

To pull themselves out of the supposed economic doldrums, these big businesses are asking Capitol Hill to mandate oversupplies on the U.S. sugar market to keep ingredient costs at artificially low levels. And history shows sugar-using industries will pocket savings from artificially low sugar prices instead of lowering food costs.

This isn't the first time these companies have sought to manipulate legislators to enhance profitability. In 2006, these same companies proposed sending sugar farmers $1.3 billion a year in subsidy checks to have the government buy down sugar prices to artificial lows.


Current U.S. sugar policy has no subsidy checks involved, but it does keep heavily subsidized sugar from Brazil and elsewhere from flooding the U.S. market and displacing domestic production. That provision is under fire from candy executives, despite the fact that U.S. sugar prices are currently below world prices when transportation is factored in.

The Triantis study notes that if sugar policy were to be altered in any significant way, as the confectioners advocate, a large number of jobs supported by the sugar-producing industry would be lost to foreign subsidization. And, he says, there is no evidence that consumers would benefit in the form of lower prices for sugar-containing products, so there'd be no economic upside.

This is not simply a theory. It has been borne out in the European Union, which altered its sugar policy in 2006 in favor of greater import dependence. Since then, 120,000 EU sugar jobs have been lost, and sweetened product prices have risen 20 percent.

As Congress debates this Farm Bill, lawmakers should consider the whole economic story, including the one so many investors missed years ago.

Clearly, companies that make sugar-containing products have thrived under the current sugar policy -- and without it, we put another vital U.S. industry and our food supply at risk.

Roney is the director of economics and policy analysis for the American Sugar Alliance, the national coalition of growers, processors and refiners of sugar beets and sugarcane.

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